As filed with the Securities and Exchange Commission on April 11, 2001
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
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United Pan-Europe Communications N.V.
(Exact name of registrant as specified in its charter)
The Netherlands 4841 98-0191997
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
Boeing Avenue 53
1119 PE, Schiphol Rijk
The Netherlands
+31 20 778 9400
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
--------------
Michael T. Fries, Chairman
c/o UnitedGlobalCom, Inc.
4643 South Ulster Street, Suite 1300
Denver, Colorado 80237
(303) 770-4001
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
Copies to:
Garth B. Jensen, Esq. James Healy, Esq., Richard Ely, Esq.
Holme Roberts & Owen LLP Skadden, Arps, Slate, Meagher & Flom LLP
1700 Lincoln, Suite 4100 One Canada Square - 39th Floor
Denver, Colorado 80203 Canary Wharf
(303) 861-7000 London E14 5DS England
(011) 44-20-7519-7000
--------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Title of each class of Proposed maximum
securities Number of Price per aggregate Amount of
to be registered Securities Security offering price registration fee
-----------------------------------------------------------------------------------------------------------
Rights to subscribe for 125,000,000 Nil Nil Nil
one ordinary share A (in
the form of ordinary
shares or American
Depositary Shares)
Ordinary Shares A to be 125,000,000 $7.2104(2) $901,306,895 $225,326.72
issued upon exercise of
subscription rights (1)
-----------------------------------------------------------------------------------------------------------
(1) In the form of ordinary shares A or American Depositary Shares. Each
American Depositary Share represents one ordinary share A. A separate
registration statement on Form F-6 will be filed for the registration of
American Depositary Shares evidenced by the American Depositary Receipts
issuable upon the deposit of the ordinary shares A registered hereby.
(2) The subscription price is Euro8.00 per ordinary share A ($7.2104 per
ordinary share A based on the U.S. dollar - Euro exchange rate on April 4,
2001). The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933, as amended, or until this
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE +
+CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS +
+PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO +
+BUY THESE SECURITIES IN ANY JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Prospectus subject to completion, dated April 11, 2001.
[UPC LOGO]
125,000,000 Ordinary Shares A
in the form of Ordinary Shares A or American Depositary Shares
------------------
United Pan-Europe Communications N.V. is issuing a maximum of ___
ordinary shares A at a price of Euro8.00 per ordinary share A. UPC is also
offering American Depositary Shares ("ADSs") at the U.S. dollar equivalent of
Euro8.00 per ADS. At the exchange rate for April 4, 2001, Euro8.00
represents $7.21. Each ADS represents one ordinary share A. In connection with
the issue of ordinary shares A, each holder of ordinary shares A will receive
____ transferable ordinary share rights for every ____ ordinary shares A held by
that holder after the close of trading of the ordinary shares A on the Official
Segment of the stock market of Euronext Amsterdam N.V. on ___________, 2001.
The rights permit holders to subscribe for a total of 125,000,000 ordinary
shares A in the form of ordinary shares A or ADSs for a subscription price of
Euro8.00 per share. Only holders of ordinary share rights can subscribe for the
newly issued ordinary shares A. Each ordinary share right gives its holder the
right to subscribe for one newly issued ordinary share A. In connection with the
offering of ADSs, each holder of ADSs will receive ___ transferable ADS rights
for every __ ADSs held by that holder at ___ p.m. New York City time on ________
__, 2001. Only holders of ADS rights can subscribe for the offered ADSs. Each
ADS right gives its holder the right to subscribe for one ADS. We have made
arrangements for you to pay the ADS subscription price in U.S. dollars.
Ordinary share rights expire at __ p.m. Amsterdam time on ___________,
2001 and ADS rights expire at __ p.m. New York City time on _____________, 2001.
UnitedGlobalCom, Inc., our majority shareholder, has agreed to exercise
all of the ordinary share rights and ADS rights held by it immediately prior to
the expiration of such rights and to subscribe, at the issue price of Euro8.00
per ordinary share A and the U.S. dollar equivalent of Euro8.00 per ADS, and
pay for any ordinary shares A or ADSs that holders of ordinary share rights or
ADS rights have not subscribed for. United also has agreed to purchase and pay
for an additional number of ordinary shares A in a placement directly to United
at Euro11.40 per ordinary share A, the average closing price of our ordinary
shares A over the five trading days ended February 21, 2001, the date two days
before the rights offering was announced. The number of ordinary shares A United
would purchase and pay for in this placement will be set such that the aggregate
price of ordinary shares A and/or ADSs, as the case may be, purchased and paid
for by United as part of the rights offering and the placement together equals
Euro1.0 billion.
UPC's ordinary shares A are traded on the Official Segment of the stock
market of Euronext Amsterdam under the symbol "UPC" and ADSs representing UPC's
ordinary shares A are traded on the Nasdaq National Market under the symbol
"UPCOY." On ______, 2001, the last reported sale price of UPC's ordinary shares
A on the Official Segment of the stock market of Euronext Amsterdam was Euro__
per ordinary share A. On ________, 2001, the last reported sale price of UPC's
ADSs on the Nasdaq National Market was $______ per ADS.
The ordinary share rights will trade on the Official Segment of the
stock market of Euronext Amsterdam. We do not intend to apply for the ADS rights
to be traded on the Nasdaq National Market or any stock exchange, but you may
trade them in the over-the-counter market.
See "Risk Factors" on page ___ to read about factors you should
consider before exercising your rights to subscribe for ordinary shares A or
ADSs.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------
Per ordinary share A
and ADS Total
--------------------------- -----
Price to shareholders and holders of ADS.......... Euro8.00 Euro1,000,000,000
Underwriting discount............................. Nil Nil
Proceeds, before expenses, to UPC................. Euro8.00 Euro1,000,000,000
------------------
Prospectus dated ____________, 2001.
The terms "we," "us," "our" and similar terms refer to UPC.
------------------
We take responsibility for the accuracy and completeness of the information
contained in this prospectus. We confirm that the information contained in this
prospectus is in all material respects true and accurate and that there are no
other facts the omission of which would make any statement in this prospectus
misleading in any material respect.
------------------
In connection with the rights offering, the dealer managers may overallot or
effect transactions that stabilize or maintain the market prices of the ordinary
shares A, ADSs, ordinary share rights and ADS rights at levels which might
otherwise not prevail in the open market. Stabilizing transactions may be
effected on the Official Segment of the stock market of Euronext Amsterdam, on
the Nasdaq National Market, in the over-the-counter market or otherwise. If such
stabilizing activities are commenced, they may be discontinued at any time and,
in any event, will be discontinued not later than 30 days after the closing of
the rights offering.
------------------
Table of Contents
Prospectus Summary...........................................................................................1
Risk Factors.................................................................................................6
Use of Proceeds.............................................................................................13
Dividend Policy.............................................................................................13
Capitalization..............................................................................................14
Selected Consolidated Financial Data........................................................................15
Business ...................................................................................................16
The Rights Offering.........................................................................................21
Determination of Issue Price................................................................................27
Description of Share Capital................................................................................28
Description of American Depositary Shares...................................................................31
Summary of Additional Material Provisions of Our Articles of Association and Other Matters..................38
Shares Eligible for Future Sale.............................................................................41
Certain Netherlands Tax Considerations......................................................................42
Certain U.S. Federal Income Tax Consequences................................................................48
Dealer Manager Arrangements.................................................................................51
Legal Matters...............................................................................................51
Experts ...................................................................................................51
Enforcement of Civil Liabilities............................................................................52
Forward Looking Statements..................................................................................52
Available Information.......................................................................................52
Information Incorporated by Reference.......................................................................53
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this
prospectus or incorporated by reference into this prospectus. This summary does
not contain all of the information that you should consider before exercising
your rights. You should carefully read the entire prospectus, especially the
risks of investing in our ordinary shares A and ADSs discussed under "Risk
Factors."
GENERAL INFORMATION ABOUT US AND OUR BUSINESS
We own and operate broadband communications networks or services in 17
countries in Europe and in Israel. Our subscriber base is the largest of any
group of broadband communications networks operated across Europe. Our goal is
to enhance our position as a leading pan-European distributor of video
programming services and to become a leading pan-European provider of telephone,
internet and enhanced video services, offering a one-stop shopping solution for
residential and business communication needs. We plan to reach this goal by
increasing the penetration of our new services, such as digital video, telephone
and internet, primarily within our existing customer base.
Our operations are organized into three principal divisions. UPC
Distribution comprises our local operating systems, delivers video and, in many
of our Western European systems, telephone and internet services ("the triple
play") to our residential customers. UPC Media comprises our internet access
business and converging internet content and programming businesses, which
provide their products and services to us, as well as third parties. We are in
the process of spinning-off our third division, Priority Telecom CLEC, as the
provider of telephone and data network solutions to the business market.
RIGHTS OFFERING SUMMARY
Ordinary shares A, including ordinary shares Arepresented by ADSs, outstanding
as of April 10, 2001.....................
41,246,729
Ordinary shares A, including ordinary shares A represented by ADSs,
offered.....................
125,000
Ordinary shares A, including ordinary shares A
represented by ADSs, outstanding after the rights
offering, assuming full subscription of the rights
offering.....................
566,246,729 ordinary shares A, excluding approximately 40.6 million ordinary
shares A to be issued in a separate placement to UnitedGlobalCom, Inc.
("United").
Backstop arrangement with United and placement to
United.....................
United has agreed to exercise all of the ordinary share rights and ADS rights
held by it immediately prior to the expiration of such rights and to subscribe,
at the issue price of Euro8.00 per ordinary share A and the U.S. dollar
equivalent of Euro8.00 per ADS, and pay for any ordinary shares A or ADSs that
holders of ordinary share rights or ADS rights have not subscribed for. United
also has agreed to purchase and pay for an additional number of ordinary shares
A in a placement directly to United at Euro11.40 per ordinary share A, the
average closing price of our ordinary shares A over the five trading days ended
February 21, 2001, the date two days before the rights offering was announced.
The number of ordinary shares A United would purchase and pay for in this
placement will be set such that the aggregate price of ordinary shares A and/or
ADSs, as the case may be, purchased and paid for by United as part of the rights
offering and the placement together equals Euro1.0 billion. In the event that
the rights offering is fully subscribed, we would raise approximately an
additional Euro463 million from this placement of ordinary shares A to United.
Beneficial ownership and voting power of United.....................
As of April 10, 2001, United beneficially owned approximately 53.7% of our
outstanding ordinary shares A. Depending upon the number of ordinary shares A
and ADSs purchased by others upon exercise of ordinary share rights and ADS
rights, respectively, United will beneficially own approximately between 56.8%
and 63.9% of our outstanding ordinary shares A upon completion of the rights
offering and the placement to United. See "The Rights Offering - Backstop
arrangement with United and placement to United" below.
Use of proceeds.....................
Depending upon the number of ordinary shares A and ADSs purchased by
shareholders and ADS holders other than United upon exercise of ordinary share
rights and ADS rights, respectively, the aggregate proceeds to us from the
rights offering and the separate placement to United (if any) will be between
Euro1.0 billion and approximately Euro1.463 billion, before deducting
offering expenses payable by us. It is currently anticipated that the net
proceeds will be used for general corporate purposes, including working capital,
acquisitions and other business opportunities. Pending application of the
proceeds, we may invest the proceeds in short-term, interest-bearing
investments.
Preemptive rights.....................
Statutory preemptive rights are precluded with respect to the rights offering
and the placement with United.
Holders of ordinary shares A in bearer form Ordinary share
rights.....................
We will grant _____ transferable ordinary share rights for every _____ ordinary
shares A you own of record after the close of trading of the ordinary shares A
on the Official Segment of the stock market of Euronext Amsterdam on the
ordinary share rights record date.
Issue price.....................
Euro8.00 per ordinary share A
Ordinary share rights record date.....................
May _____, 2001
Ordinary share rights expiration date.....................
____ p.m. Amsterdam time on _______, 2001
Ordinary share rights subscription period.....................
May _____, 2001 to ________, 2001
Ordinary share subscription agent.....................
-----
Method of subscription.....................
Your bank through which you hold your existing ordinary shares A will
normally be responsible for informing you of the number of ordinary share rights
you are entitled to. If you want to exercise your ordinary share rights, you
should instruct your bank in accordance with the instructions received from it.
Upon such instruction, your bank will be responsible for instructing in turn the
ordinary share subscription agent to exercise your ordinary share rights.
Method of payment.....................
You should pay the issue price for the new ordinary shares A you have
subscribed for in accordance with the instructions received from your bank
through which you hold your existing ordinary shares A. Your bank will in turn
pass such issue price to the ordinary share subscription agent, which will in
turn pass it to us.
Transfer of ordinary share rights.....................
Ordinary share rights may be exercised or sold and transferred. Ordinary
share rights will trade on the Official Segment of the stock market of Euronext
Amsterdam. If you want to sell all or part of your ordinary share rights, you
should instruct your bank accordingly in accordance with the instructions
received from it.
Delivery of ordinary shares A.....................
All ordinary shares A in bearer form issued upon exercise of ordinary share
rights will be embodied in the existing single global share certificate lodged
with NECIGEF on _____________, 2001.
Listing.....................
Our ordinary shares A in bearer form are traded on the Official Segment of
the stock market of Euronext Amsterdam under the symbol "UPC." The ordinary
share rights will also trade on the Official Segment of the stock market of
Euronext Amsterdam.
Holders of ADSs
ADS rights.....................
We will grant _____ transferable ADS rights for every _____ ADS you own of
record at 5:00 p.m. New York City time on the ADS rights record date.
Estimated U.S. dollar ADS issue price per
ADS.....................
U.S. dollar equivalent of Euro8.00 per ADS, estimated at $7.21. As described in
"The Rights Offering - The rights offering to holders of ADSs," we have made
arrangements with the ADS subscription agent, for you to pay the ADS issue price
at this estimated U.S. dollar amount. To the extent the estimated U.S. dollar
price is less than the actual U.S. dollar equivalent of the ADS issue price as
of _______, 2001, you will be required to pay the difference. To the extent the
estimated U.S. dollar price is higher, you will receive a refund of the excess.
ADS rights record date.....................
May _____, 2001
ADS rights expiration date.....................
____ p.m. New York City time on _______, 2001.
ADS rights subscription period.....................
May _____, 2001 to ________, 2001
ADS subscription agent and ADS depositary.....................
Citibank, N.A.
Method of subscription and payment.....................
You can exercise your ADS rights by the delivery of a properly executed warrant,
together with payment in full of the ADS issue price, to the ADS subscription
agent by no later than _____ p.m. New York City time on _________, 2001.
Transfer of ADS rights.....................
We do not intend to apply for the ADS rights to be traded on the Nasdaq National
Market. However, ADS rights may be exercised, sold or assigned to others. ADS
rights may be bought or sold through banks or brokers. You may place an order
with the ADS subscription agent to sell all or part of your ADS rights, whether
or not in connection with a subscription. The ADS subscription agent must
receive your order prior to _____ p.m. New York City time on _______ __, 2001.
No ADS right may be sold, assigned or otherwise transferred after 5:00 p.m. New
York City time on _______, 2001. If only a portion of the ADS rights are to be
sold by the ADS subscription agent, your warrant must include instructions as to
the action to be taken with respect to your ADS rights that are not to be sold.
Delivery of ADRs.....................
The ADS depositary will provide you with American Depositary Receipts ("ADRs")
evidencing your new ADSs as soon as practicable after _______, 2001, provided
that you have paid the ADS subscription agent any shortfall arising from the
conversion of a U.S. dollar payment.
Listing.....................
ADSs representing our ordinary shares A are traded on the Nasdaq National
Market under the symbol "UPCOY." We do not intend to apply for the ADS rights to
be traded on the Nasdaq National Market or any stock exchange, but you may trade
them in the over-the-counter market.
For additional information regarding the rights offering, see "The Rights
Offering."
Authorization.
The resolution of our Board of Management by means of which the ordinary shares
A and the ADSs will be issued, passed on [date] and was duly authorized by a
resolution of our Supervisory Board passed on February 13, 2001, and was
approved by written consent of holders of priority shares on [date]..
Certain Netherlands Tax Considerations.
Deemed resident individuals of The Netherlands will generally be taxed at 30% on
a fixed 4% return on the individual's yield basis (rendementsgrondslag),
regardless of the actual income, gains and/or losses realised. The ordinary
shares A and/or ADSs and/or rights will be part of the individual's yield basis.
Deemed resident corporations of The Netherlands will generally be subject to
Netherlands corporation tax for the income, gains and/or losses realised as
regards the ordinary shares A and/or ADSs and/or rights, unless the
corporation's investment in the ordinary shares A and/or ADSs and/or rights
qualifies for the participation exemption (deelnemingsvrijstelling).
Non-resident holders of the ordinary shares A and/or ADSs and/or rights,
generally will not be subject to Netherlands income tax. On dividends
Netherlands dividend tax may be withheld. Exemptions may apply to the foregoing
tax treatment exemptions may apply. Special provisions apply to substantial
interest holders (aanmerkelijk belanghouders). See "Certain Netherlands Tax
Considerations."
Certain U.S. Federal Income Tax Consequences.
For U.S. federal income tax purposes, U.S. holders of rights as of the
ADS rights record date or the ordinary share rights record date generally will
not recognize taxable income in connection with the distribution to them or
exercise by them of rights. U.S. holders of rights may recognize gain or loss
upon the sale or exchange of rights or ordinary shares A or ADSs acquired
through exercise of the rights. See "Certain U.S. Federal Income Tax
Consequences."
OUR ADDRESS AND TELEPHONE NUMBER
Our office address is Boeing Avenue 53, 1119 PE, Schiphol Rijk, The Netherlands.
Our telephone number is +31 20 778 9400.
RISK FACTORS
An investment in the securities offered hereby is subject to a number of risks.
You should consider carefully the following risk factors, as well as all of the
other information in this prospectus and the information in the documents
incorporated by reference. The video, telephone and internet/data service
industries are changing rapidly. Therefore, the forward-looking statements and
statements of expectations, plans and intent in this prospectus are subject to a
greater degree of risk than similar statements regarding certain other
industries.
We expect to continue to make net losses for the next five to ten years.
We have experienced net losses every year since we started business in July
1995. Through December 31, 2000, we had recognized cumulative losses of
approximately Euro3.1 billion (US$2.9 billion). We expect to incur net losses
for at least the next five to ten years.
Our high level of debt and limitations on our capacity to raise capital and
invest could slow down growth in subscribers and revenue.
We are highly leveraged. Many of our unconsolidated subsidiaries and affiliates
also have long- and short-term debt. Our high level of debt and limitations on
our capacity to raise capital and invest reduce our financial flexibility. This
could reduce the amount of money available to develop our businesses and result
in slower growth in subscribers and revenues than we plan. As of December 31,
2000, we owed Euro8.1 billion (US$7.6 billion) in consolidated debt. We may need
to seek significant additional financing in the future which, if available,
could result in our incurring significant additional indebtedness. The covenants
of our and our subsidiaries' and affiliates' indentures and debt facilities may
restrict our and their operations.
As a subsidiary of United, we are restricted by the terms of United's debt
instruments in addition to our own debt instruments. We have agreed with United
not to take any action that would result in a breach of these terms. This limits
our ability to incur more debt and issue certain preferred stock. Our freedom to
invest in entities that we do not control is also limited. Even if we do not
cause a breach of the terms of United's debt securities, a breach that is caused
by United or one of its other subsidiaries could still restrict us from
incurring more debt or taking other actions.
Adverse regulation of our video services could limit our revenues and growth
plans and expose us to various penalties.
In most of our markets, regulation of video services takes the form of price
controls and programming content restrictions. Regulations impose other types of
charges on us and restrictions on our ownership and operations, violations of
which may lead to monetary penalties or forfeitures of our rights to provide
services or facilities. In The Netherlands and Austria, local municipalities
have contractual rights that restrict our flexibility to increase prices, change
programming and introduce new services. In many countries we may require
approval to move channels from our basic tier of service to other higher-priced
tiers, a key component of our strategy. UPC Polska, our Polish operating
company, is currently operating in certain areas without the necessary permits.
Failure to obtain these permits could lead to governmental orders requiring UPC
Polska to stop operating in those areas, the imposition of monetary penalties,
and forfeiture of our cable networks. Poland also has restrictions with respect
to rights to install and operate cable television and direct-to-home
broadcasting networks by entities in which foreign ownership exceeds certain
limits and in which the majority of governing bodies are not Polish citizens
residing in Poland. UPC Polska may not be deemed to be in full compliance with
these or other restrictions or regulations. We are subject to pending claims in
Israel alleging that we have engaged in certain unlawful acts, including
violation of our cable television franchise agreements.
Increased regulatory review may preclude certain arrangements between our
content companies and our operating systems.
We have begun facing increased competition regulatory review of our operations
in some countries because we own interests in both cable television and internet
access systems as well as companies that provide content for cable television
and internet subscribers. Local operators with whom UPC Media has long term
content agreements are subject to exclusivity obligations that allow UPC Media
to offer its content products to them to the exclusion of other competing
providers. These exclusivity obligations may attract the interest of European
Union or national regulatory authorities. European Union and national regulatory
agencies or national courts could reduce the period of exclusivity under which
we offer our services over the networks of our local operators or could declare
that our agreements are null and void, which may require them to be
renegotiated. Our competitors may then be able to provide services through our
local operators on the same terms and conditions as we have negotiated, or our
local operators may offer competing services earlier than we had anticipated in
our agreements. Moreover, an agreement containing exclusivity provisions could
in some cases give rise to substantial fines imposed by the European Commission
and civil liability from third parties. As a result of this regulatory review,
we may be precluded from making certain arrangements between our content
companies and our operating systems.
Adverse regulation could require us to provide access to our networks to third
parties on economic terms and conditions that may be adverse to us.
In The Netherlands there are debates ongoing on the question of what rights
should be afforded to third parties in terms of access to cable networks. In the
summer of 2000, The Netherlands government committed to producing a legal
framework on access to cable networks, in line with the future European Union
framework, within two years. The early stages of consultation on this law are
now ongoing. In addition, in March of 2001 OPTA (the Netherlands communications
regulator) and the NMa (the Netherlands competition authority) published a joint
consultation paper regarding the definition of the internet market and whether a
distinction should be drawn between broadband and narrowband technologies. It is
likely that the findings of this consultation paper will influence the ongoing
legislative process to the extent that a separate broadband internet market is
defined. In the event that we are required to offer third parties access to our
cable infrastructure, without being able to specify the terms and conditions of
such access, for the delivery of internet services, internet service providers
could potentially provide services that compete with our services over our
network infrastructure.
At the European Union level, access to cable networks is not, presently, covered
by specific regulation. However, draft directives which are currently under
consideration and which are expected to enter into force on December 31, 2001,
would, as presently drafted, prevent European Union member states from imposing
ex-ante access obligations other than on those operators deemed to have
Significant Market Power (re-defined in line with the European Union competition
law concept of dominance) in a particular market. All European Union member
states, including The Netherlands, are required to adapt their laws in line with
any European Union directive. However, there can be no certainty at the moment
as to the final form of any such law, if passed, nor of the way in which it will
be implemented by the regulatory authorities should it come into force. Nor can
there be certainty as to the future requirements of the European Union
regulatory regime.
Regulation may increase the cost of offering internet/data services and slow
demand.
The internet access business has, to date, not been materially restricted by
regulation in our markets. The legal and regulatory environment of internet
access and electronic commerce is uncertain, however, and may change. New laws
and regulations may be adopted for internet service offerings. Existing laws may
be applied to the new forms of electronic commerce. Uncertainty and new
regulation could increase our costs. It could also slow the growth of electronic
commerce on the internet significantly. This could delay growth in demand for
our internet/data services and limit the growth of our revenues. New and
existing laws may cover issues such as:
o user privacy,
o sales and other taxation,
o consumer protection,
o characteristics and quality of products and services,
o cross-border commerce,
o libel and defamation,
o copyright and trademark infringement,
o pornography and indecency, and
o other claims based on the nature and content of internet materials.
As we become larger, we are beginning to face increased competition regulatory
review that may preclude certain acquisitions or other transactions.
Over the last few years, we have grown through acquisition of other companies
and systems. We have a substantial presence in some markets, including The
Netherlands. Because of our size and position, we often have to seek approval
from competition regulators for certain acquisitions. We may be precluded from
making certain acquisitions or entering into certain transactions as a result of
competition-related regulatory issues. We have begun facing increased
competition regulatory review of our operations in some countries because we own
interests in both cable television and internet access systems as well as
companies that provide content for cable television and internet subscribers. As
a result of this regulatory review, we may be precluded from making certain
arrangements between our content companies and operating systems.
Any pending or future acquisitions may involve significant risks.
Although we are currently largely in a phase of consolidation, we may still
acquire systems for strategic, economic or other reasons. We are often and
currently are engaged in discussions or negotiations regarding the acquisition
of businesses and systems, some potentially significant in relation to our size.
Any pending new acquisitions, as well as future acquisitions, will be
accompanied by risks. For example, we may not be able to satisfy conditions that
sellers of networks may demand in order to close acquisitions. In addition,
there may be significant legal and contractual issues in connection with
acquisitions, such as change of control provisions in licenses and agreements,
that could delay or prevent completion. Regulatory bodies may impose adverse
conditions on the completion of our acquisitions. At the time of closing any new
acquisition, we may waive conditions to closing, either because we believe that
the condition will be satisfied in the future or because we believe an
unsatisfactory resolution would not materially adversely affect us and our
subsidiaries as a whole. There is a risk that our beliefs in some of these
instances will prove to be incorrect. Further, our ability to consummate future
acquisitions may also be constrained by our inability to raise sufficient
capital to fund such future acquisitions.
We cannot be certain that we will be successful in integrating acquired
businesses with our existing businesses.
Our success depends, in part, upon the successful integration of our recently
acquired businesses and any future acquisitions we make. Although we believe
that integration of our new acquisitions will result in significant benefits and
synergies, the integration of these businesses will also present significant
challenges, including:
o realizing economies of scale in interconnection, programming and
network operations, and eliminating duplicate overheads, and
o integrating networks, financial systems and operational systems.
We cannot assure you, with respect to either our new acquisitions or future
acquisitions, that we will realize any anticipated benefits or will
successfully integrate any acquired business with our existing operations.
Our business is almost entirely dependent on various telecommunications and
media licenses granted and renewed by various national regulatory authorities in
the territories in which we do business, and without these licenses, a number of
our businesses could be severely curtailed.
Licenses are granted for a limited term and they may not be renewed when they
expire. For example, the licenses of our Israeli operating company expire in
2001. Regulatory authorities may have the power, at their discretion, to
terminate a license (or amend any provisions, including those related to license
fees) without cause. If we were to breach a license or applicable law,
regulatory authorities could revoke, suspend, cancel or shorten the term of a
license or impose fines. Regulatory authorities may grant new licenses to third
parties, resulting in greater competition in territories where we are already
licensed. New technologies may permit new competitors to compete in areas where
we hold exclusive licenses. National authorities may pass new laws or
regulations requiring us to re-bid or reapply for licenses or interpret present
laws against us, adversely affecting our business. Licenses may be granted on a
temporary basis, and there is no assurance that these licenses will be continued
on the same terms. Licenses may require us to grant access to bandwidth,
frequency capacity, facilities or services to other businesses that compete for
our customers. Accordingly, a number of our businesses could be severely
curtailed if those licenses were no longer available or were available at
unfavorable terms.
Low demand, competition, unplanned costs, regulation and difficulties with
interconnection could hinder the profitability of our telephone services.
Our telephone services may not become profitable for a number of reasons. Our
strongest competition will come from incumbent operators. Regulation of the
prices charged by the incumbent for the use of network elements and to end users
may be critical to our ability to compete with the incumbent operator. Generally
our services are not subject to price regulation and the incumbent's are. Also,
customer demand could be low, or we may encounter competition and pricing
pressure from incumbent and other telecommunications operators. Our network
upgrade may cost more than planned. In addition, our operating companies need to
obtain and retain licenses and other regulatory approvals for our existing and
new services. They may not succeed, and such licenses are currently unavailable
in Israel, the Czech Republic and Romania. Furthermore, our operating systems
need to interconnect their networks with those of the incumbent
telecommunications operators in order to provide telephone services. Problems in
negotiating interconnection agreements could delay the introduction or impede
the profitability of our telephone services. Not all of our systems have
interconnection agreements in place, and interconnection agreements have limited
duration and may be subject to regulatory and judicial review. We are
negotiating interconnection agreements for our planned telephone markets that do
not yet have them. This may involve time-consuming negotiations and regulatory
proceedings. While incumbent telecommunications operators in the European Union
are required by law to provide interconnection, incumbent telecommunications
operators may not agree to interconnect on a time scale or on terms that will
permit us to offer profitable telephone services. After interconnection
agreements are concluded, we remain reliant upon the good faith and cooperation
of the other parties to these agreements for reliable interconnection.
The complexities of the operating systems we need to develop for our new
services could increase the costs and slow the introduction of these services.
We only recently began offering digital services and continue to offer new
internet and telephone services in existing and new markets. We may not have
planned for or be able to overcome all of the problems in introducing these
services, especially on the large scale that we hope to achieve. This would
impede our planned revenue growth and harm our financial condition.
The new services involve many operating complexities. We will need to develop
and enhance new services, products and systems, as well as marketing plans to
sell the new services. We are in the process of introducing a comprehensive new
billing and customer care system to support our services. However, until the
change to the new system is completed, we will continue to use our existing
customer care and billing systems. Problems with the existing or new systems
could delay the introduction of the new services, increase their costs, or slow
successful marketing. These complexities and others may cause the new services
not to meet our financial expectations. This could impede our planned revenue
growth and harm our financial condition.
The success of our services depends on continued achievement of technological
advances.
Technology in the cable and telecommunications industry is changing very
rapidly. These changes influence the demand for our products and services. We
need to be able to anticipate these changes and to develop successful new and
enhanced products quickly enough for the changing market. This will determine
whether we can continue to increase our revenues and the number of our
subscribers and be competitive.
We have introduced new services, including:
o digital services,
o pay-per-view services with frequent starting times, which are known as
"near video-on-demand,"
o high speed data and internet access services, and
o cable telephone services.
The technologies used to provide these services are in operation in some of our
systems as well as systems of other providers. However, we cannot be sure that
demand for our services will develop or be maintained in light of other new
technological advances.
We expect that new products and technologies will continue to emerge and that
existing products and technologies will further develop. These new products and
technologies may reduce the prices of our services or they may be superior to,
and render obsolete, the products and services we offer and the technologies we
use. It may be very expensive for us to upgrade our products and technology in
order to continue to compete effectively. Our future success depends, in part,
on our ability to anticipate and adapt in a timely manner to technological
changes.
Lack of necessary equipment could delay or impair the implementation and
expansion of our new services.
If we cannot obtain the equipment needed for our existing and planned services,
our operating results and financial condition may be harmed. For example, a
customer will need a digital set-top computer to access the internet or receive
our other enhanced services through a television set. These computers are being
developed by several suppliers. If there are not enough set-top computers for
subscribers, however, we may have to delay our expansion plans. Further, we
expect the price for these computers to decrease. If the price for set-top
computers does not decrease from current levels as expected, it could impair our
ability to offer these services.
Inability to obtain the necessary content could reduce demand for our services.
Our success depends on obtaining or developing affordable and popular video and
internet services for our subscribers. We may not be able to obtain or develop
enough competitive content to meet our needs. This would reduce demand for our
digital video and internet services, limiting their revenues. We rely on other
programming suppliers for most of our content although we have committed and
will continue to commit substantial resources to obtaining and developing new
content. Where appropriate, we have found partners for obtaining new content,
and, as necessary, we will continue to seek new partners. We may not, however,
find appropriate partners, obtain necessary broadcasting licenses or
successfully implement our content plans.
Increased competition in video services could reduce our revenues.
The cable television industry in many of our markets is competitive and changing
rapidly. Competition could result in the loss of our customers and a decrease in
our revenues. We expect that competition will increase as new entrants, who use
multi-channel television technologies different from the technologies our cable
systems use, enter our markets. These technologies may include direct-to-home
satellite services, private cable systems used by housing associations and
multiple unit dwellings, and "wireless" cable transmitted by low frequency
radio.
We may also face competition in video services from other communications and
entertainment media companies. These could include incumbent telecommunications
operators and providers of services over the internet. In some franchise areas,
our rights to provide video services are not exclusive. We currently compete
with other cable operators and in the future may have to compete with additional
cable operators.
The competitiveness of the telephone and internet/data services industries will
make it difficult for our new services to enter the market.
In the provision of our telephone and internet/data services, we face
competition from incumbent telecommunications operators and other new entrants
to these markets. Our telephone service also competes with wireless telephone
carriers. In the provision of internet/data services we compete with companies
that provide such services using traditional, low speed telephone lines, and we
expect to face growing competition from internet service providers that, like
us, use higher-speed, higher-capacity cable modems and providers that use other
broadband technologies, such as fiber, microwave, satellite and digital
subscriber lines. Some of our competitors have more experience in providing
telephone and/or internet services than we have and others may be able to devote
more capital to these services than we can.
Developing a profitable telephone service will depend, among other things, on
whether we can attract and retain customers, maintain competitive prices, and
provide high quality customer care and billing services without incurring
significant additional costs. Prices for long distance calls have decreased
significantly in recent years and we expect them to continue to drop. Increased
competition may also push prices down for local telephone services. Regulators
may make incumbent telecommunications operators lower their rates or increase
their pricing flexibility. Because these are our principal competitors, this
could force us to lower our rates to remain competitive.
European use of the internet, electronic commerce and other bandwidth intensive
applications may not increase as we expect.
Our business plan assumes that European use of the internet, electronic commerce
and other bandwidth intensive applications will continue to increase
substantially in the next few years. Our business plan assumes a less rapid
increase in Eastern Europe. If the use of applications requiring intensive
bandwidth does not increase in Europe as anticipated, subscriptions to chello
broadband and other services involving managed bandwidth could be materially
lower than we currently anticipate. Reduced demand for our services may have a
negative effect on our revenues and our financial condition.
We may not always control our operating companies and joint ventures.
We currently hold a controlling ownership interest in most of our operating
companies. From time to time we have acquired non-controlling interests in
various companies. In the past we have formed joint ventures by combining
certain of our assets with those of our partners and we typically retain an
ownership interest in the joint venture proportionate to the value of the assets
we contributed. We expect to continue to enter into these types of transactions
in the future. In addition, we may sell interests in certain of our operating
companies in public offerings or private sales. At some point, we may hold
minority voting or economic interests in these joint ventures and operating
companies. While we intend to be actively involved in the management of these
minority-owned operating companies, we may be precluded from affirmatively
controlling these operating companies. If we do not control these companies, we
may be unable to cause these operating companies and joint ventures to pay
dividends or other distributions to their respective shareholders and may be
unable to implement the strategies that we favor.
We will continue to be controlled by United, whose interests may be different
from those of other shareholders.
United currently owns about 53.7% of our outstanding ordinary shares A and all
of our priority shares. If it converts all of our preference shares and
exercises all of our warrants that it holds, its ownership interest will be
54.7% (using a May 28, 2001, preference share conversion rate). Depending upon
the number of ordinary shares A and ADSs purchased by shareholders and holders
of ADSs other than United upon exercise of ordinary share rights and ADS rights,
respectively, United will beneficially own approximately between 56.8% and 63.9%
of our outstanding ordinary shares A upon completion of the rights offering and
the separate placement to United. As a result, United is able to control the
election of all but two of the members of our Supervisory Board. Royal Philips
Electronics N.V. has had the right to appoint one member since United acquired
50% of our issued shares from Philips in 1997. In addition, the Discount Group,
our partner in our Israeli system, has a contractual right to appoint one
director although they have not yet exercised this right. United will be able to
determine the outcome of almost all corporate actions requiring the approval of
our shareholders. Our priority shares, which are held solely by United, give
United additional approval rights over certain of our actions. As a result,
United will continue to control substantially all of our business affairs and
policies.
Our Supervisory Board has the power to approve transactions in which United has
an interest. This power is subject to directors' fiduciary duties to our other
shareholders. Nonetheless, conflicts may arise between the interests of United
and our other shareholders. For example, United could cause us to provide
financial resources to our shareholders. This could limit our current strategy
of investing in our new businesses.
We do not intend to pay dividends for the foreseeable future.
We have never paid dividends on our shares. We do not intend to pay dividends in
the foreseeable future. The terms of some of our existing debt facilities and
indentures prevent us from paying dividends. At the moment, we do not have
sufficient shareholders' equity under Netherlands law to make distributions. You
should therefore not expect to receive dividends on our shares for the
foreseeable future.
We cannot assure that a trading market will develop for the rights, and, even if
a market develops, the rights, will be subject to even greater volatility than
our ordinary shares A and ADSs.
We intend to list the ordinary share rights on the Official Segment of the stock
market of Euronext Amsterdam. We do not intend to apply for the ADS rights to be
traded on the Nasdaq National Market or any stock exchange, but you may trade
them in the over-the-counter market. We cannot assure that an active trading
market will develop for the rights. Even if an active market develops, the
trading price of the rights will be extremely volatile. Because the trading
price of the rights depends on the trading price of our ordinary shares A and
ADSs, the existing volatility of our ordinary shares A and ADSs will magnify the
volatility of the rights.
The price of our ordinary shares A and ADSs may decline before or after the
rights expire.
We cannot assure you that the public trading market price of our ordinary shares
A and ADSs will not decline after you elect to exercise your rights. If that
occurs, you will have committed to buy ordinary shares A or ADSs at a price
above the prevailing market price and you will have an immediate unrealized
loss. Moreover, we cannot assure you that following the exercise of rights you
will be able to sell your ordinary shares A or ADSs at a price equal to or
greater than the issue price. Until ordinary shares A or ADSs are delivered upon
expiration of the rights offering, you may not be able to sell the ordinary
shares A or ADSs that you purchase in the rights offering.
If you do not exercise all of your rights, you may suffer significant dilution
of your percentage ownership of our ordinary shares A or ADSs. In the event that
the rights offering is fully subscribed, the separate placement to United of our
ordinary shares A will result in a small dilution of your percentage ownership
of our ordinary shares A or ADSs.
The rights offering is designed to enable us to raise capital in a manner that
gives the opportunity to all shareholders and holders of ADSs to subscribe for
newly issued ordinary shares A and ADSs as further described in this prospectus.
Our majority shareholder, United, has agreed to exercise all of its rights and
to purchase any ordinary shares A or ADSs that holders of ordinary share rights
or ADS rights have not subscribed for. To the extent that you do not exercise
your rights and ordinary shares A and ADSs in respect of your rights are
purchased by United, your proportionate voting interest will be reduced, and the
percentage that your original ordinary shares A or ADSs represent of our
expanded equity after exercise of the rights will be disproportionately reduced.
If no shareholder or ADS holder other than United exercises its rights, United's
ownership interests in UPC will increase to approximately 63.9% from
approximately 53.7%.
United also has agreed to purchase and pay for an additional number of ordinary
shares A in a placement directly to United at Euro11.40 per ordinary share A.
The number of ordinary shares A United would purchase and pay for in this
placement will be set such that the aggregate price of ordinary shares A and/or
ADSs, as the case may be, purchased and paid for by United as part of the rights
offering and the placement together equals Euro1.0 billion. In the event that
the rights offering is fully subscribed, United would acquire approximately an
additional 40.6 million ordinary shares A in this separate placement and
United's ownership interest in our ordinary shares A would increase to
approximately 56.8% from approximately 53.7%.
We will not pay you interest on funds delivered to the ordinary share
subscription agent or the ADS subscription agent pursuant to the exercise of
rights.
Once you exercise your rights, you may not revoke the exercise. If we elect to
withdraw or terminate the rights offering, neither we nor the ordinary
subscription agent nor the ADS subscription agent will have any obligation with
respect to the rights except to return, without interest, any subscription
payments.
USE OF PROCEEDS
Depending upon the number of ordinary shares A and ADSs purchased by
shareholders and ADS holders other than United upon exercise of ordinary share
rights and ADS rights, respectively, the aggregate proceeds to us from the
rights offering and the separate placement to United if any will be between
Euro1.0 billion and approximately Euro1.463 billion before deducting offering
expenses payable by us. We will use the net proceeds for general corporate
purposes, including working capital, acquisitions and other business
opportunities. Pending application of the proceeds, we may invest the proceeds
in short-term, interest-bearing investments.
Prior to completion of the rights offering, we plan to repay our Euro750
million bridge facility from existing cash on hand. See "Capitalization."
DIVIDEND POLICY
We have never declared or paid cash dividends on our ordinary shares. We do not
intend to pay dividend for the foreseeable future. Some of our debt facilities
currently prohibit us from paying cash dividends. In addition, Netherlands law
limits our distributions from statutory shareholders' equity. See "Risk Factors
- We do not intend to pay dividends for the foreseeable future."
CAPITALIZATION
The following table sets forth, on a consolidated basis, our non-restricted cash
and cash equivalents, debt and equity capitalization:
o as of December 31, 2000,
o as adjusted to reflect the repayment on _______, 2001 of the
Euro750 million UPC bridge facility from our existing cash balances,
and to reflect completion of the rights offering and the separate
placement to United, if any, net of offering costs, (1) if United is
the only shareholder or ADS holder that participates in the rights
offering and (2) if all shareholders and ADS holders participate
in the rights offering pro rata and United purchases the additional
ordinary shares A pursuant to an agreement with us dated February 22,
2001 (the "Commitment Agreement") at Euro11.40 per ordinary share A,
or approximately Euro463 million in the aggregate, as necessary to
fulfill its Euro1.0 billion commitment.
You should read the table in conjunction with our audited consolidated financial
statements, the notes and supplements thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," all of which are
incorporated by reference into this prospectus.
As of December 31, 2000
---------------------------------------------------
(As Adjusted)
--------------------------------------
All shareholders
participate and
United as only United purchases
participating additional
Actual shareholder ordinary shares A
--------- ----------------- ------------------
(In thousands of euros)
Non-restricted cash and cash equivalents........... 1,590,230 1,814,230 2,276,980
========= ============= =============
Short-term debt.................................... 69,692 69,692 69,692
-------- -------- --------
Minority interest in subsidiaries.................. 831,132 831,132 831,132
======== ======== ========
Long-term debt..................................... 8,078,269 7,328,269 7,328,269
Shareholders' equity:
Priority Stock..................................... -- -- --
Ordinary shares A.................................. 441,247 566,247 606,861
Series 1 convertible preferred stock............... 1,392,251 1,392,251 1,392,250
Additional paid-in capital......................... 2,800,234 3,649,234 4,071,370
Deferred compensation.............................. (87,945) (87,945) (87,945)
Accumulated deficit................................ (3,110,627) (3,110,627) (3,110,627)
Other cumulative comprehensive income.............. 78,210 78,210 78,210
------------- ------------- -------------
Total shareholders' equity......................... 1,513,370 2,487,370 2,950,120
------------- ------------- -------------
Total capitalization............................... 9,591,639 9,815,639 10,278,389
============= ============= =============
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended December
31, 1996, 1997, 1998, 1999, and 2000 have been derived from our audited
consolidated financial statements, some of which are incorporated by reference
into this prospectus. We were formed when United and Philips contributed their
respective ownership interests in certain cable television systems to us. On
December 11, 1997, United acquired the 50% of our issued shares that it did not
already own from Philips. As a result of this acquisition and the associated
push-down of United's basis on December 11, 1997, the financial information for
the years ended December 31, 1998, 1999 and 2000 is presented on a
"post-acquisition" basis. The data set forth below for us is qualified by
reference to, and should be read in conjunction with, our audited consolidated
financial statements and notes thereto and also with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," incorporated by
reference into this prospectus.
Year Ended December 31,
-------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
(In thousands of euros, except per share data)
Statement of Operations Data:
Service and other revenue..... 111,257 153,040 185,582 447,501 1,000,825
Operating expense............. (37,409) (53,777) (62,830) (293,778) (714,906)
Selling, general and
administrative expense..... (36,836) (54,030) (218,587) (466,260) (569,121)
Depreciation and amortization. (36,226) (60,302) (85,150) (266,070) (718,669)
-------------------------------------------------------------------------------
Net operating income (loss)... 786 (15,069) (180,985) (578,607) (1,001,871)
Interest income............... 1,251 2,955 3,357 20,104 44,345
Interest expense ............. (17,459) (32,100) (47,355) (178,448) (753,231)
Foreign exchange gain (loss)
and other, net............. (9,620) (27,205) (1,606) (21,060) (181,285)
-------------------------------------------------------------------------------
Net income (loss) before income (25,042) (71,419) (226,589) (758,011) (1,892,042)
taxes and other items......
Shares in results of affiliated
companies, net............. (13,936) (11,552) (28,962) (29,760) (116,690)
Minority interests in
subsidiaries............... (1,002) 69 523 1,651 23,887
Income tax benefit (expense).. (231) 748 (551) 1,822 (3,930)
-------------------------------------------------------------------------------
Net income (loss)............. (40,211) (82,154) (255,579) (784,298) (1,988,775)
===============================================================================
Basic net loss attributable to
ordinary shareholders...... (40,211) (82,154) (255,579) (784,298) (1,996,408)
===============================================================================
Basic and diluted loss per
ordinary share A........... (0.14) (0.30) (1.03) (2.08) (4.56)
===============================================================================
Weighted-average number of 261,187,767 275,421,933 247,915,834 377,969,829 438,041,841
ordinary shares outstanding
===============================================================================
Selected Balance Sheet Data:
Non-restricted cash and cash
equivalents................. 19,807 45,443 13,419 1,025,460 1,590,230
Other current assets.......... 37,784 38,762 61,735 311,202 530,357
Investments in affiliated
companies.................. 118,195 187,706 223,737 242,847 685,288
Property, plant and equipment,
net........................ 188,768 220,075 273,628 1,908,414 3,581,539
Goodwill and intangible assets,
net........................ 122,705 313,129 308,585 2,611,413 5,119,892
Other non-current assets...... 1,259 64,194 57,213 702,936 295,065
-------------------------------------------------------------------------------
Total assets............... 488,518 869,309 938,317 6,802,272 11,802,371
===============================================================================
Short-term debt............... 204,152 116,855 159,664 213,532 69,692
Other current liabilities..... 54,748 84,150 110,956 565,207 1,263,107
Long-term debt................ 125,153 438,397 533,078 3,903,410 8,078,269
Other non-current liabilities 5,317 26,377 156,510 88,028 46,801
-------------------------------------------------------------------------------
Total liabilities.......... 389,370 665,779 960,208 4,770,177 9,457,869
===============================================================================
Minority interest in
subsidiaries 2,067 3,955 11,768 11,895 831,132
===============================================================================
Total shareholders' equity
(deficit)................ 97,081 199,575 (33,659) 2,020,200 1,513,370
===============================================================================
BUSINESS
Below is a brief overview of our business. You can read a more detailed
description of our business, including the competitive and regulatory
environment in which we operate, in our most recent annual report on Form 10-K
incorporated by reference into this prospectus. We report the results of our
operations in euros. In this prospectus we have translated some amounts into
U.S. dollars using the December 31, 2000, exchange rate of Euro1.077 to $1.00.
We own and operate broadband communications networks or services in 17 countries
in Europe and in Israel. Our subscriber base is the largest of any group of
broadband communications networks operated across Europe. Our goal is to enhance
our position as a leading pan-European distributor of video programming services
and to become a leading pan-European provider of telephone, internet and
enhanced video services, offering a one-stop shopping solution for residential
and business communication needs. We plan to reach this goal by increasing the
penetration of our new services, such as digital video, telephone and internet,
primarily within our existing customer base.
We have recently more formally organized our operations into three primary
business units:
o UPC Distribution, which comprises of our local operating systems,
delivers video and, in many of our Western European systems, telephone
and internet services to our residential customers,
o UPC Media comprises the converging businesses of chello broadband,
internet access and portal, and video programming, which provide their
products and services to us, as well as third parties, and
o Priority Telecom includes our competitive local exchange carrier
("CLEC") and wireless local loop ("WLL") business, targeting the
business market.
UPC Distribution
Our distribution division delivers video services and, in many of our Western
European systems, telephone and internet services to the residential market.
Over the past few years we have been upgrading our cable television systems to
high-speed, two-way capacity. In addition to being able to offer telephone and
internet services, the upgraded network will allow us to offer enhanced digital
video services, such as near video-on-demand ("NVOD") and interactive
television. As of December 31, 2000, approximately 67% of the network in our
Western European systems, excluding Germany, had been upgraded, as well as 12%
of our Eastern European systems.
During 2000, we initiated the soft launch of our digital video services in The
Netherlands, our largest market. We plan the hard launch of digital video in The
Netherlands in 2001, as well as launching in Austria and France. Full
digitalization of our television signals will be made possible by our network
upgrade to full two-way capability. The roll-out of digital services via set-top
computers installed in customers' homes will involve significant capital
investment and the use of new technologies. We cannot assure you that we will be
able to complete the roll-out of digital services on the planned schedule.
During 2000, we undertook a significant project of upgrading and integrating our
information technology systems, creating a pan-European infrastructure to
support the delivery of our services. The primary purpose of the project is the
integration of software applications and processes into a complete information
technology and business solution. Various modules, such as billing and
collection, customer care, activation and provisioning, capacity management and
reporting will be linked to a pan-European data center based in The Netherlands.
Currently, all of the telephone and internet customers of UPC France have been
transferred to this platform. During the course of 2001, we are planning to
migrate UPC France's video customers, as well as UPC Netherlands' customers to
the new platform.
UPC Distribution--Video. As of December 31, 2000, our operating systems had
approximately 9.0 million aggregate subscribers to their basic tier video
services, excluding an additional 474,000 subscribers for our digital DTH
service in Poland, Hungary, the Czech Republic and the Slovak Republic. In the
third quarter of 2000, we soft launched digital video services in The
Netherlands, and had approximately 14,700 digital video subscribers as of
December 31, 2000 in The Netherlands. We plan to continue increasing our revenue
per subscriber by expanding our video services program offerings through digital
and expanded basic tier services, pay-per-view and digital audio.
We currently offer our subscribers some of the most advanced analog video
services available today and a larger choice of radio programs. In many systems,
for example, we have introduced impulse pay-per-view services. We plan to
continue to improve our expanded basic tier offerings by adding new channels.
Generally, basic tier pricing is regulated while the expanded basic tier is not
specifically price regulated, although it will be subject to the general rules
of competition law. In addition, we plan to offer subscribers additional choice
by offering thematic groupings of tiered video services in a variety of genres
and by increasing the number and time availability of pay-per-view offerings.
The increased channel capacity provided by digitalization will enable us to
offer subscribers more choice in video products, such as NVOD, digital expanded
basic tiers, and additional premium channels. In addition, digitalization will
allow us to provide value added services such as digital music, walled garden,
interactive television and basic e-mail functionality. The increased channel
capacity provided by digitalization will enable subscribers to customize their
subscriptions for our products and services to suit their lifestyles and
personal interests. We also intend to provide our subscribers with customizable
programming guides that would enable them to program their favorite channels and
also allow parents to restrict their children's viewing habits.
In areas where our cable television franchises are exclusive, our operating
companies generally face competition from DTH satellite service providers and
television terrestrial broadcasters. We have faced the most competition from DTH
providers in France, Poland and Sweden. In those areas where our cable
television franchises are non-exclusive, our operating companies face
competition from other cable television service providers, DTH satellite service
providers and television broadcasters.
UPC Distribution--Telephone. We believe that our fiber and broadband, coaxial
cable and cable-based subscriber relationships provide ready access to potential
residential telephone subscribers and give us a unique opportunity to provide
residential telephone services in Europe. We offer residential telephone
services over our network, branded as Priority Telecom, in our Austrian,
Netherlands, French and Norwegian systems. Historically, we have offered
residential, WLL and CLEC services as Priority Telecom. We are in the process of
spinning-off Priority Telecom CLEC as a separate business to focus on the
business market. We also have a traditional telephone network in Hungary and the
Czech Republic. We offer our residential telephone customers local, national and
international voice services, in addition to several value added features. As of
December 31, 2000, we had 358,000 residential telephone subscribers.
Traditional telephone service is carried over twisted copper pair in the local
loop. The cable telephone technology that we are using allows telephone traffic
to be carried over our upgraded network without requiring the installation of
twisted copper pair. This technology requires the addition of equipment at the
master telecom center, the distribution hub and in the customer's home to
transform voice communication into signals capable of transmission over the
fiber and coaxial cable. We are currently working in close co-operation with
some suppliers to develop the possible introduction of alternative telephony
technologies, including Voice over Internet Protocol ("VOIP"). VOIP is
well-suited for many of our networks, as the technology used is similar to our
existing internet service. Because of these similarities, we believe we can
minimize our capital expenditures for the introduction of VOIP as compared to
other technologies. Although VOIP services are commercially available from other
operators, there can be no assurances that we will be able to successfully
launch VOIP services to our customers.
We generally price our telephone service at a discount compared to services
offered by incumbent telecommunications operators. Because of the relatively
high European local tariff rates, we believe potential customers will be
receptive to our telephone services at a lower price. In addition to offering
competitive pricing, we offer a full complement of services to telephone
subscribers including custom local access services, "CLASS," including caller
ID, call waiting, call forwarding, call blocking, distinctive ringing and
three-way calling. We also provide voice mail and second lines. The introduction
of number portability in some of our markets, including The Netherlands, Norway
and France, provides an even greater opportunity as potential customers will be
able to subscribe to our service without having to change their existing
telephone numbers.
Each operating company that offers telephone services has entered into an
interconnection agreement with the incumbent national telecommunications service
provider. In addition, certain of these operating companies have also entered
into interconnection agreements with other telecommunications service providers,
providing alternative routes and additional flexibility. Even though we have
secured these interconnection arrangements, we may still experience difficulty
operating under them. Priority Telecom will manage our interconnection
relationships in the future.
In the provision of telephone services, our operating companies face competition
from the incumbent telecommunications operator in each country. These operators
have substantially more experience in providing telephone services and may have
greater resources to devote to the provision of telephone services. In many
countries, our operating companies also face competition from other new
telephone service providers like ourselves, including traditional wire line
providers, other cable telephone providers, wireless telephone providers and
indirect access providers.
UPC Distribution--Internet. By capitalizing on our existing network
capabilities, we believe we will be able to benefit from the rapid growth of the
internet. We initially launched our broadband internet business in a few of our
operating systems in September 1997. As we have upgraded our network, we have
continued to roll-out our internet service. As of December 31, 2000, we had
343,300 consolidated residential internet subscribers.
Cable modem technology allows access to the internet over our existing upgraded
network. All that is required to transform data communication into signals
capable of transmission over fiber and coaxial cable is the addition of
incremental electronic equipment, including servers, routers and switches at the
master telecom center. Cable modems allow internet access at speeds
significantly faster than tradition dial-up access, although we cannot guarantee
the speed over our networks since it is a shared medium. A number of different
technologies designed to provide much faster access than traditional dial-up
modems have been proposed and are being introduced, such as ISDN and digital
subscriber line ("DSL"), which competes with our cable modem access technology.
Our local operating companies have entered into franchise agreements with chello
broadband, which provides our local systems access to the internet gateway and
the chello portal. Under the franchise agreements chello broadband provides our
affiliates with internet connectivity, caching, local language broadband
portals, and marketing support for a fee based upon a percentage of subscription
revenue.
In providing internet access, we face competition from incumbent
telecommunications companies and other telecommunications operators and other
cable-based and non-cable based internet service providers. The internet
services offered by these competitors include both traditional dial-up internet
services and high-speed access services. We have recently encountered
competition from a new technology, DSL, which provides high-speed internet
access over traditional telephone lines. DSL services are offered by both
incumbent and alternative providers. We expect to face strong competition from
DSL operators for our internet service in the future.
UPC Media
We have recently formed a new division, UPC Media, combining our internet and
programming businesses. Due to the convergence of various media forms, we
believe these businesses will operate more efficiently if combined. UPC Medial
will focus on four key areas: (i) chello broadband internet access; (ii)
interactive services; (iii) transaction television; and (iv) pay television.
chello broadband. In March 1998, we formed chello broadband for the purpose of
developing a global broadband internet operation. chello broadband provides
access to the gateway for our operating companies and non-affiliates, as well as
content through the chello portal. chello broadband was initially launched by
certain of our operating companies in March 1999, and as of December 31, 2000,
it had approximately 338,000 subscribers, including 13,200 non-UPC affiliates.
chello broadband has long-term agreements for the distribution of internet
services to residential and business customers using cable television and fixed
wireless infrastructure of local operators, including our companies and those of
United, covering 16.7 million homes in Europe and Latin America. chello
broadband currently provides its services through our subsidiaries in Austria,
Belgium, France, The Netherlands, Norway, Sweden, Hungary and Poland, and
through United's operating companies in Chile. chello broadband's agreements
with our affiliates cover all the homes in their territory. Therefore as the
affiliates' networks expand, other than through acquisitions, chello broadband's
exclusive rights to distribute its services will expand as well. In addition,
chello broadband has a license agreement with Austar in Australia, under which
Austar is allowed to use the chello broadband product.
chello broadband provides our affiliates and non-affiliated local operators with
high speed connectivity, caching, local language broadband portals, and
marketing support for a fee based upon percentage of subscription and
installation revenue through a franchise agreement. In the future the franchise
agreement further provides that the local operator will receive a percentage of
the revenue from chello broadband e-commerce and advertising.
The primary components of chello broadband's network are its network operations
center, its backbone infrastructure named AORTA, and its master and regional
data centers. AORTA allows internet traffic to be routed or rerouted if parts of
the network are congested or impaired. The core of AORTA connects Amsterdam,
Stockholm, Vienna, Paris, Brussels and London. In addition, Oslo and New York
are part of the AORTA network. chello broadband uses its network operations
center to monitor the quality of services. From this center in Amsterdam, which
operates 24 hours per day, 7 days per week, chello broadband can manage AORTA,
regional data centers, regional networks, headend facilities, servers and other
components of the network infrastructure. During 2001, chello broadband plans to
introduce bandwidth monitoring tools in conjunction with UPC Distribution, which
are critical for effective network cost control. In addition, chello broadband
plans to launch a "chello plus" product for heavy users.
In the provision of internet access, services and online content, chello
broadband faces competition from incumbent telecommunications companies and
other telecommunications operators, other cable-based internet service
providers, non-cable based internet service providers and internet portals. The
internet services offered by these competitors include both traditional dial-up
internet services and high-speed access services.
Interactive Services. We expect the development of interactive services to play
a vital role in our digital product. Our interactive services group within UPC
Media is responsible for core digital products, such as electronic program
guide, walled garden, tv e-mail, pc and tv portal and eTV iTV applications such
as enhanced news and on-screen betting. The technical platform launch, which
will allow us to commence with the offering of interactive service for both The
Netherlands and Austria, is nearing completion.
Interactive services will also be responsible for continued development of the
chello portal. Our strategy is to initially create a "thin portal" internally,
and then work with strong partners to develop deep content. To date chello
broadband has developed nine local language portals. Each of these portals
brings together locally relevant content with broadband content and is managed
and supported locally by a chello broadband office. chello broadband plans to
offer an expanding variety of multimedia programming, e-commerce and services
specifically designed to take advantage of the speed and versatility provided by
broadband access.
Transactional Television. Transactional television, consisting of NVOD and video
on demand ("VOD") is another core component of our digital services. Our current
digital product in The Netherlands includes 36 channels of NVOD. We plan to
launch NVOD in Austria in 2001, followed by France in 2002. VOD will provide a
broad product offering, including much more than movies-events, local drama,
music, kids, subscriptions and other.
Pay Television. The core of UPC Media's existing pay television business is the
eight-channel thematic bouquet launched by UPCtv beginning in May 1999. The
channels were created by acquiring content from third parties. The channels
include various genres, such as Extreme Sports Channel, Expo Film1, Avante,
Sport1, Club, Reality TV, and Innergy and are distributed from the digital media
center ("DMC") throughout Europe. We distribute these channels to entities that
are not affiliated with us and in countries where we do not currently operate.
We currently have over 20 non-UPC distribution contracts. We have already
reached agreement to distribute one or more of our channels to non-affiliated
systems in Germany, Sweden, The Netherlands, Israel and Turkey.
In October 2000, we officially opened the DMC in Amsterdam. The DMC is a state
of the art production facility that provides UPCtv and other broadcasters with
production and post-production playout and transmission facilities. The DMC
combines the ability to produce high-quality, customized programming by
integrating various video segments, language dubbing, sub-titling and special
effects, with up and down-link facilities for delivery to customers.
In addition, we also have a strategic investment of approximately 23.5% of SBS
Broadcasting SA, which creates, acquires, packages and distributes programming
and other media content in many of our territories and elsewhere in Europe via
commercial general entertainment television channels, radio stations and the
internet.
Priority Telecom
Our existing network infrastructure and facilities provide the opportunity for
cost-effective access to potential business telephone and data customers. In
1998, we founded Priority Telecom for the purpose of providing telephone
services to customers passed by our upgraded networks. In addition we created
Priority Wireless as an outreach technology to reach additional customers using
wireless local loops. Due to the potential value of our business customers, we
decided to spin-off the business telephone and data customers of our local
systems into a separate company as Priority Telecom, which is now positioned to
become our European solutions provider for the business market. We expect to
complete the spin-off process by the third quarter of 2001. Through Priority
Telecom, our CLEC business is currently operating in 12 cities in 5 European
countries.
In November 2000, Priority Telecom acquired Cignal Global Communications
("Cignal"), a global carriers' carrier. Priority Telecom acquired 100% of Cignal
in exchange for a 16.0% interest in its shares.
In addition to basic telephony services, Priority Telecom is developing a
product portfolio towards advanced telecoms/information technology solutions,
including VOIP, advanced hosting services, internet protocol-virtual private
network services and application service provider enabling services. Management
believes this process is necessary to anticipate and meet changing business
customer requirements.
We expect Priority Telecom to be able to leverage substantially from our
operating companies existing infrastructure, allowing for efficient,
cost-effective growth. For operations within our affiliates' network areas,
Priority Telecom's network will consist of 12 metropolitan area fiber networks
("MANs") and national and international long distance networks. Contrary to
typical CLEC built networks, which target a selected business area only,
Priority Telecom's MAN based on our network, will be a denser "general-purpose"
built network. This creates strategic advantages for Priority Telecom since it
can, for instance, serve the headquarters of a large bank in Amsterdam, and also
serve their branch offices across the city with on-net solutions. In addition,
the dense network enables Priority Telecom to execute a "smart build" strategy.
It allows typical CLEC extensions to the current footprint and addition of local
tails for limited capital expenditure with a short execution time. In addition,
Priority Telecom obtained a pan-European backbone network, providing
connectivity to its 14 target cities through its merger with Cignal.
We are in the process of completing the spin-off of our business CLEC services.
Priority Telecom's MANs and national networks will be based on 25-year
indefeasible rights of use. As part of the agreements, Priority Telecom will pay
an annual administration, operations and maintenance fee to our affiliates, as
well as entering into service agreements. Priority Telecom will also receive
access to local tail circuits connecting the business premises to the MANs.
Our affiliates have also agreed to provide certain services relating to Priority
Telecom's operations through outsourcing contracts. Services include the
maintenance, upgrade and configuration of network termination devices, network
operations center management, network management services, fault resolution for
the local network infrastructure, and certain operations support systems
functions.
In the provision of CLEC services, Priority Telecom faces competition from the
incumbent telecommunications operator in each country and other CLEC operators.
Certain of these operators have substantially more experience in providing
telephone services and have greater resources to devote to the provision of
telephone services.
THE RIGHTS OFFERING
The rights offering to holders of ordinary shares A in bearer form
This section applies to you if you hold ordinary shares A in bearer form and not
ordinary shares A in registered form or ADSs. We have no holders of ordinary
shares in registered form other than United. If you are a holder of ordinary
shares A in the form of ADSs, see "The rights offering to holders of ADSs"
below.
Ordinary shares A in bearer form are embodied in a single global share
certificate, which is lodged with Nederlands Centraal Instituut voor Giraal
Effectenverkeer B.V., the Netherlands central securities depositary known as
NECIGEF. Holders of ordinary shares A in bearer form hold their shares through
the book-entry systems of NECIGEF and the affiliated institutions of NECIGEF,
most of which are Netherlands banks. Holders of ordinary shares A will be
informed by the banks through which they hold their existing ordinary shares A
of details of the aggregate number of ordinary share rights allocated to them,
such information to be supplied in accordance with the banks' usual customer
relations procedures. We summarize the procedures for subscription by holders of
ordinary shares A in registered form and by holders of ADSs in the sections
below.
The timetable below lists certain important dates relating to the offering to
holders of ordinary shares A in bearer form. All times referred to are Amsterdam
time.
Announcement of the rights offering in the Official
Gazette and a nationally distributed daily newspaper in
The Netherlands
__________ ___, 2001
Record date for ordinary share rights
After close of trading on __________ ___, 2001
Subscription period commences
__________ ___, 2001
Trading of ordinary share rights commences on the
Official Segment of the stock market of Euronext
Amsterdam
__________ ___, 2001
Ex-rights trading of ordinary shares A commences on the
Official Segment of the stock market of Euronext
Amsterdam
__________ ___, 2001
Trading of ordinary share rights ceases on the Official
Segment of the stock market of Euronext Amsterdam
1:15 p.m. on __________ ___, 2001
Latest time for exercise of the ordinary share rights
3:00 p.m. on __________ ___, 2001
Latest time for exchanging an ordinary share right for
an ADS
3:00 p.m. on __________ ___, 2001
Expected allotment of ordinary shares A
__________ ___, 2001
Expected first trading date of the ordinary shares A issued pursuant to
the rights offering on the Official Segment of the stock market of
Euronext Amsterdam
__________ ___, 2001
Issue and delivery of the newly issued ordinary shares A
__________ ___, 2001
The holders of ordinary share rights may subscribe for new ordinary shares A in
bearer form as follows:
Ordinary share rights record date. The record date for determination of those
holders of ordinary shares A who are eligible to receive ordinary share rights
is __________ ___, 2001 after the close of trading of the ordinary shares A on
the Official Segment of the stock market of Euronext Amsterdam.
Entitlement to ordinary share rights. Every ___ ordinary share A held of record
on the ordinary share rights record date will entitle the holder to ___ ordinary
share rights. The holder of one ordinary share right is entitled to subscribe
for one new ordinary share A at the issue price. Ordinary share rights will be
held through the book-entry systems of NECIGEF.
Fractional entitlements. We have not allotted ordinary share rights for
fractions of new ordinary shares A in making the initial allocations of ordinary
share rights to subscribe for new ordinary shares A. These fractional ordinary
share rights will be aggregated and the related new ordinary shares A will be
sold in the market for your benefit.
Issue price. The issue price of Euro8.00 is payable to us in euro. For
information on how to pay, see "Method of payment" below.
Ordinary share rights expiration date. If unexercised, ordinary share rights
will expire at 3:00 p.m. Amsterdam time on __________ ___, 2001 and will be void
thereafter. We refer to __________ ___, 2001 as the ordinary share rights
expiration date.
Ordinary share subscription agent. ___ is acting as ordinary share subscription
agent to accept subscriptions for new ordinary shares A. The banks which are
affiliated institutions of NECIGEF (through which you hold your existing
ordinary shares A) will be responsible for collecting subscription instructions
from holders of ordinary share rights and for informing the ordinary share
subscription agent of such subscription instructions.
Method of subscription for new ordinary shares A in bearer form. Your bank
through which you hold your existing ordinary shares A will normally be
responsible for informing you of the number of ordinary share rights you are
entitled to. If you want to exercise your ordinary share rights, you should
instruct your bank accordingly in accordance with the instructions received from
it. Upon such instruction, your bank will be responsible for instructing in turn
the ordinary share subscription agent to exercise your ordinary share rights
(see "Ordinary share subscription agent" above). You may also wish to instruct
your bank to sell all or part of your ordinary share rights on your behalf (see
"Transfer of ordinary share rights" below).
All questions concerning the timeliness, validity and form of instructions to
your bank in relation to the exercise, sale or purchase of ordinary share rights
will be determined by your bank in accordance with its usual customer relations
procedures or as otherwise notified to you by it.
Method of payment. You should pay the issue price for the new ordinary shares A
you have subscribed for in accordance with the instructions received from your
bank through which you hold your existing ordinary shares A. Your bank will in
turn pass such issue price to the ordinary share subscription agent, which will
in turn pass it to us.
No revocation. Once you have exercised your ordinary share rights, you may not
revoke or modify that exercise.
Transfer of ordinary share rights. Ordinary share rights may be exercised or
sold and transferred. Ordinary share rights will trade on the Official Segment
of the stock market of Euronext Amsterdam. Transfer of title to ordinary share
rights will take place through the book-entry systems of NECIGEF and its
affiliated institutions. If you want to sell all or part of your ordinary share
rights, you should instruct your bank accordingly in accordance with the
instructions received from it. You may also want to instruct your bank to
purchase ordinary share rights on your behalf.
Delivery of ordinary shares A. All ordinary shares A in bearer form issued upon
exercise of ordinary share rights will be embodied in the existing single global
share certificate lodged with NECIGEF on ________, 2001.
Ranking. New ordinary shares A issued upon exercise of the ordinary share rights
will rank equally in all respects with outstanding ordinary shares A.
The rights offering to holders of ADSs
This section applies to you if you hold ADSs on the ADS rights record date, May
__, 2001. If you are a holder of ordinary shares A in bearer form or of ordinary
shares A in registered form, see "The rights offering to holders of ordinary
shares A in bearer form" above.
We will issue ADS rights to subscribe for new ADSs to holders of record of ADSs.
Holders of ordinary shares A in the United States will receive ordinary share
rights to subscribe for new ordinary shares A (see "The rights offering to
holders of ordinary shares A in bearer form" above).
We are sending to holders of ADSs transferable warrants evidencing ADS rights,
instructions relating to the exercise of these ADS rights and this prospectus.
We summarize the procedures for subscription by holders of ADSs and by holders
of ordinary shares A in the sections above.
The timetable below lists certain important dates relating to the rights
offering to holders of ADSs. All times referred to are New York City time.
Announcement of details of the rights offering
__________ ___, 2001
Record date for ADS rights
5:00 p.m. on _________ ___, 2001
ADS warrants, instructions relating to the exercise of ADS rights and this
prospectus sent to eligible ADS olders
__________ ___, 2001
Subscription period commences
__________ ___, 2001
Trading of ADS rights commences
__________ ___, 2001
Latest time to give instructions to ADS subscription agent to sell
ADS rights
5:00 p.m. on __________ ___, 2001
Trading of ADS rights ceases
5:00 p.m. on __________ ___, 2001
Latest time for exchanging an ADS right for an ordinary share A
5:00 p.m. on __________ ___, 2001
Latest time to transfer an ADS right
5:00 p.m. on __________ ___, 2001
Latest time for the exercise of ADS rights and payment
12:00 noon on __________ ___, 2001
Expected first trading date of ADRs on the Nasdaq National Market
__________ ___, 2001
New ADRs evidencing new ADSs provided to holders as soon as practicable
after
__________ ___, 2001
The holders of ADS rights may subscribe for new ADSs representing new ordinary
shares A as follows:
ADS rights record date. The record date for determining those holders who are
eligible to receive ADS rights in the rights offering is 5:00 p.m. New York City
time on _______, 2001.
Warrants. ADS rights are evidenced by transferable warrants which we will issue
to eligible ADS holders. Every ___ ADSs held of record on the ADS rights record
date will entitle the holder to ___ ADS rights. The holder of one ADS right is
entitled to subscribe for one new ADS at the ADS issue price.
The warrants are to be issued under the terms of an agreement between us and
Citibank, N.A., which is acting as ADS subscription agent. Citibank, N.A. is
also the depositary for our ADSs. We have filed copies of the deposit agreement
and the rights agency agreement relating to the rights offering between us and
Citibank, N.A. as exhibits to the registration statement, and copies are
available for inspection at the offices of Citibank, N.A. in New York.
Fractional entitlements. We have not allotted ADS rights for fractions of new
ADSs in making the initial allocations of ADS rights to subscribe for new ADSs.
These fractional ADS rights will be aggregated and the related new ADSs will be
sold in the market for your benefit.
ADS issue price. The ADS issue price is the U.S. dollar equivalent of
Euro8.00. For information on how to pay, see "Method of subscription and
payment" below.
ADS rights expiration date. If unexercised, ADS rights will expire at 12:00 noon
New York City time on ___, 2001 and will be void thereafter. We refer to ___,
2001 as the ADS rights expiration date.
ADS subscription agent. Citibank, N.A., 111 Wall Street, New York, New York
10043, the depositary for ADSs, is acting as ADS subscription agent to accept
subscriptions for new ADSs.
Method of subscription and payment. You can exercise your ADS rights by the
delivery of a properly executed warrant, together with payment in full of the
ADS issue price, as follows:
by hand by mail by courier
CITIBANK, N.A. CITIBANK, N.A. CITIBANK, N.A.
C/o Securities Transfer and Reporting Corporate Actions Corporate Actions
Services Inc. P.O. Box 2544 Suite 4660
Attn: Corporate Actions Jersey City, N.J. 07303-2544 515 Washington Blvd.
100 William Street - GALLERIA Jersey City, N.J. 07303
New York, N.Y. 10038
which must be received by the ADS subscription agent no later than 12:00 noon
New York City time on ___, 2001.
The ADS subscription agent has sole discretion to refuse any improperly
completed or delivered or unexecuted warrant. Deposit in the mail will not
constitute effective delivery.
You must pay the ADS issue price in U.S. dollars. The ADS subscription
agent will arrange to convert payments made in U.S. dollars into euro and pay
the appropriate amount in euro to us. The payment per new ADS, which must be
paid by a subscriber to the ADS subscription agent in U.S. dollars, is $___. You
may pay in U.S. dollars by check, bank draft, or postal or express money order,
made payable to "Citibank, N.A." In addition, you may pay by wire transfer to
ABA ___, Account Number ___, Ref: UPC. The ADS issue price will be deemed to
have been received by the ADS subscription agent only upon:
o clearance of any uncertified check, or
o receipt by the ADS subscription agent of any certified check, cashier's
check or postal or express money order.
If you pay by uncertified check, please note that the funds may take at least
five business days to clear.
The ADS subscription agent will make the conversion from U.S. dollars into euro
as soon as practicable on or about ___, 2001 at a commercially reasonable rate.
If there is any excess or deficiency in U.S. dollars as a result of such
conversion, the ADS subscription agent will refund to you the excess amount
without interest in U.S. dollars or bill you for the deficiency, with interest.
The estimated U.S. dollar ADS issue price represents a convenience translation
of the euro issue price, which has been based on the noon buying rate on ___,
2001, rounded upwards to ___% of that rate with the expectation that after
payment of the U.S. dollar equivalent of Euro8.00 there will be a refund to all
subscribers paying in U.S. dollars. We cannot assure that this will be the case.
If your payment in U.S. dollars, when converted into euro, is less than the ADS
issue price in euro for the number of new ADSs you subscribed for, the ADS
subscription agent will pay the amount of the deficiency to us on your behalf.
You will then be required to pay promptly to the ADS subscription agent the
amount of such deficiency, including interest and expenses, and you will not
receive new ADSs subscribed for prior to the ADS subscription agent's receipt of
payment. If your payment of a deficiency is not received by the ADS subscription
agent by ___, 2001, the ADS subscription agent may sell your new ADSs in an
amount sufficient to cover the amount you owe. In that event, the ADS
subscription agent will send you an ADR representing any remaining new ADSs,
together with a check in the amount of the excess proceeds, if any, from such
sale.
If you desire to subscribe and time will not permit your warrant to reach the
ADS subscription agent before the ADS rights expiration date, your subscription
will be accepted if, on or before the ADS rights expiration date, the ADS
subscription agent has received payment in full of the ADS issue price in U.S.
dollars and a completed "Notice of Guaranteed Delivery" in the form provided by
the ADS subscription agent. The Notice of Guaranteed Delivery will require that
you state your name and the number of new ADSs subscribed for and will contain
an irrevocable guarantee of an eligible financial institution of the type
specified in the instructions that your properly completed and executed warrant
will be delivered by the eligible financial institution to the ADS subscription
agent prior to 12:00 noon New York City time on ___, 2001. If the eligible
financial institution fails to deliver your properly executed warrant by 12:00
noon New York City time on ___, 2001, the ADS subscription agent will return to
you any funds paid by you without interest and your ADS rights will be treated
as unexercised.
All questions concerning the timeliness, validity, form and eligibility of any
exercise of ADS rights will be determined by the ADS subscription agent in its
sole discretion. The ADS subscription agent may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any ADS right.
Warrants will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the ADS
subscription agent determines. Neither we, nor the ADS subscription agent nor
any dealer manager has a duty to give notification of any defect or irregularity
in connection with the submission of warrants or incur any liability for failure
to give such notification.
No revocation. Once you have exercised your ADS rights, you may not revoke or
modify that exercise.
Transfer of ADS rights. We do not intend to apply for the ADS rights to be
traded on the Nasdaq National Market. However, ADS rights may be exercised, sold
or assigned to others. ADS rights may be bought or sold through banks or
brokers.
You may place an order with the ADS subscription agent to sell all or part of
your ADS rights, whether or not in connection with a subscription. The ADS
subscription agent must receive your order prior to 5:00 p.m. New York City time
on ___, 2001. No ADS right may be sold, assigned or otherwise transferred after
5:00 p.m. New York City time on ___, 2001. If only a portion of the ADS rights
are to be sold by the ADS subscription agent, your warrant must include
instructions as to the action to be taken with respect to your ADS rights that
are not to be sold. The ADS subscription agent's obligation to execute orders is
subject to its ability to find buyers. If buyers cannot be found, ADS rights
that are not sold will be treated as unexercised. Neither we, nor the ADS
subscription agent nor any dealer manager will be liable to you for the ADS
subscription agent's failure to obtain the best market price for any ADS rights
it sells at your request. A check for the proceeds from any ADS rights sold, net
of fees and commissions, will be sent to you by the ADS subscription agent.
Non-U.S. holders of ADSs. We will not mail warrants to holders of ADSs with
record addresses outside the United States, including those whose addresses
indicate that they are on military or other government service outside the
United States. The ADS subscription agent will hold these warrants for the
accounts of the holders who may, prior to 5:00 p.m. New York City time on ___,
2001, instruct the ADS subscription agent in writing as to the disposition of
their ADS rights as described above. In the alternative, non-U.S. holders may,
prior to 5:00 p.m. New York City time on ___, 2001, instruct the ADS
subscription agent in writing to exercise their ADS rights as described above.
If instructions and payment are not received prior to that time, ADS rights held
for these holders will be treated as unexercised and will be void.
Eligibility. ADS holders with registered addresses in Canada will not be
eligible to exercise their ADS rights. These ADS rights will be treated as
unexercised ADS rights and will be void.
Delivery of ADRs. The depositary will provide you with an ADR evidencing your
new ADSs as soon as practicable after ___, 2001, provided that you have paid the
ADS subscription agent any shortfall arising from the conversion of a U.S.
dollar payment, if applicable.
Ranking. New ADSs will rank equally in all respects with outstanding ADSs.
Exchange of ADS rights for ordinary share rights and ordinary share rights for
ADS rights
At any time prior to 5:00 p.m. New York City time on __________ ___, 2001, you
may surrender a warrant representing ADS rights to the ADS subscription agent at
its New York office in exchange for ordinary share rights to subscribe for the
appropriate number of new ordinary shares A covered by such warrant at the issue
price.
At any time prior to 1:15 p.m. Amsterdam time on __________ ___, 2001, you may
exchange your ordinary share rights for a warrant representing ADS rights in an
amount sufficient to subscribe for the appropriate number of new ADSs covered by
your ordinary share rights at the U.S. dollar equivalent of the issue price.
If you exchange ordinary share rights or ADS rights pursuant to the exchange
privilege described above, you must pay any associated taxes or levies and
depositary fees.
Backstop arrangement with United and placement to United
As of April 10, 2001, United beneficially owned approximately 53.7% of our
outstanding ordinary shares A, and will thus receive rights to subscribe for ___
ordinary shares A in the rights offering. Under the Commitment Agreement, United
has agreed to exercise all of the ordinary share rights and ADS rights held by
it immediately prior to the expiration of such rights and to subscribe, at the
issue price of Euro8.00 per ordinary share A and the U.S. dollar equivalent of
Euro8.00 per ADS, and pay for any ordinary shares A or ADSs that holders of
ordinary share rights or ADS rights have not subscribed for.
Depending upon the number of ordinary shares A and ADSs purchased by others upon
exercise of ordinary share rights and ADS rights, respectively, United will
beneficially own approximately between 56.8% and 63.9% of our outstanding
ordinary shares A upon completion of the rights offering. These percentage
holdings exclude any ordinary shares A acquired by United in the placement
referred to below.
We also have agreed with United in the Commitment Agreement that United will
purchase and pay for an additional number of ordinary shares A in a placement
directly to United at Euro11.40 per ordinary share A, the average closing price
of our ordinary shares A over the five trading days that ended February 21,
2001, the date two days before the rights offering was announced. The number of
ordinary shares A United would purchase and pay for in this placement will be
set such that the aggregate price of ordinary shares A and/or ADSs, as the case
may be, purchased and paid for by United as part of the rights offering and the
placement together equals Euro1.0 billion. If the rights offering is fully
subscribed, we would raise approximately an additional Euro463 million from this
placement of ordinary shares A to United and, upon completion of the rights
offering and the placement of ordinary shares A to United, United will
beneficially own approximately 56.8% of our outstanding ordinary shares A.
The rights offering is conditional upon United's receipt of at least $1.0
billion of cash from Liberty Media Corp. or its affiliates as well as other
conditions including receipt of all necessary third-party and regulatory
consents and approval, the effectiveness of the registration statement covering
the rights offering and listing of the ordinary shares A and ADSs on the
Official Segment of the stock market of Euronext Amsterdam and the Nasdaq
National Market, respectively. If these other conditions are not satisfied, but
United still receives at least $1.0 billion in cash from Liberty Media or its
affiliates, we can require United to purchase in a private placement Euro1.0
billion of ordinary shares A at a price of Euro9.70 per ordinary share.
DETERMINATION OF ISSUE PRICE
The issue price of Euro8.00 per ordinary shares A was determined by a committee
of our Supervisory Board and represents approximately an 18% discount to the
market price of an ordinary share A of Euro9.70 on February 22, 2001, the date
on which the issue price was determined. Our Supervisory Board determined the
issue price with a goal of encouraging all shareholders and all holders of ADSs
to exercise their rights and thereby raise capital without significantly
diluting their interests. The issue price does not necessarily bear any
relationship to the book value of our assets, past operations, cash flows,
earning, financial condition or any other established criteria for value. While
we set the issue price in consultation with an independent financial advisor, we
have neither sought nor obtained a valuation opinion from an outside financial
consultant or investment banker.
There can be no assurance that the market price for ordinary shares A during the
rights offering will be equal to or above the issue price, or that, following
the issuance of the rights and of the ordinary shares A or ADSs upon an exercise
of the rights, a holder will be able to sell the ordinary shares A or ADSs
purchased in the rights offering at a price equal to or greater than the issue
price.
DESCRIPTION OF SHARE CAPITAL
Pursuant to our articles of association, as amended on December 7, 2000, our
authorized share capital is Euro1,353,000,000, consisting of:
Nominal Value
Number and Type of Share Per Share
700,000,000 ordinary shares A Euro1.00
300,000,000 ordinary shares B Euro0.01
300 priority shares Euro1.00
49,999,700 class A preference shares Euro1.00
600,000,000 class B preference shares Euro1.00
Upon completion of the rights offering and assuming full subscription and
exercise by holders of their rights under the rights offering, ____ ordinary
shares A will be issued and fully paid. At present, 12,400 class A preference
shares (Series 1) and 300 priority shares are also outstanding. No ordinary
shares B or class B preference shares have been issued. The following
description of our share capital is qualified in its entirety by reference to
the full text of the articles of association, which have been filed with the
Securities and Exchange Commission.
We are seeking shareholder approval at our May 17, 2001, annual meeting to
increase the number of ordinary shares A authorized to 1,000,000,000 and our
total share capital to Euro1,653,000,000.
Ordinary Shares
General. We have two classes of ordinary shares: ordinary shares A and
ordinary shares B. Our ordinary shares B have similar rights to our ordinary
shares A, except for the following primary differences:
o holders of ordinary shares B are entitled to one vote per share and
holders of ordinary shares A are entitled to 100 votes per share, and
o our Board of Management must obtain the approval of the meeting of
holders of the ordinary shares B before cooperating with a public offer
for our shares if the offer is limited to our ordinary shares A or the
offer is not made on equal financial terms for both the ordinary shares
A and the ordinary shares B.
Ordinary shares may, at the option of the shareholder, be registered shares or
bearer shares. A shareholder may convert ordinary shares in bearer form into
registered ordinary shares of the same class at any time, and vice versa. The
ordinary shares A in bearer form are listed on the Official Segment of the stock
market of Euronext Amsterdam.
Ordinary shares A in bearer form are embodied in a single global share
certificate, which is lodged with NECIGEF for safekeeping on behalf of the
parties entitled to such ordinary shares A shares. The ordinary shares A in
bearer form can only be transferred through the giro-based securities transfer
system of NECIGEF.
Holders of registered ordinary shares A are entered in our shareholders register
and share certificates are not be issued. At the request of the registered
shareholder, we will, without fee, issue a non-negotiable extract from the
shareholders register in the name of the holder. A deed of transfer, together
with our acknowledgment in writing, is required to transfer registered shares.
Issue of Ordinary Shares; Preemptive Rights. Pursuant to our articles of
association, all unissued shares of the authorized capital may be issued by the
Board of Management upon approval of both the Supervisory Board and United as
holder of all outstanding priority shares. The authority of the Board of
Management to issue ordinary shares will end July 23, 2004, unless extended by
the articles of association or by resolution of the general meeting of
shareholders, for a period not exceeding five years in each instance. If no such
extension is given, issues of ordinary shares will require a resolution of the
general meeting of shareholders in addition to approval of the Supervisory Board
and United as holder of all outstanding priority shares. A resolution of the
general meeting of shareholders to extend the authority of the Board of
Management to issue shares requires the approval of both the Supervisory Board
and United as holder of all outstanding priority shares.
Except for issues of ordinary shares in return for non-cash consideration and
shares issued to our employees or employees of any of our subsidiaries as
defined under Netherlands law, holders of ordinary shares will have preemptive
rights to subscribe for their pro-rata amount of all our new ordinary share
issuances. These rights may be restricted or excluded, however, by a resolution
of the Board of Management subject to approval of both the Supervisory Board and
United, as the priority shareholder.
Dividends. Each ordinary share A and ordinary share B is entitled to the same
amount of dividend if one is declared. We may not pay a dividend to holders of
ordinary shares A without paying the same dividend to holders of ordinary shares
B.
Voting Rights. All ordinary shares (A and B) vote together on all matters
presented at a general meeting of shareholders. Each ordinary share A represents
the right to cast 100 votes at a general meeting of shareholders and each
ordinary share B represents the right to cast one vote at a general meeting of
shareholders.
Special Approval Rights for Ordinary Shares B. The Board of Management must
obtain the approval of the meeting of holders of the ordinary shares B prior to
cooperating with a public offer for our shares if the offer is limited to
ordinary shares A or the offer is not made on equal financial terms for the
shares of both classes (A and B) of our ordinary shares.
Priority Shares
All of our priority shares are held by United. Except for the transfer of
priority shares to us, priority shares can only be transferred with the approval
of the Board of Management and the Supervisory Board. In addition to holding a
controlling majority of ordinary shares, United, as the holder of the priority
shares, has some specific rights and powers over us, including:
o the right to approve a resolution of our Management Board for the
issuance by us of our shares,
o the right to approve a resolution of our Management Board for the
exclusion or restriction of the preemptive rights of existing
shareholders,
o the right to nominate members for appointment to the Management and
Supervisory Boards, which nominations may only be set aside by a
resolution of the general meeting of shareholders adopted by two-thirds
of the votes cast representing more than one-half of the issued nominal
capital,
o the right to approve certain decisions of our Board of Management, and
o the exclusive right to propose amendments to our articles of
association and to propose our merger, split up or dissolution.
Priority shares are issued in the same way as ordinary shares, but carry no
preemptive rights. Priority shares are entitled to a nominal annual dividend of
5% of their nominal value, to the extent distributable profits are available.
At such time as the holders of the priority shares hold less than 15% of the
issued and outstanding ordinary shares A, the holder is required to transfer all
of the priority shares to a foundation, the trustees of which are our
Supervisory Directors.
Preference Shares
Our articles of association provide for the issuance of class A and class B
preference shares. Class A preference shares may be issued exclusively for
financing purposes. Upon any voluntary or involuntary liquidation, winding up or
dissolution of us that becomes effective on or before May 1, 2010, the amount
payable with respect to our class A preference shares Series 1, shall be equal
to the amount that would have been payable on our ordinary shares A if these
class A preference shares, Series 1, had been converted into our ordinary shares
A before such date. Upon our liquidation after May 1, 2010, holders of class A
preference shares do not share in our reserves although they may be entitled to
a share premium reserve if it were so decided at the time of their first
issuance (see "Summary of Additional Material Provisions of Our Articles of
Association and Other Matters--Liquidation Rights" below). Class A preference
shares are not listed. The class A preference shares are registered shares and
share certificates are not issued. Class A preference shares carry no preemptive
rights. Each class A preference share represents the right to cast 100 votes at
a general meeting of shareholders. Class A preference shares are paid an annual
dividend, the amount or method of determining of which will be determined at the
time of their first issuance by the Board of Management, to the extent
distributable profits are available.
Class B preference shares are designed as a preventive measure against
unfriendly takeover bids. The minimum amount required to be paid on the class B
preference shares upon issuance is 25% of the nominal amount issued. In the
event of a hostile takeover bid, class B preference shares may be issued to a
legal entity charged with caring for our interests and preventing influences
that may threaten our continuity, independence or identity. Upon our
liquidation, holders of class B preference shares do not share in our reserves
for more than the nominal value of their shares and such shares are not listed.
The class B preference shares will be registered shares and share certificates
will not be issued. Class B preference shares can be issued in the same way as
ordinary shares, but carry no preemptive rights. Each class B preference share
will represent the right to cast 100 votes at a general meeting of shareholders.
Class B preference shares will be paid a cumulative annual dividend calculated
on the basis of the deposit interest rate of the European Central Bank to be
applied over the paid up part of their nominal value, to the extent
distributable profits are available.
Class B preference shares may be issued by the Board of Management upon approval
of both the Supervisory Board and United, as the holder of our priority shares.
Notwithstanding, if class B preference shares are proposed to be issued and such
shares would exceed 100% of all of our other outstanding shares, such issuance
will require the approval of the general meeting of shareholders. In all
instances where class B preference shares are issued, we must explain the reason
for the issuance within four weeks thereof at a general meeting of shareholders.
Within two years after the first issuance of class B preference shares, a
general meeting of shareholders must be held to vote on whether the class B
preference shares should be repurchased or cancelled. If such a resolution is
not adopted, another meeting is held within two years of the previous meeting
and this procedure is repeated until no more class B preference shares are
outstanding. This procedure does not apply to class B preference shares issued
with the approval of the general meeting of shareholders.
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
Citibank, N.A. acts as the depositary bank for the American Depositary Shares.
Citibank's depositary offices are located at 111 Wall Street, New York, New York
10043, U.S.A. American Depositary Shares are frequently referred to as "ADSs"
and represent ownership interests in securities that are on deposit with the
depositary bank. ADSs are normally represented by certificates that are commonly
known as "American Depositary Receipts" or "ADRs." The depositary bank typically
appoints a custodian through which the securities on deposit are held. In this
case, the custodian is Citibank N.A., Amsterdam located at Europlaza,
Hoogoordreef 54 B, 1101 BE Amsterdam ZO, The Netherlands.
We have appointed Citibank as depositary bank pursuant to a deposit agreement. A
copy of the deposit agreement is on file with the SEC under cover of a
Registration Statement on Form F-6. You may obtain a copy of the deposit
agreement from the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, U.S.A. Please refer to Registration Number 333-9850 when
retrieving a copy.
We are providing you with a summary description of the ADSs and your rights as
an owner of ADSs. Please remember that summaries by their nature lack the
precision of the information summarized and that a holder's rights and
obligations as an owner of ADSs will be determined by the deposit agreement and
not by this summary. We urge you to review the deposit agreement in its entirety
as well as the form of ADR attached to the deposit agreement.
Each ADS represents one ordinary share A. The ordinary shares A underlying the
ADSs will be deposited into accounts maintained by the custodian with NECIGEF.
An ADS will also represent any other property received by the depositary bank or
the custodian on behalf of the owner of the ADS but that has not been
distributed to the owners of ADSs because of legal restrictions or practical
considerations.
If you become an owner of ADSs, you will become a party to the deposit agreement
and therefore will be bound by its terms as well as to the terms of the ADR that
represents your ADSs. The deposit agreement and the ADR specify our rights and
obligations as well as your rights and obligations as owner of ADSs and those of
the depositary bank. As an ADS holder you appoint the depositary bank to act on
your behalf in certain circumstances. The deposit agreement is governed by New
York law. However, our obligations to the holders of ordinary shares A will
continue to be governed by the laws of The Netherlands, which may be different
from the laws of the United States.
As an owner of ADSs, you may hold your ADSs either by means of an ADR registered
in your name or through a brokerage or safekeeping account. If you decide to
hold your ADSs through a brokerage or safekeeping account, you must rely on the
procedures of your broker or bank to assert your rights as an ADS owner. Please
consult with your broker or bank to determine what those procedures are. This
summary description assumes you have opted to own the ADSs directly by means of
an ADR registered in your name and, as such, we will refer to you as the
"holder."
Dividends and Distributions
As a holder, you generally have the right to receive the distributions we make
on the securities deposited with the custodian. Your receipt of these
distributions may be limited, however, by practical considerations and legal
limitations. Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of ADSs held as of a specified
record date.
Distributions of Cash
Whenever we make a cash distribution for the securities on deposit with the
custodian, we will notify the depositary bank. Upon receipt of such notice the
depositary bank will arrange for the funds to be converted into U.S. dollars and
for the distribution of the U.S. dollars to the holders.
The conversion into U.S. dollars will take place only if practicable and if the
U.S. dollars are transferable to the United States. The amounts distributed to
holders will be net of the fees, expenses, taxes and governmental charges
payable by holders under the terms of the deposit agreement. The depositary will
apply the same method for distributing the proceeds of the sale of any property
(such as undistributed rights) held by the custodian in respect of securities on
deposit.
Distributions of Shares
Whenever we make a free distribution of ordinary shares A for the securities on
deposit with the custodian, we will notify the depositary bank. Upon receipt of
such notice, the depositary bank will either distribute to holders new ADSs
representing the ordinary shares A deposited or modify the ADSs to ordinary
shares A ratio, in which case each ADS you hold will represent rights and
interests in the additional ordinary share A so deposited. Only whole new ADSs
will be distributed. Fractional entitlements will be sold and the proceeds of
such sale will be distributed as in the case of a cash distribution.
The distribution of new ADSs or the modification of the ADS-to-share ratio upon
a distribution of ordinary shares A will be made net of the fees, expenses,
taxes and governmental charges payable by holders under the terms of the deposit
agreement. In order to pay such taxes or governmental charges, the depositary
bank may sell all or a portion of the new ordinary shares A so distributed.
No such distribution of new ADSs will be made if it would violate the law (i.e.,
U.S. or Netherlands securities laws) or if it is not operationally practicable.
If the depositary bank does not distribute new ADSs as described above, it will
use its best efforts to sell the ordinary shares A received and will distribute
the proceeds of the sale as in the case of a distribution of cash.
Distributions of Rights
Whenever we intend to distribute rights to purchase additional ordinary shares
A, we will give prior notice to the depositary bank and we will assist the
depositary bank in determining whether it is lawful and reasonably practicable
to distribute rights to purchase additional ADSs to holders.
The depositary bank will establish procedures to distribute rights to purchase
additional ADSs to holders and to enable such holders to exercise such rights if
it is lawful and reasonably practicable to make the rights available to holders
of ADSs, and if we provide all of the documentation contemplated in the deposit
agreement (such as legal opinions to address the legality of the transaction).
You may have to pay fees, expenses, taxes and other governmental charges to
subscribe for the new ADSs upon the exercise of your rights. The depositary bank
is not obligated to establish procedures to facilitate the distribution and
exercise by holders of rights to purchase new ordinary shares A directly rather
than new ADSs.
The depositary bank will not distribute the rights to you if:
o we do not request that the rights be distributed to you or we ask
that the rights not be distributed to you, or
o we fail to deliver satisfactory documents to the depositary bank, or
o it is either not lawful or not reasonably practicable to distribute
the rights.
Elective Distributions
Whenever we intend to distribute a dividend payable at the election of
shareholders either in cash or in additional shares, we will give prior notice
thereof to the depositary bank and will indicate whether we wish the elective
distribution to be made available to you. In such case, we will assist the
depositary bank in determining whether such distribution is lawful and
reasonably practicable.
The depositary bank will make the election available to you only if it is
reasonably practicable and if we have provided all of the documentation
contemplated in the deposit agreement. In such case, the depositary bank will
establish procedures to enable you to elect to receive either cash or additional
ADSs, in each case as described in the deposit agreement.
If the election is not made available to you, you will receive either cash or
additional ADSs, depending on what a shareholder in The Netherlands would
receive for failing to make an election, as more fully described in the deposit
agreement. The depositary bank is not obligated to establish procedures to
facilitate the distribution and exercise by holders of a dividend in ordinary
shares A rather than ADSs.
Other Distributions
Whenever we intend to distribute property other than cash, ordinary shares A or
rights to purchase additional ordinary shares A, we will notify the depositary
bank in advance and will indicate whether we wish such distribution to be made
to you. If so, we will assist the depositary bank in determining whether such
distribution to holders is lawful and reasonably equitable and practicable.
If it is reasonably practicable to distribute such property to you and if we
provide all of the documentation contemplated in the deposit agreement, the
depositary bank will distribute the property proportionately to the holders in a
manner it deems practicable.
The distribution will be made net of fees, expenses, taxes and governmental
charges payable by holders under the terms of the deposit agreement. In order to
pay such taxes and governmental charges, the depositary bank may sell all or a
portion of the property received.
The depositary bank will not distribute the property to you and will sell the
property if:
o we do not request that the property be distributed to you or if we
ask that the property not be distributed to you, or
o we do not deliver satisfactory documents to the depositary bank, or
o the depositary bank determines that all or a portion of the
distribution to you is not reasonably practicable.
The proceeds of such a sale will be distributed to holders as in the case of a
cash distribution.
Redemption
Whenever we decide to redeem any of the securities on deposit with the
custodian, we will notify the depositary bank. If it is reasonably practicable
and if we provide all of the documentation contemplated in the deposit
agreement, the depositary bank will mail notice of the redemption to the
holders.
The custodian will be instructed to transfer the shares being redeemed to an
institution with an account at NECIGEF, which will be referred to as an
affiliated institution of NECIGEF, that we designate against payment of the
applicable redemption price. The depositary bank will convert the redemption
funds received into U.S. dollars upon the terms of the deposit agreement and
will establish procedures to enable holders to receive the net proceeds from the
redemption upon surrender of their ADSs to the depositary bank. You may have to
pay fees, expenses, taxes and other governmental charges upon the redemption of
your ADSs. If less than all securities on deposit are being redeemed, the ADSs
to be retired will be selected by lot or on a pro rata basis, as the depositary
bank may determine.
Changes Affecting Ordinary Shares A
The ordinary shares A held on deposit for your ADSs may change from time to
time. For example, there may be a change in nominal or par value, a split-up,
cancellation, consolidation or classification of such ordinary shares A or a
recapitalization, reorganization, merger, consolidation or sale of assets.
If any such change occurs, your ADSs would, to the extent permitted by law,
represent the right to receive the property received or exchanged in respect of
the ordinary shares A held on deposit. The depositary bank may in such
circumstances deliver new ADSs to you or call for the exchange of your existing
ADSs for new ADSs. If the depositary bank may not lawfully distribute such
property to you, the depositary bank may sell such property and distribute the
net proceeds to you as in the case of a cash distribution.
Issuance of ADSs upon Deposit of Ordinary Shares A
The ordinary shares A to be represented by the ADSs will be credited to an
account maintained by the custodian at NECIGEF. The custodian will be the holder
of record of all of these ordinary shares A. Once the custodian confirms the
registration of the ordinary shares A on its account at NECIGEF, the depositary
bank may create ADSs on your behalf. The depositary bank will deliver these ADSs
to the person you indicate only after you pay any applicable issuance fees and
any charges and taxes payable for the transfer of the ordinary shares A. The
records maintained by NECIGEF and the affiliated institutions of NECIGEF will
show the ownership of the deposited ordinary shares A and transfers of ownership
interests.
The issuance of ADSs may be delayed until the depositary bank or the custodian
receives confirmation that all required approvals have been given and that the
ordinary shares A have been duly credited to the custodian's NECIGEF account.
The depositary bank will only issue ADSs in whole numbers.
When you, through an affiliated institution of NECIGEF, make a deposit of
ordinary shares A, you will be responsible for transferring good and valid title
to the custodian. As such, you will be deemed to represent and warrant that:
o the ordinary shares A are duly authorized, validly issued, fully
paid, non-assessable and legally obtained,
o all preemptive (and similar) rights, if any, with respect to such
ordinary shares A have been validly waived or exercised,
o you are duly authorized to deposit the ordinary shares A,
o the ordinary shares A presented for deposit are free and clear of any
lien, encumbrance, security interest, charge, mortgage or adverse
claim, and are not, and the ADSs issuable upon such deposit will not
be, "restricted securities" (as defined in the deposit agreement), and
o the ordinary shares A presented for deposit have not been stripped of
any rights or entitlements.
If any of the representations or warranties are incorrect in any way, we and the
depositary bank may, at your cost and expense, take any and all actions
necessary to correct the consequences of the misrepresentations.
Withdrawal of Ordinary Shares A Upon Cancellation of ADSs
As a holder, you will be entitled to present your ADSs to the depositary bank
for cancellation in order to withdraw the underlying deposited securities. In
order to withdraw the deposited securities, you will be required to pay to the
depositary the fees for cancellation of ADSs and any charges and taxes payable
upon the transfer of the deposited securities being withdrawn and then an
affiliated institution of NECIGEF you designate will be entitled to the delivery
of the deposited securities represented by your ADSs. You assume the risk for
delivery of all funds and securities upon withdrawal. Once canceled, you will
not have any rights under the deposit agreement in respect of the ADSs.
If you hold an ADR registered in your name, the depositary bank may ask you to
provide proof of identity, the genuineness of any signature and certain other
documents the depositary bank deems appropriate before it will cancel your ADSs.
The withdrawal of the deposited securities represented by your ADSs may be
delayed until the depositary bank receives satisfactory evidence of compliance
with all applicable laws and regulations. Please keep in mind that the
depositary bank will only accept ADSs for cancellation that represent a whole
number of securities on deposit.
You will have the right to withdraw the deposited securities represented by your
ADSs at any time, except for:
o temporary delays that may arise because (i) the transfer books for the
ordinary shares A or ADSs are closed, or (ii) ordinary shares A are
immobilized on account of a shareholders' meeting or a payment of
dividends,
o obligations to pay fees, taxes and similar charges, and
o restrictions imposed because of laws or regulations applicable
to ADSs or the withdrawal of securities on deposit.
The deposit agreement may not be modified to impair your right to withdraw the
securities represented by your ADSs except to comply with mandatory provisions
of law.
Voting Rights
As a holder, you generally have the right under the deposit agreement to
instruct the depositary bank to exercise the voting rights for the ordinary
shares A represented by your ADSs. The voting rights of holders of ordinary
shares A are described in "Description of Share Capital-Ordinary Shares-Voting
Rights."
At our request, the depositary bank will mail to you any notice of shareholders'
meeting received from us together with information explaining how to instruct
the depositary bank to exercise the voting rights of the securities represented
by your ADSs.
If the depositary bank timely receives voting instructions from a holder of
ADSs, it will endeavor to vote the securities represented by the holder's ADSs
in accordance with such voting instructions.
Please note that the ability of the depositary bank to carry out voting
instructions may be limited by practical and legal limitations and the terms of
the securities on deposit. We cannot assure you that you will receive voting
materials in time to enable you to return voting instructions to the depositary
bank in a timely manner. Securities for which no voting instructions have been
received will not be voted.
Fees and Charges
As an ADS holder, you will be required to pay the following service fees to the
depositary bank:
Service Fees
-------- -----
Issuance of ADSs ......... Up to $0.05, per ADS issued
Cancellation of ADSs ...... Up to $0.05, per ADS canceled
Exercise of rights to purchase additional ADSs Up to $0.05, per ADS issued
Distribution of cash upon sale of rights and Up to $0.02, per ADS held
other entitlements
As an ADS holder you will also be responsible to pay certain fees and expenses
incurred by the depositary bank and certain taxes and governmental charges such
as:
o fees for the transfer and registration of ordinary shares A (i.e.,
upon deposit and withdrawal of ordinary shares A),
o expenses incurred for converting foreign currency into U.S. dollars,
o expenses for cable, telex and fax transmissions and for delivery of
securities, and
o taxes and duties upon the transfer of securities (i.e., when
ordinary shares A are deposited or withdrawn from deposit).
You should note that the fees and charges you may be required to pay may vary
over time and may be changed by us and by the depositary bank. You will receive
prior notice of such changes.
Amendments and Termination
We may agree with the depositary bank to modify the deposit agreement at any
time without your consent. We undertake to give holders 30 days prior notice of
any modifications that would prejudice any of their substantial rights under the
deposit agreement (except in very limited circumstances enumerated in the
deposit agreement).
You will be bound by the modifications to the deposit agreement if you continue
to hold your ADSs after the modifications to the deposit agreement become
effective. The deposit agreement cannot be amended to prevent you from
withdrawing the ordinary shares A represented by your ADSs (except as permitted
by law).
We have the right to direct the depositary bank to terminate the deposit
agreement. Similarly, the depositary bank may, in certain circumstances, on its
own initiative, terminate the deposit agreement. In either case, the depositary
bank must give notice to the holders at least 30 days before termination.
Upon termination, the following will occur under the deposit agreement:
o For a period of six months after termination, you will be able to
request the cancellation of your ADSs, the withdrawal of the ordinary
shares A represented by your ADSs and the delivery of all other
property held by the depositary bank in respect of those deposited
securities on the terms existing prior to the termination. During such
six month period, the depositary bank will continue to collect all
distributions received on the ordinary shares A on deposit but will not
distribute any such property to you until you request the cancellation
of your ADSs.
o After the expiration of such six month period, the depositary bank may
sell the securities held on deposit. The depositary bank will hold the
proceeds from such sale and any other funds then held for the holders
of ADSs in a non-interest bearing account. At that point, the
depositary bank will have no further obligations to holders other than
to account for the funds then held for the holders of ADSs still
outstanding.
Books of Depositary
The depositary bank will maintain ADS holder records at its depositary office.
You may inspect the records at such office during regular business hours but
solely for the purpose of communicating with other holders in the interest of
business matters relating to the ADSs and the deposit agreement.
The depositary bank will maintain facilities in New York to record and process
the issuance, cancellation, combination, split-up and transfer of ADRs. These
facilities may be closed from time to time, to the extent not prohibited by law.
Limitations on Obligations and Liabilities
The deposit agreement limits our obligations and the depositary bank's
obligations to you. Please note the following:
o We and the depositary bank are only obligated to take the actions
specifically stated in the deposit agreement, and we must do so without
negligence or bad faith.
o The depositary bank disclaims any liability for any failure to carry
out voting instructions, for any manner in which a vote is cast and the
effect of any vote, provided it acts in good faith and in accordance
with the terms of the deposit agreement.
o The depositary bank disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the content
of any document forwarded to you on our behalf or for the accuracy of
any translation of such a document, for the investment risks associated
with investing in ordinary shares A, for the validity or worth of the
ordinary shares A, for any tax consequences that result from the
ownership of ADSs, for the creditworthiness of any third party, for
allowing any rights to lapse under the terms of the deposit agreement,
for the timeliness of any of our notices and for our failure to give
notice.
o We and the depositary bank will not be obligated to perform any act
that is inconsistent with the terms of the deposit agreement.
o We and the depositary bank disclaim any liability if we are prevented
or forbidden from acting on account of any law or regulation, any
provision of our articles of association, any provision of any
securities on deposit or by reason of any act of God, war or other
circumstances beyond our control.
o We and the depositary bank disclaim any liability by reason of any
exercise of, or failure to exercise, any discretion provided for in the
deposit agreement, in our articles of association or in any provisions
of securities on deposit
o We and the depositary bank disclaim any liability for any action or
inaction in reliance on the advice or information received from legal
counsel, accountants, any person presenting ordinary shares A for
deposit, any holder of ADSs or authorized representative thereof, or
any other person believed in good faith by either of us to be competent
to give such advice or information.
o We and the depositary bank disclaim liability for the inability of a
holder to benefit from any distribution, offering, right or other
benefit which is made available to holders of ordinary shares A but is
not, under the terms of the deposit agreement, made available to you.
o We and the depositary bank may rely without any liability upon any
written notice, request or other document which we believe to be
genuine and to have been signed or presented by the proper parties.
Pre-Release Transactions
The depositary bank may, in certain circumstances, issue ADSs before receiving a
deposit of ordinary shares A or release ordinary shares A before receiving ADSs.
These transactions are commonly referred to as "pre-release transactions." The
deposit agreement limits the aggregate size of pre-release transactions and
imposes a number of conditions on such transactions (i.e., the need to receive
collateral, the type of collateral required, the representations required from
brokers, etc.). The depositary bank may retain the compensation received from
the pre-release transactions.
Taxes
You will be responsible for the taxes and other governmental charges payable on
the ADSs and the securities represented by the ADSs. We, the depositary bank and
the custodian may deduct from any distribution payable to you the taxes and
governmental charges payable by holders and may sell any and all property on
deposit to pay such taxes and governmental charges. You will be liable for any
deficiency if the sale proceeds do not cover the taxes or charges that are due.
The depositary bank may refuse to issue ADSs, to deliver, transfer, split and
combine ADRs or to release securities on deposit until all taxes and charges are
paid by the applicable holder. The depositary bank and the custodian may take
reasonable administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on your behalf. However, you may be required
to provide to the depositary bank and to the custodian proof of taxpayer status
and residence and such other information as the depositary bank and the
custodian may require to fulfill legal obligations. You are required to
indemnify us, the depositary bank and the custodian for any claims with respect
to taxes based on any tax benefit obtained for you.
Foreign Currency Conversion
The depositary bank will arrange for the conversion of all foreign currency
received by it into U.S. dollars, if such conversion is practicable, and it will
distribute the U.S. dollars in accordance with the terms of the deposit
agreement. You may have to pay fees and expenses incurred by the depositary bank
in converting foreign currency, such as fees and expenses incurred in complying
with currency exchange controls and other governmental requirements.
If the conversion of foreign currency is not practicable or lawful, or if any
required approvals are denied or not obtainable at a reasonable cost or within a
reasonable period, the depositary bank may take the following actions in its
discretion:
o convert the foreign currency to the extent practicable and lawful and
distribute the U.S. dollars to the holders for whom the conversion and
distribution is lawful and practicable,
o distribute the foreign currency to holders for whom the distribution is
lawful and practicable, and
o hold the foreign currency (without liability for interest) for the
applicable holders.
SUMMARY OF ADDITIONAL MATERIAL PROVISIONS OF
OUR ARTICLES OF ASSOCIATION AND OTHER MATTERS
General
We were incorporated under Netherlands law on December 21, 1990, as a private
limited liability company (besloten vennootschap met beperkte
aansprakelijkheid), and were converted on December 11, 1997, into a public
limited liability company (naamloze vennootschap). We have our corporate seat in
Amsterdam, The Netherlands and are registered in the Amsterdam Commercial
Register under number 33274976. We are not subject to the rules for large
companies (structuurvennootschappen).
Set forth below is a summary of certain additional material provisions of the
articles of association, as amended, and Netherlands corporate law. This summary
does not purport to be complete and is qualified in its entirety by reference to
our articles of association and the law of The Netherlands. Copies of our
articles of association and our most recent annual accounts and annual report
may be obtained in both Dutch and English upon written request to us at our
principal office or to our sponsor, Fortis Bank N.V., at its Amsterdam office.
Corporate Purpose
Article 3 of our articles of association provides that our business activity is,
among other things:
o to own, operate, and develop subscription and multi-channel television
systems and networks, to render related consulting, engineering and
programming services and to provide other communications services,
o to incorporate, manage and finance, and to participate in other
companies and enterprises, and
o to take up loans, land and make investments and acquire, transfer
and dispose of claims and assets in general.
Acquisition of Our Own Shares
We may acquire our own shares subject to certain provisions of Netherlands law.
We may only acquire our own fully paid up shares for consideration if (1) the
shareholders' equity less the payment required to make the acquisition does not
fall below the sum of the paid-up and called portion of the share capital and
any reserves we must hold pursuant to Netherlands law, and (2) we and our
subsidiaries would thereafter not hold or hold in pledge shares with an
aggregate nominal value exceeding one-tenth of our issued share capital. Shares
held by us in our own capital may not be voted or counted for quorum purposes at
shareholders' meetings.
Acquisitions by us of our own shares may be effected by our Board of Management,
subject to the approval of the Supervisory Board and United as the holder of our
priority shares, only if the general meeting of shareholders has authorized the
Board of Management to effect such acquisitions. The general meeting adopted
such a resolution on June 9, 2000. Such resolutions expire within 18 months and
must be renewed. Acquisitions by us of our own shares that are listed on a stock
exchange do not require the above-mentioned authorization of the general meeting
if made for the purpose of transferring such shares to our employees or
employees of a company in our group.
Obligations to Disclose Holdings
Pursuant to the Netherlands Act on Disclosure of Holdings in Listed Companies
1996 (Wet melding zeggenschap in ter beurze genoteerde vennootschappen 1996),
anyone directly or indirectly obtaining or divesting our shares and thereby
causing the percentage of shares directly or indirectly held by him or her, or
direct or indirect voting control exercisable by him or her, to come under a
different range must notify us and the Securities Board of The Netherlands. The
relevant ranges are: 0 to 5%, 5 to 10%, 10 to 25%, 25 to 50%, 50 to 66 2/3% and
66 2/3% or more. Failure to disclose one's shareholdings is a criminal offense
pursuant to the Netherlands Economic Offenses Act, and may also result in civil
penalties, including suspension of voting rights, or administrative sanctions
being imposed. As a holder of ADSs, you agree to comply with the requirements of
the deposit agreement.
Shareholders Meeting
We are required to hold a general shareholders' meeting annually, as well as
when the Supervisory Board or the Board of Management deem such necessary.
Unless otherwise required by law or our articles of association, all decisions
of the general meeting of shareholders may be adopted by a majority of the votes
cast.
Adoption of Annual Accounts and Discharge
Within five months following the end of each fiscal year, the Board of
Management must prepare annual accounts accompanied by an annual report. This
period may be extended by the general meeting of shareholders on account of
special circumstances for up to six months. The annual accounts and report must
then be submitted to the Supervisory Board, which will present a report on it to
the general meeting of shareholders. The annual accounts and the annual report
will be available to shareholders from the day of notice convening the annual
general meeting of shareholders.
Pursuant to Netherlands law, each member of the supervisory board and board of
management is responsible to us for the proper performance of his or her
assigned duties. The general meeting of shareholders may resolve to discharge
the members of the Supervisory Board and Board of Management from liability in
respect of the exercise of their duties during the financial year concerned.
This discharge of liability may be limited by mandatory provisions of
Netherlands law, such as in the case of bankruptcy. Furthermore, such discharge
does not extend to actions and omissions neither disclosed in or apparent from
the adopted annual accounts nor otherwise communicated to the discharging
shareholders. In case of such actions or omissions, the members of the
Supervisory Board or Board of Management will be jointly and severally liable
for losses sustained as a result of such actions or omissions, unless the
Supervisory Board or Board of Management member proves that he or she is not
responsible for the actions or omissions. Generally, under Netherlands law,
directors will not be held personally liable for decisions made with reasonable
business judgment.
Dividends
Subject to certain exceptions, dividends are only paid by us on profits as shown
in our annual financial statements. We may not pay dividends if the payment
would reduce shareholders' equity below the sum of the paid-up capital and any
reserves required by Netherlands law. Pursuant to our articles of association,
the priority shares and preference shares have preferential dividend rights. See
"Description of Share Capital - Priority Shares" and "- Preference Shares."
Thereafter, the Board of Management, upon approval of the Supervisory Board,
shall determine how much of the remaining profit shall be allocated to our
reserves before dividends are paid on the ordinary shares. To date, we have not
paid dividends on our ordinary shares and do not intend to do so for the
foreseeable future. The Board of Management may propose, with the approval of
the Supervisory Board, to the general meeting of the shareholders that some or
all of the dividends on the ordinary shares will be paid in our shares rather
than in cash. The Board of Management may, with the prior approval of the
Supervisory Board and subject to certain statutory provisions, distribute one or
more interim dividends. Any dividends paid but not claimed by the recipient
within five years revert to us.
Capital Reduction
Upon the proposal of our Board of Management and after approval by the
Supervisory Board, the general meeting of shareholders may resolve to reduce the
issued share capital by cancellation of shares or by reducing the nominal value
of our shares, subject to certain statutory provisions and the provisions of our
articles of association.
Amendment of the Articles of Association; Dissolution; Legal Merger; Split-up
Only United, as the holder of our priority shares, may propose amendments to our
articles of association as well as to effect our legal merger, split-up or
dissolution. The general meeting of shareholders cannot effect our merger,
split-up or dissolution or amend our articles of association if the proposal is
made by any one other than United as the holder of our priority shares.
Liquidation Rights
In the event that we are dissolved or liquidated, the assets remaining after
payment of all debts are to be distributed to holders of our share capital as
follows: first, to any issued and outstanding class B preference shares in an
amount equal to any previously declared but unpaid dividend and the paid-up
amount of such class B preference shares; second, to any issued and outstanding
class A preference shares in an amount as determined in the resolution by which
such class A preference shares were issued, which may include, inter alia, (a)
an amount equal to the accrued but unpaid dividend, (b) the nominal paid up
amount on such class A preference shares and the contributed share premium, (c)
a compensation over the paid capital, and (d) an amount equal to the amount the
holder of such class A preference shares would be entitled to, had he converted
these shares into ordinary shares on the day of liquidation; third, to the
holders of priority shares in an amount equal to their nominal value; and,
fourth any remaining assets shall be distributed to the holders of ordinary
shares in proportion to the number of shares held by them regardless of the
class of ordinary shares.
Transfer and Dividend Paying Agent and Registrar
Citibank, N.A. is the depositary bank for our ADSs.
Fortis Bank N.V. is the transfer and dividend paying agent and registrar for our
ordinary shares A.
SHARES ELIGIBLE FOR FUTURE SALE
Our ordinary shares A are traded on the Official Segment of the stock market of
Euronext Amsterdam, and ADSs representing ordinary shares A are traded on the
Nasdaq National Market. No prediction can be made of the effect, if any, that
the rights offering will have on the market price of the ordinary shares A or
the ADSs.. Sales of substantial amounts of such securities in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the ordinary shares A and the ADSs and could impair out future ability
to raise capital through an offering of its equity securities.
Upon consummation of the rights offering and theseparate placement to United,
if any, we will have outstanding between _____ and _____ ordinary shares A,
depending on the number of ordinary shares A sold to United in the placement. We
will also have outstanding 300 priority shares and 12,400 class A preference
shares Series 1 convertible into approximately _____ ordinary shares A. The
ordinary shares A and ADSs issued upon exercise of the rights will be freely
tradable in the United States by persons other than us or our "affiliates" as
that term is defined in SEC Rule 144, which is discussed below. All of the
issued and outstanding priority shares and ordinary shares A held by United are
"restricted securities" within the meaning of Rule 144 and may be sold in the
public market only if registered or (as discussed below) sold under an exemption
from registration under the Securities Act, including the exemption provided by
Rule 144.
Under the regulations of Euronext Amsterdam, United and any other holder of 5%
of more of our outstanding shares capital collectively may not until February
11, 2002, the third anniversary of our initial public offering, subject to
certain exceptions, sell more than 25% of the shares then outstanding. This
lock-up requirement applies unless we report a profit, in which case these
shareholder collectively are entitled to dispose of a maximum of (1) 50% of the
shares then outstanding if a profit was made during one year or (2) 75% of the
shares then outstanding if a profit was made during two years. The Official
Segment of the stock market of Euronext Amsterdam has agreed to grant permission
to these shareholders to dispose of their remaining interest if such disposition
is consummated through a public secondary offering involving a due diligence
investigation, the issuance of a prospectus and compliance with the other
listing rules of the Euronext Amsterdam occurring at least one year after our
initial public offering. If we issue and sell more shares in the future (other
than by way of a stock dividend, bonus shares of conversion or exercise of any
securities into our shares) and the interest of any 5% holder in us falls below
5%, such holder will no longer be subject to the lock-up requirements of the
Euronext Amsterdam.
In general, under Rule 144 of the Securities Act, any of our affiliates, or a
person or persons whose shares are aggregated who has beneficially owned
restricted securities for at least one year (including the holding period of any
prior owner except an affiliate), is entitled to sell in any three-month period
a number of shares that does not exceed the greater of (1) 1% of the number of
shares then outstanding, or approximately, _____ shares immediately after this
offering; or (2) the average weekly trading volume of the ADSs on the Nasdaq
National Market during the four calendar weeks immediately preceding. Sales
under Rule 144 are also subject to requirements relating to manner of sale,
notice and availability of current public information about us. Under Rule
144(k), a person or persons whose shares are aggregated who has not been one of
our affiliates at any time during the 90 days immediately preceding the sale and
who has beneficially owned his or her shares for at least two years is entitled
to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. In general,
under Rule 701 of the Securities Act, any of our employees, consultants or
advisors who purchases shares from us pursuant to Rule 701 in connection with a
compensatory stock or option plan or other written agreement is eligible to
resell, unless contractually restricted, such shares 90 days after the effective
date of the rights offering in reliance on Rule 144, but without compliance with
certain restrictions, including the holding period, contained in Rule 144.
CERTAIN NETHERLANDS TAX CONSIDERATIONS
The following discussion, subject to the limitations set forth therein,
describes the material Netherlands tax consequences of the acquisition,
ownership and disposition of the ordinary shares A and/or ADSs and/or
transferable rights and is the opinion of Arthur Andersen, special Netherlands
tax counsel (belastingadviseurs) to us. This opinion represents Arthur
Andersen's interpretation of existing law. No assurance can be given that tax
authorities or courts in The Netherlands will agree with such interpretation.
This opinion does not address the income taxes imposed by any political
subdivision of The Netherlands or any tax imposed by any other jurisdiction.
This opinion does not discuss all the tax consequences that may be relevant to
the holders in light of their particular circumstances or to holders that are
subject to special treatment under applicable law and is not intended to be
applicable in all respects to all categories of investors. Changes in our
organizational structure or the manner in which we conduct our business may
invalidate this opinion. The laws upon which this opinion is based are subject
to change, sometimes with retroactive effect. Changes in the applicable laws may
invalidate this opinion, and this opinion will not be updated to reflect such
subsequent changes.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR
TAX CONSEQUENCES OF THEIR ACQUIRING, OWNING AND DISPOSING OF THE ORDINARY SHARES
A AND/OR ADSs AND/OR RIGHTS.
Substantial Interest. A shareholder that owns, either via shares, warrants,
conversion rights or options, directly or indirectly 5% or more of any class of
shares, or 5% or more of the total issued share capital of a company is
considered to have a "Substantial Interest" and is subject to special tax rules.
Profit participation rights which give the holder rights to 5% or more of the
annual profit or 5% or more of the liquidation proceeds of the target company
will also qualify as substantial interest. A deemed substantial interest is
present if all or part of a substantial interest has been disposed of, or is
deemed to have been disposed of, on a non-recognition basis. With respect to
individuals, attribution rules exist in determining the presence of a
Substantial Interest. In the situation that a shareholder has or is deemed to
have a Substantial Interest in us, then, inter alia, all the ordinary shares A
and/or ADSs and/or rights such shareholder holds will form a part of this
Substantial Interest.
Unless indicated otherwise, the term "shareholder," as used herein, includes
individuals and entities as defined under Netherlands tax law holding the
ordinary shares A and/or ADSs and/or rights, but does not include any such
person having a Substantial Interest in us.
Dividend Withholding Tax
The rights to be received at no charge will not be considered a dividend and
will as such not be subject to dividend withholding tax.
Dividends that we distribute on our ordinary shares A are subject to withholding
tax at a rate of 25%, unless:
o the participation exemption (as defined in Article 13 of the
Netherlands Corporation Tax Act 1969 (the "Corporation Tax Act"))
applies and the ordinary shares A and/or ADSs are attributable to the
business carried out in The Netherlands, or
o dividends are distributed to a corporate European Union member state
shareholder, and both we and the recipient meet the criteria set out in
article 4a of the Dividend Tax Act 1965, or
o the rate is reduced by an applicable Convention for the avoidance of
double taxation with respect to taxes on income (the "Income Tax
Treaty"), or
o Surtax (as described below) was due on the dividend distribution and
the recipient is a resident of The Netherlands, the Netherlands
Antilles or Aruba, a member state of the European Union or a country
with which The Netherlands has concluded an Income Tax Treaty.
Dividends may include:
o distributions of cash,
o distributions of property in kind,
o constructive dividends,
o hidden dividends,
o liquidation proceeds in excess of our recognized paid-in capital,
o consideration for the repurchase of the ordinary shares A and/or ADSs
by us (including a repurchase by one of our direct or indirect
subsidiaries, in excess of our recognized average paid-in capital,
unless such repurchase is for temporary investment, or exempt on the
basis of article 4c Dividend Tax Act 1965,
o proceeds from the redemption of ordinary shares A and/or ADSs in
excess of our recognized paid-in capital,
o stock dividends equal to their nominal value (unless distributed out
of our recognized paid-in share premium), and
o the repayment of paid-in capital not recognized as capital.
The term "recognized paid-in capital" or "share premium" relates to our paid-in
capital or share premium as recognized for Netherlands tax purposes.
Generally, a shareholder that resides, or is deemed to reside, in The
Netherlands will be allowed a credit against Netherlands income tax or
corporation tax for the tax withheld on dividends paid on the ordinary shares A
and/or ADSs. A legal entity resident in The Netherlands that is not subject to
Netherlands corporate income tax may, under certain conditions, request a refund
of the tax withheld.
Anti-abuse legislation relating to the beneficial ownership status of the
dividend recipient has been proposed; however, this legislation has not yet
entered into force. The entry into force depends on the discussions between the
banking sector and the Ministry of Finance and could be effected by a Royal
Decree. The measure, when entered into force, would disallow non-beneficial
owner dividend recipients the credit of dividend withholding tax.
Dividends we pay to a resident corporate shareholder that qualify for the
participation exemption will not be subject to the dividend withholding tax if
the ordinary shares A and/or ADSs are attributable to the shareholder's business
carried out in The Netherlands. A resident corporate shareholder will qualify
for the participation exemption if the resident shareholder owns at least 5% of
our nominal paid-in capital and additional conditions are met.
A non-resident shareholder may benefit from a reduced dividend withholding tax
rate pursuant to an income tax treaty in effect between the shareholder's
country of residence and The Netherlands. Under most income tax treaties, the
withholding tax rate is reduced to 15% or less, provided that:
o the recipient shareholder does not have a permanent establishment in
The Netherlands to which the ordinary shares A and/or ADSs are
attributable, and
o the recipient shareholder is the beneficial owner of the dividends.
Residents of the United States that qualify for, and comply with, the procedures
for claiming benefits under the Convention between The Kingdom of The
Netherlands and the United States of America for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income
(the "US/NL Income Tax Treaty"), generally are eligible for a reduction of the
Netherlands withholding tax on dividend income to 15%, which rate may under
certain conditions further be reduced to 5% if the beneficial owner is a company
which holds directly at least 10% of our voting power. Generally, a holder of
the ordinary shares A and/or ADSs will qualify for benefits under the US/NL
Income Tax Treaty (subject to compliance with the procedures for claiming
benefits) if the holder:
o is the beneficial owner of the dividends paid,
o is resident in the United States according to the US/NL Income Tax
Treaty,
o does not hold the ordinary shares A and/or ADSs in connection with
the conduct of business in The Netherlands,
o is an individual, an estate, a trust, a company and any other
body of persons as defined in the US/NL Income Tax Treaty, and
o qualifies under article 26 of the US/NL Income Tax Treaty (Limitation
on Benefits).
The US/NL Income Tax Treaty provides a complete exemption for dividends received
by exempt pension trusts and exempt organizations, under the conditions as
defined therein.
The withholding of tax on dividend distributions on ordinary shares A and/or
ADSs to a non-resident corporate shareholder carrying on a business through a
Netherlands permanent establishment is not required as long as:
o the Netherlands participation exemption applies, and
o the ordinary shares A and/or ADSs form a part of the permanent
establishment's business assets.
To qualify for the participation exemption, this entity should generally hold at
least 5% of our nominal paid-in capital and meet other requirements.
Surtax
As a result of a major tax reform effective as of January 1, 2001, we will be
subject to 20% corporate income tax on "excessive" dividends distributed by us
in the period from January 1, 2001 up to and including December 31, 2005
("Surtax").
Dividends (to be understood in the widest sense, like distributions in cash,
liquidation proceeds and proceeds at the event of repurchase) are considered to
be excessive if in a certain calendar year the total amount of distributed
dividends exceeds the highest of the following amounts:
o 4% of the fair market value of our issued ordinary shares A and/or ADSs
in us at the beginning of that certain calendar year,
o twice the amount of the average annual amount of dividends regularly
distributed, as indicated in the "Surtax"-legislation (Temporary
provisions to the Corporation Tax Act as described in article IV sub B
of the Implementation Act Income tax 2001), by us during the three
calendar years immediately preceding January 1, 2001, and
o Our results of the preceding book year (exclusive of certain results as
indicated in the "Surtax"-legislation).
The Surtax is reduced pro rata to the extent that we can demonstrate that at the
time of the distribution, the ordinary shares A and/or ADSs were held, for an
uninterrupted period of three years, by individuals or entities holding at least
5% of our nominal paid-in capital and that these shareholders are resident of
The Netherlands, the Netherlands Antilles or Aruba, a member state of the
European Union or a country with which The Netherlands has concluded an Income
Tax Treaty. Shareholders holding 5% of the ordinary shares A and/or ADSs on
September 14, 1999, are deemed to hold the ordinary shares A and/or ADSs for
three years.
The preceding paragraph does not apply to investment institutions
(beleggingsinstellingen) as defined in the Netherlands Corporate Income Tax Act
1969.
The distribution tax is not levied to the extent that our distributions exceed
the retained earnings and silent reserves present on December 31, 2000.
Income Tax Consequences for Residents and/or Deemed Residents of The Netherlands
Individual Income Tax. The individual resident or deemed individual resident
holder will be taxed on a deemed income from "savings and investments" (sparen
en beleggen), unless:
o the ordinary shares A and/or ADSs and/or rights are attributable to
a trade or business carried on by the individual shareholder, or
o form part of a Substantial Interest, or
o the income derived from the ordinary shares A and/or ADSs and/or
capital gains realized from the sale or exchange of the ordinary shares
A and/or ADSs and/or rights qualify as "taxable income from one or more
activities which do not generate taxable profit or taxable wages"
(belastbaar resultaat uit overige werkzaamheden).
The deemed income from savings and investments amounts to 4% of the individual's
"yield basis" (rendementsgrondslag), insofar as this yield basis exceeds a
certain threshold. The yield basis is computed at the average of the assets and
liabilities at the beginning and at the end of the year and consists of the fair
market value of certain assets and liabilities of the individual, including
ordinary shares A and/or ADSs and/or rights.
The deemed income from savings and investments is taxed annually at a flat rate
of 30%, regardless whether any dividend is received, capital gains are realized
or capital losses are suffered.
Income derived from the ordinary shares A and/or ADSs and capital gains realized
from the sale or exchange of the ordinary shares A and/or ADSs and/or rights by
an individual resident shareholder are subject to tax on a net income basis at
the progressive income tax rates, if the ordinary shares A and/or ADSs and/or
rights are attributable to a trade or business carried on by the individual
shareholder, or the income and/or capital gains qualify as taxable income from
one or more activities which do not generate taxable profit or taxable wages.
Income derived from the ordinary shares A and/or ADSs and capital gains realized
from the sale or exchange of the ordinary shares A and/or ADSs and/or rights by
an individual resident shareholder that holds a Substantial Interest are
generally subject to income tax at a rate of 25% on a net basis.
Corporate Income Tax.
Dividends received from the ordinary shares A and/or ADSs and capital gains
realized from the sale or exchange of the ordinary shares A and/or ADSs and/or
rights by a corporate shareholder that resides, or is deemed to reside, in The
Netherlands are subject to Netherlands corporation tax on a net basis, generally
if the ordinary shares A and/or ADSs and/or rights are (deemed) attributable to
a trade or business carried on (or deemed to be carried on) by the holder,
unless the shareholding in us qualifies for the participation exemption.
To qualify for the participation exemption, the corporate shareholder should
generally hold at least 5% of our nominal paid-in capital and meet other
requirements. The rights do not qualify for computing the 5% threshold.
If the ordinary shares A and/or ADSs and/or rights are held by a qualifying
pension fund as described in article 5 of the Corporation Tax Act, dividends
received from the ordinary shares A and/or ADSs and gains realized from the sale
or exchange of the ordinary shares A and/or ADSs and/or rights are exempt from
Netherlands corporation tax.
Income Tax Consequences for Non-Residents of The Netherlands
A non-resident holder of ordinary shares A and/or ADSs and/or rights will not be
subject to Netherlands income tax on dividends received from the ordinary shares
A and/or ADSs or capital gains derived from the sale or disposition of the
ordinary shares A and/or ADSs an/or rights, provided such holder:
o does not carry on and has not carried on a business in The Netherlands
through a permanent establishment or a permanent representative to
which the ordinary shares A and/or ADSs and/or rights are attributable,
o does not hold and has not held a Substantial Interest in our share
capital or, in the event the non-resident holder holds or has held a
Substantial Interest in us, such interest is or was a business asset in
the hands of the holder,
o does not carry out any activities which can be qualified as "taxable
income from one or more activities which do not generate taxable profit
or taxable wages" (belastbaar resultaat uit overige werkzaamheden) to
which the holding of the ordinary shares A and/or ADSs and/or rights
was connected,
o does not carry out and has not carried out employment activities in The
Netherlands or serves or served as a director or board member of any
entity resident in The Netherlands, or serves or served as a civil
servant of a Netherlands public entity with which the holding of the
ordinary shares A and/or ADSs and/or rights is or was connected, and
o does not share and has not shared directly (not through the beneficial
ownership of ordinary shares A and/or ADSs and/or rights or similar
securities) in the profits of an enterprise managed and controlled in
The Netherlands which owned or was deemed to have owned ordinary shares
A and/or ADSs and/or rights.
Income derived from ordinary shares A and/or ADSs or capital gains derived from
the sale or disposition of ordinary shares A and/or ADSs and/or rights by a
non-resident corporate shareholder, carrying on a business through a permanent
establishment in The Netherlands, are not subject to Netherlands corporation
tax, provided that:
o the ordinary shares A and/or ADSs and/or rights are attributable to
the business carried out in The Netherlands, and
o The Netherlands participation exemption applies.
To qualify for the participation exemption, the shareholder must generally hold
at least 5% of our nominal paid-in capital and meet other requirements.
Under most Income Tax Treaties, the right to tax capital gains realized by a
non-resident shareholder from the sale or exchange of ordinary shares A and/or
ADSs and/or rights is in many cases allocated to the shareholder's country of
residence.
Gift Tax and Inheritance Tax
Residents or Deemed Residents of The Netherlands. Netherlands gift tax or
inheritance tax will be due with respect to a gift or inheritance of ordinary
shares A and/or ADSs and/or rights from a person who resided, or was deemed to
have resided, in The Netherlands at the time of the gift or his or her death.
Netherlands tax will be due in the case of a gift of ordinary shares A and/or
ADSs and/or rights by an individual who at the time of the gift was neither
resident nor deemed to be resident in The Netherlands, if such individual dies
within 180 days after the date of the gift, while being resident or deemed
resident in The Netherlands. A Netherlands national is deemed to have been
resident in The Netherlands if he or she was a resident in The Netherlands at
any time during the ten years preceding the date of the gift or the date of his
or her death. For gift tax purposes, each person (regardless of nationality) is
deemed to be a Netherlands resident if he or she was a resident in The
Netherlands at any time during the 12 months proceeding the date of the gift.
The ten-year and 12-month residency rules may be modified by an Income Tax
Treaty.
Liability for payment of the gift tax or inheritance tax rests with the donee or
heir, respectively. The rate at which these taxes are levied is primarily
dependent on the fair market value of the gift or inheritance and the
relationship between the donor and donee or the deceased and his or her heir(s).
Exemptions may apply under specific circumstances.
Non-Residents of The Netherlands. A gift or inheritance of ordinary shares A
and/or ADSs and/or rights from a non-resident shareholder will not be subject to
Netherlands gift tax or inheritance tax in the hands of the donee or heir
provided the non-resident holder was not:
o a Netherlands national who has been resident in The Netherlands at any
time during the 10 years preceding the date of gift or the date of
death or, in the event he or she was resident in The Netherlands during
such period, the non-resident holder was not a Netherlands national at
the time of gift or death,
o solely for the purpose of the gift tax, a resident of The Netherlands
at any time during the 12 months preceding the time of the gift
(however, in case of a gift by an individual who at the time of the
gift was neither resident nor deemed to be resident in The Netherlands
and such individual dies within 180 days after the date of the gift,
while being resident or deemed to be resident in The Netherlands, tax
will be due),
o engaged in a business in The Netherlands through a permanent
establishment or a permanent representative which included in its
assets ordinary shares A and/or ADSs and/or rights, and
o shared directly (not through the beneficial ownership of ordinary
shares A and/or ADSs and/or rights or similar securities) in the
profits of an enterprise managed and controlled in The Netherlands
which owned or is deemed to have owned ordinary shares A and/or ADSs
and/or Rights.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is the opinion of Holme Roberts & Owen LLP on the
material U.S. federal income tax consequences to U.S. Shareholders of ordinary
shares A or ADSs of the receipt, transfer, lapse, exercise, sale or exchange of
rights. This discussion does not address the income taxes imposed by any
political subdivision of the United States or any tax imposed by any other
jurisdiction. Moreover, this discussion does not address every aspect of
taxation that may be relevant to a particular taxpayer under special
circumstances or who is subject to special treatment under applicable law and is
not intended to be applicable in all respects to all categories of investors.
For example, certain types of investors, such as insurance companies, tax-exempt
persons, financial institutions, regulated investment companies, dealers in
securities, persons who hold ordinary shares A or ADSs as part of a hedging,
straddle, constructive sale or conversion transaction, persons whose functional
currency is not the U.S. dollar and U.S. persons owning (directly, indirectly or
constructively) 10% or more of the ordinary shares A or ADSs may be subject to
different tax rules not discussed below.
General
The discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), the` Treasury regulations promulgated thereunder, judicial authority,
and current administrative rulings and practice, all of which are subject to
change on a prospective or retroactive basis. The discussion is limited to those
U.S. Shareholders who receive rights pursuant to the rights offering and have
held the ordinary shares A or ADSs and who will hold the rights and any ordinary
shares A or ADSs acquired upon the exercise of rights as capital assets
(generally, property held for investment) within the meaning of Section 1221 of
the Code.
For purposes of this discussion, a "U.S. Shareholder" is a holder of ordinary
shares A or ADSs that is (i) an individual who is a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created in, or
organized under the laws of, the United States or any state or political
subdivision thereof, (iii) an estate the income of which is includable in gross
income for U.S. federal income tax purposes regardless of its source, or (iv) a
trust (A) the administration of which is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who have the authority to
control all substantial decisions of the trust, or (B) that was in existence on
August 20, 1996, was treated as a U.S. person on the previous day, and elected
to continue to be so treated.
Receipt of Rights. A U.S. Shareholder will not recognize taxable income for U.S.
federal income tax purposes upon receipt of the rights.
Basis and Holding Period of the Rights. Except as provided in the following
sentence, a U.S. Shareholder's tax basis in the rights received as a
distribution with respect to such U.S. Shareholder's ordinary shares A or ADSs
will be zero. If, however, either (i) the fair market value of the rights on
their date of issuance is 15% or more of the fair market value (on the date of
issuance) of the ordinary shares A or ADSs with respect to which they are
received or (ii) the U.S. Shareholder elects, in his or her U.S. federal income
tax return for the taxable year in which the rights are received, to allocate
part of the tax basis of such ordinary shares A or ADSs to the rights, then upon
exercise or transfer of the rights, the U.S. Shareholder's tax basis in such
ordinary shares A or ADSs will be allocated between the ordinary shares A or
ADSs and the rights in proportion to the fair market values of each on the date
of issuance. A U.S. Shareholder who considers electing to allocate part of his
or her basis in such ordinary shares A or ADSs to the rights is urged to consult
with his or her tax advisor in connection with such election.
The holding period of a U.S. Shareholder with respect to the rights received as
a distribution on such U.S. Shareholder's ordinary shares A or ADSs will include
the U.S. Shareholder's holding period for the ordinary shares A or ADSs with
respect to which the rights were distributed.
In the case of a purchaser of rights, the tax basis of such rights will be equal
to the purchase price paid, and the holding period for such rights will commence
on the day following the date of purchase.
Transfer of the Rights. A U.S. Shareholder or purchaser of rights who sells or
exchanges rights will recognize gain or loss equal to the difference between the
amount realized on the sale or exchange and the tax basis, if any, in the rights
sold or exchanged. In the case of a U.S. Shareholder of the ordinary shares A or
ADSs, gain or loss on the sale or exchange of rights will be capital gain or
loss, so long as we are not classified as a Passive Foreign Investment Company
or Foreign Personal Holding Company as further described herein, if gain or loss
from a sale or exchange of the ordinary shares A or ADSs held by such U.S.
Shareholder would be characterized as capital gain or loss at that time.
Lapse of the Rights. U.S. Shareholders who allow the rights received by them in
the rights offering to lapse will not recognize any gain or loss, and no
adjustment will be made to the tax basis of the ordinary shares A or ADSs they
own. Purchasers of the rights will recognize a loss equal to their tax basis in
the rights, if such rights expire unexercised. Any loss recognized on the
expiration of the rights acquired by a purchaser will be a capital loss.
Exercise of the Rights; Basis and Holding Period of the Ordinary Shares A or
ADSs. U.S. Shareholders will not recognize any gain or loss upon the exercise of
rights.
The tax basis of the ordinary shares A or ADSs acquired through exercise of the
rights will be equal to the sum of the issue price for the rights and the U.S.
Shareholder's tax basis in such rights, if any. The holding period for the
ordinary shares A or ADSs acquired through exercise of the rights will begin on
the date the rights are exercised.
Taxes on Other Distributions
Subject to the PFIC rules discussed below, the gross amount of any distribution
other than shares and share rights (including any Netherlands withholding tax
thereon) actually or constructively received by a U.S. Shareholder with respect
to ordinary shares A or ADSs will be a dividend and included in the gross income
of the U.S. Shareholder as ordinary income to the extent of our current and
accumulated earnings and profits (as determined under U.S. federal income tax
principles as of year end). Our dividends will generally constitute income from
sources outside the United States and will not therefore be eligible for the
dividends received deduction that is allowed to United States corporate
shareholders on dividends paid by another corporation out of income from sources
within the United States.
A distribution in excess of our current and accumulated earnings and profits
will be treated first as a nontaxable return of capital to the extent of such
U.S. Shareholder's adjusted tax basis in its ordinary shares A or ADSs. Any
distribution in excess of such tax basis will constitute gain, which gain will
be capital gain if the ordinary shares A or ADSs are held as capital assets.
The amount of any distribution paid in euros will be the dollar value of the
euros on the date of distribution, regardless of whether the U.S. Shareholder
converts the payment into dollars. Gain or loss, if any, recognized by a U.S.
Shareholder on the sale, conversion or disposition of euros will be ordinary
income or loss. Such gain or loss will generally be income or loss from sources
within the United States.
Subject to certain conditions and limitations, Netherlands tax withheld in
accordance with the Income Tax Treaty of December 18, 1992, between The
Netherlands and the United States will be treated as a foreign tax that U.S.
Shareholders may elect to deduct in computing their U.S. federal taxable income
or credit against their U.S. federal income tax liability. Amounts paid in
respect of dividends on ordinary shares A or ADSs will generally be treated for
U.S. foreign tax credit purposes as "passive income," or in the case of certain
holders, "financial services income." Additional withholding tax, if any, in
excess of the rate applicable under the Treaty generally will not be eligible
for credit against the U.S. Shareholder's U.S. federal income tax liability.
Netherlands withholding tax may not be creditable against the U.S. Shareholder's
U.S. federal income tax liability to the extent we are permitted to reduce the
amount of dividend withholding tax paid over to The Netherlands Tax
Administration by obtaining a credit for withholding tax imposed on certain
dividends paid to us. We will endeavor to provide to U.S. Shareholders the
information they will need to calculate their foreign tax credit.
Sale or Other Disposition of Ordinary Shares A or ADSs
A U.S. Shareholder will generally recognize gain or loss for U.S. federal income
tax purposes upon the sale or exchange of ordinary shares A or ADSs in an amount
equal to the difference between the amount realized from such sale or exchange
and the U.S. Shareholder's tax basis for the ordinary shares A or ADSs. Such
gain or loss will be a capital gain or loss if the ordinary shares A or ADSs are
held as a capital asset, and long-term capital gain if the holding period
requirement is met, so long as we are not classified as a PFIC or FPHC as
further described herein. Any such gain or loss will generally be U.S. source
gain or loss.
Passive Foreign Investment Company
We have determined that we are not currently a passive foreign investment
company ("PFIC") for U.S. federal income tax purposes. This is a factual
determination that must be made annually and thus may change. If we were
determined to be a PFIC, any gain from the sale or exchange of ordinary shares A
or ADSs by a U.S. Shareholder would be allocated ratably to each year in the
holder's holding period and would be treated as ordinary income. U.S. federal
income tax would be imposed on the amount allocated to each year prior to the
year of disposition at the highest rate in effect for that year, and interest
would be charged at the rate applicable to underpayments on the tax payable in
respect of the amount so allocated. The same rules would apply to "excess
distributions," which are defined generally as distributions exceeding 125% of
the average annual distribution made by us over the shorter of the holder's
holding period or the three preceding years. We will evaluate our PFIC status on
an annual basis and will inform U.S. Shareholders in the event that we determine
that we are a PFIC.
A U.S. Shareholder will not be subject to the special tax and interest charge
regime described above if it makes a "Qualified Electing Fund" ("QEF") election
for the first taxable year in which such U.S. Shareholder owns ordinary shares A
or ADSs and for which we are a PFIC. Instead, such U.S. Shareholder would be
required to include its pro rata share of our ordinary earnings and net capital
gain in income for U.S. federal income tax purposes for each taxable year
(regardless of when or whether cash attributable to such income is actually
distributed). A QEF election is effective only if certain information is made
available to U.S. Shareholders by us. In the event we determine that we have
become a PFIC, we would undertake to notify U.S. Shareholders and to comply with
the information requirements necessary to permit U.S. Shareholders to make QEF
elections and to determine their pro rata shares of our ordinary earnings and
net capital gain.
Foreign Personal Holding Company Classification
We could be classified as a foreign personal holding company ("FPHC") if in any
taxable year (i) five or fewer individuals who are United States citizens or
residents own (directly or constructively through certain attribution rules)
more than 50% of the total voting power of all classes of our stock entitled to
vote or the total value of our stock and (ii) at least 60% (50% in certain
cases) of its gross income consists of passive income such as dividends,
interest, gains, rent and royalties. Classification as an FPHC would in general
require each U.S. Shareholder who held ordinary shares A or ADSs on the last day
of the taxable year to include in gross income as a dividend such shareholder's
pro rata portion of our undistributed FPHC income.
We do not expect to be an FPHC for 2001. This is a factual determination that
must be made annually and thus our status of whether we are an FPHC is subject
to change.
Information Reporting and Backup Withholding
Under the backup withholding rules of the Code, U.S. Shareholders may be subject
to backup withholding at the rate of 31% with respect to payments made pursuant
to ordinary shares A or ADSs unless such U.S. Shareholder (i) is a corporation
or comes within certain other exempt categories and, when required, demonstrates
this fact, or (ii) provides a correct taxpayer identification number and
certifies under penalties of perjury that the taxpayer identification number is
correct and that the U.S. Shareholder is not subject to backup withholding
because of a failure to report all dividends and interest income. Any amount
withheld under these rules will be credited against the U.S. Shareholder's U.S.
federal income tax liability. We may require U.S. Shareholders to establish
exemption from backup withholding or to make arrangements satisfactory to us
with respect to the payment of backup withholding.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
EACH U.S. SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR HER
PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE AND
LOCAL INCOME AND OTHER TAX LAWS.
DEALER MANAGER ARRANGEMENTS
The ordinary shares A and ADSs offered pursuant to the rights offering are being
offered by us directly to holders of our ordinary shares A and ADSs. We have
retained _________ and ________ to act as the dealer managers in connection with
the rights offering. The dealer managers will provide marketing assistance in
connection with the rights offering and will solicit the exercise of rights by
holders.
We have agreed to pay the dealer managers a selling commission of __________ for
each ordinary share A issued in connection with the rights offering, except
ordinary shares A purchased by United and __________. In addition, we have
agreed to reimburse certain of the dealer managers' expenses.
We have agreed to indemnify the dealer managers with respect to certain
liabilities, including civil liabilities under the Securities Act of 1933, or to
contribute to payments which the dealer managers may be required to make in
respect thereof.
None of the dealer managers has prepared any report or opinion constituting a
recommendation or advice to us or our shareholders or holders of our ADSs, nor
has any dealer manager prepared an opinion as to the fairness of the issue price
or the terms of the rights offering to us or our current shareholders or holders
of our ADSs. None of the dealer managers expresses an opinion nor makes any
recommendation to shareholders or holders of our ADSs as to the purchase by any
person of any ordinary shares A or ADSs. None of the dealer managers expresses
an opinion as to the prices at which ordinary shares A or ADSs to be distributed
in connection with the rights offering may trade if and when they are issued or
at any future time.
Other than the dealer managers, the ordinary share subscription agent and the
ADS subscription agent, we have not employed any brokers, dealers or
underwriters in connection with solicitation of exercise of the rights, and,
except as described herein, no other commissions, fees or discounts will be paid
in connection with the rights offering. Some of our employees may solicit
responses from shareholders or holders of our ADSs, but such employees will not
receive any commissions or compensation for such services other than their
normal employment compensation.
In connection with the rights offering, the dealer managers may purchase and
sell ordinary shares A, ADSs, ordinary share rights and ADS rights in the open
market. These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by a dealer manager of a greater number of any of these securities than
it holds. Stabilizing transactions consist of various bids for or purchases of
any of these securities made by a dealer manager in the open market prior to
the completion of the rights offering.
Purchases to cover a short position and stabilizing transactions may have the
effect of preventing or retarding a decline in the market price of our ordinary
shares A, ADSs, ordinary share rights or ADS rights and may stabilize, maintain
or otherwise affect the market price of those securities. As a result, the price
of those securities may be higher than the price that otherwise might exist in
the open market. These transactions may be effected on the Official Segment of
the stock market of Euronext Amsterdam, on the Nasdaq National Market, in the
over-the-counter market or otherwise. If these activities are commenced, they
may be discontinued at any time and, in any event, will be discontinued not
later than 30 days after the closing of the rights offering.
LEGAL MATTERS
The validity of the ordinary shares and the preference shares and the status of
the debt securities as our binding obligations will be passed on for us by Holme
Roberts & Owen LLP, Denver, Colorado and Allen & Overy, Amsterdam, The
Netherlands. Certain legal matters will be passed on for the dealer-manager by
Skadden, Arps, Slate, Meagher & Flom LLP, London, England, and De Brauw
Blackstone Westbroek N.V., Amsterdam, The Netherlands.
EXPERTS
The consolidated financial statements and schedules as of December 31, 1999 and
2000, and for the three years ended December 31, 2000, and incorporated by
reference in this prospectus have been audited by Arthur Andersen, independent
auditors, as indicated in their reports with respect thereto, and are
incorporated by reference herein upon the authority of said firm as experts in
giving said reports.
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of The Netherlands, and certain members of
our Supervisory Board, our Board of Management and certain of the experts named
herein are residents of The Netherlands or other countries outside the United
States. Substantially all of our assets and the assets of such persons are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon us or such
persons, or to enforce against us or such persons in courts in the United States
judgments of such courts predicated upon the civil liability provisions of
United States securities laws. We have been advised by legal counsel in The
Netherlands, Allen & Overy, that because there is no convention on reciprocal
recognition and enforcement of judgments in civil and commercial matters between
the United States and The Netherlands, a final judgment rendered by a United
States court will not automatically be enforced by the courts in The
Netherlands. In order to obtain a judgment that is enforceable in The
Netherlands, the relevant claim will have to be relitigated before a competent
Dutch court. Under current practice, however, a final and conclusive judgment
rendered by a United States court will be recognized by a Dutch court if it
finds that (1) the final judgment results from proceedings compatible with
Netherlands concepts of due process and (2) the final judgment does not
contravene public policy of The Netherlands. If the final judgment is recognized
by a Dutch court, that court generally will grant the same judgment without
relitigation on the merits. In addition, Netherlands law does not recognize a
shareholder's right to bring a derivative action on behalf of a corporation.
FORWARD LOOKING STATEMENTS
This prospectus, including incorporated documents, includes forward looking
statements within the meaning of U.S. federal securities law. We base forward
looking statements on our reasonable beliefs, assumptions, and expectations of
our future economic performance, taking into account information currently
available to us. Forward looking statements involve risks and uncertainties that
could cause actual outcomes and results to differ materially from the results
expressed or implied in such forward looking statements.
Some of the factors which could materially alter the outcomes and results
include:
o general economic conditions,
o industry-wide market factors, including competition,
o capital expenditure requirements,
o regulatory developments affecting our operations,
o interest rates,
o taxes,
o operating losses,
o future losses anticipated,
o recent share history, and
o access to capital markets
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934. You may read and copy this information at the
following locations of the SEC:
Judiciary Plaza, Room 10024
450 Fifth Street, N.W.
Washington, D.C. 20549
Seven World Trade Center
Suite 1300
New York, New York 10048
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661
You can also obtain copies of this information by mail from the Public Reference
Room of the SEC, 450 Fifth Street, N.W., Room 10024, Washington D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an internet world wide web site that contains reports,
proxy statements and other information about issuers, like us that file
electronically with the SEC. The address of that site is http://www.sec.gov.
Our ADSs representing our ordinary shares A are traded on the Nasdaq National
Market, and copies of reports, proxy statements and other information can be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3 that registers
the securities we are offering. We also plan to file a registration statement on
Form F-6 that registers the ADSs we are offering. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about us and our securities. The rules and regulations of the SEC
allow us to omit certain information included in the registration statements
from this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The following documents (the "Reports") have been filed with the SEC (File No.
000-25365) and are incorporated in this prospectus by reference and made a part
hereof.
1. Our Annual Report on Form 10-K for the year ended December 31, 2000
(the "Annual Report").
2. Our Proxy Statement for our annual shareholders' meeting to be held on
May 17, 2001.
3. Our Reports on Form 8-K dated January 16, 2001 and February 23, 2001.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and prior to the
termination of the rights offering, shall be deemed to be incorporated by
reference in this prospectus and to be a part hereof from the dates of filing of
such documents.
Any statement contained in the Annual Report shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference in this prospectus modifies or supersedes
such report. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus is
delivered a copy of any and all of the information that has been incorporated by
reference in this prospectus (not including exhibits to such information unless
such exhibits are specifically incorporated by reference into such information).
Any such request should be directed to Ruth Pirie, Investor Relations, United
Pan-Europe Communications N.V., Boeing Avenue 53, 1119 PE, Schiphol Rijk, The
Netherlands; + 44 20 7661 3422.
[UPC Logo]
125,000,000 Ordinary Shares A
in the form of Ordinary Shares A or American Depositary Shares
____________, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the meanings ascribed to
them in the prospectus contained in this Registration Statement.
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than underwriting discounts
and commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby, all of which expenses, except
for the Commission registration fee, are estimated:
Securities and Exchange Commission registration fee ....... $225,327
NASD and blue sky fees..................................... *
Depositary fees and expenses............................... *
Legal fees and expenses.................................... *
Accounting fees............................................ *
Printing and engraving expenses............................ *
Miscellaneous.............................................. *
Total.............................................. $ *
===========
---------
* To be completed by amendment
Item 15. Indemnification of Directors and Officers
UPC has entered into indemnification agreements with its directors and
executive officers, providing for indemnification by UPC against any liability
to which a director or executive officer may be subject for judgments,
settlements, penalties, fines and expenses of defense (including attorneys'
fees, bonds and costs of investigation), arising out of or in any way related to
acts or omissions as a member of the Management or Supervisory Board, or an
executive officer, or in any other capacity in which services are rendered to
UPC or its subsidiaries. UPC believes that the indemnification agreements will
assist UPC in attaining and retaining qualified individuals to serve as
directors and executive officers. The agreements provide that a director or
officer is not entitled to indemnification under such agreements (i) if
indemnification is expressly prohibited under applicable law, (ii) for certain
violations of securities laws of (iii) for certain claims initiated by the
officer or director. Generally, under Netherlands law, a director will not be
held personally liable for decisions made with reasonable business judgment,
absent self dealing. In addition, indemnification may not be available to
directors or officers under Netherlands law if any act or omission by a director
or officer would qualify as willful misconduct or gross negligence. Due to the
lack of applicable case law, it is not clear whether indemnification is
available in case of breach of securities laws of the United States.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Form of Dealer Manager Agreement*
1.2 Commitment Agreement*
4.1 Form of warrants for ADSs*
5.1 Opinion of Allen & Overy as to as to the legality of the issuance of
the ordinary shares A*
5.2 Opinion of Holme Roberts & Owen LLP as to the legality of the issuance
of the ADSs*
8.1 Opinion of Arthur Andersen as to certain Netherlands tax matters*
8.2 Opinion of Holme Roberts & Owen LLP as to certain U.S. tax matters*
10.1 Form of Rights Agency Agreement between UPC and the Rights Agent*
23.1 Consent of Arthur Andersen
24.1 Powers of Attorney
-----------------------------------
* To be filed by amendment.
Item 17. Undertakings
UPC hereby undertakes that:
For purposes of determining any liability under the Securities Act of 1933
(the "Securities Act"), the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by UPC pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
UPC hereby undertakes that, for purposes of determining any liability under the
Securities Act, each filing of UPC's annual report pursuant to Section 13 (a) or
Section 15 (d) of the Exchange Act of 1934 that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of UPC pursuant to
any charter provision, by-law, contract, arrangement, statute, or otherwise, UPC
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by UPC of expenses incurred or paid by a
director, officer or controlling person of UPC in the successful defense of any
action, suit or proceeding) is asserted against UPC by such director, officer or
controlling person in connection with the securities being registered, UPC will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in London, England, on this 11th day of April, 2001.
United Pan-Europe Communications N.V.,
a Netherlands public limited liability company
By: /s/ Charles H.R. Bracken
--------------------------------------------
Charles H. R. Bracken
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
caused this Registration Statement to be signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of Board of Management and Chief April 11, 2001
----------------------------------------
Mark L. Schneider Executive Officer
/s/ Charles H.R. Bracken Board of Management Member and Chief April 11, 2001
----------------------------------------
Charles H.R. Bracken Financial Officer (Principal Accounting
Officer)
* Board of Management Member, Managing April 11, 2001
----------------------------------------
Nimrod J. Kovacs Director, Eastern Europe and Executive
Chairman, UPC Central Europe
* Board of Management Member and Chief April 11, 2001
----------------------------------------
Gene Musselman Operating Officer
* Board of Management Member and Managing April 11, 2001
----------------------------------------
Shane O'Neill Director, Strategy, Acquisitions and
Corporate Development
* Board of Management Member and President April 11, 2001
----------------------------------------
John F. Riordan
* Board of Management Member and General April 11, 2001
----------------------------------------
Anton M. Tuijten Counsel
* Supervisory Board Member and agent for
----------------------------------------
Michael T. Fries service.
* Supervisory Board Member April 11, 2001
----------------------------------------
John P. Cole, Jr.
Supervisory Board Member April 11, 2001
----------------------------------------
Richard De Lange
* Supervisory Board Member April 11, 2001
----------------------------------------
Ellen P. Spangler
* Supervisory Board Member April 11, 2001
----------------------------------------
Tina M. Wildes
*By /s/ Charles H.R. Bracken
------------------------
Charles H.R. Bracken, Attorney-in-
fact