<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1996
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
HYPERION TELECOMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4841 25-1669404
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
5 WEST THIRD STREET -- P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------
DANIEL R. MILLIARD, PRESIDENT
HYPERION TELECOMMUNICATIONS, INC.
5 WEST THIRD STREET -- P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
21ST FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8826
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
===============================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Series B Senior Discount
Notes Due 2003................ $329,000,000 49.758% $163,705,000 $56,450.00
</TABLE>
===============================================================================
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f)(2).
------------
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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE , 1996
OFFER TO EXCHANGE
13% SERIES B SENIOR DISCOUNT NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING 13% SENIOR DISCOUNT NOTES DUE 2003
OF
HYPERION TELECOMMUNICATIONS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
---------------
Hyperion Telecommunications, Inc. ("Hyperion" or the "Company") hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange $1,000 principal amount of 13%
Series B Senior Discount Notes of the Company (the "New Notes") for each
$1,000 principal amount of the issued and outstanding 13% Senior Discount
Notes due 2003 (the "Old Notes," and collectively with the New Notes, the
"Senior Notes"). As of the date of this Prospectus, $329,000,000 aggregate
principal amount at maturity of the Old Notes is outstanding. The terms of the
New Notes and the Old Notes are substantially identical in all material
respects, except for certain transfer restrictions and registration rights;
and except that holders of Old Notes are entitled to receive Liquidated
Damages (as defined) if (a) the Company fails to file any of the registration
statements required by the Registration Rights Agreement (as defined) on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Securities and Exchange Commission
(the "Commission") on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date"), (c) the Company fails to consummate the
Exchange Offer within 30 business days of the Effectiveness Target Date with
respect to the Exchange Offer registration statement, or (d) a shelf
registration statement or the registration statement of which this Prospectus
forms a part (the "Exchange Offer Registration Statement") is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities (as defined) during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"). In the event of a
Registration Default, the Company is required to pay Liquidated Damages to
each holder of Transfer Restricted Securities, with respect to the first 90-
day period immediately following the occurrence of such Registration Default,
at a rate of 0.5% per annum, determined daily, on the Accreted Value of the
Senior Notes (or after April 15, 2001, on the principal amount of the Senior
Notes) as of the immediately preceding interest payment date. Such interest
rate will increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period up to a maximum aggregate increase of 2.0% per annum
until all Registration Defaults have been cured, at which time the accrual
rate borne by the Old Notes will be reduced to the original accrual rate. See
"Description of Senior Notes--Registration Rights; Liquidated Damages."
The Exchange Offer is being made to satisfy certain obligations of the
Company under the Registration Rights Agreement, dated as of April 15, 1996,
among the Company and the Initial Purchasers (the "Registration Rights
Agreement"). Upon consummation of the Exchange Offer, holders of Old Notes
that were not prohibited from participating in the Exchange Offer and did not
tender their Old Notes will not have any registration rights under the
Registration Rights Agreement with respect to such nontendered Old Notes and,
accordingly, such Old Notes will continue to be subject to the restrictions on
transfer contained in the legend thereon.
Based on interpretations by the staff of the Commission with respect to
similar transactions, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder of such New Notes (other than
any such holder which is an "affiliate" of Hyperion within the meaning of Rule
405 under the Securities Act of 1933, as amended (the "Securities Act"))
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes and neither the holder nor any other person is engaging in or intends to
engage in a distribution of the New Notes. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes must acknowledge that
it will deliver a prospectus in connection with any resale of its New Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of the New Notes received in exchange for
the Old Notes acquired by the broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale for a period of 365 days after the Exchange Date (as defined)
or, if earlier, until all participating broker-dealers have so resold. See
"Plan of Distribution."
(Continued on following page)
---------------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined). For a more complete
description of the terms of the New Notes, see "Description of Senior Notes."
There will be no cash proceeds to the Company from the Exchange Offer. The New
Notes will be general obligations of the Company exclusively, will not be
secured by any assets of the Company, its Subsidiaries (as defined) or Joint
Ventures (as defined), will rank pari passu in right of payment with all
existing and future senior Indebtedness (as defined) of the Company and will
rank senior in right of payment to future subordinated Indebtedness of the
Company; however, because the Company is a holding company that conducts
substantially all of its business through its Subsidiaries and its Joint
Ventures, the New Notes will be effectively subordinated to all liabilities of
the Subsidiaries and Joint Ventures, including trade payables and indebtedness
incurred by its Subsidiaries and Joint Ventures.
The Old Notes were originally issued and sold on April 15, 1996 in the
Offering (as defined), a transaction exempt from registration under the
Securities Act in reliance upon the exemptions provided by Rule 144A and by
Section 4(2) of the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an exemption from the
registration requirements of the Securities Act and applicable state
securities laws is available.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the
Exchange Offer.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1996, unless extended (as
it may be so extended, the "Expiration Date"), provided that the Exchange
Offer shall not be extended beyond 30 business days from the date of this
Prospectus. The date of acceptance for exchange of the Old Notes for the New
Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders are
irrevocable.
Prior to this Exchange Offer, there has been no public market for the Senior
Notes. The Old Notes have traded on the PORTAL Market. If a market for the New
Notes should develop, the New Notes could trade at a discount from their
initial offering price. The Company does not intend to apply for listing of
the New Notes on any securities exchange or in any automated quotation system.
There can be no assurance that an active trading market for the New Notes will
develop.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-4 under the Securities Act with respect to the Exchange
Offer. This Prospectus, which is part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Exchange Offer, reference is made to such Registration
Statement and the exhibits and schedules filed as part thereof. The
Registration Statement and the exhibits and schedules thereto filed with the
Commission may be inspected without charge at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and will also be available for inspection and copying at
the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the Registration Statement may be obtained from the Public
Reference Section of the Commission upon payment of certain prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov), which is maintained by the Commission and which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL HYPERION ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES LAWS OF SUCH JURISDICTION.
1
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the consolidated Financial Statements and Notes thereto,
appearing elsewhere in this Prospectus. For a description of certain terms used
in this Prospectus, see the Glossary attached to this Prospectus as Appendix A.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Persons participating in this Exchange Offer are cautioned that such statements
are only predictions and that actual events or results may differ materially.
In evaluating such statements, participants in the Exchange Offer should
specifically consider the various factors identified in this Prospectus,
including the matters set forth under the caption "Risk Factors," which could
cause actual results to differ materially from those indicated by such forward-
looking statements. References in this Offering Memorandum to the "Company" or
"Hyperion" mean Hyperion Telecommunications, Inc. together with its
subsidiaries, except where the context otherwise requires. Unless the context
otherwise requires, references herein to the "networks," the "Company's
networks" or the "Operating Companies' networks" mean the 13 telecommunications
networks owned by 11 Operating Companies (which, as defined herein, are (i)
wholly owned subsidiaries of the Company and (ii) joint venture partnerships
and corporations managed by the Company and in which the Company holds less
than a majority equity interest with one or more other partners). See "--
Company and Partnership Ownership." Currently, nine of the Operating Companies
(comprising 11 of the 13 networks) are partnerships that are 50% or less owned
by the Company, and the Operating Companies do not include the South Florida
Partnership (as defined herein). As described more fully herein, the Company
designs, constructs, manages and operates networks on behalf of the Operating
Companies, and it is through these networks that the Company and the Operating
Companies provide telecommunications services. Unless otherwise indicated, the
information in this Prospectus gives effect to a 10,000-to-one stock split on
April 8, 1996 of each outstanding share of the Company's Common Stock (as
defined).
THE COMPANY
Hyperion Telecommunications, Inc. ("Hyperion" or the "Company") is a leading
competitive local exchange carrier ("CLEC") that designs, constructs, operates
and manages state-of-the-art fiber optic networks and facilities. According to
industry data, the Company believes it operates one of the three largest CLECs
in the United States based upon route miles and buildings connected. The
Company's networks work in conjunction with interexchange carriers ("IXCs")
such as AT&T, MCI, Sprint, WorldCom and others in order to offer small, medium
and large businesses, government and education end users a broad array of
integrated, high quality voice, video and enhanced data communications
services. The Company, through its 13 networks, currently offers traditional
access services, including high capacity interconnection between (i) points of
presence ("POPs") of an IXC, (ii) the POPs of different IXCs, (iii) a Local
Exchange Carrier's Central Office ("LEC-CO") and IXC POPs, (iv) end users and
their selected IXCs and (v) different locations of particular customers
("Private Line Services"). The Company has also installed switches or remote
switching capability in five of its networks and plans to offer switched
services, including customer dial tone, in all of its operating markets by the
end of 1996. Three of the Company's networks also offer enhanced data services
to their customers such as frame relay, Asynchronous Transfer Mode ("ATM") data
transport, business video conferencing, private line data interconnect service
and LAN connection and monitoring services in certain markets in a partnership
with !NTERPRISE, a wholly-owned subsidiary of US West. These services, along
with the long distance services provided by IXCs, enable the Company to provide
an integrated telecommunications service offering to network customers that is
more reliable, has a superior level of service and is priced lower relative to
that of the incumbent local exchange carriers ("LECs") in markets served by the
Company's networks.
The Company currently manages and operates 13 networks which are primarily
clustered in three regions located in the eastern half of the United States and
which serve 19 cities with populations from at least 25,000 to more than
600,000. The Company also has four new networks under construction which will
serve 17 additional cities and which the Company will manage and operate upon
their expected completion in calendar year 1996. Eleven of the Company's
operating networks and three of its networks under construction are owned in
2
<PAGE>
partnership with several major cable television operators, including Tele-
Communications, Inc., Time Warner/Newhouse, Continental Cablevision, TKR Cable,
Lenfest Communications, Viacom, InterMedia Partners and Multimedia/Gannett, and
an electric utility, PECO Energy, owner of the Philadelphia Electric Company
(collectively, the "Local Partners"). The Company believes that working with a
Local Partner significantly reduces the cost and time in developing a network
through the utilization of existing cable or utility facilities. The remaining
two operating networks and one network under construction are wholly-owned by
the Company and lease fiber capacity from Adelphia Communications Corporation
("Adelphia"), the Company's corporate parent, to achieve similar time and cost
savings in developing the networks.
The Company intends to increase the density of its existing network clusters
and expand into new geographic markets or clusters through the construction of
approximately ten new networks by the end of 1997. From the Company's inception
in October 1991 through December 31, 1995, the Company and its partners have
invested approximately $147 million to build and develop the network
infrastructure and operations. As of February 29, 1996, the Company's 13
operating networks served 19 cities, and along with the four networks under
construction, included approximately 2,180 route miles of fiber optic cable and
were connected to approximately 808 buildings. For the nine months ended
December 31, 1995, the Company's 13 networks generated total revenues of
approximately $5.5 million. The Company reports its interest in joint ventures
pursuant to the equity method of accounting on a basis consistent with
generally accepted accounting principles. The Company's revenues and EBITDA
were approximately $2.5 million and ($1.8) million, respectively, for the nine
months ended December 31, 1995.
The Company believes the passage of the Telecommunications Act of 1996 (the
"Telecommunications Act") on February 8, 1996 will substantially expand the
market opportunities for the Company and its networks. The Telecommunications
Act provides for the removal of legal barriers to entering the local exchange
telecommunications market and directs the incumbent LECs to negotiate with
CLECs to resolve network and competitive issues such as interconnection of CLEC
and incumbent LEC networks, reciprocal compensation for termination of calls
originating on a competing network, telephone number portability, access to
rights-of-way and the unbundling of network services. The Telecommunications
Act may provide an incentive for incumbent LECs to cooperate with local
facilities-based competitors, such as the Company, on interconnection issues
because the existence of an interconnection agreement with a facilities-based
competitor is a prerequisite for incumbent LEC entry into the long distance
market unless no such facilities-based competitor has requested access and
interconnection in accordance with the terms of the Telecommunications Act.
Based upon data compiled by the Federal Communications Commission (the "FCC"),
the Company believes that the passage of the Telecommunications Act increases
the potential market for CLECs from approximately $26.3 billion to
approximately $97.1 billion annually due to the opening of the market for
switched services which will permit CLECs to offer a full range of local
telecommunications services including local dial tone, local calls, custom
calling features and intraLATA toll services for both business and residential
customers. In the markets where the Company's networks are currently operating
or under construction, the Company now believes it has an addressable market
opportunity of approximately $4.8 billion, substantially all of which is
currently provided by the incumbent LECs.
COMPANY STRATEGY
The Company, through its networks, is a leading provider of integrated local
telecommunications services to small, medium and large businesses, government
and educational end users and IXCs in its existing markets. The Company
differentiates its service offerings by partnering with local cable television
operators and utility companies to develop networks that will provide customers
with greater market coverage, lower costs and superior service. The Company's
networks also leverage the IXCs' name recognition and reputation for quality
and reliability by becoming preferred suppliers for IXCs of local
telecommunications services in the Company's markets. The IXCs market their
long distance services in conjunction with the Company's local service
offerings to provide end users with a fully integrated telecommunications
service offering in all of the Company's operating markets. Principal elements
of the Company's strategy include:
3
<PAGE>
Develop a Rapid Entry/Low Cost Approach with Local Partners. The Company
works with a Local Partner in order to significantly reduce the cost and time
to construct a fiber optic network, enable the Company to rapidly begin
offering services and lower the overhead associated with operating and
maintaining the Company's networks. Advantages of building the Company's
networks with Local Partners include (i) sharing the cost of building the fiber
optic network with a cable television system or utility system which the
Company believes reduces the cost of aerial fiber construction by approximately
62%, (ii) reducing the time and cost of obtaining access to rights-of-way and
building entrances and (iii) enabling the Company to leverage the Local
Partners' experience and capabilities for maintaining fiber optic cables
thereby significantly reducing the ongoing costs of a fiber optic network.
Through the partnerships, the Company has financed its expansion at a lower
cost relative to its competitors by utilizing pro rata equity investments and
Local Partner financings of a significant portion of fiber construction. Local
Partners provide most of the funds for the fiber build in a network and lease
the fiber capacity back to the partnership under long-term agreements.
Build Broad Network Coverage. The Company intends to build substantially
larger networks than the networks of the CLECs it competes with in its markets.
As of February 29, 1996, in all of the markets in which the Company and its
networks operate, management believes that the Company has the broadest network
coverage in terms of route miles of any of its CLEC competitors. The Company
believes that expanded network coverage will enable the Company to (i) provide
broader and more reliable coverage for network customers, (ii) carry a greater
amount of traffic on its own networks rather than on the networks of other
carriers thereby increasing the Company's revenues and profit margins, (iii)
increase the potential market available to the Company due to the greater
number of buildings, LEC-COs and customers that the Company's networks can
service, (iv) improve the value of the Company's networks to IXCs, cellular
providers and new telecommunications providers such as Personal Communications
Service ("PCS") operators that need wide backbone coverage, (v) offer services
in areas where there are fewer potential CLECs with facilities and (vi)
leverage the fixed cost structure of the Company's networks, particularly with
regard to network electronics such as switches.
Expansion through Development of Network Clusters. The Company intends to
build on its extensive network size by adding markets near its existing
networks and targeting markets in close proximity when establishing new
networks. Management believes that there are significant operating and
marketing advantages to locating its networks in clusters. Clustering enables
the Company to (i) take advantage of economies of scale in management,
construction, network operations and sales and marketing, (ii) optimize the
networks' switching capacity by utilizing remote switch capacity in nearby
cities, (iii) offer services to lower density traffic areas in which the
Company's networks are less likely to face strong competition from incumbent
LECs and other CLECs and (iv) increase the networks' ability to offer highly
reliable, end-to-end connectivity on a regional basis. The Company also
believes that creating regional networks will enable the Company to gain a
greater share of high margin long distance transport traffic.
Develop Strategic Relationships with IXCs. The Company, through its networks,
provides customers with an integrated, one-stop shopping approach to their
telecommunications needs through its strategic relationships with IXCs such as
AT&T, MCI, Sprint, WorldCom and others. The goal of these relationships is for
the Company's networks to offer their local services in conjunction with the
long distance services of these IXCs. Management believes that working in
partnership with IXCs instead of as a competitor will be attractive to IXCs and
enable the Company to (i) utilize extensive market information from the IXCs
regarding traffic patterns and building requirements to more optimally
construct and extend its networks, (ii) work closely with IXC account teams to
provide an integrated service approach to end users, (iii) increase market
penetration by capitalizing on the IXCs' name recognition and (iv) lower sales
and marketing costs by utilizing the extensive marketing resources and
salesforce of the IXCs to market the networks' products and services. In
pursuing this strategy, the Company has entered into a national service
agreement (the "National Service Agreement") with a major IXC pursuant to which
the Company's networks will be the major IXC's preferred supplier of dedicated
special access and switched access transport services.
4
<PAGE>
Expand Enhanced Service Offerings. Three of the Company's networks operate in
partnership with !NTERPRISE, a leading, nationwide network integrator that
designs, develops and deploys state-of-the-art data networks (including both
network services and equipment) to support and enhance the information systems
with which the networks' customers operate their businesses. Pursuant to the
partnership agreements, !NTERPRISE co-markets enhanced services, including
frame relay, ATM data transport, business video conferencing, private line data
interconnect service and LAN connection and monitoring services to the
networks' customers in the networks' respective markets. The Company believes
that the partnerships with !NTERPRISE provide the opportunity to offer network
customers a full complement of enhanced services more rapidly and without the
Company incurring the cost and overhead of establishing its own nationwide
enhanced services marketing, sales and installation effort. The Operating
Companies intend to enter into additional agreements with !NTERPRISE and other
service integrators in the future.
COMPANY AND PARTNERSHIP OWNERSHIP
The Company is an 89% owned subsidiary of Adelphia, the seventh largest cable
television company in the United States which as of March 31, 1996 owned or
managed cable television systems that served approximately 1.65 million
subscribers in 15 states. The balance of the Company is owned by senior
management which has extensive experience in the telecommunications field. The
Company manages and operates networks in 13 markets. The Company owns its 13
operating networks through (i) partnerships with eight Local Partners (the
"Operating Partnerships") and (ii) two wholly-owned subsidiaries of the Company
and one corporation in which it is a minority shareholder ("Operating
Corporations") (collectively the Operating Partnerships and the Operating
Corporations are referred to herein as the "Operating Companies"). The Company
is responsible for the network design, construction, management and operation
of the Operating Companies, for which it receives management fees. Prior to May
16, 1996, the Company also had an investment in a partnership operating in
southern Florida (the "South Florida Partnership") in which it had no
management responsibility.
The following is an overview of the Company's network structure as of June
15, 1996, except as noted below for the South Florida Partnership.
<TABLE>
<CAPTION>
ACTUAL OR
EXPECTED
DATE OF HYPERION
COMPANY MARKETS OPERATION(A) INTEREST LOCAL PARTNERS
- --------------- ------------ -------- ---------------------------
OPERATING NETWORKS
- ------------------
<S> <C> <C> <C>
Northeast Cluster
Albany, NY(b)................ 2/95 50.0% Time Warner/Newhouse
Binghamton, NY(b)............ 3/95 20.0 Time Warner/Newhouse
Buffalo, NY.................. 1/95 40.0 Tele-Communications, Inc.
Time Warner/Newhouse
Syracuse, NY(b).............. 8/92 50.0 Time Warner/Newhouse
Vermont...................... 11/94 100.0 (c)
Mid-Atlantic Cluster
Charlottesville, VA.......... 11/95 100.0 (c)
Harrisburg, PA............... 4/95 50.0 Lenfest Communications
New Brunswick, NJ............ 11/95 19.7 TKR Cable(d)
Richmond, VA................. 9/93 37.0 Continental Cablevision
Mid-South Cluster
Louisville, KY............... 3/95 50.0(e) TKR Cable
Nashville, TN................ 11/94 25.0(e) InterMedia Partners, Viacom
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ACTUAL OR
EXPECTED
DATE OF HYPERION
COMPANY MARKETS OPERATION(A) INTEREST LOCAL PARTNERS
- --------------- ------------ -------- -----------------------
<S> <C> <C> <C>
Other Networks
Jacksonville, FL............... 9/92 20.0 Continental Cablevision
Wichita, KS.................... 9/94 49.9 Multimedia/Gannett
NETWORKS UNDER CONSTRUCTION(F)
- ------------------------------
Mid-Atlantic Cluster
Morristown, NJ................. 1996(g) 19.7 TKR Cable(d)
Philadelphia, PA............... 1996(g) 50.0 PECO Energy
Scranton/Wilkes-Barre, PA...... 1996(g) 100.0 (c)
Mid-South Cluster
Lexington, KY.................. 1996(g) 50.0(e) TKR Cable
NETWORK INVESTMENTS
- -------------------
South Florida(h)............... 1/94 15.7 (h)
</TABLE>
- --------
(a) Refers to the date on which (i) the network is connected to at least one
IXC POP; (ii) the network is capable of accepting traffic from IXCs and end
users; (iii) the Company's central office is fully functional and (iv) the
initial network SONET fiber rings have been completed.
(b) The interests in the Albany, Binghamton and Syracuse markets are all owned
by one Operating Partnership.
(c) Adelphia or its affiliate leases 100% of the fiber capacity to the
Operating Companies in these markets.
(d) Sutton Capital Associates also owns a minority interest.
(e) The Company's interest in these markets is subject to change or has
recently changed. See "Business--Recent Developments."
(f) The Company has entered into binding agreements with respect to the
construction of these networks.
(g) The Company expects each of these networks to be operational between August
1996 and December 1996.
(h) The Company was an investor in TCG South Florida, the South Florida
Partnership, with several other partners and had no management oversight
responsibility with regard to such partnership. On May 16, 1996, the
Company sold its investment in such partnership. See "Recent Developments."
RECENT DEVELOPMENTS
Sale of Partnership Interest in the South Florida Partnership. On May 16,
1996, the Company completed the sale of its 15.7% partnership interest in TCG
South Florida to Teleport Communications Group Inc. for an aggregate sales
price of approximately $11.6 million resulting in a pre-tax gain of
approximately $8.4 million. Amounts related to the South Florida Partnership
included in the Company's investments and equity in net loss of joint ventures
as of and for the nine months ended December 31, 1995 were approximately $2.9
million and ($0.6) million, respectively. As part of the transaction, the
Company was released from its covenant not to compete with respect to the South
Florida market. The Company plans to use the proceeds from the sale to continue
to expand and develop its existing markets, complete new networks under
construction and enter additional markets.
National Service Agreement with Major IXC. The Company has entered into the
National Service Agreement with a major IXC pursuant to which the Company's
networks will be the IXC's preferred supplier of dedicated special access and
switched access transport services. The National Service Agreement requires the
Company to provide such services to the IXC at a discount from the tariffed or
published incumbent LEC rates. The National Service Agreement is in effect in
all of the Company's markets. The Company believes that only four other CLECs
have comparable National Service Agreements and have passed such major IXC's
network validation tests and operational readiness testing.
6
<PAGE>
Other Changes in Partnership Interests. The Company recently has entered into
an agreement or letter of intent pursuant to which the Company's ownership
interests in certain of the Operating Partnerships have recently increased or
are expected to increase in three markets. These transactions are consistent
with the Company's goal to own at least a 50% interest in its Operating
Partnerships in the future, and where appropriate the Company may consider
similar transactions from time to time in its other markets. Assuming the
successful completion of all of the transactions contemplated below, Hyperion
would own at least 50% of ten of its 17 then existing markets and markets under
construction.
Pursuant to a binding letter of intent with TKR, dated as of January 29,
1996, and a subsequent amendment to the related partnership agreement dated May
8, 1996, the Company has agreed to make additional capital contributions to its
Louisville, Kentucky Operating Partnership (which will also operate the network
under construction in Lexington, Kentucky) and has increased its partnership
ownership interest to 50%. Under a nonbinding letter of intent with InterMedia,
dated as of February 12, 1996, the Company intends to increase its partnership
ownership interest in the Nashville, Tennessee Operating Partnership to at
least 51% and as much as 95% by purchasing the Local Partner's interests, at
the option of such partner.
The consummation of the InterMedia transaction is subject to the negotiation
and execution of definitive, binding agreements and to other terms and
conditions. No assurances can be given as to whether or when, or the terms upon
which, any such transaction will be consummated.
THE EXCHANGE OFFER
Securities Offered.......... Up to $329,000,000 aggregate principal amount
at maturity of 13% Series B Senior Discount
Notes due 2003 of the Company (the "New
Notes," and collectively with the Old Notes,
the "Senior Notes"). The terms of the New
Notes and the Old Notes are substantially
identical in all material respects, except
for certain transfer restrictions,
registration rights and liquidated damages
("Liquidated Damages") for Registration
Defaults relating to the Old Notes which will
not apply to the New Notes. See "Description
of Senior Notes."
The Exchange Offer.......... The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes. See "The
Exchange Offer" for a description of the
procedures for tendering Old Notes. The
Exchange Offer satisfies the registration
obligations of the Company under the
Registration Rights Agreement. Upon
consummation of the Exchange Offer, holders
of Old Notes that were not prohibited from
participating in the Exchange Offer and did
not tender their Old Notes will not have any
registration rights under the Registration
Rights Agreement with respect to such
nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the
restrictions on transfer contained in the
legend thereon.
Tenders, Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1996, or such
later date and time to which it is extended,
provided that the Exchange Offer shall not be
extended beyond 30 business days from the
date of this Prospectus. Tender of
7
<PAGE>
Old Notes pursuant to the Exchange Offer may
be withdrawn and retendered at any time prior
to the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holder as promptly as practicable after the
expiration or termination of the Exchange
Offer.
Federal Income Tax The Exchange Offer will not result in any
Considerations.............. income, gain or loss to the holders of Senior
Notes or the Company for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Use of Proceeds............. There will be no proceeds to the Company from
the exchange of New Notes for the Old Notes
pursuant to the Exchange Offer.
Exchange Agent.............. Bank of Montreal Trust Company, the Trustee
under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection
with the Exchange Offer.
CONSEQUENCES OF EXCHANGING OR FAILURE TO EXCHANGE OLD NOTES PURSUANT TO THE
EXCHANGE OFFER
Generally, holders of Old Notes (other than any holder who is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who
exchange their Old Notes for New Notes pursuant to the Exchange Offer may offer
their New Notes for resale, resell their New Notes, and otherwise transfer
their New Notes without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided such New Notes are acquired
in the ordinary course of the holder's business, such holders have no
arrangement with any person to participate in a distribution of such New Notes
and neither the holder nor any other person is engaging in or intends to engage
in a distribution of the New Notes. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes must acknowledge that it will
deliver a prospectus in connection with any resale of its New Notes. See "Plan
of Distribution." To comply with the securities laws of certain jurisdictions,
it may be necessary to qualify for sale or register the New Notes prior to
offering or selling such New Notes. The Company is required, under the
Registration Rights Agreement, to register the New Notes in any jurisdiction
requested by the holders, subject to certain limitations. Upon consummation of
the Exchange Offer, holders that were not prohibited from participating in the
Exchange Offer and did not tender their Old Notes will not have any
registration rights under the Registration Rights Agreement with respect to
such nontendered Old Notes, and accordingly, such Old Notes will continue to be
subject to the restrictions on transfer contained in the legend thereon. In
general, Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws. See "The Exchange Offer--
Consequences of Failure to Exchange."
SUMMARY DESCRIPTION OF SENIOR NOTES
Securities Offered.......... Up to $329,000,000 principal amount of 13%
Series B Senior Discount Notes due 2003 of
the Company (the "New Notes," and
collectively with the Old Notes, the "Senior
Notes"). The terms of the New Notes and the
Old Notes are substantially identical in all
material respects, except for certain
transfer restrictions, registration rights
and Liquidated Damages for Registration
Defaults relating to the Old Notes which will
not apply to the New Notes. See "Description
of Senior Notes."
8
<PAGE>
Maturity.................... April 15, 2003
Interest.................... Cash interest will not accrue on the Senior
Notes prior to April 15, 2001. Thereafter,
the Senior Notes will bear interest at the
rate of 13% per annum, payable semi-annually,
in cash, on April 15 and October 15 of each
year, commencing October 15, 2001.
Optional Redemption......... The Senior Notes may be redeemed at the
option of the Company, in whole or in part,
on or after April 15, 2001 at a premium
declining to par in 2002, plus accrued and
unpaid interest, if any, through the
redemption date.
On or before April 15, 1999, the Company may,
at its option, redeem up to 25% of the
aggregate principal amount at maturity of the
Senior Notes then outstanding at a redemption
price of 113.0% of the Accreted Value thereof
with the proceeds of (i) an Initial Public
Offering of common stock of the Company or
(ii) a sale of the Capital Stock (other than
the Disqualified Stock) of the
Company to a Strategic Investor; provided,
however, that at least 75% of the aggregate
principal amount at maturity of the Senior
Notes remains outstanding following any such
redemption and provided, further, that such
redemption shall occur within 90 days of the
date of the closing of such Initial Public
Offering or such sale to a Strategic
Investor, as the case may be.
Change of Control........... In the event of a Change of Control, the
holders of the Senior Notes will have the
right to require the Company to purchase
their Senior Notes at a price equal to 101%
of the Accreted Value thereof or in the case
of any such purchase on or after April 15,
2001, at 101% of the aggregate principal
amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase.
There can be no assurance that the Company
will have the financial resources necessary
to repurchase the Senior Notes upon a Change
of Control. See "Description of the Senior
Notes--Offer to Purchase upon Change of
Control."
Ranking..................... The Senior Notes are general unsecured
obligations of the Company. The Senior Notes
rank pari passu in right of payment with all
existing and future senior Indebtedness of
the Company and senior in right of payment to
all future subordinated Indebtedness of the
Company. In addition, holders of indebtedness
and other liabilities of the Company's
Subsidiaries and Joint Ventures will have
claims that are effectively senior to the
Senior Notes. As of December 31, 1995, the
aggregate principal amount outstanding of
such senior Indebtedness (excluding trade
payables and other accrued liabilities) of
the Subsidiaries and Joint Ventures would
have been $22.7 million, substantially all of
which were Capital Lease Obligations.
Covenants................... The indenture with respect to the Senior
Notes (the "Indenture") contains certain
covenants that, among other things, limit the
ability
9
<PAGE>
of the Company and its subsidiaries to incur
additional Indebtedness and issue preferred
stock, pay dividends or make other
distributions, repurchase Equity Interests
(as defined) or subordinated Indebtedness,
engage in sale and leaseback transactions,
create certain liens, enter into certain
transactions with affiliates, sell assets of
the Company or its subsidiaries, issue or
sell Equity Interests of the Company's
subsidiaries or enter into certain mergers
and consolidations. In addition, under
certain circumstances, the Company will be
required to offer to purchase Senior Notes at
a price equal to 100% of the Accreted Value
thereof or, in the case of any such purchase
on or after April 15, 2001, at 100% of the
principal amount thereof, plus accrued and
unpaid interest, if any, to the date of
purchase, with the proceeds of certain Asset
Sales (as defined). See "Description of the
Senior Notes."
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following summary financial data (except the unaudited information for
the fiscal years ended March 31, 1992 and 1993 and the nine months ended
December 31, 1994, pro forma information, Network Data and Other Network and
Operating Data ) are derived from, and should be read in conjunction with, the
audited Consolidated Financial Statements of the Company and the related Notes
thereto contained herein. The unaudited information for the fiscal years ended
March 31, 1992 and 1993 and the nine months ended December 31, 1994, pro forma
information, Network Data and Other Network and Operating Data are derived from
other Company information. Except as noted below, the following table includes
financial and operating information relating to the South Florida Partnership
and the Company's 15.7% interest therein which was sold by the Company on May
16, 1996. See "Recent Developments." All of the following information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------- ------------------
1992 1993 1994 1995 1994 1995
------ ------- ------- ------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Telecommunications
service and management
fee revenue........... $ -- $ 89 $ 434 $ 1,768 $ 975 $ 2,496
Operating expenses:
Network operations.... 2 19 330 1,382 733 1,878
Selling, general and
administrative........ 211 921 2,045 2,524 2,132 2,375
Depreciation and
amortization.......... -- 30 189 463 180 861
------ ------- ------- ------- -------- --------
213 970 2,564 4,369 3,045 5,114
------ ------- ------- ------- -------- --------
Operating income
(loss)................ (213) (881) (2,130) (2,601) (2,070) (2,618)
------ ------- ------- ------- -------- --------
Interest expense and
fees.................. -- -- (2,164) (3,321) (2,298) (4,152)
Equity in net loss of
joint ventures........ -- (194) (528) (1,799) (1,347) (3,151)
------ ------- ------- ------- -------- --------
Loss before income
taxes and cumulative
effect of change in
accounting principle.. $ (213) $(1,075) (4,822) (7,721) (5,715) (9,921)
Income tax benefit..... 55 29 22 58
Cumulative effect of
change in accounting
for income taxes...... 42 -- -- --
------ ------- ------- ------- -------- --------
Net income (loss)...... $ (213) $(1,075) $(4,725) $(7,692) $ (5,693) $ (9,863)
====== ======= ======= ======= ======== ========
Net loss per weighted
average share of
common stock.......... $(0.02) $ (0.11) $ (0.47) $ (0.77) $ (0.57) $ (0.99)
Weighted average shares
of common stock
outstanding........... 10,000 10,000 10,000 10,000 10,000 10,000
Ratio of earnings to
fixed charges(a)...... -- -- -- -- -- --
Cash dividends
declared.............. -- -- -- -- -- --
Pro forma interest
expense(b)............ -- -- -- -- -- (20,076)
Pro forma ratio of
earnings to fixed
charges(c)............ -- -- -- -- -- --
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31, PRO FORMA AS OF
--------------------------------- -------------------- DECEMBER 31,
1992 1993 1994 1995 1994 1995 1995(F)
----- ------- ------- -------- --------- --------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 5 $ 118 $ -- $ -- $ -- $ -- $140,631
Working capital........ (291) (441) 1,377 936 (517) (4,135) 136,496
Total assets........... 82 4,316 14,765 23,212 19,432 30,948 177,774
Senior Notes........... -- -- -- -- -- -- 163,705
Note payable--Adelphia. -- 4,814 19,968 35,541 30,123 49,946 24,946
Total liabilities...... 295 5,390 20,776 36,915 31,136 54,514 193,219
Stockholders' equity
(deficiency)........... (213) (1,074) (6,011) (13,703) (11,704) (23,566) (15,445)
Book value per common
share.................. (.02) (.11) (.60) (1.37) (1.17) (2.36) (1.54)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------- ------------------
1992 1993 1994 1995 1994 1995
----- ----- ------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER COMPANY DATA:
EBITDA(d)................ $(213) $(851) $(1,941) $ (2,138) $ (1,890) $ (1,757)
Capital expenditures and
Company investments in
Operating Companies and
the South Florida
Partnership(e).......... 60 3,891 8,607 10,376 7,548 13,570
</TABLE>
<TABLE>
<CAPTION>
AS OF
FEBRUARY 29,
1996
------------
<S> <C>
NETWORK DATA (G):
Networks in operation............................................. 13
Cities served..................................................... 19
Network clusters.................................................. 3
Networks under construction....................................... 4
Route miles....................................................... 2,180
Fiber miles....................................................... 104,640
Buildings connected............................................... 808
LEC-COs collocated(h)............................................. 44
VGE circuits(i)................................................... 185,244
Switches and remote switch modules installed...................... 5
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------- -----------------
1992 1993 1994 1995 1994 1995
---- ------ ------- ------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT EMPLOYEE
INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
OTHER NETWORK AND OPERATING DATA
(J):
Network revenues(k)............. $ 0 $ 173 $ 1,028 $ 4,083 $ 2,343 $ 8,261
Capital expenditures(l)......... 0 2,559 27,445 33,522 22,897 44,268
Fiber lease financings during
period(m)....................... 0 1,262 1,527 17,420 15,473 6,852
Employees(n).................... 4 20 40 95 78 142
</TABLE>
- --------
(a) For purposes of calculating the ratio of earnings to fixed charges: (i)
earnings consist of loss before income taxes, plus fixed charges excluding
capitalized interest plus amortization of deferred financing costs and (ii)
fixed charges consist of interest expensed and capitalized. For the fiscal
years ended March 31, 1992, 1993, 1994 and 1995, the Company's earnings
were insufficient to cover fixed charges by $213, $1,075, $4,822 and
$7,721, respectively. For the nine months ended December 1994 and 1995, the
Company's earnings were insufficient to cover fixed charges by $5,715 and
$9,921, respectively.
(b) Pro forma interest expense assumes (i) repayment of $25.0 million of the
Adelphia Note (as defined) at an interest rate of 11.28%, (ii) gross
proceeds attributable to the issuance of the Senior Notes of $163.7
million, (iii) issuance of the Senior Notes at an interest rate of 13.0%
and (iv) original issue discount attributable to the Warrants.
12
<PAGE>
(c) On a pro forma basis, for the nine months ended December 31, 1995, the
Company's earnings would have been insufficient to cover fixed charges by
$25,845.
(d) EBITDA consists of net income (loss) before equity in net loss of joint
ventures, interest, income taxes, depreciation and amortization for the
periods presented. It is a measure commonly used in the telecommunications
industry and is presented to assist in understanding the Company's
operating results. However, it is not intended to represent cash flow or
results of operations in accordance with generally accepted accounting
principles. See the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
(e) For the fiscal years ended March 31, 1992, 1993, 1994 and 1995, the
Company's capital expenditures (including capital expenditures relating to
its wholly-owned Operating Companies) were $60, $1,950, $3,097 and $2,850,
respectively, and the Company's investments in its less than wholly-owned
Operating Companies and the South Florida Partnership were $0, $1,941,
$5,510 and $7,526, respectively, for the same periods. For the nine months
ended December 31, 1994 and 1995, the Company's capital expenditures
(including capital expenditures relating to its wholly-owned Operating
Companies) were $1,191 and $4,473, respectively and the Company's
investments in its less than wholly-owned Operating Companies and the South
Florida Partnership were $6,357 and $9,097, respectively, for the same
periods. See the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
(f) Gives effect to (i) the consummation of the sale on April 15, 1996 of
329,000 Units ("Units") (the "Offering") consisting of $329,000,000
aggregate principal amount at maturity of Senior Notes and Warrants to
purchase an aggregate of 613,427 shares of Common Stock of the Company, and
the allocation of approximately $163.7 million to the Senior Notes and
approximately $11.6 million to the Warrants and (ii) the application of the
estimated net proceeds from such sale, including the repayment of certain
indebtedness and loans to certain stockholders.
(g) Network Data is derived from the Company's records and presents information
for the Operating Companies, but does not include information for the South
Florida Partnership.
(h) LEC-CO collocated means that the Company has interconnected its network at
the LEC-CO.
(i) Voice grade equivalent circuits.
(j) Except for employees as discussed in note (n) below, the data presented
represent selected unaudited combined operating data of the Company's
Operating Companies (including the Company's two wholly-owned Operating
Companies) and the South Florida Partnership, and do not include data of
the Company on a stand alone basis.
(k) Includes the total of (i) the Operating Companies' revenues and (ii) the
South Florida Partnership's revenues.
(l) Represents investments made by the Operating Companies (including
investments made by Local Partners) and the South Florida Partnership in
property, plant and equipment (including capitalized leases).
(m) Fiber Lease Financing (as defined) represents the incremental borrowings by
the Operating Companies and the South Florida Partnership regarding fiber
assets accounted for as capital leases for each period presented.
(n) Employees includes combined employees of the Operating Companies and the
Company.
13
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business in connection with the Exchange Offer.
Consequences of Failure to Exchange. Upon consummation of the Exchange
Offer, holders of Old Notes that were not prohibited from participating in the
Exchange Offer and did not tender their Old Notes will not have any
registration rights under the Registration Rights Agreement with respect to
such nontendered Old Notes and, accordingly, such Old Notes will continue to
be subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act and applicable state securities laws, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not intend to register the
Old Notes under the Securities Act. Based on interpretations by the staff of
the Commission with respect to similar transactions, the Company believes that
the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder of
such New Notes (other than any such holder which is an "affiliate" of Hyperion
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will
deliver a prospectus in connection with any resale of its New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of the New Notes received in exchange for
the Old Notes acquired by the broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale for a period of 365 days after the Exchange Date or, if
earlier, until all participating broker-dealers have so resold. See "Plan of
Distribution." The New Notes may not be offered or sold unless they have been
registered or qualified for sale under applicable state securities laws or an
exemption from registration or qualification is available and is complied
with. The Company is required, under the Registration Rights Agreement, to
register the New Notes in any jurisdiction requested by the holders, subject
to certain limitations.
Absence of a Public Market. Prior to this Exchange Offer, there has been no
public market for the Old Notes. If a market for the New Notes should develop,
the New Notes could trade at a discount from their principal amount. The
Company does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active public market for the New
Notes will develop.
Negative Cash Flow and Operating Losses; Limited History of Operations. The
Company has experienced significant losses since its inception, with operating
losses of approximately ($2.1) million, ($2.6) million and ($2.6) million for
the fiscal years ended March 31, 1994 and 1995 and the nine months ended
December 31, 1995, respectively. The Company expects to continue to incur
substantial operating losses in the foreseeable future as it pursues its plans
to expand its networks, service offerings and customer base. There can be no
assurance that such losses will not continue indefinitely. The Company
currently accounts for its ownership interests in the Operating Companies in
which it does not have majority ownership interest using the equity method
and, therefore, the Company's consolidated financial statements include only
the Company's pro rata share of the Operating Companies' and the South Florida
Partnership's net losses as equity in net losses of joint ventures.
The Company was formed in October 1991 and ten of its 13 networks have been
in operation for less than 24 months. Prospective investors therefore have
limited historical financial information about the Company upon
14
<PAGE>
which to base an evaluation of the Company's performance. The development of
the Company's businesses and the installation and expansion of its networks
require significant expenditures, a substantial portion of which are made
before any revenues may be realized. Certain of the expenditures, including
marketing, sales and general and administrative costs, are expensed as
incurred, while certain other expenditures, including network design and
construction, negotiation of rights-of-way and costs to obtain legal and
regulatory approval, are deferred until the applicable network is operational.
The Company will continue to incur significant expenditures in connection with
the construction, acquisition, development and expansion of the Company's and
Operating Companies' networks, services and customer base.
In light of the Company's limited operating history, its history of
significant operating losses and its expectation that it will continue to
incur significant expenses and operating losses for the foreseeable future,
there can be no assurance that the Company will be able to implement its
growth strategy, achieve or sustain profitability or generate sufficient cash
flow to service the Senior Notes. If the Company is unable to generate
positive cash flow, holders of the Senior Notes would be adversely affected.
Substantial Leverage. As of December 31, 1995, after giving pro forma effect
to the Offering, the Company's total amount of debt outstanding would have
been $188.7 million and the Company would have had a stockholders' deficiency
of $15.4 million. In addition, in each year since its inception, the Company's
earnings have been inadequate to cover its fixed charges by a substantial
margin. Commencing on October 15, 2001, semi-annual cash interest payments of
$21.4 million will be due on the Senior Notes, which substantially exceeds the
Company's gross revenues of approximately $2.5 million for the nine months
ended December 31, 1995.
Because the Company currently has a consolidated cash flow deficit, its
ability to make cash interest payments on the Senior Notes commencing on
October 15, 2001 and to repay its obligations on the Senior Notes at maturity
will be dependent on developing one or more sources of cash flow prior to the
date on which cash interest payment obligations begin on the Senior Notes. To
accomplish this the Company may seek to (i) refinance all or a portion of the
Senior Notes, (ii) sell all or a portion of its interests in one or more of
the Operating Companies, (iii) negotiate with its current Local Partners to
permit any excess cash generated by its Operating Companies to be distributed
to partners rather than invested in the businesses of such Operating Companies
and/or (iv) invest in companies that will make substantial cash distributions
on or before the maturity of the Senior Notes. There can be no assurance that
(i) there will be a market for the debt or equity securities of the Company in
the future, (ii) the Company will be able to sell assets in a timely manner or
on commercially reasonable terms or in an amount that will be sufficient to
make cash interest payments and repay the Senior Notes when due, (iii) the
Company will be able to persuade its Local Partners that cash generated by the
operations of the Operating Companies should be distributed to partners or
shareholders or (iv) the Company will be able to locate and invest in
companies that will be mature enough to make substantial cash contributions to
the Company prior to the maturity date of the Senior Notes. The inability of
the Company to develop any of the sources of liquidity described above could
adversely affect the holders of the Senior Notes.
In addition, the Company's ability to sell or transfer its or its
subsidiaries' ownership interest in the Operating Companies is subject to
limitations contained in the various subscription and partnership agreements,
including, in certain cases, complete prohibitions on sales or transfers for a
period of three to five years after formation and/or rights of first refusal.
Furthermore, none of the ownership interests in the Operating Companies are,
or are expected to be, publicly traded securities. As a result, the Company's
ability to liquidate any or all of the ownership interests in the Operating
Companies will be substantially limited, and there can be no guarantee that
the Company will be able to do so in a timely manner in the event of an
acceleration of the Senior Notes prior to their maturity or in order to
satisfy its obligations in respect of such securities in the event of a Change
of Control or to otherwise make payments on the Senior Notes prior to or at
their maturity.
Holding Company Structure; Inability to Access Cash Flow. The Company is a
holding company with substantially all of its operations conducted through the
Operating Companies and the Company expects that it could develop new networks
and operations in the future through Joint Ventures in which the Company will
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own less than 50% of the equity interests. Accordingly, the Company's cash
flow and, consequently, its ability to service its debt, including the Senior
Notes, is dependent on its pro rata share of the cash flow of the Operating
Companies and the payment of funds by those Operating Companies in the form of
management fees, loans, dividends, distributions or otherwise. The Operating
Companies are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Senior Notes
or to make any funds available therefor, whether in the form of loans,
dividends, distributions or otherwise. Furthermore, the Company may be unable
to access the cash flow of certain of the Operating Companies because it holds
a 50% or less ownership interest in certain of such entities and, therefore,
does not have the requisite control to cause such entities to make
distributions or pay dividends (as applicable) to the partners or equity
holders (as applicable). In addition, such entities will be permitted to incur
indebtedness that may severely restrict or prohibit the making of
distributions, the payment of dividends (as applicable) or the making of
loans. The inability of the Company to receive cash from the Operating
Companies would adversely affect the holders of the Senior Notes.
Ranking. The Senior Notes are obligations of the Company exclusively and are
not secured by any of the assets of the Company, its subsidiaries or the
Operating Companies. Accordingly, holders of secured indebtedness of the
Company will have claims that are prior to the claims of the holders of the
Senior Notes to the extent of the assets securing such other indebtedness. In
addition, holders of indebtedness and other liabilities of the Company's
subsidiaries and the Joint Ventures will have claims that are effectively
senior to the Senior Notes. As of December 31, 1995, the aggregate principal
amount of such senior Indebtedness incurred by the Company's subsidiaries and
Joint Ventures (excluding trade payables and other accrued liabilities) was
approximately $22.7 million, substantially all of which were Capital Lease
Obligations. The Indenture permits certain indebtedness of the Company, its
Subsidiaries and the Joint Ventures to be secured. See "Description of the
Senior Notes."
Risks Associated with Joint Ventures. Most of the Operating Companies' Local
Partner Agreements (as defined) contain mandatory buy/sell provisions that,
after a certain number of years, can be initiated by either partner and result
in one partner purchasing all of the other partner's interests. Accordingly,
there can be no assurance that the Company and its subsidiaries will continue
to be in partnership with their current Local Partner, or any other partner,
in each of their respective markets, or that the Company or its subsidiaries
will have sufficient funds to purchase the partnership interest of such other
partner. In addition, if a partner triggers such buy/sell provisions and the
Company is unable to purchase the initiating partner's interests, the Company
will be forced to sell its interests to the partner, thereby terminating the
partnership, which could result in a material adverse effect on the future
cash flow of the Company.
The bankruptcy or insolvency of a Local Partner or an Operating Company
could result in the termination of the respective Local Partner Agreement and
the related Fiber Lease Agreement (as defined). The effect of such
terminations could be materially adverse to the Company and the respective
Operating Company. Similarly, all of the Management Agreements (as defined),
two of the Local Partner Agreements and five of the Fiber Lease Agreements can
be terminated by the respective Local Partner at various times during the next
seven years. While the Company believes such agreements will be renewed, there
can be no assurance that the Local Partner will not seek to terminate the
agreements. See "Business--Operating Agreements." Accordingly, the failure to
renew such agreements could materially adversely affect the Company and the
respective Operating Companies. In addition, the failure of a Local Partner to
make required capital contributions could have a material adverse effect on
the Company and the respective Operating Company.
The Indenture does not restrict Operating Companies in which the Company
owns a less than 45% interest with respect to the amount of indebtedness they
can incur. Accordingly, the Company's ability to access the cash flow and
assets of such Operating Companies may be severely limited. While none of the
Operating Companies currently have a substantial amount of indebtedness, there
can be no assurance that such Operating Companies will not incur substantial
indebtedness in the future. See "Description of the Senior Notes-- Incurrence
of Indebtedness and Issuance of Preferred Stock."
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Significant Future Capital Requirements. Expansion of the Company's existing
networks and services and the development of new networks and services require
significant capital expenditures. The Company's
operations have required and will continue to require substantial capital
investment for (i) the installation of electronics for switched services in
the Company's networks, (ii) the expansion and improvement of the Company's
NOCC and existing networks and (iii) the design, construction and development
of additional networks. The Company plans to make substantial capital
investments and investments in Operating Companies in connection with the
deployment of switches in all of its operating markets by the end of 1996, the
expansion of existing markets and the construction and development of new
markets. Expansion of the Company's networks will include the geographic
expansion of the Company's existing clusters and the development of new
markets. The Company expects to build networks in approximately ten additional
markets by the end of 1997. The Company estimates that it will require
approximately $110 million to $115 million to fund anticipated capital
expenditures, working capital requirements and operating losses of the Company
and to make investments in existing and new Operating Companies and to enter
certain additional markets during calendar 1996 and 1997. In order to achieve
its goal of entering ten new markets by the end of 1997, however, the Company
expects to be required to seek additional capital. The Company expects to fund
additional capital requirements through existing resources, secured credit
facilities at the Company and Operating Company levels, internally generated
funds, equity invested by Local Partners in Operating Companies, additional
Operating Companies and additional debt or equity financings, as appropriate.
The Company may also be required to raise capital (i) to fund the planned
purchase of certain partnership interests in the Louisville Operating
Partnership and the Nashville Operating Partnership and (ii) in order to
purchase the partnership interests of a Local Partner seeking to exercise its
right to sell its partnership interest. See "--Risks Associated with Joint
Ventures," "Business--Recent Developments" and "Business--Local Partner
Agreements." There can be no assurance, however, that the Company will be
successful in generating sufficient cash flow or in raising sufficient debt or
equity capital on terms that it will consider acceptable, or at all. The lack
of available additional capital would have a significant negative effect on
the Company's growth and its ability to effectively compete in the
telecommunications industry and would adversely impact the holders of the
Senior Notes. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
The expectations of required future capital expenditures are based on the
Company's current estimates. There can be no assurance that actual
expenditures will not significantly exceed current estimates.
Expansion Risk. The Company is experiencing a period of rapid expansion
which the Company believes will increase following the Offering. The operating
complexity of the Company, as well as the level of responsibility for
management personnel, has increased as a result of this expansion. The
Company's ability to manage such growth effectively will require it to
continue to expand and improve its operational and financial systems and to
expand, train and manage its employee base. The Company's inability to
effectively manage its expansion could have a material adverse effect on its
business and the holders of the Senior Notes.
Competition. In each of the markets served by the Company's networks, the
services offered by the Company compete principally with the services offered
by the incumbent LEC serving that area. Incumbent LECs have long-standing
relationships with their customers, have the potential to subsidize
competitive services from monopoly service revenues, and benefit from
favorable state and federal regulations. In light of the passage of the
Telecommunications Act, federal and state regulatory initiatives will provide
increased business opportunities to CLECs such as the Company, but regulators
are likely to provide incumbent LECs with increased pricing flexibility for
their services as competition increases. If incumbent LECs are allowed by
regulators to lower their rates substantially, engage in excessive volume and
term discount pricing practices for their customers, or charge CLECs excessive
fees for interconnection to the incumbent LECs' networks, the net income and
cash flow of CLECs, including the Operating Companies, could be materially
adversely affected.
The Telecommunications Act also establishes procedures under which the
Regional Bell Operating Companies ("RBOCs") can obtain authority to provide
long distance services if they comply with certain
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interconnection requirements. There has been significant merger activity among
the RBOCs in anticipation of entry into the long distance market. If RBOCs are
permitted to provide such services, they will ultimately be in
a position to offer single source service. This could result in decreased
market share for the major IXCs, which are the Company networks' major
customers. Such a result could have an adverse effect on the Company.
The Company also faces, and will continue to face, competition from other
current and potential market entrants, including other CLECs, AT&T, MCI,
Sprint and other IXCs, cable television companies, electric utilities,
microwave carriers, wireless telecommunications providers and private networks
built by large end users. A number of markets served by the Company already
are served by another CLEC or other CLECs. In addition, all three major IXCs
are expected to enter the market for local telecommunications services. MCI
has announced that it will invest more than $2.0 billion in fiber optic rings
and local switching equipment in major metropolitan markets throughout the
United States and AT&T has filed applications with the FCC for authority to
provide local telecommunications services in all 50 states. Although the
Company has good relationships with the IXCs, there are no assurances that any
of these IXCs will not build their own facilities or resell the services of
other carriers rather than use the Company's services when entering the market
for local exchange services.
The Company also competes with equipment vendors and installers, and
telecommunications management companies with respect to certain portions of
its business.
Many of the Company's current and potential competitors, particularly
incumbent LECs, have financial, personnel and other resources substantially
greater than those of the Company, as well as other competitive advantages
over the Company. See "Competition" for more detailed information on the
competitive environment faced by the Company.
Dependence on Business from IXCs. For the nine months ended December 31,
1995, approximately 78% of the Operating Companies' combined revenues were
attributable to access services provided to IXCs, one of which accounted for
approximately 55% of such combined IXCs' revenues. The loss of access revenues
from IXCs in general or the loss of such single IXC as a customer could have a
material adverse effect on the Company's business. See "Business--Company
Strategy--Customer Strategy."
The Company's growth strategy assumes increased revenues from IXCs and end
users following the deployment of switches on the Company's networks and the
provision of switched access origination and termination services. In
addition, the Company competes in its markets with other CLECs for IXC
business. Accordingly, there is no assurance that the IXCs will continue to
increase their utilization of the Company's services, or will not reduce or
cease their utilization of the Company's services, either of which could have
a material adverse effect on the Company.
Furthermore, the Telecommunications Act establishes procedures under which
RBOCs can obtain authority to compete with the IXCs in the long distance
market. Due to the Operating Companies' dependence on business from IXCs, any
loss of market share by the IXCs could have a material adverse effect on the
Company.
Regulation and Risks of the Telecommunications Act. The Company is subject
to varying degrees of federal, state and local regulation. The Company is not
currently subject to price cap or rate of return regulation by the FCC, nor is
it currently required to obtain FCC authorization for the installation,
acquisition or operation of its network facilities. However, the FCC has
determined that nondominant carriers, such as the Company and the Operating
Companies, are required to file interstate tariffs on an ongoing basis. The
Telecommunications Act also requires the FCC to establish a subsidy mechanism
for universal telephone service to which the Company will be required to
contribute. The Operating Companies that provide intrastate services are also
generally subject to certification and tariff filing requirements by state
regulators and may also be subject to reporting, customer service and
universal service requirements. Challenges to these tariffs by third parties
could cause the Company to incur substantial legal and administrative
expenses. In addition, under the Telecommunications Act, provision of switched
services by the Company could be subject to a far greater degree
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of regulation than previously experienced by the Company with regard to its
nonswitched services. See "Regulation--Telecommunications Act of 1996."
Although the Telecommunications Act eliminates legal barriers to entry, no
assurance can be given that changes in current or future regulations adopted
by the FCC or state regulators or other legislative or judicial initiatives
relating to the telecommunications industry would not have a material adverse
effect on the Company. In particular, the Company's belief that the entire $97
billion local exchange market may ultimately be open to CLEC competition
depends upon favorable interpretation of the Telecommunications Act, and the
ability of the Company and the Operating Companies to compete in these new
market segments may be adversely affected if incumbent LECs are granted
greater pricing flexibility and other regulatory relief that enables them to
impose costs on potential competitors or otherwise restrict the Company's
ability to serve its customers and attract new customers. In addition, the
Telecommunications Act removes entry barriers for all companies and could
increase substantially the number of competitors offering comparable services
in the Company's markets. See "Regulation--Overview" for more detailed
information on the regulatory environment in which the Company and the
Operating Companies operate.
Need to Obtain and Maintain Permits and Rights-of-Way. There can be no
assurance that the Company or the Operating Companies, through Local Partners,
Adelphia or their own efforts, will be able to maintain existing permits and
rights-of-way or to obtain and maintain the other permits and rights-of-way
needed to develop and operate existing and future networks. In addition, the
Company and the Operating Companies may require pole attachment agreements
with electric utilities to operate existing and future networks, and there can
be no assurance that such agreements will be obtained or will be obtainable on
reasonable terms. Failure to obtain or maintain such permits, rights-of-way
and agreements could have a material adverse effect on the Company's ability
to operate and expand its networks. See "Business--Operating Agreements--Fiber
Lease Agreements."
Control by Principal Shareholder. Adelphia owns approximately 89% of the
outstanding capital stock of the Company, with the remaining 11% owned by
certain of the Company's senior management (the "Management Shareholders").
Accordingly, Adelphia is able to control the vote on corporate matters
requiring shareholder approval, including, but not limited to, electing
directors, amending the Company's certificate of incorporation and approving
mergers or sales of substantially all of the Company's assets. In addition,
pursuant to a shareholders agreement, as amended, between the Company,
Adelphia and the Management Shareholders, Adelphia has the power to control
certain corporate transactions of the Company, including its ability to enter
into joint ventures and other business relationships, and Adelphia has the
right, under certain circumstances, to purchase the interests of the
Management Shareholders. In addition, Adelphia has agreed to vote its shares
of the Common Stock of the Company to elect the Management Shareholders to the
Company's Board of Directors. There can be no assurance that the interests of
Adelphia will not conflict with the interest of the holders of the Senior
Notes. See "Certain Relationships and Transactions."
Rapid Technological Changes. The telecommunications industry is subject to
rapid and significant changes in technology. While the Company believes that
for the foreseeable future these changes will neither materially affect the
continued use of fiber optic telecommunications networks nor materially hinder
the Company's ability to acquire necessary technologies, the effect of
technological changes on the businesses of the Company cannot be predicted.
Thus, there can be no assurance that technological developments will not have
a material adverse effect on the Company.
Dependence on Key Personnel. The success of the Company and its growth
strategy depends in large part on the Company's ability to attract and retain
key management, marketing and operations personnel. Currently, the Company's
businesses are managed by a small number of management and operating personnel
with certain other services, including financial and certain accounting
services, provided by Adelphia. There can be no assurance that the Company
will attract and retain the qualified personnel needed to manage, operate and
further develop its business. In addition, the loss of the services of any one
or more members of the Company's senior management team could have a material
adverse effect on the Company.
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Original Issue Discount; Possible Unfavorable Tax and Other Legal
Consequences for Holders of Senior Notes and the Company. The Senior Notes
were issued at a substantial discount from the stated principal amount
thereof. Consequently, holders of the Senior Notes should be aware that,
although interest will not accrue
on the Senior Notes prior to April 15, 2001, and there will be no periodic
payments of cash interest on the Senior Notes prior to October 15, 2001,
original issue discount (i.e., the difference between the stated redemption
price at maturity and the issue price of the Senior Notes) will accrue from
the issue date of the Senior Notes and will be includible as interest income
periodically (including for periods ending prior to April 15, 2001) in a
holder's gross income for U.S. federal income tax purposes in advance of
receipt of the cash payments to which the income is attributable. Similar
results may apply under state and other tax laws.
If a bankruptcy case is commenced by or against the Company under the U.S.
Bankruptcy Code, the claim of a holder of Senior Notes with respect to the
principal amount thereof may be limited to an amount equal to the sum of (i)
the initial offering price and (ii) that portion of the original issue
discount that is not deemed to constitute "unmatured interest" for purposes of
the U.S. Bankruptcy Code. Any original issue discount that was not amortized
as of any such bankruptcy filing would constitute "unmatured interest."
See "Certain Federal Income Tax Consequences."
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On April 15, 1996, Hyperion issued $329,000,000 aggregate principal amount
at maturity of Old Notes to Bear, Stearns & Co. Inc., Chase Securities Inc.
and NationsBanc Capital Markets, Inc., the Initial Purchasers. The issuance
was not registered under the Securities Act in reliance upon the exemption
under Rule 144A and Section 4(2) of the Securities Act. In connection with the
issuance and sale of the Old Notes, Hyperion entered into a Registration
Rights Agreement with the Initial Purchasers dated as of April 15, 1996 (the
"Registration Rights Agreement"), which requires Hyperion to cause the Old
Notes to be registered under the Securities Act or to file with the Commission
a registration statement under the Securities Act with respect to an issue of
new notes of Hyperion identical in all material respects to the Old Notes, and
use its best efforts to cause such registration statement to become effective
under the Securities Act and, upon the effectiveness of that registration
statement, to offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, which will
be issued without a restrictive legend and may be reoffered and resold by the
holder without restrictions or limitations under the Securities Act. A copy of
the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Exchange Offer
is being made pursuant to the Registration Rights Agreement to satisfy
Hyperion's obligations thereunder.
Based on no-action letters issued by the staff of the Commission to third
parties, Hyperion believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder of such New Notes (other than any such
holder which is an "affiliate" of Hyperion within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. Any
holder who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes cannot rely on such interpretation by the staff
of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution."
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), Hyperion will accept any and all Old Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue a principal amount of New Notes in
exchange for an equal principal amount of outstanding Old Notes tendered and
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. The date of acceptance for exchange of
the Old Notes for the New Notes (the "Exchange Date") will be the first
business day following the Expiration Date.
The terms of the New Notes and the Old Notes are substantially identical in
all material respects, except for certain transfer restrictions, registration
rights and Liquidated Damages for Registration Defaults relating to the Old
Notes which will not apply to the New Notes. See "Description of Senior
Notes." The New Notes will evidence the same debt as the Old Notes. The New
Notes will be issued under and entitled to the benefits of the Indenture
pursuant to which the Old Notes were issued.
As of the date of this Prospectus, $329,000,000 aggregate principal amount
at maturity of the Old Notes are outstanding. This Prospectus, together with
the Letter of Transmittal, is being sent to all registered holders.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with
the Exchange Offer. Hyperion intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Exchange Act, and the rules and regulations of
the Commission thereunder. Old Notes which are not tendered and were not
prohibited from being tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and to be subject to transfer
restrictions, but will not be entitled to any rights or benefits under the
Registration Rights Agreement.
Upon satisfaction or waiver of all the conditions to the Exchange Offer, on
the Exchange Date Hyperion will accept all Old Notes properly tendered and not
withdrawn and will issue New Notes in exchange therefor. For purposes of the
Exchange Offer, Hyperion shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if Hyperion has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the New Notes from
Hyperion.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents; provided,
however, that Hyperion reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes or substitute Old Notes evidencing the unaccepted
portion, as appropriate, will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or termination
of the Exchange Offer.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. Hyperion will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time, on
, 1996, unless Hyperion, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall
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mean the latest date and time to which the Exchange Offer is extended;
provided that the Exchange Offer shall not be extended beyond 30 business days
after the date of this Prospectus.
In order to extend the Expiration Date, Hyperion will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, prior to 9:00 a.m., New York City
time, on the next business day after the then Expiration Date.
Hyperion reserves the right, in its sole discretion, (i) to delay accepting
any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer
if any of the conditions set forth below under "Conditions" shall not have
been satisfied, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer. Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof. If
the Exchange Offer is amended in a manner determined by Hyperion to constitute
a material change, Hyperion will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of Old Notes of such amendment.
Without limiting the manner in which Hyperion may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, Hyperion shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely
release to an appropriate news agency.
INTEREST ON THE NEW NOTES
Cash interest will not accrue on the New Notes prior to April 15, 2001.
Thereafter, the New Notes will bear interest at the rate of 13% per annum,
payable semi-annually, in cash, on April 15 and October 15 of each year,
commencing October 15, 2001.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Hyperion will not be
required to exchange any New Notes for any Old Notes, and may terminate or
amend the Exchange Offer before the acceptance of any Old Notes for exchange,
if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer
which seeks to restrain or prohibit the Exchange Offer or, in
Hyperion's judgment, would materially impair the ability of Hyperion to
proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule, order or regulation is interpreted,
by any government or governmental authority which, in Hyperion's
judgment, would materially impair the ability of Hyperion to proceed
with the Exchange Offer; or
(c) the Exchange Offer or the consummation thereof would otherwise violate
or be prohibited by applicable law.
If Hyperion determines in its sole discretion that any of these conditions
is not satisfied, Hyperion may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders who tendered such
Old Notes to withdraw their tendered Old Notes, or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, Hyperion will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and Hyperion will extend the Exchange
Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
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The foregoing conditions are for the sole benefit of Hyperion and may be
asserted by Hyperion regardless of the circumstances giving rise to any such
condition or may be waived by Hyperion in whole or in part at any time and
from time to time in its sole discretion. The failure by Hyperion at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by Hyperion
concerning the events described above shall be final and binding on all
parties.
PROCEDURES FOR TENDERING
The tender of Old Notes by a holder as set forth below and the acceptance
thereof by Hyperion will constitute an agreement between such holder and
Hyperion in accordance with the terms and subject to the conditions set forth
in this Prospectus and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must (i) complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for
book-entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date,
or (ii) comply with the guaranteed delivery procedures described below.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO HYPERION. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering of
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any Eligible Institution (as defined) unless the
Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes, with the
signature thereon guaranteed by an Eligible Institution. If the Letter of
Transmittal or any Old Notes or bond powers are signed by
23
<PAGE>
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Hyperion,
evidence satisfactory to Hyperion of their authority to so act must be
submitted with the Letter of Transmittal.
Any financial institution that is a participant in the book-entry transfer
facility for the Old Notes, The Depository Trust Company ("DTC"), may make
book-entry delivery of Old Notes by causing DTC to transfer
such Old Notes into the Exchange Agent's account with respect to the Old Notes
in accordance with DTC's procedures for such transfer. Although delivery of
Old Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received and confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by Hyperion in its sole discretion, which
determination will be final and binding. Hyperion reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes
Hyperion's acceptance of which would, in the opinion of counsel for Hyperion,
be unlawful. Hyperion also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. Hyperion's
interpretation of the terms and conditions of the Exchange Offer (including
the instructions in the Letter of Transmittal) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes must be cured within such time as Hyperion shall
determine. Although Hyperion intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither Hyperion, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, Hyperion reserves the right in its sole discretion to purchase
or make offers for any Old Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder will also represent to Hyperion (i) that the New
Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the holder, (ii) that neither the holder nor any such
person has an arrangement or understanding with any person to participate in
the distribution of such New Notes and (iii) that neither the holder nor any
such other person is an "affiliate," as defined in Rule 405 under the
Securities Act, of Hyperion, or that if it is an "affiliate," it will comply
with the registration and prospective delivery requirements of the Securities
Act to the extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or (iii) who cannot complete the procedures for book-entry
transfer of Old Notes to the Exchange Agent's account with DTC prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
24
<PAGE>
(b) On or prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice
of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder, the
certificate number(s) of such Old Notes (if possible) and the principal
amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five business trading days after
the Expiration Date, (i) the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, or (ii)
that book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC will be effected and confirmation of such book-entry
transfer will be delivered to the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer and all other documents
required by the Letter of Transmittal, or confirmation of book-entry
transfer of the Old Notes into the Exchange Agent's account at DTC, are
received by the Exchange Agent within five business trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The holder tendering Old Notes exchanges, assigns and transfers the Old
Notes to the Company and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants to the
Company and the Exchange Agent that (i) it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire the New
Notes in exchange for the Old Notes, (ii) when the Old Notes are accepted for
exchange, the Company will acquire good and unencumbered title to the Old
Notes, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, (iii) it will, upon request, execute and
deliver any additional documents deemed by the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes and (iv) acceptance of any tendered Old Notes by the Company and the
issuance of New Notes in exchange therefor will constitute performance in full
by the Company of its obligations under the Registration Rights Agreement and
the Company will have no further obligations or liabilities thereunder to such
holders (except with respect to accrued and unpaid Liquidated Damages, if
any). All authority conferred by the holder will survive the death or
incapacity of the holder and every obligation of the holder will be binding
upon the heirs, legal representatives, successors, assigns, executors and
administrators of the holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or that, if it
is an "affiliate," it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (ii) is
acquiring the New Notes offered in the ordinary course of its business and
(iii) has no arrangement with any person to participate in the distribution of
the New Notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
facsimile transmission or letter indicating notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to
25
<PAGE>
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be
registered, if different from that of the Depositor. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawn Old Notes or otherwise comply with DTC's
procedures. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by Hyperion, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for payment will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Old Notes may be retendered by following one of the procedures described above
under "Procedures for Tendering" at any time prior to the Expiration Date.
UNTENDERED OLD NOTES
Holders of Old Notes whose Old Notes are not tendered or are tendered but
not accepted in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to
the existing restrictions upon transfer thereof and Hyperion will have no
further obligations to such holders, other than the Initial Purchaser, to
provide for the registration under the Securities Act of the Old Notes held by
them. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Old Notes
could be adversely affected.
EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent of the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail, By Facsimile: Bank of Montreal Trust
by hand or by Overnight Courier Company Attention: Corporate Trust
Bank of Montreal Trust Company 77 Department (212) 701-7684 Confirm by
Water Street New York, NY 10005 Telephone: (212) 701-7653
Attention: Corporate Trust Department
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Hyperion. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
Hyperion and its affiliates.
26
<PAGE>
Hyperion has not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. Hyperion, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith and will pay the
reasonable fees and expenses of holders in delivering their Old Notes to the
Exchange Agent.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by Hyperion. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
Hyperion will pay all transfer taxes, if any, applicable to the exchange of
Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Notes that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes may not be offered
or sold, unless registered under the Securities Act and applicable state
securities laws, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
Based on interpretations by the staff of the Commission with respect to
similar transactions, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder of such New Notes (other than
any such holder which is an "affiliate" of Hyperion within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such
holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. If any
holder has any arrangement or understanding with respect to the distribution
of the New Notes to be acquired pursuant to the Exchange Offer, the holder (i)
could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes must acknowledge that it will deliver a prospectus in connection
with any resale of its New Notes. See "Plan of Distribution." The New Notes
may not be offered or sold unless they have been registered or qualified for
sale under applicable state securities laws or an exemption from registration
or qualification is available and is complied with. The Company is required,
under the Registration Rights Agreement, to register the New Notes in any
jurisdiction requested by the holders, subject to certain limitations.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
27
<PAGE>
Upon consummation of the Exchange Offer, holders of the Old Notes that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person
participating in the Exchange Offer is acquiring the New Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the
Exchange Offer. In this regard, the Company will make each person
participating in the Exchange Offer aware (through this Prospectus or
otherwise) that if the Exchange Offer is being registered for the purpose of
secondary resale, any holder using the Exchange Offer to participate in a
distribution of New Notes to be acquired in the registered Exchange Offer (i)
may not rely on the staff position enunciated in Morgan Stanley and Co. Inc.
(avail. June 5, 1991) and Exxon Capital Holding Corp. (avail. May 13, 1988) or
similar letters and (ii) must comply with registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in Hyperion's accounting records on the Exchange Date.
Accordingly, no gain or loss for accounting purposes will be recognized by
Hyperion. The expenses of the Exchange Offer will be expensed over the terms
of the New Notes.
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange Offer.
28
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1995 and as adjusted to reflect the sale of the Units, consisting
of Senior Notes and Warrants, in the Offering. This table should be read in
conjunction with the Consolidated Financial Statements and related Notes
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------
ACTUAL AS ADJUSTED(1)
------- --------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS.............................. $ -- $140,631
======= ========
LONG-TERM DEBT
13% Senior Discount Notes due 2003................... $ -- $163,705
Note payable--Adelphia(2)............................ 49,946 24,946(3)
------- --------
TOTAL LONG-TERM DEBT................................... $49,946 $188,651
======= ========
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock, $.01 par value, 30,000,000 shares
authorized, 10,000,000 shares issued and
outstanding....................................... 100 100
Warrants............................................. -- 11,121(4)
Loans to stockholders................................ -- (3,000)
Accumulated deficit.................................. (23,666) (23,666)
------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)................ (23,566) (15,445)
------- --------
TOTAL CAPITALIZATION................................... $26,380 $173,206
======= ========
</TABLE>
- --------
(1) Reflects the effect of approximately $175.3 million in gross proceeds from
the sale of the Units and the receipt of the net proceeds therefrom.
(2) The Company has an unsecured credit arrangement with Adelphia. The
Indenture provides certain restrictions on the ability of the Company to
make payments of interest and principal on this affiliate note (the
"Adelphia Note"). See "Description of the Senior Notes--Restricted
Payments."
(3) Reflects the repayment of $25.0 million of the Company's outstanding
indebtedness to Adelphia.
(4) Reflects approximately $11.6 million of gross proceeds from the sale of
the Units allocated to the Warrants, less approximately $0.4 million of
fees and expenses related to the Offering and attributed to the Warrants.
29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following selected financial and operating data (except the unaudited
information for the fiscal years ended March 31, 1992 and 1993 and the nine
months ended December 31, 1994, pro forma information, Network Data and Other
Network and Operating Data ) are derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements of the Company
and the related Notes thereto contained herein. The unaudited information for
the fiscal years ended March 31, 1992 and 1993 and the nine months ended
December 31, 1994, pro forma information, Network Data and Other Network and
Operating Data are derived from other Company information. Except as noted
below, the following table includes financial and operating information
relating to the South Florida Partnership and the Company's 15.7% interest
therein which was sold by the Company on May 16, 1996. See "Recent
Developments."All of the following information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------------- ------------------
1992 1993 1994 1995 1994 1995
------ ------- ------- ------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Telecommunications
service and management
fee revenue........... $ -- $ 89 $ 434 $ 1,768 $ 975 $ 2,496
Operating expenses:
Network operations.... 2 19 330 1,382 733 1,878
Selling, general and
administrative........ 211 921 2,045 2,524 2,132 2,375
Depreciation and
amortization.......... -- 30 189 463 180 861
------ ------- ------- ------- -------- --------
213 970 2,564 4,369 3,045 5,114
------ ------- ------- ------- -------- --------
Operating income
(loss)................ (213) (881) (2,130) (2,601) (2,070) (2,618)
------ ------- ------- ------- -------- --------
Interest expense and
fees.................. -- -- (2,164) (3,321) (2,298) (4,152)
Equity in net loss of
joint ventures........ -- (194) (528) (1,799) (1,347) (3,151)
------ ------- ------- ------- -------- --------
Loss before income
taxes and cumulative
effect of change in
accounting principle.. $ (213) $(1,075) (4,822) (7,721) (5,715) (9,921)
Income tax benefit..... 55 29 22 58
Cumulative effect of
change in accounting
for income taxes...... 42 -- -- --
------ ------- ------- ------- -------- --------
Net income (loss)...... $ (213) $(1,075) $(4,725) $(7,692) $ (5,693) $ (9,863)
====== ======= ======= ======= ======== ========
Net loss per weighted
average share of
common stock.......... $(0.02) $ (0.11) $ (0.47) $ (0.77) $ (0.57) $ (0.99)
Weighted average shares
of common stock
outstanding........... 10,000 10,000 10,000 10,000 10,000 10,000
Ratio of earnings to
fixed charges(a)...... -- -- -- -- -- --
Cash dividends
declared.............. -- -- -- -- -- --
Pro forma interest
expense(b)............ -- -- -- -- -- (20,076)
Pro forma ratio of
earnings to fixed
charges(c)............ -- -- -- -- -- --
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31, PRO FORMA AS OF
--------------------------------- -------------------- DECEMBER 31,
1992 1993 1994 1995 1994 1995 1995(F)
----- ------- ------- -------- --------- --------- ---------------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 5 $ 118 $ -- $ -- $ -- $ -- $140,631
Working capital........ (291) (441) 1,377 936 (517) (4,135) 136,496
Total assets........... 82 4,316 14,765 23,212 19,432 30,948 177,774
Senior Notes........... -- -- -- -- -- -- 163,705
Note payable--Adelphia. -- 4,814 19,968 35,541 30,123 49,946 24,946
Total liabilities...... 295 5,390 20,776 36,915 31,136 54,514 193,219
Stockholders' equity
(deficiency)........... (213) (1,074) (6,011) (13,703) (11,704) (23,566) (15,445)
Book value per common
share.................. (.02) (.11) (.60) (1.37) (1.17) (2.36) (1.54)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
------------------------------- ------------------
1992 1993 1994 1995 1994 1995
----- ----- ------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER COMPANY DATA:
EBITDA(d).............. $(213) $(851) $(1,941) $ (2,138) $ (1,890) $ (1,757)
Capital expenditures
and Company
investments in
Operating Companies
and the South Florida
Partnership(e)........ 60 3,891 8,607 10,376 7,548 13,570
</TABLE>
<TABLE>
<CAPTION>
AS OF
FEBRUARY 29,
1996
------------
<S> <C>
NETWORK DATA (G):
Networks in operation............................................. 13
Cities served..................................................... 19
Network clusters.................................................. 3
Networks under construction....................................... 4
Route miles....................................................... 2,180
Fiber miles....................................................... 104,640
Buildings connected............................................... 808
LEC-COs collocated(h)............................................. 44
VGE circuits(i)................................................... 185,244
Switches and remote switch modules installed...................... 5
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
--------------------------- -----------------
1992 1993 1994 1995 1994 1995
---- ------ ------- ------- -------- --------
(AMOUNTS IN THOUSANDS, EXCEPT EMPLOYEE
INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
OTHER NETWORK AND OPERATING DATA
(J):
Network revenues(k)............. $ 0 $ 173 $ 1,028 $ 4,083 $ 2,343 $ 8,261
Capital expenditures(l)......... 0 2,559 27,445 33,522 22,897 44,268
Fiber lease financings during
period(m)....................... 0 1,262 1,527 17,420 15,473 6,852
Employees(n).................... 4 20 40 95 78 142
</TABLE>
- --------
(a) For purposes of calculating the ratio of earnings to fixed charges: (i)
earnings consist of loss before income taxes, plus fixed charges excluding
capitalized interest plus amortization of deferred financing costs and
(ii) fixed charges consist of interest expensed and capitalized. For the
fiscal years ended March 31, 1992, 1993, 1994 and 1995, the Company's
earnings were insufficient to cover fixed charges by $213, $1,075, $4,822
and $7,721, respectively. For the nine months ended December 1994 and
1995, the Company's earnings were insufficient to cover fixed charges by
$5,715 and $9,921, respectively.
(b) Pro forma interest expense assumes (i) repayment of $25.0 million of the
Adelphia Note (as defined) at an interest rate of 11.28%, (ii) gross
proceeds attributable to the issuance of the Senior Notes of $163.7
million, (iii) issuance of the Senior Notes at an interest rate of 13.0%
and (iv) original issue discount attributable to the Warrants.
(c) On a pro forma basis, for the nine months ended December 31, 1995, the
Company's earnings would have been insufficient to cover fixed charges by
$25,845.
31
<PAGE>
(d) EBITDA consists of net income (loss) before equity in net loss of joint
ventures, interest, income taxes, depreciation and amortization for the
periods presented. It is a measure commonly used in the telecommunications
industry and is presented to assist in understanding the Company's
operating results. However, it is not intended to represent cash flow or
results of operations in accordance with generally accepted accounting
principles. See the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
(e) For the fiscal years ended March 31, 1992, 1993, 1994 and 1995, the
Company's capital expenditures (including capital expenditures relating to
its wholly-owned Operating Companies) were $60, $1,950, $3,097 and $2,850,
respectively, and the Company's investments in its less than wholly-owned
Operating Companies and the South Florida Partnership were $0, $1,941,
$5,510 and $7,526, respectively, for the same periods. For the nine months
ended December 31, 1994 and 1995, the Company's capital expenditures
(including capital expenditures relating to its wholly-owned Operating
Companies) were $1,191 and $4,473, respectively and the Company's
investments in its less than wholly-owned Operating Companies and the
South Florida Partnership were $6,357 and $9,097, respectively, for the
same periods. See the Company's Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
(f) Gives effect to (i) the consummation of the sale on April 15, 1996 of
329,000 Units ("Units") (the "Offering") consisting of $329,000,000
aggregate principal amount at maturity of Senior Notes and Warrants to
purchase an aggregate of 613,427 shares of Common Stock of the Company,
and the allocation of approximately $163.7 million to the Senior Notes and
approximately $11.6 million to the Warrants and (ii) the application of
the estimated net proceeds from such sale, including the repayment of
certain indebtedness and loans to certain stockholders.
(g) Network Data is derived from the Company's records and presents
information for the Operating Companies, but does not include information
for the South Florida Partnership.
(h) LEC-CO collocated means that the Company has interconnected its network at
the LEC-CO.
(i) Voice grade equivalent circuits.
(j) Except for employees as discussed in note (n) below, the data presented
represent selected unaudited combined operating data of the Company's
Operating Companies (including the Company's two wholly-owned Operating
Companies) and the South Florida Partnership, and do not include data of
the Company on a stand alone basis.
(k) Includes the total of (i) the Operating Companies' revenues and (ii) the
South Florida Partnership's revenues.
(l) Represents investments made by the Operating Companies (including
investments made by Local Partners) and the South Florida Partnership in
property, plant and equipment (including capitalized leases).
(m) Fiber Lease Financing (as defined) represents the incremental borrowings
by the Operating Companies and the South Florida Partnership regarding
fiber assets accounted for as capital leases for each period presented.
(n) Employees includes combined employees of the Operating Companies and the
Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's audited Consolidated Financial Statements and the Notes thereto
appearing elsewhere in this Prospectus.
OVERVIEW
The Company, through its Operating Companies, provides a competitive
alternative to the telecommunications services offered by the incumbent LECs
in its markets. Since its inception in October 1991, the Company has
experienced substantial growth, building from its original two partnerships
which served two markets to serving 13 markets and 19 cities through its 11
Operating Companies. The Operating Companies' customers are principally small,
medium and large businesses and government and educational end users as well
as IXCs. The Company is also building four additional networks which are
expected to serve 17 additional cities and which it will manage and operate
upon their expected completion during calendar 1996. Prior to May 16, 1996,
the Company also owned a 15.7% investment in the South Florida Partnership in
which it had no management responsibility, which investment the Company sold
on May 16, 1996. See "Business--Recent Developments." The Company believes
that its strategy of utilizing Local Partners to develop its networks has
allowed the Company to build networks with greater coverage, lower upfront and
ongoing costs and superior service and reliability.
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The Company's Operating Companies are made up of two wholly owned
subsidiaries and 11 investments where the Company owns 50% or less. Results of
the wholly owned subsidiaries are consolidated into the Company's financial
statements in this Prospectus. The Company's pro rata share of the results of
the Operating Companies where the Company owns 50% or less and the South
Florida Partnership are recorded under the caption "Equity in net loss of
joint ventures" in the Company's consolidated financial statements and results
of operations in this Prospectus utilizing the equity method of accounting.
Correspondingly, the Company's initial investments in these Operating
Companies and the South Florida Partnership are carried at cost, and
subsequently are adjusted for the Company's pro rata share of the Operating
Companies' and the South Florida Partnership's net losses, additional capital
contributions to the Operating Companies and the South Florida Partnership,
and distributions from the Operating Companies and the South Florida
Partnership to the Company. The Company is responsible for the design,
construction, management and operation of all of these Operating Companies and
receives management fees from the Operating Companies for its management and
network monitoring services. Management fees are determined by Local Partner
Agreements and vary depending upon the market. Management fees are accounted
for as revenues of the Company and reported in the Company's consolidated
financial statements. To date, the Company's principal source of revenues has
been derived through management fees from its Operating Companies.
Since its inception, the Company, in conjunction with its Local Partners,
has made substantial investments in designing, constructing and enhancing the
Operating Companies' fiber optic networks. As of February 29, 1996, the
Company's networks and networks under construction had approximately 2,180
route miles, approximately 104,640 fiber miles and were connected to
approximately 808 buildings in 17 markets. The Operating Companies have also
installed five switches or remote modules which serve five markets, and the
Company has built its Network Operations and Control Center (the "NOCC") in
Coudersport, Pennsylvania, which provides for remote control, monitoring and
diagnosis of all of the Operating Companies' networks. According to industry
data, the Company believes it is the third largest CLEC in the United States
based upon its Operating Companies' networks' route miles or buildings
connected. Funding for the development of the Operating Companies has come
from investments by the Company and the Local Partners as well as from Fiber
Lease Financings which enable the Company to finance the building of fiber
optic plant through long-term leases. The combined capital invested through
December 31, 1995 in (i) the Operating Companies' networks, (ii) investments
in the Company related to the NOCC and other activities and (iii) the
Company's and its partners' investments in the South Florida Partnership has
totaled approximately $147 million. Due to savings achieved in the
construction of fiber optic networks by working with Local Partners, the
Company believes that building a
comparable level of network infrastructure without Local Partners would
require a substantially greater level of capital investment.
The Company believes that as a result of the Telecommunications Act, the
potential market for its services has expanded significantly. According to the
Company's analysis of FCC data and its knowledge of the industry, the Company
estimates that the market for traditional access services and switched
services in its existing markets is approximately $4.8 billion. The Company
plans to deploy switches or remote switching modules in the balance of its
markets by the end of 1996 in order to more fully address this potential
market opportunity. See "Business" and "Regulation."
RECENT DEVELOPMENTS
Sale of Partnership Interest in the South Florida Partnership. On May 16,
1996, the Company completed the sale of its 15.7% partnership interest in TCG
South Florida to Teleport Communications Group Inc. for an aggregate sales
price of approximately $11.6 million resulting in a pre-tax gain of
approximately $8.4 million. Amounts related to the South Florida Partnership
included in the Company's investments and equity in net loss of joint ventures
as of and for the nine months ended December 31, 1995 were approximately $2.9
million and ($0.6) million, respectively. As part of the transaction, the
Company was released from its covenant not to compete with respect to the
South Florida market. The Company plans to use the proceeds from the sale to
continue to expand and develop its existing markets, complete new networks
under construction and enter additional markets.
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National Service Agreement with Major IXC. The Company has entered into the
National Service Agreement with a major IXC pursuant to which the Company's
networks will be the IXC's preferred supplier of dedicated special access and
switched access transport services. The National Service Agreement requires
the Company to provide such services to the IXC at a discount from the
tariffed or published incumbent LEC rates. The National Service Agreement is
in effect in all of the Company's markets. The Company believes that only four
other CLECs have comparable National Service Agreements and have passed such
major IXC's network validation tests and operational readiness testing.
Other Changes in Partnership Interests. The Company recently has entered
into an agreement or letter of intent pursuant to which the Company's
ownership interests in certain of the Operating Partnerships have recently
increased or are expected to increase in three markets. These transactions are
consistent with the Company's goal to own at least a 50% interest in its
Operating Partnerships in the future, and where appropriate the Company may
consider similar transactions from time to time in its other markets. Assuming
the successful completion of these transactions, Hyperion would own at least
50% of ten of its 17 then existing markets and markets under construction. See
"Business--Recent Developments."
The consummation of one of these transactions is subject to the negotiation
and execution of definitive, binding agreements and to other terms and
conditions. No assurances can be given as to whether or when, or the terms
upon which, any such transaction will be consummated.
RESULTS OF OPERATIONS
Nine Months Ended December 31, 1995 in Comparison with Nine Months Ended
December 31, 1994
Revenues increased 156% to $2.5 million in the nine months ended December
31, 1995 from $1.0 million for the same period in the prior fiscal year. A
significant portion of the growth in revenues resulted from continued
expansion in the number and size of Operating Companies and a resultant
increase in management fees. In addition, the Company's first wholly-owned
Operating Company, which operates in the Vermont market (the "Vermont
Operating Company"), generated revenues during the entire nine months ended
December 31, 1995.
Network operations expense increased 156% to $1.9 million in the nine months
ended December 31, 1995 from $0.7 million for the same period in the prior
fiscal year. Approximately $0.2 million of the increase was attributable to
the expansion of operations at the NOCC, including systems upgrades. Most of
the remaining increase was due to the Vermont Operating Company reporting
expenses relating to its operations for the entire nine-month period ended
December 31, 1995.
Selling, general and administrative expense increased 11% to $2.4 million in
the nine months ended December 31, 1995 from $2.1 million for the same period
in the prior fiscal year. The majority of the increase is attributable to the
full nine-months of operations at the Vermont Operating Company. Otherwise,
corporate overhead remained relatively constant during the period, despite
growth in the number of Operating Companies managed by the Company.
EBITDA increased 7% to ($1.8) million in the nine months ended December 31,
1995 from ($1.9) million for the same period in the prior fiscal year as a
result of increased revenues from management fees and the Vermont Operating
Company, which were only partially offset by increased operating costs.
Depreciation and amortization expense increased 378% to $0.9 million in the
nine months ended December 31, 1995 from $0.2 million for the same period in
the prior fiscal year primarily as a result of increased capital expenditures
at the NOCC and the wholly-owned Operating Companies.
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<PAGE>
Interest expense increased 81% to $4.2 million in the nine months ended
December 31, 1995 from $2.3 million for the same period in the prior fiscal
year. The increase was directly attributable to increased borrowings from
Adelphia which were used to fund investments in Operating Companies and the
South Florida Partnership, capital expenditures and the Company's operations.
All of the Company's interest expense was non-cash and was added to amounts
due to Adelphia.
Equity in net loss of joint ventures increased by 134% to ($3.2) million in
the nine months ended December 31, 1995 from ($1.3) million for the same
period in the prior fiscal year as more nonconsolidated Operating Companies
began operations. The number of nonconsolidated Operating Companies paying
management fees to the Company increased from nine at March 31, 1995 to eleven
at December 31, 1995.
Net income (loss) increased 73% from ($5.7) million for the nine-month
period ended December 31, 1994 to ($9.9) million for the same period in the
current fiscal year. The increase was primarily attributable to greater
interest expense, increased equity in the net losses of the Company's joint
ventures, and increased depreciation and amortization.
Fiscal 1995 in Comparison with Fiscal 1994
Revenues increased 307% from $0.4 million to $1.8 million from the year
ended March 31, 1994 ("Fiscal 1994") to the year ended March 31, 1995 ("Fiscal
1995"). A substantial portion of the increase in revenues resulted from growth
in the number of Operating Companies and the resulting management fees. The
number of nonconsolidated Operating Companies paying management fees to the
Company increased from three at March 31, 1994 to nine at March 31, 1995. The
Vermont Operating Company commenced operations and generated revenues during
Fiscal 1995.
Network operations expense increased 319% from $0.3 million in Fiscal 1994
to $1.4 million in Fiscal 1995. This increase was primarily the result of the
expansion of the Company's NOCC staff and technical resources staff required
to support an increasing number of Operating Companies that were operating
during Fiscal 1995.
Selling, general, and administrative expense increased 23% from $2.0 million
in Fiscal 1994 to $2.5 million in Fiscal 1995. The change was primarily due to
increases in accounting, regulatory and marketing personnel to support
increased management and monitoring operations. A portion of this increase was
also attributable to additional personnel and related costs for the
commencement of operations at the Vermont Operating Company.
EBITDA decreased by $0.2 million or 10% from ($1.9) million in Fiscal 1994
to ($2.1) million in Fiscal 1995. This decrease was the result of increasing
expenses incurred in advance of new networks becoming operational and
therefore more than offsetting increased revenues.
Depreciation and amortization expense increased by 145% from $0.2 million in
Fiscal 1994 to $0.5 million in Fiscal 1995. This increase was directly
attributable to the addition of telecommunications monitoring equipment
totaling $1.5 million and the expansion of the telecommunications networks in
the Company's wholly-owned Operating Companies.
Interest expense increased by 53% from $2.2 million in Fiscal 1994 to $3.3
million in Fiscal 1995. The increase was primarily due to the increase in
borrowings from Adelphia to fund investments in Operating Companies and the
South Florida Partnership, capital expenditures and the Company's operations.
All of the Company's interest expense was non-cash and was added to amounts
due to Adelphia.
Equity in net loss of joint ventures increased by ($1.3) million from ($0.5)
million in Fiscal 1994 to ($1.8) million in Fiscal 1995. The increase was
primarily due to the six Operating Companies beginning operations in Fiscal
1995.
Net income (loss) increased ($3.0) million from ($4.7) million in Fiscal
1994 to ($7.7) million in Fiscal 1995. This increase was primarily the result
of the increase in the Company's operating loss, greater interest expense and
increased equity in the net losses of the Company's joint ventures.
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SUPPLEMENTARY OPERATING COMPANY REVENUE ANALYSIS
The Company believes that working with Local Partners to develop markets
enables the Company to build larger networks in a rapid and cost effective
manner. In pursuit of this strategy, the Company has entered into nine joint
ventures with Local Partners where the Company owns 50% or less of each
partnership or corporation. As a result of the Company's ownership position in
these joint ventures, a substantial portion of the Operating Companies'
results are reported by the Company on the equity method of accounting for
investments which only reflects the Company's pro rata share of net income or
loss of the Operating Companies. Because all of the assets, liabilities and
results of operations of the Operating Companies are not presented in the
Company's consolidated financial statements, financial analysis of these
Operating Companies based upon the Company's results does not represent a
complete measure of the growth or operations of the Operating Companies.
In order to provide an additional measure of the growth and performance of
all of the Company's networks, management of the Company analyzes a variety of
financial information including revenues. Revenues of the Operating Companies
indicate the level of activity in the Company's networks. Capital expenditures
of the Operating Companies along with network construction statistics, such as
route miles and buildings connected, indicate the extensiveness of the
Company's construction and expansion efforts in those markets. The financial
information set forth below, however, is not indicative of the Company's
overall financial position and investors should not place undue reliance on
such information when considering an investment in the Senior Notes.
The Operating Companies have shown substantial growth in revenues since the
Company's inception in October 1991. Total combined revenues for the Operating
Companies has increased approximately 237% from approximately $1.0 million in
Fiscal 1994 to approximately $3.3 million in Fiscal 1995. For the nine months
ended December 31, 1995, the Operating Companies' revenues totaled
approximately $5.5 million as compared with approximately $1.8 million for the
comparable period in 1994, representing an increase of approximately 201%. The
Operating Companies' revenues for the fiscal quarter ended December 31, 1995
were approximately $2.0 million. Multiplying the Operating Companies' revenues
in the latest fiscal quarter by four ("Latest Quarter Annualized Revenues")
provides an indication of the potential annual revenue base of the Operating
Companies for that quarterly period. The Operating Companies' Latest Quarter
Annualized Revenues were approximately $8.2 million. This figure is
approximately 151% greater than the Operating Companies' actual annual revenue
for Fiscal 1995. There can be no assurance, however, that the Operating
Companies will continue to experience revenue growth at this rate, or at all.
See "Risk Factors--Negative Cash Flow and Operating Losses; Limited History of
Operation." Furthermore, there can be no assurance that the Company will be
able to benefit from such growth in revenues if such growth occurs. See "Risk
Factors--Holding Company Structure; Inability to Access Cash Flow."
<TABLE>
<CAPTION>
REVENUES
------------------------------------------
NINE MONTHS ENDED LATEST
DECEMBER 31, QUARTER
FISCAL FISCAL ----------------- ANNUALIZED
CLUSTER 1994 1995 1994 1995 REVENUES
- ------- ------ ------ -------- -------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Northeast........................ $706 $1,492 $ 724 $2,864 $4,267
Mid-Atlantic..................... 4 288 171 505 836
Mid-South........................ -- 70 22 312 462
Other Networks................... 255 1,401 907 1,803 2,610
---- ------ -------- -------- ------
Total.......................... $965 $3,251 $1,824 $5,484 $8,175
==== ====== ======== ======== ======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The development of the Company's business and the installation and expansion
of the Operating Companies' networks, combined with the construction of the
Company's NOCC, have resulted in substantial capital expenditures and
investments during the past several years. Capital expenditures by the Company
were $3.1 million, $2.9 million and $4.5 million for Fiscal 1994, Fiscal 1995
and the nine months ended December
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<PAGE>
31, 1995, respectively. Further, investments made in the Company's
nonconsolidated Operating Companies and the South Florida Partnership were
$5.5 million, $7.5 million and $9.1 million in Fiscal 1994, Fiscal 1995 and
the nine months ended December 31, 1995, respectively. The Company expects
that it will continue to have substantial capital and investment requirements.
The Company also expects to have to continue to fund operating losses as the
Company develops and grows its business. See "Risk Factors--Significant Future
Capital Requirements."
Since its inception, substantially all of the Company's direct expenditures
for network construction, expansion, operations and investments have been
funded by Adelphia, which had invested as of December 31, 1995 approximately
$49.9 million in loans (including accrued interest) to the Company and $5.7
million in fiber network construction leased back to certain Operating
Companies and the South Florida Partnership. In addition, Local Partners and
the Company's partners in the South Florida Partnership in the aggregate have
contributed approximately $64.8 million as their pro rata investment in those
networks. These partners have also provided additional capital of $26.2
million for the construction of the Company's and the South Florida
Partnership's networks through the partnership agreements by funding the fiber
construction of the network and then leasing the fiber back to the partnership
in long-term, renewable agreements (the "Fiber Lease Financings").
Collectively, Adelphia's and the Company's partners' investments and the Fiber
Lease Financings have totaled $146.6 million from the Company's inception
through December 31, 1995. Due to savings achieved in the construction of
fiber optic networks by working with Local Partners, the Company believes that
building a comparable level of network infrastructure without Local Partners
would require a substantially greater level of capital investment.
The Company has experienced negative cash flow since its inception. A
combination of operating losses, the substantial capital investments required
to build the Company's wholly-owned networks and its state-of-the-art NOCC,
and incremental investments in the Operating Companies has resulted in
substantial negative cash flow. See "Risk Factors--Negative Cash Flow and
Operating Losses; Limited History of Operations." Funding of the Company's
cash flow deficiency was principally accomplished through additional
borrowings from Adelphia. Interest and fees on this unsecured credit facility
are based upon the weighted average cost of unsecured borrowings of Adelphia.
The average interest rate charged for all periods through December 31, 1995
was 11.3% (excluding fees charged which were based on the amount borrowed). As
of December 31, 1995, no cash payments for interest or fees have been made by
the Company to Adelphia. The total cumulative amount of interest converted to
note principal at December 31, 1995 was $8.1 million. See "Certain
Relationships and Transactions."
The competitive local telecommunication service business is a capital-
intensive business. The Company's operations have required and will continue
to require substantial capital investment for (i) the installation of
electronics for switched services in the Company's networks, (ii) the
expansion and improvement of the Company's NOCC and (iii) the design,
construction and development of additional networks. The Company plans to make
substantial capital investments and investments in Operating Companies in
connection with the deployment of switches in all of its operating markets by
the end of 1996, the expansion of existing markets and the construction and
development of new markets. Expansion of the Company's networks will include
the geographic expansion of the Company's existing clusters and the
development of new markets. The Company expects to build networks in
approximately ten additional markets by the end of 1997. The Company estimates
that it will require approximately $110 million to $115 million to fund
anticipated capital expenditures, working capital requirements and operating
losses of the Company and to make investments in existing and new Operating
Companies during calendar 1996 and 1997. The Company expects that it will have
adequate resources to fund such expenditures through the proceeds from the
sale of the Units and internal sources of funds including cash flow from
operations. The Company also expects to raise additional capital through a
private or public equity placement in the next 12 to 18 months. There can be
no assurance, however, as to the availability of funds from internal cash flow
or from the private or public equity markets. See "Risk Factors--Significant
Future Capital Requirements."
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In addition, the Company expects that pro rata investments by the Company
and its Local Partners as well as Fiber Lease Financings and anticipated
vendor financings will be adequate to fund the requirements of the Operating
Companies for capital expenditures, operating losses and working capital for
existing networks, networks currently under construction and certain of the
Company's planned additional markets during calendar years 1996 and 1997.
There can be no assurance as to the availability of funds from internal cash
flow, the Local Partners or other external sources or as to the terms of such
financings. In addition, the Indenture provides certain restrictions upon the
Company's ability to incur additional indebtedness. The Company's inability to
fund pro rata investments required for the Operating Companies could result in
a dilution of the Company's interest in the individual Operating Companies or
could otherwise have a material adverse effect upon the Company and/or the
Operating Companies.
EFFECT OF NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In
accordance with SFAS No. 121, the Company reviews the carrying amounts of its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Measurement of any
impairment would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of the assets with their
net carrying value. The adoption of SFAS No. 121 in the year ended March 31,
1995 had no effect on the consolidated financial statements of the Company.
IMPACT OF INFLATION
The Company does not believe that inflation has had a significant impact on
the Company's consolidated operations or on the operations of the Operating
Companies over the past three fiscal years.
BUSINESS
INDUSTRY HISTORY
Deregulation, technological change and the increasingly information
intensive nature of the United States economy have significantly expanded the
role of telecommunications in business. In particular these changes have
accelerated the growth of certain aspects of the telecommunications market.
For example, industry sources estimate that voice traffic is growing at a rate
of approximately seven percent per year while data communications are growing
at three to five times that rate due to the increase in computerized
transaction processing and video applications, the movement to distributed
data processing and the rise of decentralized management structures, all of
which require the transmission of large amounts of information with speed,
accuracy and reliability.
The present structure of the U.S. telecommunications market resulted largely
from the divestiture of the "Bell System" in 1984 (the "Divestiture"). As part
of the Divestiture, seven RBOCs were created to offer services in
geographically defined areas called LATAs. The RBOCs were separated from the
long distance provider, AT&T, resulting in the creation of two distinct
industries: local exchange and interexchange (commonly known as long
distance). The Divestiture facilitated direct, open competition in the long
distance segment of the telecommunications market; however, it did not promote
competition in the local telecommunications market. Nonetheless, several
factors have served to promote competition in the local telecommunications
market and the emergence of competitive access providers ("CAPs"), including
(i) the incumbent LECs' monopoly position and regulated pricing structure,
which provided little incentive for incumbent LECs to reduce prices, improve
service or upgrade their networks, (ii) customer demand for an alternative to
the incumbent LEC monopoly, which demand grew rapidly and was spurred in part
by the development of competitive activities in the long distance market and
increasing demand for high quality, reliable services, (iii) the advancement
of fiber optic and digital electronic technologies (such as ATM and
38
<PAGE>
SONET), which combined the ability to transmit voice, data and video at high
speeds with greatly increased capacity and reliability as compared to the
incumbent LECs' copper-based networks and (iv) the significant fees, called
"access charges," IXCs are required to pay to incumbent LECs for originating
and terminating calls on the incumbent LEC networks.
Established in the mid 1980s, CAPs were among the first competitors in the
local telecommunications market. CAPs provided non-switched services (i.e.,
dedicated special access and private line) by installing fiber optic
facilities connecting IXCs POPs within a metropolitan area and, in some cases,
connecting end users (primarily large businesses and government agencies) with
IXCs. CAPs used the substantial capacity and economies of scale inherent in
fiber optic cable to offer customers service that was generally less expensive
and of a higher quality than could be obtained from incumbent LECs. In
addition, CAPs offered customers shorter installation and repair intervals and
improved service reliability in comparison to incumbent LECs.
The Telecommunications Act, which was adopted on February 8, 1996, is
considered to be the most comprehensive reform of the nation's
telecommunications laws since the Communications Act of 1934 and will
substantially affect the development of competition for local telephone
services. Among the more significant provisions of the Telecommunications Act
are (i) the removal of legal barriers to entry in local telephone markets,
(ii) the requirement that incumbent LECs "interconnect" with competitors,
(iii) the establishment of procedures for incumbent LEC entry into new
markets, such as long distance and cable television, (iv) the relaxation of
the regulation of telecommunication services provided by incumbent LECs and
others and (v) the establishment of a subsidy mechanism for the preservation
of universal telephone service. The Company believes the Telecommunications
Act will position the competitive local telecommunications business for
significant growth as CAPs evolve into CLECs by expanding their networks and
service offerings. Of the $32 billion of access fees paid by IXCs to LECs in
1994, CAPs accounted for $294 million or less than 1%. The Company expects
that the anticipated entry of incumbent LECs into the long distance business
will increase this penetration rate if IXCs seek alternatives to incumbent
LECs as sources of access to their customers. Regulatory reform, together with
increasing customer demand, will create more opportunities for CLECs to
introduce additional services, expand their networks and address a larger
customer base. The Company believes that these changes afford CLECs the
potential to grow significantly over the next several years. The Company
believes, based on data compiled by the FCC, that the passage of the
Telecommunications Act combined with earlier state regulatory developments
have increased the potential market for CLECs from approximately $26.3 billion
to approximately $97.1 billion annually due to the opening of the market for
switched services. This new market opportunity will permit CLECs to offer a
full range of local telecommunications services including local dial tone,
local calls, custom calling features and intraLATA toll services for both
business and residential customers. See "Competition" and "Regulation--
Overview."
THE COMPANY
Hyperion is a leading CLEC that designs, constructs, operates and manages
state-of-the-art, fiber optic networks and facilities. According to industry
data, the Company believes it operates one of the three largest CLECs in the
United States based upon route miles and buildings connected. The Company's
networks work in conjunction with IXCs such as AT&T, MCI, Sprint, WorldCom and
others in order to offer small, medium and large businesses, government and
education end users a broad array of integrated, high quality voice, video and
enhanced data communications services. The Company, through its 13 networks,
currently offers traditional access services and has also installed switches
or remote switching capability in five of its networks and plans to offer
switched services, including customer dial tone, in all of its operating
markets by the end of 1996. Three of the Company's networks also offer
enhanced data services to their customers such as frame relay and ATM data
transport. These services, along with the long distance services provided by
IXCs, enable the Company to provide an integrated telecommunications service
offering to network customers that is more reliable, has a superior level of
service and is priced lower relative to that of the incumbent LECs in the
markets served by the Company's networks.
The Company currently manages and operates 13 networks which are primarily
clustered in three regions located in the eastern half of the United States
and which serve 19 cities with populations from at least 25,000 to
39
<PAGE>
more than 600,000. The Company also has four new networks under construction
which will serve 17 additional cities and will be managed and operated by the
Company upon their expected completion in calendar year 1996. Eleven of the
Company's networks and three of its networks under construction are owned in
partnership with several major cable television operators including Tele-
Communications, Inc., Time Warner/Newhouse, Continental Cablevision, TKR
Cable, Lenfest Communications, Viacom, InterMedia Partners and
Multimedia/Gannett, and an electric utility, PECO Energy, owner of the
Philadelphia Electric Company. The Company believes that working with Local
Partners significantly reduces the cost and time in developing a network
through utilization of existing cable or utility facilities. The remaining two
operating networks and one network under construction are wholly owned by the
Company and lease fiber capacity from Adelphia to achieve similar time and
cost savings in developing the networks. Due to savings achieved in the
construction of fiber optic networks by working with Local Partners, the
Company believes that building a comparable level of network infrastructure
without Local Partners would require a substantially greater level of capital
investment.
The Company has targeted markets primarily in the eastern half of the United
States where it can leverage the Company's existing network infrastructure and
take advantage of the economies of scale associated with operating networks in
contiguous markets. Since the Company's inception in October 1991, the Company
and its partners have invested approximately $147 million to build and develop
the overall network infrastructure. As of February 29, 1996, the Company's 13
operating networks served 19 cities, and along with the four networks under
construction, included approximately 2,180 route miles of fiber optic cable
and were connected to approximately 808 buildings. The Company intends to
increase the density of its existing network clusters and expand into new
geographical markets or clusters through the construction of approximately ten
additional networks by the end of 1997. The Company will continue to focus on
developing networks in conjunction with Local Partners and managing and
operating these networks on behalf of the Operating Companies. The Company's
goal for future partnerships is to maintain at least a 50% equity interest in
these networks. The Company has recently entered into a partnership agreement
amendment with TKR and a nonbinding letter of intent with InterMedia to
increase its equity interests to 50% or more in the Louisville, Lexington and
Nashville market. Assuming the successful completion of all of these
transactions, Hyperion would own at least 50% of ten of its 17 then existing
markets and markets under construction. See "--Recent Developments."
COMPANY STRATEGY
The Company, through its networks, is a leading provider of integrated local
telecommunications services to small, medium and large businesses, government
and educational end users and IXCs in its existing markets. The Company
differentiates its service offering by partnering with local cable television
operators and utility companies to develop networks that will provide
customers with greater market coverage, lower costs and superior service. The
Company's networks leverage the IXCs' name recognition and reputation for
quality and reliability by becoming preferred suppliers for IXCs of local
telecommunications services in the Company's markets. The IXCs market their
long distance services in conjunction with the Company's local service
offerings to provide end users with a fully integrated telecommunications
service offering in all of the Company's operating markets. Principal elements
of the Company's network, market and customer strategies include:
Network Strategy
Develop a Rapid Entry/Low Cost Approach with Local Partners. The Company
works with a Local Partner in order to significantly reduce the cost and time
to construct a fiber optic network, enable the Company to rapidly begin
offering services and lower the overhead associated with operating and
maintaining the Company's networks. Advantages of building the Company's
networks with Local Partners include (i) sharing the cost of building the
fiber optic network with a cable television system or utility system which the
Company believes reduces the cost of aerial fiber construction by
approximately 62%, (ii) reducing the time and cost of obtaining access to
rights-of-way and building entrances and (iii) enabling the Company to
leverage the Local Partners' experience and capabilities for building and
maintaining fiber optic cables thereby significantly reducing the upfront and
ongoing costs of a fiber optic network. Through the partnerships, the Company
has financed its expansion at a lower cost relative to its competitors by
utilizing pro rata equity investments and Local
40
<PAGE>
Partner financings of a significant portion of fiber construction. Local
Partners provide most of the funds for the fiber build in a network and lease
the fiber capacity back to the partnership under long-term agreements. The
partnership purchases and owns the electronic and customer premises equipment
associated with the networks.
The Company is able to lower the cost of building fiber optic networks by
working with Local Partners who own existing communications networks and
organizations that design, build and maintain these networks. The Company
achieves savings in the design, construction and maintenance of these fiber
optic networks because a substantial portion of these activities are shared
with existing efforts of the Local Partner. A significant portion of the
upfront savings is achieved in the construction of the fiber optic network.
The Company believes that, based upon its experience of building fiber optic
networks with Local Partners, the Company is able to achieve approximately a
62% reduction in aerial fiber optic construction costs versus constructing an
aerial fiber optic network without a Local Partner. The Company estimates that
approximately 70% of its network construction will be aerial and that the
Company can achieve similar savings in underground construction where conduit
is available. These estimates are based upon historical experience, and there
can be no assurance that the Company will be able to achieve similar results
in future efforts. These cost savings are achieved primarily through the
sharing of pole attachment costs ("Pole Attachment Costs") and the elimination
of costs of the engineering and rearrangement of cables to prepare telephone
poles for the attachment of new fiber optic cable ("Make Ready Costs"). An
analysis of the estimated cost savings for the Company for one mile of aerial
construction is set forth in the following table.
<TABLE>
<CAPTION>
COSTS WITH LOCAL PARTNER WITHOUT LOCAL PARTNER
- ----- ------------------ ---------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Make Ready Costs........... $ 0.0(a) $18.0(b)
Pole Attachment Costs...... 3.4(c) 5.0
Fiber Costs................ 8.0(d) 8.0
Splicing Costs............. 0.6(e) 0.6
----- -----
Total.................... $12.0(f) $31.6
===== =====
</TABLE>
- --------
(a) Assumes a fiber overlash of existing cable plant.
(b) Assumes an average cost of $200 per pole, 40 poles per mile, to move the
telephone and cable television wires in the communications space and the
replacement of two poles per mile.
(c) Assumes the payment of a pro rata portion (approximately 33%) of such
costs by the Local Partner with respect to capacity to be available for
such partner's use.
(d) Represents the cost of the Operating Company's fiber that is installed on
the pole.
(e) Represents the cost of cutting and integrating new fiber components.
(f) In the above analysis, this would be the amount amortized by an applicable
Fiber Lease Financing between an Operating Company and its Local Partner.
Build Broad Network Coverage. The Company intends to build substantially
larger networks than the networks of the CLECs it competes with in its
markets. As of February 29, 1996, in all of the markets in which the Company
and its networks operate, management believes that the Company has the
broadest network coverage in terms of route miles of any of its CLEC
competitors. The Company believes that expanded network coverage will enable
the Company to (i) provide broader and more reliable coverage for network
customers, (ii) carry a greater amount of traffic on its own networks rather
than on the networks of other carriers thereby increasing the Company's
revenues and profit margins, (iii) increase the potential market available to
the Company due to the greater number of buildings, LEC-COs and customers that
the Company's networks can service, (iv) improve the value of the Company's
networks to IXCs, cellular providers and new telecommunications providers such
as PCS operators that need wide backbone coverage, (v) offer services in areas
where there are fewer potential CLECs with facilities and (vi) leverage the
fixed cost structure of the Company's networks, particularly with regard to
network electronics such as switches.
41
<PAGE>
Market Strategy
Expansion through Development of Network Clusters. The Company's networks
are located primarily in the eastern half of the United States. The Company
expects to continue to focus on this region due to the eastern location of the
Company's existing networks and the Company's NOCC and headquarters. The
Company also believes that the eastern half of the United States, particularly
the Northeast, has greater concentrations of large business, government and
education end users and telecommunications traffic. The Company intends to
build networks in ten additional markets located near existing clusters or in
one or more new clusters by the end of 1997. Management believes that there
are significant operating and marketing advantages to locating its networks in
clusters. Clustering enables the Company to (i) take advantage of economies of
scale in management, construction, network operations and sales and marketing,
(ii) optimize the networks' switching capacity by utilizing remote switch
capacity in nearby cities that do not have switches, (iii) offer services to
lower density traffic areas in which the Company's networks are less likely to
face strong competition from incumbent LECs and other CLECs and (iv) increase
the networks' ability to offer highly reliable, end-to-end connectivity on a
regional basis. The Company also believes that creating regional networks will
enable the Company to gain a greater share of higher margin long distance
transport traffic.
Customer Strategy
Develop Strategic Relationships with IXCs. The Company, through its
networks, provides customers with an integrated, one-stop shopping approach to
their telecommunications needs through its strategic relationships with IXCs
such as AT&T, MCI, Sprint, WorldCom and others. The goal of these
relationships is for the Company's networks to offer their local services in
conjunction with the long distance services of these relationship IXCs.
Management believes that working in partnership with IXCs instead of as a
competitor will be attractive to IXCs and enable the Company to (i) utilize
extensive market information from the IXCs regarding traffic patterns and
building requirements to more optimally construct and extend its networks,
(ii) work closely with IXC account teams to provide an integrated service
approach to end users, (iii) increase market penetration by capitalizing on
the IXCs' name recognition and (iv) lower sales and marketing costs by
utilizing the extensive marketing resources and salesforce of the IXCs to
market the networks' products and services. In pursuing this strategy, the
Company has entered into the National Service Agreement with a major IXC
pursuant to which the Company's networks will be the IXC's preferred supplier
of dedicated special access and switched access transport services. The
National Service Agreement requires the Company to provide such services to
the IXC at a discount from the tariffed or published LEC rates. The National
Service Agreement is currently in effect in three of the Company's markets and
the Company is currently negotiating with the major IXC to include all the
Company's markets by the end of 1996, provided the networks in these markets
pass certain quality, service and validation tests similar to those passed in
three markets currently operating under the National Service Agreement. See
"--Recent Developments."
Expand Enhanced Service Provider Offerings. Three of the Company's networks
operate in partnership with !NTERPRISE, a leading, nationwide network
integrator that designs, develops and deploys state-of-the-art data networks
(including both network services and equipment) to support and enhance the
information systems with which the networks' customers operate their
businesses. Pursuant to the partnership agreements, !NTERPRISE co-markets
enhanced services, including frame relay, ATM data transport, business video
conferencing, private line data interconnect service and LAN connection and
monitoring services to the networks' customers in the networks' respective
markets. The Company believes that the partnerships with !NTERPRISE provide
the opportunity to offer network customers a full complement of enhanced
services more rapidly and without the Company incurring the cost and overhead
of establishing its own nationwide enhanced services marketing, sales and
installation effort. The Operating Companies intend to enter into additional
agreements with !NTERPRISE and other service integrators in the future.
RECENT DEVELOPMENTS
Sale of Partnership Interest in the South Florida Partnership. On May 16,
1996, the Company completed the sale of its 15.7% partnership interest in TCG
South Florida to Teleport Communications Group, Inc. for an
42
<PAGE>
aggregate sales price of approximately $11.6 million resulting in a pre-tax
gain of approximately $8.4 million. Amounts related to the South Florida
Partnership included in the Company's investments and equity in net loss of
joint ventures as of and for the nine months ended December 31, 1995 were
approximately $2.9 million and ($0.6) million, respectively. As part of the
transaction the Company was released from its covenant not to compete with
respect to the South Florida Market. The Company plans to use the proceeds
from the sale to continue to expand and develop its existing markets, complete
new networks under construction and enter additional markets.
National Service Agreement with Major IXC. The Company has entered into the
National Service Agreement with a major IXC pursuant to which the Company's
networks will be the IXC's preferred supplier of dedicated special access and
switched access transport services. The National Service Agreement requires
the Company to provide such services to the IXC at a discount from the
tariffed or published incumbent LEC rates. As of April 15, 1996, the National
Service Agreement was in effect in three of the Company's markets, and the
Company is currently negotiating with the major IXC to include all the
Company's markets by the end of 1996, provided the networks in these markets
pass certain quality, service and validation tests similar to those passed in
the three markets operating under the National Service Agreement. The Company
believes that only five other CLECs have comparable National Service
Agreements and have passed such major IXC's network validation tests and
operational readiness testing.
Other Changes in Partnership Interests. The Company recently has entered
into an agreement with TKR and a nonbinding letter of intent with InterMedia
pursuant to which the Company's ownership interests in certain of the
Operating Partnerships have recently increased or are expected to increase in
three markets. These transactions are consistent with the Company's goal to
own at least a 50% interest in its Operating Partnerships in the future, and
where appropriate the Company may consider similar transactions from time to
time in its other markets. Assuming the successful completion of all of the
transactions contemplated below, Hyperion would own at least 50% of ten of its
17 then existing markets and markets under construction.
Pursuant to a letter of intent with TKR, dated as of January 29, 1996, and a
subsequent amendment to the related partnership agreement dated May 8, 1996,
the Company has agreed that it will make additional capital contributions to
its Louisville, Kentucky Operating Partnership (which will also operate the
Lexington, Kentucky network under construction) and has increased its
partnership ownership interest to 50%. The Company estimates that the required
additional capital contributions will be approximately $2.7 million.
Pursuant to a nonbinding letter of intent with InterMedia, dated as of
February 12, 1996, the Company intends to increase its partnership ownership
interest in the Nashville, Tennessee Operating Partnership from 25% to at
least 51% and as much as 95% by purchasing interests held by its Local Partner
at the option of such partner.
The consummation of the InterMedia transaction is subject to the negotiation
and execution of definitive, binding agreements, and both of the proposed
transactions are subject to other terms and conditions. No assurances can be
given as to whether or when, or the terms upon which, any such transaction
will be consummated.
COMPANY SERVICES
Traditional Access Services
Special Access and Private Line Services. Non-switched dedicated
connections, including high capacity interconnections between (i) POPs of an
IXC, (ii) the POPs of different IXCs, (iii) large end users and their selected
IXCs and (iv) different locations of particular customers. These services are
billed at a flat, non-usage sensitive, monthly rate.
Collocated Special Access Services. A dedicated line carrying switched
transmissions from the IXC POP, through the LEC-CO to the end user.
Switched Access Transport Services. A dedicated line carrying switched
transmissions from the LEC-CO to an IXC POP.
43
<PAGE>
Long Distance Transport Services. Non-switched, high capacity
interconnection services sold on a wholesale basis to IXCs and cellular and
PCS operators.
Switched Services
Local Exchange Services. Switched services providing dial tone to business
customers.
Long Distance Services. Switching and transport of interexchange traffic,
including voice, data and video billed on a minutes-of-use basis. The Company
intends to offer this service to its customers in conjunction with IXCs with
which it has developed strategic relationships.
Enhanced Services
The Company and the Operating Companies currently offer, or intend to offer,
their customers a broad array of high bandwidth, enhanced data services,
including frame relay, ATM transport services, business Internet access and
high speed video conferencing. Operating Companies currently offer some of
those services to customers in three markets through partnerships with
!NTERPRISE. !NTERPRISE is a wholly-owned subsidiary of US West that provides
enhanced data services to end users throughout the country. The Company
intends to service additional markets through joint ventures with !NTERPRISE
or other enhanced service providers. See""--Customer Strategy."
MARKET SIZE
The following table sets forth the Company's estimate, based upon an
analysis of industry sources including industry projections and FCC data, of
the market size in the Company's current operating markets and markets under
construction for the services the Company offered in calendar year 1995. The
estimates, however, do not include estimates for long distance transport and
enhanced services which the Company expects will provide substantial revenue
opportunities. See "--Company Services." There is currently limited direct
information relating to these markets and therefore a significant portion of
the information set forth below is based upon estimates and assumptions made
by the Company. Management believes that these estimates are based upon
reliable information and that its assumptions are reasonable. There can be no
assurance, however, that these estimates will not vary substantially from the
actual market data. Investors should not place undue reliance on this
information in making an investment decision with respect to the Senior Notes.
<TABLE>
<CAPTION>
TRADITIONAL TOTAL REVENUE(B)
CLUSTER ACCESS SERVICES(A) SWITCHED SERVICES POTENTIAL
- ------- ------------------ ----------------- ----------------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Northeast................. $ 67.9 $1,591.2 $1,659.1
Mid-Atlantic.............. 109.3 1,884.5 1,993.8
Mid-South................. 28.1 600.9 629.0
Other Networks............ 23.4 480.4 503.8
------ -------- --------
Total................... $228.7 $4,557.0 $4,785.7
====== ======== ========
</TABLE>
- --------
(a) Excludes long distance transport.
(b) Excludes the potential market for enhanced services.
THE COMPANY'S MARKETS
Overview
The Company currently manages and operates 13 networks. The networks are
owned by the Operating Companies, eight of which are Operating Partnerships
and three of which are Operating Corporations. Two of the Operating
Corporations are wholly-owned subsidiaries of the Company. The Company manages
and operates these networks through a combination of local management and
through the Company's headquarters and NOCC in Coudersport, Pennsylvania, and
the Company's marketing offices in Pittsburgh, Pennsylvania. The following
operating network market statistics are as of June 15, 1996, except for the
South Florida Partnership as noted below.
44
<PAGE>
OPERATING NETWORK MARKET STATISTICS
<TABLE>
<CAPTION>
DATE HYPERION
COMPANY MARKETS OPERATIONAL(A) INTEREST LOCAL PARTNERS
- --------------- -------------- -------- ---------------------------
OPERATING NETWORKS
- ------------------
<S> <C> <C> <C>
Northeast Cluster
Albany, NY(b)........... 2/95 50.0% Time Warner/Newhouse
Binghamton, NY(b)....... 3/95 20.0 Time Warner/Newhouse
Buffalo, NY............. 1/95 40.0 Tele-Communications, Inc.
Time Warner/Newhouse
Syracuse, NY(b)......... 8/92 50.0 Time Warner/Newhouse
Vermont................. 11/94 100.0 (c)
Mid-Atlantic Cluster
Charlottesville, VA..... 11/95 100.0 (c)
Harrisburg, PA.......... 4/95 50.0 Lenfest Communications
New Brunswick, NJ....... 11/95 19.7 TKR Cable(d)
Richmond, VA............ 9/93 37.0 Continental Cablevision
Mid-South Cluster
Louisville, KY.......... 3/95 50.0(e) TKR Cable
Nashville, TN........... 11/94 25.0(e) InterMedia Partners, Viacom
Other Networks
Jacksonville, FL........ 9/92 20.0 Continental Cablevision
Wichita, KS............. 9/94 49.9 Multimedia/Gannett
NETWORKS UNDER
CONSTRUCTION(F)
- ---------------
Mid-Atlantic Cluster
Morristown, NJ.......... 1996(g) 19.7 TKR Cable(d)
Philadelphia, PA........ 1996(g) 50.0 PECO Energy
Scranton/Wilkes-Barre,
PA...................... 1996(g) 100.0 (c)
Mid-South Cluster
Lexington, KY........... 1996(g) 50.0(e) TKR Cable
NETWORK INVESTMENTS
- -------------------
South Florida(h)........ 1/94 15.7 (h)
</TABLE>
- --------
(a) Refers to the date on which (i) the network is connected to at least one
IXC POP; (ii) the network is capable of accepting traffic from IXCs and
end users; (iii) the Company's central office is fully functional and (iv)
the initial network SONET fiber rings have been completed.
(b) The interests in the Albany, Binghamton and Syracuse markets are all owned
by one Operating Partnership.
(c) Adelphia or its affiliate leases 100% of the fiber capacity to the
Operating Companies in these markets.
(d) Sutton Capital Associates also owns a minority interest.
(e) The Company's interest in these markets is subject to change or has
recently changed. See "--Recent Developments."
(f) The Company has entered into binding agreements with respect to the
construction of these networks.
(g) The Company expects each of these networks to be operational between
August 1996 and December 1996.
(h) The Company was an investor in TCG South Florida, the South Florida
Partnership, with several other partners and had no management oversight
responsibility with regard to such partnership. On May 16, 1996, the
Company sold its investment in such partnership. See "Recent
Developments."
45
<PAGE>
CLUSTER STATISTICS(A)
<TABLE>
<CAPTION>
LATEST
QUARTER
ROUTE FIBER BUILDINGS ANNUALIZED
CLUSTER MILES MILES CONNECTED VGES(B) REVENUES(C)
- ------- ----- ------- --------- ------- -----------
<S> <C> <C> <C> <C> <C>
Northeast........................... 626 30,048 259 46,766 $4,267
Mid-Atlantic........................ 636 30,528 162 44,109 836
Mid-South........................... 364 17,472 129 35,084 462
Other Networks...................... 554 26,592 258 59,285 2,610
----- ------- --- ------- ------
Total............................. 2,180 104,640 808 185,244 $8,175
===== ======= === ======= ======
</TABLE>
- --------
(a) Non-financial information is as of February 29, 1996.
(b) Voice grade equivalents circuits.
(c) Latest Quarter Annualized Revenue is derived by multiplying revenue from
the quarter ended December 31, 1995 by four.
OPERATING AGREEMENTS
Generally, subsidiaries of the Company enter into partnership agreements
with Local Partners to take advantage of the benefits of building networks in
conjunction with local cable television or utility operators. The typical
Operating Partnerships are formed and operated pursuant to three key
agreements: (i) a partnership agreement between the Company or one of its
wholly-owned subsidiaries and a cable television operator or electric utility
(the "Local Partner Agreement"); (ii) a fiber capacity lease agreement between
the Local Partner and the Operating Partnership (the "Fiber Lease Agreement");
and (iii) a management agreement between the Operating Company and the Company
or one of its subsidiaries (the "Management Agreement"). One of the Operating
Partnerships and two of the Operating Corporations have also entered into
agreements with !NTERPRISE, a wholly-owned subsidiary of US West, to co-market
enhanced services.
Local Partner Agreements
Each Local Partner Agreement establishes the structure of the applicable
Operating Partnership by determining, among other things, the partner's
capital contribution requirements, capital structure, purpose and scope of
business activities, transfer restrictions, dissolution procedures, duration
and competition restrictions, as well as the voting and buy/sell rights and
rights of first refusal of the partners of the Operating Partnership.
Ownership and Capital Contributions. The initial capital contributions and
percentage of ownership of the Operating Partnerships vary. Some of the Local
Partner Agreements establish maximum capital contributions such that each
partner's ultimate aggregate capital contribution is determined at the
Operating Partnership's inception. Initial capital contributions are paid on
an installment basis as determined by a management committee. Unless a
majority vote of the partners determines otherwise, capital contributions in
excess of the initial capital contribution are not required. Generally, the
percentage of ownership is also fixed at the Operating Partnership's
inception. Absent an agreement by the partners, generally, the only
circumstances that result in the dilution of such partner's ownership interest
are a partner's failure to make a capital contribution or its failure to
exercise a right of first refusal.
Matters Requiring a Vote. Most partner votes of an Operating Partnership
require only a majority vote; however, a unanimous vote of the partners is
required for, among other things, expansion of the scope of the business
activities in the defined business area, admission of additional partners and
merger or consolidation with any other entity if the Operating Partnership is
not the surviving entity.
Distributions. Generally, the Local Partner Agreements allow for
distributions to the partners; however, the Local Partner Agreements vary with
regard to the procedure for determining if, when and how much of a
46
<PAGE>
distribution should be made. In one Local Partnership Agreement, the Company,
through its affiliate, controls such determinations. In the remaining Local
Partner Agreements, the partners or the partnership's Managing Committee makes
such determinations by either majority approval or unanimous consent.
Transfer of Ownership. The Local Partner Agreements generally prohibit the
transfer of partnership interests, including most changes in control.
Generally, transfers of entire partnership interests to subsidiaries of a
partner's parent corporation and the sale or disposition of all or
substantially all of the stock or assets of a partner's parent are expressly
permitted in the typical Local Partner Agreement.
Rights of First Refusal; Buy/Sell Agreements. The partners of most of the
Operating Partnerships also retain certain rights of first refusal and
buy/sell rights. Generally, after a specified period of time, either partner
may transfer its interest to an unrelated third party if such partner first
offers its interest to the other partner at the same terms and the other
partner elects not to purchase the interest. In addition, in most of the
Operating Partnerships, either partner can, after a specified period of time,
make an offer to the other partner(s) to sell its own interest. Within 30 days
of submitting a price, the other partner must respond to the offer indicating
its election to either accept the offer to buy or sell at the offered price.
Certain partners in two of the partnerships have the right after a specified
period of time to put their interest in the respective partnership (i) to the
other partners at an amount equal to the fair market value of such partner's
interest pursuant to one agreement and (ii) to the Company at an amount equal
to the partner's capital contributions plus interest less any distributions
pursuant to the other agreement.
Term. Most of the Operating Partnerships were created in the last three and
half years and have a duration of 10 to 25 years unless earlier dissolved. Two
of the Local Partner Agreements contain provisions whereby the respective
Local Partner can terminate its interest, at such Local Partner's sole
discretion, prior to 2003. See "Risk Factors--Risks Associated with Joint
Ventures." Generally, each partner and certain of its affiliates are
restricted from competing with the Operating Partnership in the defined
business area so long as the partner is a partner plus two or three years
thereafter.
Fiber Lease Agreements
Generally, the Operating Partnerships lease fiber optic capacity from their
Local Partners. In some instances, the Operating Partnerships lease existing
fiber optic capacity and in other instances, the Operating Partnerships
request the Local Partners to construct new fiber optic capacity. Monthly
lease payments in both instances are based on the amortization of the Local
Partner's cost of construction and material costs over the term of the Fiber
Lease Agreement. Because construction and material costs are amortized over
the then current term of the Fiber Lease Agreement, it is possible for the
amount of a monthly lease payment to be significantly lower during a renewal
term unless the construction of additional fiber optic cable is scheduled for
such renewal term. Typically, the amount of the lease payments in a renewal
period equals the amount of monthly maintenance costs for the leased fiber
optic cable.
Each of the Fiber Lease Agreements is in its initial term. The initial terms
vary from 5 to 25 years in length. The Fiber Lease Agreements contain various
renewal options. Generally, either party can terminate the Fiber Lease
Agreement at the end of the then current term if the terminating party
provides prior written notice to the other party.
Throughout the term of the Fiber Lease Agreements and thereafter, title to
the fiber optic cable remains with the Local Partner. Similarly, the Operating
Partnerships retain title to all of their own electronics and switches that
become a part of the network. A Local Partner cannot sell the fiber subject to
the Fiber Lease Agreement to a third party unless its obligations under the
Fiber Lease Agreement are assumed by the third party.
47
<PAGE>
Management Agreements
Generally, the Company or a wholly-owned subsidiary of the Company provides
the Operating Partnerships with the following services pursuant to the
Management Agreement for a specified fee: general management, monitoring,
marketing, regulatory processing, accounting, engineering designing, planning,
construction, maintenance, operations, service ordering and billing. The term
of the typical Management Agreement is three or five years and automatically
renews for continuous one-year periods unless one party provides the other
with written notice that it intends to terminate the agreement.
Enhanced Service Agreements
Three of the Operating Companies have entered into partnership with
!NTERPRISE (the "!NTERPRISE Partnerships") in order to provide enhanced
services such as frame relay, ATM data transport, business video conferencing,
private line data interconnect service and LAN connection and monitoring
services. The partners in the !NTERPRISE Partnerships are required to
contribute equal amounts in order to retain their 50% ownership interests. The
business area serviced by the !NTERPRISE Partnerships is the same as that
serviced by the applicable Operating Partnership. The partners and their
respective affiliates are also prohibited from competing for as long as the
partners are partners plus two years thereafter. In addition, the partners
have a right of first refusal with regard to the sale of partnership interests
and, under certain circumstances, may put their interest to the partnership.
Generally, the !NTERPRISE Partnerships have a 20 year duration.
MAJOR IXC CERTIFICATION
A major IXC with which the Company has entered into the National Service
Agreement has established a certification process called Operational Readiness
Testing ("ORT") in order to determine whether a supplier's network, systems
and processes are capable of providing a level of service which meets such
major IXC's standards. ORT is a lengthy process comprised of the following
components: (i) Operational Readiness Assessment ("ORA"), (ii) Network
Validation Testing ("NVT") and (iii) Switch Network Validation Testing
("SNVT"). CLECs must pass such major IXC's ORT for access services to provide
access services to the major IXC and such major IXC's ORT for switched
services to provide switched services to such major IXC.
ORA is a one-time, in-depth evaluation to review all of the Operating
Company's processes and to verify that procedures are in place to govern
operations from initial design and construction through day-to-day operations
and maintenance. ORA is meant to ensure that every aspect of the Operating
Company's operations can deliver a product of high quality and reliability.
NVT is an ongoing evaluation process that continually evaluates existing
markets and potential markets. NVT reviews the networks' redundancy of power
supplies; the temperature, humidity and ambient condition controls; the fire
protection; the route diversity of the fiber network; the design of
electronics; the security and general appearance of the Operating Company's
facilities.
SNVT is an ongoing review that evaluates the performance and quality of the
Operating Company's switching capabilities.
The Company has successfully passed the NVT in Jacksonville and Louisville.
Passing these evaluations enables the Company's networks in such markets to
carry traditional dedicated access and switched access transport. The Company
is currently preparing for an ORA of its switch installations and a NVT of its
switch operations in two of its other markets. Passing the ORA and the NVT of
its switch operations in each market will enable the Company's networks in
those markets to carry switched traffic for such major IXC. The Company
believes that certifying the Operating Companies' switching operations will
significantly enhance the market opportunity for the Operating Companies'
services.
48
<PAGE>
SALES AND MARKETING
The Company targets its network sales and marketing activities at IXCs and
business, government and educational end users. The Company's IXC targets
include the major IXCs as well as smaller and regional IXCs. IXCs utilize the
Operating Companies' services primarily as a local component of their own
service offerings to end users. The Company also targets end users which
include small, medium and large businesses as well as government and
educational institutions. In many cases, the Company works in conjunction with
IXCs when marketing to these end users in order to leverage the name
recognition, marketing reputation and resources of IXCs. In order to increase
the value of the Company's networks to IXCs, the Company's networks do not
offer a competing long distance service offering to end users. The Company's
networks offer their services in accordance with tariffs filed with the FCC
for interstate services and state regulatory authorities for intrastate
services. The Operating Companies are classified as non-dominant carriers by
the FCC and therefore have substantial pricing flexibility and in many cases
may enter into customer and product specific agreements.
IXC Customers
The Company has national supplier agreements with all of the major IXCs. The
Company believes it can effectively provide IXCs with a full complement of
traditional access services as well as switched services. Factors that
increase the value of the Company's networks to IXCs include reliability,
state-of-the-art technology, route diversity, ease of ordering and customer
service. The Company also generally prices the services of an Operating
Company at a discount relative to the incumbent LEC. In order to further
complement the services provided to the IXCs, the Company integrates its
networks with IXC networks to enable the IXC to (i) access service, billing
and other data directly from the Company and (ii) electronically send
automated service requests to the Company.
An important component of the Company's strategy is to work with major IXCs
to develop an integrated local and long distance service offering to end
users. The Company believes this strategy will provide greater access to the
IXCs' large customer base and enable the Operating Companies to leverage the
IXCs' name recognition and reputation for reliability and quality. In pursuing
this strategy, the Company has entered into the National Service Agreement
with a major IXC pursuant to which the Company's networks will be the IXCs
preferred supplier of dedicated special access and switched access transport
services in three of the Company's markets. The National Service Agreement
requires the Company to provide such services to the IXC at a discount from
the tariffed or published LEC rates. The Company and the major IXC are
currently negotiating to include all of the Company's markets by the end of
1996, provided the networks in these markets pass certain quality, service and
validation tests similar to those passed in the three markets currently
operating under the National Service Agreement.
The Company currently utilizes national account representatives to market to
IXC customers since the major IXCs have established national or regional
groups to manage and coordinate their purchasing of access services. These
groups assess CLECs not only upon price, quality, service and ease of
provisioning in a particular market, but also upon size, scope of operations
and financial stability in order to maximize the leverage of their CLEC
relationships. The Company focuses on serving the Operating Companies' IXC
customers in all of the Company's markets with a view to establishing national
preferred vendor relationships. The terms and conditions applicable to
services ordered by IXCs are generally specified in agreements under which
some services can be terminated by the IXC on 60 days or less notice. The
Company believes that the Operating Companies are well positioned to serve the
IXCs and that the Operating Companies generally have good relationships with
their respective IXC.
End Users
Each Operating Company works in conjunction with IXCs to offer an integrated
package of local and long distance service offerings to end users. Initially,
the Operating Company offers high quality access services to these end users
in combination with an IXC's long distance offerings. Building on its success
with the end users,
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the Operating Company attempts to increase the size and number of service
offerings it provides by working with customers to analyze the customers'
local telecommunications needs. In particular, the typical Operating Company
offers end users a variety of services, including local dial tone, frame
relay, ATM transport, business video conferencing and other services. The
Company believes that, based upon the Operating Companies' reputation
developed in conjunction with major IXCs, the Operating Companies will be able
to systematically increase their share of the end users' telecommunications
expenditures. The Company believes the networks will be able to compete for
end users' needs based upon price, reliability, product diversity, service and
custom solutions to end user needs. A significant component of an Operating
Company's reliability will be its ability to offer customers end-to-end SONET
ring construction for many localized applications. The Operating Companies'
construction of SONET rings combined with the Company's large network size
will enable the Operating Companies to offer superior coverage to the
incumbent LEC and many CLECs especially in second and third tier markets.
End users are currently marketed through Company direct sales
representatives in each market. The national sales organization also provides
support for the local sales groups and develops new product offerings and
customized telecommunications applications and solutions which address the
specific requirements of particular customers. In addition, the Company
markets the Operating Companies' products through advertisements, media
relations, direct mail and participation in trade conferences. End users
typically commit to a service agreement for a term of three to five years
which is either renegotiated or automatically converted to a month-to-month
arrangement at the end of the contract term.
Hyperion Enhanced Networks
The Company develops applications in conjunction with the Operating
Companies that are not specific to an IXC's traditional business or to a
particular partnership metropolitan area as special bid Hyperion Enhanced
Networks ("HENs"). HEN services include special construction of IXC networks,
campus networks, private carriage networks and other similar network
applications. HEN customers are currently marketed through Company national
account representatives in conjunction with special IXC or information service
provider groups that manage special network, campus, or junction applications.
The terms and conditions for HENs are generally specified in agreements with
three to five year terms which automatically renew to month-to-month
arrangements at the end of contract terms.
NETWORK DEVELOPMENT AND DESIGN
Prior to any network construction in a particular market, the Company's
corporate development staff reviews the demographic, economic, competitive and
telecommunications demand characteristics of the market. These characteristics
generally include market location, the size of the telecommunications market,
the number and size of business, institutional and government end users and
the economic prospects for the area. In addition, the Company also carefully
analyzes demand information provided by IXCs, including demand for end user
special access and volume of traffic from the LEC-CO and the IXC POPs. The
Company also analyzes market size utilizing a variety of data, including
available estimates of the number of interstate access and intrastate private
lines in the region. Such information is available from the FCC.
If a particular market targeted for development is deemed to have
sufficiently attractive demographic, economic, competitive and
telecommunications demand characteristics, the Company's network planning and
design personnel, working in conjunction with the Company's Local Partner, or
Adelphia or one of Adelphia's affiliates, design a large regional network
targeted to provide access to the identified business, government and
institutional end user revenue base and to the IXC POPs and the LEC-COs in the
geographic area covered by the proposed network.
The actual network design is influenced by a number of market, cost and
technical factors including:
. Availability and ease of fiber deployment
. Location of IXC POPs
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. Density of telecommunication revenue based upon IXC information
. The Company's market information
. Cost of construction
The objective of the network design is to maximize revenue derived from
service to IXC POPs, LEC-COs and important customers in consideration of
network construction costs. In most cases, the Local Partner bears the costs
of construction for the required fiber, retains ownership of the fiber and
leases the fiber to the Operating Company. The fiber lease costs are
determined by amortizing the Operating Company's portion of the Local
Partner's cost of construction over the term of the Fiber Lease Agreement at
an assumed interest rate. This structure generally allows the Operating
Company to better match its capital costs to cash flows. See"--Fiber Lease
Agreements."
NETWORK CONSTRUCTION
The Company's networks are constructed to cost-effectively access areas of
significant end user telecommunications traffic, as well as the POPs of most
IXCs and the majority of the LEC-COs. The Company establishes with its Local
Partner or Adelphia general requirements for network design including,
engineering specifications, fiber type and amount, construction timelines and
quality control. The Company's engineering personnel provide project
management, including contract negotiation and overall supervision of the
construction, testing and certification of all facilities. The construction
period for a new network varies depending upon the number of route miles to be
installed, the initial number of buildings targeted for connection to the
network, the general deployment of the network and other factors. Networks
that the Company has installed to date have generally become operational
within six to ten months after the beginning of construction.
NETWORK OPERATING CONTROL CENTER
In Coudersport, Pennsylvania, the Company has built a NOCC that is equipped
with state-of-the-art system monitoring and control technology. The NOCC is a
single point interface for monitoring all of the Company's networks and
provisioning all services and systems necessary to operate the networks. The
NOCC currently supports all of the Company's networks including the management
of over 800 building connections, five switches or remote switching modules
and approximately 2,180 network route miles. The NOCC is designed to
accommodate the Company's anticipated growth in all existing markets as well
as in all the markets the Company plans to enter.
The NOCC is utilized for a variety of network management and control
functions including monitoring, managing and diagnosing the Company's SONET
networks, central office equipment, customer circuits and signals and the
Company's switches and associated equipment. The NOCC is also the location
where the Company provisions, coordinates, tests and accepts all orders for
switched and dedicated circuit orders. In addition, the NOCC maintains the
database for the Company's circuits and network availability. Network
personnel at the NOCC also develop and distribute a variety of software
utilized to manage and maintain the networks.
EQUIPMENT SUPPLY
The Company and the Operating Companies purchase fiber optic transmission
and other electronic equipment from Lucent Technologies, formerly AT&T Network
Systems ("Lucent"), Fujitsu, Tellabs, and other suppliers at negotiated
prices. The Company expects that fiber optic cable, equipment and supplies for
the construction and development of its networks will continue to be readily
available from Lucent, Fujitsu and other suppliers as required. The Company
has negotiated multi-year contracts for equipment with Lucent, Fujitsu, and
Tellabs. The Company and the Operating Companies have deployed two Lucent 5ESS
Switches ("5ESSs") and three remote switching modules in five of their current
markets. The Company and the Operating Companies plan to deploy seven
additional 5ESSs and one remote switching module during calendar 1996 and
additional 5ESSs and remote switching modules in each of the Company's future
operational markets.
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CONNECTIONS TO CUSTOMER LOCATIONS
Office buildings are connected by network backbone extensions to one of a
number of physical rings of fiber optic cable, which originate and terminate
at the Operating Company's central office. Signals are sent simultaneously on
both primary and alternate protection paths through a network backbone to the
Operating Company's central office. Within each building, Operating Company-
owned internal wiring connects the Operating Company's fiber optic terminal
equipment to the customer premises. Customer equipment is connected to
Operating Company-provided electronic equipment generally located where
customer transmissions are digitized, combined and converted to an optical
signal. The traffic is then transmitted through the network backbone to the
Operating Company's central office where it can be reconfigured for routing to
its ultimate destination on the network.
The Operating Company locates its fiber optic equipment in space provided by
the building owner or, more typically, on a customer's premises. IXCs often
enter into discussions with building owners to allow the Company to serve the
IXCs' customers. This network configuration enables the Company to share
electronic equipment among multiple customers, causes little interruption for
customers during installation and maintenance and allows the Company to
introduce new services rapidly and at low incremental cost.
EMPLOYEES
As of February 29, 1996, the Operating Companies and the Company employed a
total of 84 and 61 full-time employees, respectively, in support of the
Operating Companies' and the Company's operations. The Company also regularly
uses the services of its Local Partners, employees and contract technicians
for the installation and maintenance of its networks. None of the Operating
Companies' or the Company's employees is represented by a collective
bargaining agreement. The Company believes that the Operating Companies' and
the Company's relations with their respective employees are good.
PROPERTIES
The Company leases its principal executive offices in Coudersport,
Pennsylvania and its offices in Pittsburgh, Pennsylvania. Additionally, the
Company owns its NOCC facilities, and leases certain office space from
Adelphia, in Coudersport, Pennsylvania.
All of the fiber optic cable, fiber optic telecommunications equipment and
other properties and equipment used in the networks, are owned or leased by
the applicable Operating Company. See "--Company's Markets." Fiber optic cable
plant used in providing service is primarily on or under public roads,
highways or streets, with the remainder being on or under private property. As
of December 31, 1995, the Company's total telecommunications equipment in
service consist of fiber optic telecommunications equipment, fiber optic
cable, furniture and fixtures, leasehold improvements and construction in
progress. Such properties do not lend themselves to description by character
and location of principal units.
Substantially all of the fiber optic telecommunications equipment used in
the Company's networks is housed in multiple leased facilities in various
locations throughout the metropolitan areas served by the Company. The Company
believes that its properties and those of its Operating Companies are adequate
and suitable for their intended purpose.
LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings except for
claims and lawsuits arising in the normal course of business. The Company does
not believe that these claims or lawsuits will have a material effect on the
Company's financial condition or results of operations.
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COMPETITION
The Company operates in a highly competitive environment and has no
significant market share in any market in which it operates. In each of the
areas served by an Operating Company, services similar to those offered by the
Operating Company are offered by the incumbent LEC serving that area.
Incumbent LECs have long-standing relationships with their customers, have far
greater technical and financial resources and provide services that an
Operating Company may not currently be authorized by state regulators to
offer. See "Regulation--State Regulation." Following the enactment of the
Telecommunications Act, there has been significant merger activity among the
RBOCs which will result in competitors with even greater financial resources
and geographic scope than currently faced by the Company. In addition, in many
markets, the incumbent LEC currently is excused from paying license or
franchise fees or pays fees materially lower than those required to be paid by
the Operating Companies.
While new business opportunities will be made available to the Company
through the Telecommunications Act and other federal and state regulatory
initiatives, regulators are likely to provide the incumbent LECs with an
increased degree of flexibility with regard to pricing of their services as
competition increases. If the incumbent LECs elect to lower their rates and
can sustain lower rates over time, this may adversely affect the revenues of
the Operating Companies and the Company by placing downward pressure on the
rates the Operating Companies can charge. The Company believes this effect
will be offset by the increased revenues available by offering new services,
but if future regulatory decisions afford the LECs excessive pricing
flexibility or other regulatory relief, such decisions could have a material
adverse effect on the Company.
Competition for the Company's and the Operating Companies' services are
based on price, quality, network reliability, service features and
responsiveness to customer needs. The Company believes that its management
expertise, coupled with its highly reliable, state-of-the-art digital networks
and back-office infrastructure, which offer significant transmission capacity
at competitive prices, will allow it to compete effectively with the incumbent
LECs, which may not yet have fully deployed fiber optic networks in many of
the Company's target markets. The Company believes that the Operating
Companies price their services at a modest discount compared to the prices of
incumbent LECs while providing a higher level of customer service. The
Company's networks provide diverse access routing and redundant electronics,
design features not widely deployed by the incumbent LEC networks at the
present time. However, as incumbent LECs continue to upgrade their networks,
any competitive advantage held by the Company due to the superiority of its
facilities may diminish.
Other current or potential competitors of the Company's networks include
other CLECs, IXCs, wireless telecommunications providers, microwave carriers,
satellite carriers, private networks built by large end users and cable
television operators or utilities in markets in which the Company has not
partnered with one or the other. In many markets served by the Company, one or
more CLECs already are providing service. Furthermore, the three major IXCs
have announced ambitious plans to enter the local exchange market. There is no
assurance that these IXCs will choose to obtain local services from the
Operating Companies in the Company's markets. In addition, the
Telecommunications Act requires all local exchange providers, including new
entrants, to offer their services for resale. See "Regulation--
Telecommunications Act of 1996." This requirement permits companies to enter
the market for local telecommunications services without investing in new
facilities, thereby increasing the number of likely competitors in any given
market, and enables the IXCs to provide local services by reselling the
service of the incumbent LEC rather than using services provided by the
Company.
REGULATION
OVERVIEW
Telecommunications services provided by the Company and its networks are
subject to regulation by federal, state and local government agencies. At the
federal level, the FCC has jurisdiction over interstate services, which
constitute a majority of the Operating Companies' current services. Interstate
services, for the purpose of determining FCC jurisdiction, are communications
that originate in one state and terminate in another
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state or foreign country. State regulatory commissions exercise jurisdiction
over intrastate services. Intrastate services are communications that
originate and terminate in the same state. Additionally, municipalities and
other local government agencies may regulate limited aspects of the Company's
business, such as use of rights-of-way.
TELECOMMUNICATIONS ACT OF 1996
On February 8, 1996, the Telecommunications Act of 1996 was signed into law
and is considered to be the most comprehensive reform of the nation's
telecommunications laws since the Communications Act of 1934. The
Telecommunications Act will result in substantial changes in the marketplace
for voice, data and video services. These changes will open the local exchange
market to competition and will result in a substantial increase in the
addressable market for the Company's networks. Among its more significant
provisions, the Telecommunications Act (i) removes legal barriers to entry in
local telephone markets, (ii) requires incumbent LECs to "interconnect" with
competitors, (iii) establishes procedures for incumbent LEC entry into new
markets, such as long distance and cable television, (iv) relaxes regulation
of telecommunications services provided by incumbent LECs and all other
telecommunications service providers, and (v) directs the FCC to establish a
subsidy mechanism for the preservation of universal service.
Removal of Entry Barriers
Prior to enactment of the Telecommunications Act, many states limited the
services that could be offered by a company competing with the incumbent LEC.
See "--State Regulation." In these states, the incumbent LEC retained a
monopoly over basic local exchange services pursuant to state statute or
regulatory policy. In states with these legal barriers to entry, the Company
had been limited to the provision of dedicated telecommunications services,
which constitutes only a small portion of the local telephone market.
The Telecommunications Act prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect
of prohibiting any person from providing interstate or intrastate
telecommunications services. States retain jurisdiction under the
Telecommunications Act to adopt laws necessary to preserve universal service,
protect public safety and welfare, ensure the continued quality of
telecommunications services and safeguard the rights of consumers.
This provision of the Telecommunications Act should enable the Operating
Companies to provide a full range of local telecommunications services in any
state. The Operating Companies will continue their policy of not providing
long distance services that compete with the major IXCs in order to enable the
Company to work with IXCs to provide an integrated local and long distance
service offering to end users. Although the Operating Companies will be
required to obtain certification from the state regulatory commission in
almost all cases, the Telecommunications Act limits substantially the ability
of a state commission to deny a request for certification filed by an
Operating Company. While this provision of the Telecommunications Act expands
significantly the markets available to the Operating Companies, it also
reduces the barriers to entry by other potential competitors and therefore
increases the level of competition the Operating Companies will face in all
their markets. See "Competition."
Access and Interconnection with LEC Facilities
A company cannot compete effectively with the incumbent LEC in the market
for switched local telephone services unless it is able to connect its
facilities with the incumbent LEC and obtain access to certain essential
services and resources under reasonable rates, terms and conditions. Incumbent
LECs historically have been reluctant to provide these services voluntarily
and generally have done so only when ordered to by state regulatory
commissions.
The Telecommunications Act imposes a number of access and interconnection
requirements on all local exchange providers, including CLECs, with additional
requirements imposed on incumbent LECs. These requirements will provide access
to certain networks under reasonable rates, terms and conditions.
Specifically,
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the Telecommunications Act requires the FCC to adopt rules within six months
under which LECs must provide the following:
Telephone Number Portability. Telephone number portability enables a
customer to keep the same telephone number when the customer switches local
exchange carriers. New entrants are at a competitive disadvantage without
telephone number portability because of inconvenience and costs to customers
that must change numbers.
Dialing Parity. All LECs must provide dialing parity, which means that a
customer calling to or from a CLEC network cannot be required to dial more
digits than is required for a comparable call originating and terminating on
the LEC's network.
Reciprocal Compensation. The duty to provide reciprocal compensation means
that LECs must terminate calls that originate on competing networks in
exchange for a given level of compensation and that they are entitled to
termination of calls that originate on their network for which they must pay a
given level of compensation.
Resale. A LEC may not prohibit or place unreasonable restrictions on the
resale of its services. In addition, incumbent LECs must offer services to
resellers at a wholesale rate that is less than the retail rate charged to end
users.
Access to Rights-of-Way. A LEC must provide access to its poles, ducts,
conduits and rights-of-way on a reasonable, nondiscriminatory basis.
Unbundling of Network Services. Incumbent LECs must offer unbundled access
to the various elements of their network. This requirement allows new entrants
to purchase elements of an incumbent LEC's network that may be necessary to
provide service to customers not located in the new entrants' networks.
Although these requirements are intended to benefit new entrants in the
local exchange market, such as the Operating Companies, it is uncertain how
effective these requirements will be until the FCC completes its rulemaking
proceeding and state regulators begin to implement the FCC's requirements. In
particular, if CLECs are unable to obtain favorable agreements with the
incumbent LEC regarding call termination and resale of incumbent LEC
facilities and services through negotiation with the incumbent LEC or
arbitration at state public utility commissions, there is a diminished
likelihood that an Operating Company will be successful in its local exchange
market.
Moreover, these requirements place burdens on an Operating Company when it
provides switched local exchange services that will benefit potential
competitors. In particular, the obligation to offer services for resale means
that a company can resell the Operating Company's services without investing
in facilities. Similarly, the obligation to provide access to rights-of-way is
of limited benefit to the Operating Companies, which already have such access
through their Local Partners, but benefits other potential competitors to a
far greater degree.
LEC Entry into New Markets
The Company's principal competitor in each market it enters is the incumbent
LEC. See "Competition." Prior to enactment of the Telecommunications Act,
incumbent LECs generally were prohibited from providing cable television
service pursuant to the "telco/cable cross-ownership prohibition" contained in
the Communications Act of 1934. In addition, the RBOCs generally were
prohibited by the MFJ (as defined) from providing interLATA (i.e., long
distance) services within the region in which they provide local exchange
service.
The Telecommunications Act repeals the telco/cable cross-ownership
prohibition and permits incumbent LECs to provide cable television service.
With this prohibition removed, incumbent LECs are more likely to invest in
fiber optic networks because those facilities will be able to generate a
revenue stream previously unavailable to the incumbent LECs. While incumbent
LEC entry into the video market may be the motivating factor for construction
of new facilities, these facilities also can be used by an incumbent LEC to
provide services that compete with the Company's networks.
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The Telecommunications Act also eliminates the prospective effect of the MFJ
and establishes procedures under which an RBOC can enter the market for
interLATA services within its telephone service area. Before an RBOC can enter
the interLATA market, it must enter into a state-approved interconnection
agreement with a company that provides local exchange service to business and
residential customers predominantly over its own facilities. Alternatively, if
no such competitor requests interconnection, the RBOC can request authority to
provide interLATA services if it offers interconnection under state-approved
terms and conditions. The interconnection offered or provided by the RBOC must
comply with a "competitive checklist" that is comparable to the
interconnection requirements discussed above. See "--Telecommunications Act of
1996--Access and Interconnection with LEC Facilities."
The ability of the RBOCs to provide interLATA services enables them to
provide customers with a full range of local and long distance
telecommunications services. The provision of interLATA services by RBOCs is
expected to reduce the market share of the major long distance carriers, who
are the Company's networks' primary customers. Consequently, the entry of the
RBOCs into the long distance market may have adverse consequences on the
ability to generate revenues from the IXCs.
Relaxation of Regulation
A long-term goal of the Telecommunications Act is to increase competition
for telecommunications services, thereby reducing the need for regulation of
these services. To this end, the Telecommunications Act requires the FCC to
streamline its regulation of incumbent LECs and permits the FCC to forbear
from regulating particular classes of telecommunications services or
providers. Since the Company is lightly regulated by the FCC, the potential
for regulatory forbearance likely will be more beneficial to the incumbent
LECs than the Company in the long run.
Pursuant to the forbearance provisions of the Telecommunications Act, the
Company has filed a petition requesting that the FCC reinstate its forbearance
policy with regard to tariff filing requirements for competitive providers of
interstate access services, such as the Company. See "--Federal Regulation."
This would relieve the Company of its biggest existing federal regulatory
burden. Furthermore, the FCC could forbear from applying interconnection
requirements to CLECs, although it is uncertain whether the FCC would consider
such action at the present time.
The Telecommunications Act eliminates the requirement that LECs obtain FCC
authorization before constructing new facilities for interstate services. The
Telecommunications Act also limits the FCC's ability to review LEC tariff
filings. These changes will increase the speed with which incumbent LECs are
able to introduce new service offerings and new pricing of existing services,
thereby increasing the incumbent LECs' ability to compete with the Company.
Preservation of Universal Service
One of the primary goals of the original Communications Act of 1934 was to
extend telephone service to all the citizens of the United States. This goal
has been achieved largely by keeping the rates for basic local exchange
service at a reasonable level. It was traditionally thought that incumbent
LECs were able to keep basic residential rates reasonable by subsidizing them
with revenues from business and IXC customers, and by subsidizing rural
service at the expense of urban customers. The existence and level of these
subsidies has been widely disputed in recent years because they are so
difficult to quantify.
The Telecommunications Act continues the goal of advancing and preserving
universal service by requiring the FCC to establish an explicit mechanism for
subsidizing service to those who might otherwise drop off the public switched
network. Although the details will be determined by the FCC, all carriers will
be required to contribute and carriers that serve eligible customers will be
able to receive subsidies. In addition, subsidies likely will be available for
companies that provide service to schools, libraries and hospitals.
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Depending on how the FCC implements its statutory mandate, this subsidy
mechanism may provide an additional source of revenue to those LECs willing
and able to provide service to markets that are less desirable, either because
of the high cost of providing service or the limited revenues that might be
available. This could be advantageous to the Company or it could be beneficial
to the Company's competitors, depending on the geographic areas and type of
customers for which subsidies are available. For example, if distributions are
limited to companies that provide service to residential customers, the
Company may contribute more than it receives from the universal service fund
due to its focus on business customers.
FEDERAL REGULATION
Through a series of regulatory proceedings, the FCC has established
different levels of regulation for "dominant carriers" and "non-dominant
carriers." Only incumbent LECs are classified as dominant; all other providers
of domestic interstate services, including the Operating Companies, are
classified as non-dominant carriers. As a non-dominant carrier the Operating
Companies are subject to relatively limited regulation by the FCC. The
Operating Companies must offer interstate services at just and reasonable
rates in a manner that is not unreasonably discriminatory, subject to the
complaint provisions of the Communications Act of 1934, as amended.
Presently, the Company is required to file tariffs listing the terms,
conditions and rates for its services. The FCC's policy of forbearing from
requiring non-dominant carriers to file tariffs was rejected by the U.S.
Supreme Court and its policy of permitting carriers to file tariffs listing a
range of rates for each service was rejected by the U.S. Court of Appeals for
District of Columbia Circuit. Under the Telecommunications Act, the FCC has
authority to reinstate its forbearance policy for non-dominant carriers. The
Company has filed a petition requesting the FCC to take this action with
regard to competitive providers of interstate access services, but there can
be no assurance that it will do so.
The FCC has adopted rules requiring incumbent LECs to provide "virtual
collocation" to CAPs for the purpose of interconnecting their competing
networks. These rules enable the Operating Companies to carry a portion of a
customer's interstate traffic to an IXC even if the customer is not located on
the Company's network. The Company has requested collocation in some, but not
all, of its markets. The incumbent LECs have proposed interconnection rates
that are being investigated by the FCC to determine whether they are
excessive. If the FCC orders the incumbent LECs to reduce these rates,
collocation will be a more attractive option for CLECs.
Under the Telecommunications Act, an Operating Company may become subject to
additional federal regulatory obligations when it provides local exchange
service in a market. All LECs, including CLECs, must make their services
available for resale by other carriers, provide nondiscriminatory access to
rights-of-way, offer reciprocal compensation for termination of traffic and
provide dialing parity and telephone number portability. In addition, the
Telecommunications Act requires all telecommunications carriers to contribute
to the universal service mechanism established by the FCC and to ensure that
their services are accessible to and usable by persons with disabilities.
Because the FCC has yet to adopt rules implementing the Telecommunications
Act, it is uncertain how burdensome these requirements will be for the Company
and the Operating Companies. The obligation to provide services for resale by
others potentially limits any competitive advantage held by the Company by
virtue of its state-of-the-art facilities because other carriers, including
the incumbent LEC and the IXCs, can simply resell the Operating Companies'
services. Similarly, the obligation to provide access to rights-of-way
benefits certain competitors more than the Company, which already has such
access through its Local Partners. Most of the other obligations impose costs
on the Operating Companies that also will be borne by competing carriers so
the competitive implication of these requirements should not be significant if
they are implemented fairly by the FCC.
As part of its decision requiring incumbent LECs to provide virtual
collocation, the FCC also granted incumbent LECs flexibility to reduce their
rates for interstate access services in markets where a CAP is collocated.
This flexibility includes the ability to offer volume and term discounts and
to deaverage access rates
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in different "zones" in a state-based on the level of traffic. In addition,
the FCC has granted two incumbent LECs further flexibility in their most
competitive market and the FCC could grant in the future similar waivers in
markets served by the Operating Companies. The FCC also is considering
granting incumbent LECs additional pricing flexibility in its pending
proceeding regarding incumbent LEC price caps. With the passage of the
Telecommunications Act and the anticipated increase in the level of
competition faced by incumbent LECs, the FCC could grant incumbent LECs
substantial pricing flexibility with regard to interstate access services. To
the extent these regulatory initiatives enable incumbent LECs to offer
selectively reduced rates for access services, the rates the Operating
Companies for access services may charge will be constrained. The Operating
Companies' rates also will be constrained by the fact that competitors other
than the LECs are subject to the same streamlined regulatory regime as the
Operating Companies and can price their services to meet competition.
STATE REGULATION
Most state public utility commissions require companies that wish to provide
intrastate common carrier services to be certified to provide such services.
These certifications generally require a showing that the carrier has adequate
financial, managerial and technical resources to offer the proposed services
in a manner consistent with the public interest.
Operating Companies have been certificated to provide telecommunications
services in Florida, Kansas, Kentucky, New York, Pennsylvania, Tennessee,
Vermont and Virginia. The New Jersey Operating Company currently has an
application for initial operating authority pending before the New Jersey
Board of Public Utilities. The certificates in New York, Florida and Tennessee
permit the Operating Companies to provide a full range of local
telecommunications services, including basic local exchange service. In light
of the Telecommunications Act, the Operating Companies will request removal of
any restrictions that now exist on its certificates in the remaining states
and anticipate that requests will be granted. See "--Telecommunications Act of
1996--Removal of Entry Barriers." In addition, the Telecommunications Act will
enable the Company to enter new states providing a full range of local
services upon certification. In certain states, each of the Company, its
subsidiaries and the Operating Companies may be subject to additional state
regulatory requirements, including tariff filing requirements, in order to
begin offering the telecommunications services for which such entities have
been certificated. Many states also may have additional regulatory
requirements such as reporting and customer service requirements and universal
service contributions.
In addition to obtaining certification, an Operating Company must negotiate
terms of interconnection with the incumbent LEC before it can begin providing
switched services. Most states in which the Company operates have not adopted
rules governing the interconnection of competing networks. Under the
Telecommunications Act, the FCC is required to adopt interconnection
requirements by August 1996. See "--Telecommunications Act of 1996--Access and
Interconnection with LEC Facilities." These rules should greatly facilitate
the negotiation of interconnection agreements, although it is anticipated that
some incumbent LECs may remain reluctant to comply with interconnection
requests, thereby delaying an Operating Company's ability to provide switched
services. State regulators are responsible for resolving any disputes that
cannot be resolved through negotiation between carriers.
The Operating Companies are not presently subject to price regulation or
rate of return regulation in any state, although there can be no assurance
this will not change when the Operating Companies begin providing switched
services in some states. In most states, an Operating Company is required to
file tariffs setting forth the terms, conditions and prices for intrastate
services. In some states, an Operating Company's tariff lists a rate range or
set prices on an individual case basis.
Several states have allowed incumbent LECs rate and tariff flexibility,
particularly for services deemed subject to competition. This pricing
flexibility increases the ability of the incumbent LEC to compete with an
Operating Company and constrains the rates an Operating Company may charge for
its services. In light of the additional competition that is expected to
result from the Telecommunications Act, states may grant incumbent
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<PAGE>
LECs additional pricing flexibility. At the same time, some incumbent LECs may
request increases in local exchange rates to offset revenue losses due to
competition.
LOCAL GOVERNMENT AUTHORIZATIONS
An Operating Company may be required to obtain from municipal authorities
street opening and construction permits to install and expand its fiber optic
networks in certain cities. In some cities, the Local Partners or
subcontractors may already possess the requisite authorizations to construct
or expand the Company's networks. An Operating Company or its Local Partners
also must obtain a license to attach facilities to utility poles in order to
build and expand facilities. Because utilities that are owned by a cooperative
or municipality are not subject to federal pole attachment regulation, there
are no assurances that an Operating Company or its Local Partners will be able
to obtain pole attachments from these utilities at reasonable rates, terms and
conditions.
In some of the areas where the Operating Companies provide service, their
Local Partners pay license or franchise fees based on a percent of gross
revenue. In addition, in areas where the Company does not use facilities
constructed by a Local Partner, the Operating Company may be required to pay
such fees. There are no assurances that certain municipalities that do not
currently impose fees will not seek to impose fees in the future, nor is there
any assurance that, following the expiration of existing franchises, fees will
remain at their current levels. In many markets, other companies providing
local telecommunications services, particularly the incumbent LECs, currently
are excused from paying license or franchise fees or pay fees that are
materially lower than those required to be paid by the Operating Company or
Local Partner. The Telecommunications Act requires municipalities to charge
nondiscriminatory fees to all telecommunications providers, but it is
uncertain how quickly this requirement will be implemented by particular
municipalities in which the Company operates or plans to operate or whether it
will be implemented without a legal challenge initiated by the Company or
another CLEC.
If any of the existing Local Partner Agreements or Fiber Lease Agreements
held by a Local Partner or an Operating Company for a particular market were
terminated prior to its expiration date and the Local Partner or Operating
Company were forced to remove its fiber optic cables from the streets or
abandon its network in place, even with compensation, such termination could
have a material adverse effect on the Company.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
John J. Rigas............... 71 Chairman and Director
Vice Chairman, Executive Vice President and
James P. Rigas.............. 38 Director
Vice Chairman, Executive Vice President and
Michael J. Rigas............ 42 Director
Timothy J. Rigas............ 40 Vice Chairman, Executive Vice President,
Treasurer
and Director
Daniel R. Milliard.......... 49 President, Secretary and Director
Charles R. Drenning......... 51 Vice President and Director
Paul D. Fajerski............ 47 Vice President and Director
Randolph S. Fowler.......... 44 Vice President and Director
</TABLE>
John J. Rigas is the Chairman of the Board of the Company. He also is the
founder, Chairman, Chief Executive Officer and President of Adelphia. Mr.
Rigas has owned and operated cable television systems since 1952. Among his
business and community service activities, Mr. Rigas is Chairman of the Board
of Directors of
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<PAGE>
Citizens Bank Corp., Inc., Coudersport, Pennsylvania and a member of the Board
of Directors of the Charles Cole Memorial Hospital. He is a director of the
National Cable Television Association and a member of its Pioneer Association
and a past President of the Pennsylvania Cable Television Association. He is
also a member of the Board of Directors of C-SPAN and the Cable Advertising
Bureau, and is a Trustee of St. Bonaventure University. He graduated from
Rensselaer Polytechnic Institute with a B.S. in Management Engineering in
1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and James
P. Rigas, each of whom currently serves as a director and executive officer of
the Company.
James P. Rigas is Vice Chairman and Executive Vice President of the Company,
Executive Vice President, Strategic Planning of Adelphia and a Vice President
of Adelphia's other subsidiaries. He has been with Adelphia since 1986. Mr.
Rigas graduated from Harvard University (magna cum laude) in 1980 and received
a Juris Doctor degree and an M.A. degree in Economics from Stanford University
in 1984. From June 1984 to February 1986, he was a consultant with Bain & Co.,
a management consulting firm.
Michael J. Rigas is Vice Chairman and Executive Vice President of the
Company, Executive Vice President, Operations of Adelphia and a Vice President
of Adelphia's other subsidiaries. He has been with Adelphia since 1981. From
1979 to 1981, he worked for Webster, Chamberlain & Bean, a Washington, D.C.
law firm. Mr. Rigas graduated from Harvard University (magna cum laude) in
1976 and received his Juris Doctor degree from Harvard Law School in 1979.
Timothy J. Rigas is Vice Chairman and Executive Vice President and Treasurer
of the Company, Executive Vice President, Chief Financial Officer, Chief
Accounting Officer and Treasurer of Adelphia, and a Vice President of
Adelphia's other subsidiaries. He has been with Adelphia since 1979. Mr. Rigas
graduated from the University of Pennsylvania, Wharton School, with a B.S.
degree in Economics (cum laude) in 1978.
Daniel R. Milliard is President and Secretary of Hyperion, and Senior Vice
President and Secretary of Adelphia and its subsidiaries. He has been with
Adelphia since 1982. He served as outside general counsel to Adelphia's
predecessors from 1979 to 1982. Mr. Milliard graduated from American
University in 1970 with a B.S. degree in Business Administration. He received
an M.A. degree in Business from Central Missouri State University in 1971,
where he was an Instructor in the Department of Finance, School of Business
and Economics, from 1971-73, and received his Juris Doctor degree from the
University of Tulsa School of Law in 1976. He is a member of the Board of
Directors of Citizens Bank Corp., Inc. in Coudersport, Pennsylvania and is
President of the Board of Directors of the Charles Cole Memorial Hospital.
Charles R. Drenning is vice President, Engineering operations. Prior to
joining Hyperion, Mr. Drenning was a District Sales manager for Penn Access
Corporation. In addition, he has over 22 years experience with AT&T and the
Bell System, where he served in a number of executive level positions in sales
and marketing, accounting, data processing, research and development, and
strategic planning. Mr. Drenning began his career with AT&T as a member of the
technical staff of Bell Laboratories in Columbus, Ohio. His seven years of
research work at the laboratories included both hardware and software
development for central office switching equipment. Mr. Drenning holds a B.S.
in Electrical Engineering and an M.S. in Computer Information Science from
Ohio State University. He is a member of the Pennsylvania Technical Institute
and IEEE.
Paul D. Fajerski is Vice President, Marketing and Sales. Prior to joining
Hyperion, Mr. Fajerski was a District Sales Manager for Penn Access
Corporation, a competitive access provider in Pittsburgh, Pennsylvania. In
addition, he has over 13 years experience with AT&T and the Bell System where
he served in a number of executive level positions in sales and marketing. Mr.
Fajerski holds a B.S. in Business Administration from the College of
Steubenville.
Randolph S. Fowler is Vice President, Business Development and Regulatory
Affairs. Prior to joining Hyperion, Mr. Fowler was Vice President of Marketing
for Penn Access Corporation, a competitive access provider in Pittsburgh,
Pennsylvania. He previously served for four years as Director of Technology
Transfer
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<PAGE>
and Commercial Use of Space in two NASA-sponsored technology transfer
programs. In addition, he has over 17 years experience with AT&T and the Bell
System, where he served in a number of executive level positions in sales and
marketing, operations, human resources, business controls, and strategy
development. Mr. Fowler holds a B.S. in Business Administration from the
University of Pittsburgh. He has developed and taught courses in Marketing,
Network Management, and Regulation for the University of Pittsburgh's Graduate
Program in Telecommunications. Mr. Fowler is a contributing author for the
Encyclopedia of Telecommunications.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the Company's last three
fiscal years ending March 31, 1995 to the Company's President and the other
most highly compensated executive officers whose total annual salary and bonus
exceeds $100,000.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION(A) FISCAL YEAR SALARY BONUS ALL OTHER COMPENSATION
- ------------------------------ ----------- -------- ------- ----------------------
<S> <C> <C> <C> <C>
Daniel R. Milliard...... 1995 $187,412(b) $ -- $5,350(c)
President and Secretary 1994 183,484(b) -- 5,250(c)
1993 174,972(b)(d) -- 5,250(c)
Charles R. Drenning..... 1995 $128,254 $17,345 $ --
Vice President 1994 105,379 21,250 --
1993 91,057 20,000 --
Paul D. Fajerski........ 1995 $128,254 $17,345 $ --
Vice President 1994 105,379 21,250 --
1993 91,057 20,000 --
Randolph S. Fowler...... 1995 $128,254 $17,345 $ --
Vice President 1994 105,379 21,250 --
1993 91,057 20,000 --
</TABLE>
- --------
(a) James P. Rigas, Michael J. Rigas and Timothy J. Rigas are not employed by
the Company, and the Company does not reimburse Adelphia for any services
they provide to the Company.
(b) Daniel R. Milliard is not employed by the Company, but is compensated by
Adelphia for his services to the Company pursuant to an employment
agreement with Adelphia. The Company, however, reimburses Adelphia for Mr.
Milliard's base salary, insurance premium payments and other benefits paid
by Adelphia.
(c) Fiscal 1995, 1994 and 1993 amounts include (i) life insurance premiums
paid during each respective fiscal year pursuant to the employment
agreement of Daniel R. Milliard with Adelphia, in the premium payment
amounts of $4,600, during Fiscal 1995, and $4,500, during Fiscal 1994 and
1993, on policies owned by Mr. Milliard and (ii) $750 in matching
contributions for Mr. Milliard under Adelphia's 401(k) savings plan for
each of Fiscal 1995, 1994 and 1993.
(d) Includes $2,445 paid in Fiscal 1994.
DIRECTOR COMPENSATION
The directors do not receive any compensation for services rendered to the
Company in their capacities as directors.
EMPLOYMENT CONTRACTS
Each of Messrs. Drenning, Fajerski and Fowler (the "Management
Shareholders") have employment agreements with the Company which expire on
October 20, 1998. The employment agreements provide for base salary and
bonuses and benefits, and contain noncompetition and nondisclosure provisions
The employment agreements also provide for base pay and bonuses to be paid to
each Management Shareholder that are
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<PAGE>
comparable to industry average base pay and bonuses paid by comparable
companies for comparable positions. Mr. Milliard is also a senior vice
president and secretary of Adelphia and has an employment agreement with
Adelphia which provides for base salary and insurance premium payments and
benefits. The Company reimburses Adelphia for Mr. Milliard's base salary,
insurance premium payments and benefits paid by Adelphia.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The Company was founded in October 1991. From the Company's inception
through December 31, 1995, Adelphia, which owns 89% of the Company's
outstanding common stock, provided all the equity capital to the Company and
also made loans and advances totaling approximately $49.9 million. The Company
repaid $25 million of such indebtedness to Adelphia from the proceeds of the
Offering on April 15, 1996, on which date the remaining $24.9 million,
together with accrued interest and fees of approximately $1,185,000 for the
period January 1, 1996 through April 15, 1996, was evidenced by an unsecured
subordinated note due April 16, 2003 that accrues interest at an annual rate
of 16.5% and is subordinated to the Senior Notes upon Senior Note defaults.
Interest on the subordinated note is payable quarterly in cash, through the
issuance of identical subordinated notes or in any combination thereof, at the
option of the Company. Interest (excluding fees relating to amounts borrowed)
accrued on the indebtedness to Adelphia at an annual rate of 11.3% prior to
April 15, 1996.
Messrs. Drenning, Fajerski and Fowler together hold 11% of the Company's
outstanding common stock, and are parties to an amended and restated
shareholder agreement ("Shareholder Agreement") with Adelphia. The Shareholder
Agreement provides, among other things, (i) that upon the earlier of (a) the
termination of employment of any Management Shareholder or (b) after October
7, 1998, such Management Shareholder may put his shares to Adelphia for fair
market value, unless such put rights are terminated as a result of the
registration of the Company's Common Stock under the Securities Act; (ii) for
Adelphia to vote its shares in the Company to elect each Management
Shareholder to the Board of Directors of the Company; and (iii) for certain
buy/sell and termination rights and duties among Adelphia and the Management
Shareholders.
The Company has also entered into Term Loan and Stock Pledge Agreements
("Loan Agreements") with each of the Management Shareholders. Pursuant to the
Loan Agreements, each Management Shareholder has borrowed $1 million from the
Company. Each of these loans accrues interest at the average rate at which the
Company can invest cash on a short-term basis, is secured by a pledge of the
borrower's common stock in the Company, and matures upon the earlier of (i)
October 8, 1998 or (ii) the date when the Company's common stock is registered
under the 1933 Act and the Management Shareholders have the right to sell
their shares pursuant to the registration rights agreement discussed below.
Each Loan Agreement also provides that any interest accruing on a loan from
the date six months after the date of such loan shall be offset by a bonus
payment which shall be paid when principal and interest thereon are due and
which shall include additional amounts to pay income taxes applicable to such
bonus payment. The Company and the Management Shareholders are also parties to
a Registration Rights Agreement that provides the Management Shareholders with
one collective demand registration right and certain piggyback registration
rights in an initial public offering of the Company's common stock.
During Fiscal 1994 and Fiscal 1995 and the nine months ended December 31,
1995, the Company incurred charges from Adelphia of $214,000, $209,000 and
$250,000, respectively, for the provision to the Company of shared corporate
overhead services in areas such as personnel, payroll, management information
services, shared use of office and network facilities and support equipment.
The Company expects that charges for the provision of similar services by
Adelphia to the Company, or by the Company to Adelphia, will continue to be
incurred or charged by the Company in the future. The transactions related to
the provision of these services have been based on allocation of Adelphia's
costs incurred for these services, and do not necessarily represent the cost
to the Company had these services been provided on an arm's length basis.
During Fiscal 1995 and the nine months ended December 31, 1995, the Company
paid Adelphia or certain of Adelphia's affiliates fiber lease payments of
$303,000 and $766,000, respectively.
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<PAGE>
OWNERSHIP OF CAPITAL STOCK
The Company previously had authorized capital consisting of 1,000 shares of
Common Stock, par value of $1.00 per share. Prior to the closing of the
Offering of the Units, the Company recapitalized (the "Recapitalization") by
(i) amending its authorized capital to consist of 30,000,000 shares of Common
Stock, par value $0.01 per share ("Common Stock") 5,000,000 shares of
Preferred Stock, par value $0.01 per share ("Preferred Stock"), and (ii)
declaring a stock split resulting in 10,000,000 shares of Common Stock being
outstanding. As of the date hereof, Adelphia owns 8,900,020 shares of Common
Stock and Messrs. Drenning, Fajerski and Fowler each own 366,660 shares of
Common Stock. In connection with the closing of the Offering of the Units, the
Company issued Warrants which will be exercisable to purchase 613,427 shares
of Common Stock at an exercise price of $0.01 per share. In addition, Adelphia
and Messrs. Drenning, Fajerski and Fowler are parties to a shareholders
agreement. See "Certain Relationships and Transactions."
The following table provides information, as of May 31, 1996, with respect
to the beneficial ownership of the Company's Common Stock by (i) each person
known by the Company to be a beneficial owner of more than 5% of any class of
the Company's voting securities, (ii) the directors and executive officers and
(iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK COMMON STOCK
------------ -------------
<S> <C> <C>
Adelphia Communications Corporation (1).............. 8,900,020 89.0%
Charles R. Drenning (2).............................. 366,660 3.67%
Paul D. Fajerski (2)................................. 366,660 3.67%
Randolph S. Fowler (2)............................... 366,660 3.67%
All executive officers and directors as a group
(eight persons)..................................... 1,099,980 11.0%
</TABLE>
- --------
(1) The business address of Adelphia Communications Corporation is the same as
the Company.
(2) The business address of each such holder is 2570 Boyce Plaza, Pittsburgh,
Pennsylvania 15241.
DESCRIPTION OF THE SENIOR NOTES
GENERAL
The New Notes, like the Old Notes, will be issued pursuant to the Indenture,
dated April 15, 1996 (the "Indenture"), between the Company and Bank of
Montreal Trust Company, as trustee (the "Trustee"). The terms of the Senior
Notes include those stated in the Indenture and those made part of the
Indenture by reference
to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The terms of
the New Notes are substantially identical to the Old Notes in all material
respects (including interest rate and maturity), except that (i) the New Notes
will not be subject to the restrictions on transfer (other than with respect
to holders that are broker-dealers, persons who participated in the
distribution of the Old Notes or affiliates) and (ii) the Registration Rights
Agreement covenants regarding registration and the related Liquidated Damages
(other than those that have accrued and were not paid) with respect to
Registration Defaults will have been deemed satisfied. The Senior Notes are
subject to all such terms, and holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. A copy of the Indenture and
Registration Rights Agreement is available as set forth under "Available
Information." The definitions of certain terms used in the following summary
are set
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<PAGE>
forth below under "--Certain Definitions." As used in this section, the term
"Company" refers only to Hyperion Telecommunications, Inc. and not to its
subsidiaries.
As of the date of this Prospectus, $329,000,000 principal amount of the Old
Notes was outstanding.
RANKING
The Senior Notes rank senior in right of payment to all subordinated
Indebtedness of the Company. The Senior Notes rank pari passu in right of
payment with all senior borrowings.
The Company is the sole obligor with respect to the Senior Notes, however
the operations of the Company are conducted through its Subsidiaries and Joint
Ventures and, therefore, the Company is dependent upon the operations and cash
flow of its Subsidiaries and Joint Ventures to meet its obligations, including
its obligations under the Senior Notes. The Senior Notes are effectively
subordinated to all indebtedness and other liabilities and commitments
(including, without limitation, trade payables and lease obligations) of the
Company's Subsidiaries and Joint Ventures. Any right of the Company to receive
assets of any of its Subsidiaries and Joint Ventures upon such Subsidiary's or
Joint Venture's liquidation or reorganization (and the consequent right of the
holders of the Senior Notes to participate in those assets) is effectively
subordinated to the claims of that Subsidiary's or Joint Venture's creditors
except to the extent that the Company is itself recognized as a creditor of
such Subsidiary or Joint Venture, in which case the claims of the Company are
still subordinate to the claims of such creditors who hold any security in the
assets of such Subsidiary or Joint Venture and to the claims of such creditors
who hold indebtedness of such Subsidiary or Joint Venture senior to that held
by the Company. As of December 31, 1995, the aggregate principal amount of
such senior Indebtedness incurred by the Company's Subsidiaries and Joint
Ventures (excluding trade payables and other accrued liabilities) was
approximately $22.7 million, substantially all of which were Capital Lease
Obligations. See "Risk Factors--Holding Company Structure; Inability to Access
Cash Flow."
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are senior unsecured obligations of the Company, limited in
aggregate principal amount to $329.0 million at maturity and will mature on
April 15, 2003. The Senior Notes were
offered at a substantial discount from their principal amount at maturity,
along with the Warrants, to generate gross proceeds of approximately $175.3
million. See "Certain Federal Income Tax Considerations--The Senior Notes--
Original Issue Discount." Until April 15, 2001, no interest will accrue on the
Senior Notes, but the Accreted Value will accrete (representing the
amortization of original issue discount) between the date of original issuance
and April 15, 2001, on a semi-annual bond equivalent basis using a 360-day
year comprised of twelve 30-day months, such that the Accreted Value shall be
equal to the full principal amount of the Senior Notes on April 15, 2001.
Beginning on April 15, 2001, interest on the Senior Notes will accrue at a
rate of 13% per annum and will be payable semi-annually in cash on April 15
and October 15, commencing on October 15, 2001, to holders of record on the
immediately preceding April 1 and October 1. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Senior Notes will be payable
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of
interest may be made by check mailed to the holders of the Senior Notes at
their respective addresses set forth in the register of holders of Senior
Notes; provided that all payments with respect to Senior Notes the holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of same day funds to the accounts specified by the
holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Senior Notes are issued in denominations of $1,000 and
integral multiples thereof.
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<PAGE>
OPTIONAL REDEMPTION
The Senior Notes are not be redeemable at the Company's option prior to
April 15, 2001. Thereafter, the Senior Notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on April 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 106.5%
2002 and thereafter............................................ 100.0%
</TABLE>
Notwithstanding the foregoing, the Company, on or prior to April 15, 1999,
may redeem up to a maximum of 25% of the aggregate principal amount of the
Senior Notes then outstanding at a redemption price of 113.0% of the Accreted
Value thereof, with the net proceeds from either (i) an Initial Public
Offering of the common stock of the Company or (ii) a sale of the Capital
Stock (other than Disqualified Stock) of the Company to a Strategic Investor
in a single transaction or a series of related transactions for at least $25.0
million; provided that, in either case, at least 75% in aggregate principal
amount of the Senior Notes remain outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
within 90 days of the date of the closing of such Initial Public Offering or
such sale to a Strategic Investor, as the case may be.
MANDATORY REDEMPTION
Except as set forth below under "--Offer to Purchase upon Change of
Control," and "--Certain Covenants--Asset Sales," the Company is not required
to make mandatory redemption or sinking fund payments with respect to the
Senior Notes.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (the "Change of Control Offer") to each holder of Senior Notes
to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such holder's Senior Notes at a purchase price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest to the
date of repurchase (or, in the case of repurchases of Senior Notes prior to
April 15, 2001, at a purchase price equal to 101% of the Accreted Value
thereof as of the date of repurchase), in accordance with the procedures set
forth in the Indenture. Within ten days following any Change of Control, the
Company will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Senior Notes pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Senior Notes as a result of a Change
of Control.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holders of the Senior Notes to require that
the Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar transaction.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals or their Affiliates, (ii) the adoption
of a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any
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<PAGE>
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person," other than the Principals and their
Affiliates, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting power of the Capital Stock of the Company, (iv) the
consummation of the first transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" becomes the
"beneficial owner," directly or indirectly, of more of the voting power of the
Capital Stock of the Company than is at the time "beneficially owned" by the
Principals and their Affiliates in the aggregate or (v) the first day on which
a majority of the members of the Board of Directors of the Company are not
Continuing Directors. For purposes of this definition, any transfer of an
Equity Interest of an entity that was formed for the purpose of acquiring
voting power of Capital Stock of the Company will be deemed to be a transfer
of such portion of such voting power of Capital Stock as corresponds to the
portion of the equity of such entity that has been so transferred.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Senior Notes to require the Company to repurchase such Senior Notes
as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of the Company to another person may be uncertain.
SELECTION AND NOTICE
If fewer than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed, or, if the Senior
Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Senior Notes of
$1,000 or less shall be redeemed in part. Notices of redemption shall be
mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of Senior Notes to be redeemed at its
registered address. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Senior Note shall state the portion
of the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of
the holder thereof upon cancellation of the original Senior Note. On and after
the redemption date, interest ceases to accrue on Senior Notes or portions of
them called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that (i) the Company will not, and will not permit
any of its Subsidiaries or Joint Ventures to, directly or indirectly: (a)
declare or pay any dividend or make any other payment or distribution on
account of the Company's Equity Interests (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or dividends or distributions payable to the Company or any Wholly
Owned Subsidiary); (b) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or indirect parent of
the Company (other than Equity Interests owned by the Company or any Wholly
Owned Subsidiary of the Company); or (c) purchase, redeem or otherwise acquire
or retire for value, prior to a scheduled mandatory sinking fund payment date
or maturity date, any Indebtedness of the Company which ranks subordinated in
right to payment to the Senior Notes and (ii) the Company will not, and will
not permit any of its Subsidiaries or Permitted Joint Ventures to, make any
Investment other than a Permitted Investment (all such payments and other
actions set forth in clauses (i) and (ii) above being collectively referred to
as "Restricted Payments") unless, at the time of and after giving effect to
such Restricted Payment:
(x) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
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(y) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments (including, without limitation, all Restricted
Payments referred to in clauses (a), (b) and (c)(1) below but excluding
those made under clauses (c)(2) and (d) below) made by the Company and its
Subsidiaries after the date of the Indenture is less than the sum of: (1)
the excess of (A) Cumulative Pro Forma EBITDA over (B) 2.0 times Cumulative
Interest Expense plus (2) the aggregate net cash proceeds received by the
Company (other than from a Subsidiary or Joint Venture) (A) as capital
contributions to the Company, (B) from the issuance and sale of Equity
Interests, other than Disqualified Stock, and (C) from the issuance and
sale of Indebtedness that is convertible into Capital Stock (other than
Disqualified Stock), to the extent such Indebtedness is actually converted
into such Capital Stock (clauses (A), (B) and (C) collectively referred to
as "Equity Issuances"), other than any such net cash proceeds from Equity
Issuances that were used as set forth in clause (c) and (d) below; and
(z) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness other than Permitted
Indebtedness.
The foregoing provisions will not prohibit the following Restricted
Payments:
(a) the payment of any Required Capital Contribution;
(b) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(c) so long as no Default or Event of Default shall have occurred and be
continuing, Restricted Joint Venture Investments, which at the time any
such Restricted Joint Venture Investment was made, did not cause the
aggregate amount of all Restricted Joint Venture Investments then
outstanding under this clause (c) to exceed (1) $20.0 million plus (2) the
net cash proceeds from Equity Issuances not used as set forth in clause
(y) above and clause (d) below;
(d) so long as no Default or Event of Default shall have occurred and be
continuing, the making of any Investment in a Telecommunications Business
out of the net cash proceeds from Equity Issuances not used as set forth
in clauses (y) and (c)(2) above; or
(e) so long as no Default or Event of Default shall have occurred and be
continuing, the making of loans and advances to senior management in an
amount not to exceed $3.0 million.
For purposes of this covenant, in the event that a Restricted Joint Venture
becomes a Permitted Joint Venture or otherwise ceases to be a Restricted Joint
Venture, all of the then outstanding Investments made by such entity since the
date of the Indenture, shall be deemed to have been made as of the date that
such Restricted Joint Venture becomes a Permitted Joint Venture or otherwise
ceases to be a Restricted Joint Venture; provided that if a Restricted Joint
Venture ceases to be a Restricted Joint Venture as a result of (i) the loss of
its Local Partner or (ii) the loss of management control of such Restricted
Joint Venture, then the provisions of this paragraph shall not be applied to
such entity.
The amount of all Restricted Payments, other than cash, shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of such
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to such Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
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ASSET SALES
The Indenture provides that the Company will not, and will not permit any
Subsidiary to, directly or indirectly, whether in a single transaction or a
series of related transactions occurring within any twelve-month period, make
any Asset Sale, unless:
(i) the Company or the Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Board of Directors) for
the shares or assets sold or otherwise disposed of; and
(ii) at least 90% of such consideration consists of cash,
provided that
(A)an amount equal to the fair market value (as determined in good faith
by the Board of Directors) of:
(1) Telecommunications Related Assets received by the Company or any
Subsidiary from the transferee that will be used by the Company or
such Subsidiary in the operation of a Telecommunications Business;
(2) the Voting Stock of any Person engaged in a Telecommunications
Business received by the Company or any Subsidiary; provided that
on the date such Voting Stock is received, such Investment in
Voting Stock constitutes a Permitted Joint Venture Investment; or
(3) the publicly tradeable Voting Stock of any person engaged in the
Telecommunications Business received by the Company or any
Subsidiary as consideration for a sale of an Equity Interest in
any Restricted Joint Venture, will, for the purposes of this
covenant, be deemed to be cash which was applied in accordance
with the first sentence of the penultimate paragraph of this
covenant; and
(B)in the case the event of a sale by (1) Hyperion Telecommunications of
Pennsylvania, Inc., (2) Hyperion Telecommunications of Tennessee, Inc. or
(3) Hyperion Telecommunications of New York, Inc. of its partnership
interest in its respective partnership to its respective partner in the
manner specified by the related partnership agreement (y) the principal
amount of any seller note issued to the Company or any of its Wholly Owned
Subsidiaries will be deemed to be cash for purposes of this covenant and
(z) the payments of principal pursuant to such seller note shall be deemed
to be Net Cash Proceeds (for purposes of the penultimate paragraph of this
covenant) as and when such payments are received.
For purposes of this covenant, the first $1.0 million of Net Cash Proceeds
received from Asset Sales in any fiscal year shall not be subject to the
restrictions contained in this covenant.
The Indenture provides that, in determining the fair market value with
respect to any Asset Sale or series of related Asset Sales involving aggregate
consideration in excess of $10.0 million, the Board of Directors of the
Company must obtain an opinion as to the fairness to the holders of the Senior
Notes of such Asset Sales from a financial point of view issued by a
nationally recognized investment banking firm with total assets in excess of
$1.0 billion; provided that no such opinion is required if such Asset Sale is
in accordance with the terms of any Local Partnership Agreement to which the
Company or any of its Subsidiaries is a party on the date of the Indenture.
The Indenture also provides that the Company may apply the Net Cash Proceeds
from such Asset Sale to an investment in Telecommunications Related Assets in
a Telecommunications Service Market within 180 days after any Asset Sale;
provided that if the Company determines to make such investment in a New
Telecommunications Service Market, the Company will (y) within 180 days of
such Asset Sale, deliver to the
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Trustee a resolution adopted by a majority of the Board of Directors set forth
in an Officer's Certificate certifying that the Company intends to utilize the
Net Cash Proceeds of such Asset Sale to invest in a specific new
Telecommunications Service Market and (z) complete such investment within 360
days of such Asset Sale. The Company will be deemed to have completed its
investment for purposes of the preceding clause (z), so long as the Company
has (i) a business plan that sets forth the Company's investment plans for the
applicable Telecommunications Service Market and (ii) issued all material
purchase orders to the appropriate parties that are necessary to complete such
business plan. Any Net Cash Proceeds from an Asset Sale that are not invested
as provided in the preceding sentence shall constitute Excess Proceeds. When
the aggregate amount of Excess Proceeds exceeds $2.5 million, the Company
shall offer to purchase (an "Asset Sale Offer") from all holders of the Senior
Notes the maximum principal amount of Senior Notes that may be purchased out
of the Excess Proceeds, at an offer price in cash equal to 100% of aggregate
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase (or, in the case of repurchases of Senior Notes prior to April 15,
2001, at a purchase price equal to 100% of the Accreted Value thereof as of
the date of repurchase) in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate principal amount thereof, plus
accrued and unpaid interest to the date of repurchase (or, in the case of
repurchases of Senior Notes prior to April 15, 2001, the Accreted Value
thereof as of the date of repurchase) of the Senior Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use such
remaining Excess Proceeds for any purpose not prohibited by the Indenture. If
the aggregate principal amount thereof, plus accrued and unpaid interest to
the date of repurchase (or, in the case of repurchases of Senior Notes prior
to April 15, 2001, the Accreted Value thereof as of the date of repurchase) of
Senior Notes surrendered by holders thereof exceeds the amount of Excess
Proceeds, the Company shall select the Senior Notes to be purchased on a pro
rata basis. Upon completion of such offer, the amount of Excess Proceeds shall
be reset at zero. Pending application of the Net Cash Proceeds as set forth
above from Asset Sales, all such Net Cash Proceeds will be placed in escrow
for the benefit of the holders of the Senior Notes. The Company will comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Senior
Notes as a result of an Asset Sale.
Notwithstanding the foregoing, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, make any Asset Sale of any Equity
Interests of any Subsidiary (at least 80% of the voting power of the Capital
Stock of which is owned by the Company) except pursuant to an Asset Sale of
all of the Equity Interests of such Subsidiary; provided that any sale of any
Equity Interest of any such Subsidiary to a Strategic Investor shall be deemed
not to be an Asset Sale for purposes of this covenant, so long as such sale of
such Equity Interests does not result in such Subsidiary ceasing to be a
Subsidiary of the Company.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries or Joint Ventures to, directly or indirectly, create, incur,
issue, assume, guaranty or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including, without limitation, Acquired Indebtedness) and that
the Company will not issue any Disqualified Stock and will not permit any of
its Subsidiaries or Joint Ventures to issue any shares of Preferred Stock;
provided that the Company may incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock if the Company's
Consolidated Leverage Ratio as of the last day of the Company's most recently
ended fiscal quarter for which internal financial statements are available
immediately preceding the date on which such Indebtedness is incurred, or such
Disqualified Stock is issued, as the case may be, would have been (a) greater
than zero and less than 5.5 to 1.0, if such incurrence or issuance is on or
prior to March 31, 1999, and (b) greater than zero and less than 5.0 to 1.0,
if such incurrence or issuance is after March 31, 1999, determined on a pro
forma basis (including pro forma application of the net proceeds therefrom) as
if such Indebtedness had been incurred, or such Disqualified Stock had been
issued, as the case may be, at the beginning of such fiscal quarter.
The foregoing provisions do not apply to:
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(i) the incurrence of Indebtedness by the Company, any Subsidiary (other
than a General Partner Subsidiary) or any Permitted Joint Venture pursuant
to Credit Agreement(s), provided that the aggregate principal amount of
such Credit Agreement(s) at any one time outstanding under this clause (i)
does not exceed $50.0 million for the Company, all of its Subsidiaries
(other than a General Partner Subsidiary) and all of its Permitted Joint
Ventures combined;
(ii) the incurrence of Vendor Debt by the Company, any Subsidiary (other
than a General Partner Subsidiary) or any Permitted Joint Venture, provided
that the aggregate principal amount of such Vendor Debt does not exceed 80%
of the purchase price or cost of the construction, acquisition or
improvement of the applicable Telecommunications Related Assets;
(iii) Refinancing Indebtedness;
(iv) the incurrence of Indebtedness by the Company not to exceed, at any
one time outstanding, 2.0 times the net cash proceeds received by the
Company from the issuance and sale of its Capital Stock (other than
Disqualified Stock) to a Person other than a Subsidiary or a Joint Venture
of the Company, provided that such Indebtedness (y) does not mature prior
to the Stated Maturity of the Senior Notes and has a Weighted Average Life
to Maturity longer than the Senior Notes and (z) is subordinated to the
Senior Notes;
(v) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in an
aggregate principal amount (or accreted value, as applicable) at any time
outstanding not to exceed $10.0 million;
(vi) the incurrence by any Restricted Joint Venture of Non-Recourse Debt,
provided that if any Non-Recourse Debt of a Restricted Joint Venture ceases
to be Non-Recourse Debt, such event shall be deemed to constitute an
incurrence of Indebtedness as of the date such Indebtedness ceases to be
Non-Recourse Debt; and
(vii) the guarantee of Indebtedness by a General Partner Subsidiary in
connection with the incurrence of Indebtedness by the Restricted Joint
Venture of which such General Partner Subsidiary is a general partner.
For purposes of this covenant, the Indenture provides that, in the event
that the Company proposes to incur Indebtedness pursuant to clause (iv) above,
the Company shall, simultaneously with the incurrence of such Indebtedness,
deliver to the Trustee a resolution of the Board of Directors set forth in an
Officers' Certificate stating that the sale or sales of Capital Stock forming
the basis for the incurrence of such Indebtedness (i) constitutes a long term
investment in the Company and (ii) has not been made for the purpose of
circumventing this covenant. The Indenture also provides that, in event that
the Company rescinds, reverses or unwinds such sale of Capital Stock or
otherwise returns or refunds all or any portion of the net cash proceeds of
such sale of Capital Stock (whether by dividend, distribution or otherwise)
within 270 days of the date of the incurrence of such Indebtedness, such
Indebtedness will be deemed to be incurred on the date of, and immediately
after giving effect to, such rescission, reversal, unwinding, return or
refund.
For purposes of this covenant, in the event that a Restricted Joint Venture
becomes a Permitted Joint Venture or otherwise ceases to be a Restricted Joint
Venture, all of the then outstanding Indebtedness of such entity shall be
deemed to have been incurred as of the date that such Restricted Joint Venture
becomes a Permitted Joint Venture or otherwise ceases to be a Restricted Joint
Venture.
In addition to the foregoing provisions, the Indenture permits the Company's
Subsidiaries (other than General Partner Subsidiaries) and Permitted Joint
Ventures to incur Indebtedness (including Acquired Debt) all of the net
proceeds of which are used by such Subsidiary or Permitted Joint Venture
directly in connection with the design, construction, development or
acquisition of a Telecommunications Service Market if, as of the last day of
the Company's most recently ended fiscal quarter for which internal financial
statements are available
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immediately preceding the date on which such Indebtedness is incurred, either
(a) the aggregate principal amount of all Indebtedness of such Subsidiary or
such Permitted Joint Venture does not exceed 1.75 times the Invested Equity
Capital of such Subsidiary or such Permitted Joint Venture; or (b) the
Consolidated Leverage Ratio of such Subsidiary or such Permitted Joint Venture
would not have been greater than 3.5 to 1.0, in each case determined on a pro
forma basis (including pro forma application of the net proceeds therefrom) as
if such Indebtedness had been incurred at the beginning of such fiscal
quarter; provided that any Indebtedness incurred by any Subsidiary of the
Company or any Permitted Joint Venture (other than Related Networks) pursuant
to this paragraph shall be non-recourse with respect to the Company or any
other Subsidiary of the Company or any other Joint Venture.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries or Permitted Joint Ventures to, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, enter into any Sale and Leaseback Transaction; provided
that the Company or any Subsidiary (other than a General Partner Subsidiary)
may enter into a Sale and Leaseback Transaction if (i) the Company or other
entity could have incurred the Indebtedness relating to such Sale and
Leaseback Transaction pursuant to the "--Incurrence of Indebtedness and
Issuance of Preferred Stock" and "--Liens" covenants to incur secured
Indebtedness in an amount equal to the Attributable Debt with respect to such
transaction, (ii) the net proceeds of such Sale and Leaseback Transaction are
at least equal to the fair market value of such property as determined in good
faith by the Board of Directors of the Company and (iii) such proceeds are
applied in accordance with the "--Asset Sales" covenant.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to:
(i)(a) pay dividends or make any other distributions to the Company or
any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay
any indebtedness owed to the Company or any of its Subsidiaries,
(ii) make loans or advances to the Company or any of its Subsidiaries,
(iii) grant liens or grant security interests on its asset in favor of
the holders of the Senior Notes or guarantee the payment of the Senior
Notes; or
(iv) transfer any of its properties or assets to the Company or any of
its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the date of the Indenture;
(b) any Credit Agreement creating or evidencing Indebtedness
permitted by the Indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof;
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(c) the Indenture and the Senior Notes;
(d) applicable law;
(e) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with
past practices;
(f) purchase money obligations or Vendor Debt for property acquired
in the ordinary course of business that impose restrictions of the
nature described in clause (iv) above on the property so acquired;
(g) Indebtedness incurred pursuant to the last paragraph under the
"--Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant, provided that such encumbrance or restriction only relates to
the Subsidiary or Permitted Joint Venture incurring such Indebtedness;
and
(h) Refinancing Indebtedness, provided that such encumbrances or
restrictions are no more restrictive than those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Senior Notes and the Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) will,
at the time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable four-
quarter period, be permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "--Incurrence
of Indebtedness and Issuance of Preferred Stock" covenant contained herein.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary, other than those that would have
been obtained in a comparable transaction by the Company or such Subsidiary
with an unrelated Person; and
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(ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution adopted by
a majority of the disinterested members of the Board of Directors and a
majority of the Independent Directors of the Company set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above; and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million, an opinion as to the fairness to the holders of
the Senior Notes of such Affiliate Transaction from a financial point of
view issued by a nationally recognized consulting firm, business valuation
firm or investment banking firm;
provided that: (i) all agreements and arrangements with Affiliates, including
without limitation the Local Partner Agreements, the Fiber Lease Agreements,
the Management Agreements, network monitoring agreements and transactions in
connection therewith or pursuant thereto existing on the date of the Indenture
and through the current term thereof; (ii) all arrangements and transactions
with Adelphia, including existing intercompany Indebtedness, overhead charges
made in the ordinary course of business, fiber lease arrangements and similar
services existing on the date of the Indenture and through the current term
thereof; (iii) all employment arrangements approved by the Board of Directors;
(iv) all Restricted Payments made pursuant to the covenant entitled "--
Restricted Payments;" (v) transactions between or among the Company and/or its
Wholly Owned Subsidiaries; (vi) transactions between a General Partner
Subsidiary and the Restricted Joint Venture of which such General Partner
Subsidiary is a general partner; and (vii) management and network monitoring
agreements between the Company and any of its Joint Ventures, shall not be
deemed Affiliate Transactions.
LOANS TO SUBSIDIARIES AND JOINT VENTURES
The Indenture provides that all loans to Subsidiaries or Joint Ventures made
by the Company from time to time after the date of the Indenture will be
evidenced by Intercompany Notes in favor of the Company. The Indenture also
provides that all loans by the Company to any Subsidiary or Joint Venture
outstanding on the date of the Indenture will be evidenced by an unsecured
Intercompany Note. The Indenture prohibits loans by Subsidiaries to other
Subsidiaries and prohibits loans by Subsidiaries to Joint Ventures in which
such Subsidiary does not have an Equity Interest, except that such loans may
be (i) incurred and maintained between and among the Company, its Subsidiaries
and Permitted Joint Ventures in connection with the incurrence of Indebtedness
pursuant to clause (i) of the covenant entitled "--Incurrence of Indebtedness
and Issuance of Preferred Stock" or (ii) incurred and maintained between and
among Related Networks in connection with the incurrence of Indebtedness by
such Related Networks pursuant to the proviso in the last paragraph of the
covenant entitled "--Incurrence of Indebtedness and Issuance of Preferred
Stock." A form of Intercompany Note is attached as an annex to the Indenture.
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, conduct its business in a fashion that would cause it to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended) or otherwise become subject to
regulation under the Investment Company Act of 1940.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
shall, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any holder of any Senior
Notes for or as inducement to any consent, waiver or amendment of any terms or
provisions or the Senior Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Senior Notes which so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
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INDEPENDENT DIRECTORS
The Company is required, no later than 360 days from the date of the
Indenture, to have at least two members of its Board of Directors who are
neither officers nor employees of the Company or its Affiliates (the
"Independent Directors"). Any transaction requiring the approval of the
majority of the Independent Directors shall be prohibited at any time that
there are not at least two Independent Directors on the Company's Board of
Directors. If Hyperion fails to comply with this covenant, Hyperion will pay
Liquidated Damages to each holder of Senior Notes (i) with respect to the
first 90-day period immediately following the occurrence of such default at a
rate of 0.5% per annum, determined daily, on the Accreted Value of the Senior
Notes (or after April 15, 2001, on the principal amount of the Senior Notes)
and (ii) at the beginning of each subsequent 90-day period at a rate increased
by an additional 0.25% per annum up to a maximum aggregate increase of 2.0%
per annum until such default has been cured.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than the Telecommunications Business and such business
activities as are incidental or related thereto.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Senior Notes are outstanding, the Company is required to furnish
to the holders of Senior Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants; (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports;
and (iii) on a quarterly basis, certain financial information and operating
data with respect to each Subsidiary and Joint Venture engaged in a
Telecommunications Business, in the form specified by Schedule E of the
Indenture. In addition, whether or not required by the rules and regulations
of the Commission, the Company is required to file a copy of all such
information and reports with the Commission for public availability (unless
the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, the Company has agreed that, for so long as any Senior Notes remain
outstanding, it will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default:
(i) default for 30 days in the payment when due of interest on the Senior
Notes;
(ii) default in payment when due of the principal of or premium, if any,
on the Senior Notes;
(iii) failure by the Company to comply with the provisions described
under the captions "--Change of Control," "--Asset Sales," "--Restricted
Payments," or "--Merger, Consolidation or Sale of Assets";
(iv) failure by the Company to comply with the provisions described under
the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock,"
provided that for purposes of the penultimate paragraph of such covenant,
in the event that the Company fails to comply with such covenant because
indebtedness is deemed to be incurred by a Restricted Joint Venture solely
as a result of such Restricted Joint Venture ceasing to be a Restricted
Joint Venture as a result of (i) the loss of a Local Partner or (ii) the
loss of management control of such Restricted Joint Venture, such failure
shall continue for 90 days;
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(v) failure by the Company for 30 days after notice to comply with any of
its other agreements in the Indenture or the Senior Notes;
(vi) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(vii) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid within, discharged by or stayed for a period of 60 days;
(viii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Significant Subsidiaries or any of its Joint Ventures
that would, if it were a Subsidiary, constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding Senior Notes will
become due and payable without further action or notice. Holders of the Senior
Notes may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding Senior Notes may direct the Trustee
in its exercise of any trust or power. The Trustee may withhold from holders
of the Senior Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Senior Notes pursuant
to the optional redemption provisions of the Indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted
by law upon the acceleration of the Senior Notes. If an Event of Default
occurs prior to April 15, 2001 by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Senior Notes prior to April 15,
2001, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the
acceleration of the Senior Notes.
The holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the holders of all
of the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Senior Notes by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for:
(i) the rights of holders of outstanding Senior Notes to receive payments
in respect of the principal of, premium, if any, and interest on such
Senior Notes when such payments are due from the trust referred to below;
(ii) the Company's obligations with respect to the Senior Notes
concerning issuing temporary Senior Notes, registration of Senior Notes,
mutilated, destroyed, lost or stolen Senior Notes and the maintenance of an
office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Senior Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the Senior Notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Senior Notes are being defeased to maturity or to a
particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the holders of
the outstanding Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the holders of the
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outstanding Senior Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Senior Note selected for redemption. Also, the Company is not
required to transfer or exchange any Senior Note for a period of 15 days
before a selection of Senior Notes to be redeemed.
The registered holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next three succeeding paragraphs, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the
holders of at least a majority in aggregate outstanding principal amount of
the Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes), and any existing default or compliance with any provision of the
Indenture or the Senior Notes may be waived with the consent of the holders of
a majority in principal amount of the then outstanding Senior Notes (including
consents obtained in connection with a tender offer or exchange offer for
Senior Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting holder):
(i) reduce the principal amount of Senior Notes whose holders must
consent to an amendment, supplement or waiver;
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(ii) reduce the principal of or change the fixed maturity of any Senior
Note or alter the provisions with respect to the redemption of the Senior
Notes (other than provisions relating to the covenants described above
under the caption "--Offer to Purchase Upon Change of Control" and "--Asset
Sales");
(iii) reduce the rate of or change the time for payment of interest on
any Senior Note;
(iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Senior Notes (except a rescission of
acceleration of the Senior Notes by the holders of at least a majority in
aggregate principal amount of the Senior Notes and a waiver of the payment
default that resulted from such acceleration);
(v) make any Senior Note payable in money other than that stated in the
Senior Notes;
(vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Senior Notes to
receive payments of principal of or premium, if any, or interest on the
Senior Notes;
(vii) waive a redemption payment with respect to any Senior Note (other
than a payment required by the covenants described above under the captions
"Offer to Purchase upon Change of Control" or "Certain Covenants--Asset
Sales"); and
(viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Senior
Notes, the Company and the Trustee may amend or supplement the Indenture or
the Senior Notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Senior Notes in addition to or in place of certificated
Senior Notes, to provide for the assumption of the Company's obligations to
holders of Senior Notes in the case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the holders of
Senior Notes or that does not adversely affect the legal rights under the
Indenture of any such holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign. The Trustee also serves as Registrar and
Paying Agent and Trustee under certain indentures governing debt securities of
Adelphia.
The holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any holder of Senior Notes, unless such holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Registration Rights
Agreement pursuant to which the Company agreed to file the Exchange Offer
Registration Statement with the Commission. If (i) the Company
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is not required to file the Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted
by applicable law or Commission policy or (ii) any holder of Transfer
Restricted Securities notifies the Company within the specified time period
that (A) it is prohibited by law or Commission policy from participating in
the Exchange Offer or (B) that it may not resell the New Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer
and owns Senior Notes acquired directly from the Company or an affiliate of
the Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Senior Notes by the holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Old Note until (i) the
date on which such Old Note has been exchanged by a person other than a
broker-dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Old Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Old Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Senior Note is distributed to the
public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to October 12, 1996, (ii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to
issue, on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, New
Notes in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iii) if obligated to file the Shelf Registration Statement, the
Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 30 days after such filing obligation arises
(and in any event by October 12, 1996) and to cause the Shelf Registration to
be declared effective by the Commission on or prior to 30 days after such
obligation arises. If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for
such effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
Consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company must
pay Liquidated Damages to each holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of
such Registration Default, at a rate of 0.5% per annum, determined daily, on
the Accreted Value of the Senior Notes (or after April 15, 2001, on the
principal amount of the Senior Notes) as of the immediately preceding interest
payment date. Such interest rate will increase by an additional 0.25% per
annum at the beginning of each subsequent 90-day period up to a maximum
aggregate increase of 2.0% per annum until all Registration Defaults have been
cured, at which time the accrual rate borne by the Senior Notes will be
reduced to the original accrual rate. All accrued Liquidated Damages will be
paid by the Company on each Damages Payment Date to the Global Senior Note
holder by wire transfer of immediately available funds or by federal funds
check and to holders of Certificated Securities by mailing checks to their
registered addresses.
Holders of Old Notes are required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf
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Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Old Notes included in the Shelf
Registration Statement and benefit from the provisions set forth above.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Hyperion
Telecommunications, Inc., 5 West 3rd Street, Coudersport, Pennsylvania 16915;
Attention: Controller.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Accreted Value" means, as of any date of determination prior to April 15,
2001, with respect to any Senior Note, the sum of (a) the initial offering
price (which shall be calculated by discounting the aggregate principal amount
at maturity of such Senior Note at a rate of 13% per annum, compounded semi-
annually on each April 15 and October 15 from April 15, 2001 to the date of
issuance) of such Senior Note and (b) the portion of the excess of the
principal amount of such Senior Note over such initial offering price which
shall have been accreted thereon through such date, such amount to be so
accreted on a daily basis at the rate of 13% per annum of the initial offering
price of such Senior Note, compounded semi-annually on each April 15 and
October 15 from the date of issuance of the Senior Notes through the date of
determination, computed on the basis of a 360-day year of twelve 30-day
months.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise. For
purposes of the Indenture, beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control; provided, that no Local
Partner will be deemed an affiliate of a Subsidiary or a Joint Venture solely
as a result of such Local Partner's ownership of more than 10% of the Voting
Stock of such Subsidiary or Joint Venture.
"Annualized Pro Forma EBITDA" means with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter for which internal
financial statements are then available multiplied by four.
"Asset Sale" means
(i) the sale, lease, conveyance, disposition or other transfer of any
assets (including, without limitation, by way of a Sale and Leaseback
Transaction) other than (a) sales of inventory in the ordinary course of
business consistent with past practices and (b) issuances and sales by the
Company of its Equity Interests (provided that the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Change of
Control" and/or the provisions described above under the
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caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and
(ii) the issuance or sale by the Company or any of its Subsidiaries of
Equity Interests of any of the Company's Subsidiaries or Joint Ventures, in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess
of $1.0 million or (b) for net proceeds in excess of $1.0 million.
Notwithstanding the foregoing: (x) a transfer of assets by the Company to a
Wholly Owned Subsidiary or by a Subsidiary to the Company or to another Wholly
Owned Subsidiary, (y) an issuance of Equity Interests by a Subsidiary to the
Company or to a Wholly Owned Subsidiary and (z) a Restricted Payment that is
permitted by the covenant described above under the caption "--Restricted
Payments" will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any U.S. commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and
(iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard
& Poor's Corporation and in each case maturing within six months after the
date of acquisition.
"Consolidated Interest Expense" means, for any Person, for any period, the
aggregate of the following for such Person for such period determined on a
consolidated basis in accordance with GAAP: (a) the amount of interest in
respect of Indebtedness (including amortization of original issue discount,
amortization of debt issuance costs, and non-cash interest payments on any
Indebtedness and the interest portion of any deferred payment obligation) and
(b) the interest component of rentals in respect of any Capital Lease
Obligation paid, in each case whether accrued or scheduled to be paid or
accrued by such Person during such period to the extent such amounts were
deducted in computing Consolidated Net Income, determined on a consolidated
basis in accordance with GAAP. For purposes of this definition, interest on a
Capital Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP consistently applied.
"Consolidated Leverage Ratio" means, for any Person, as of any date, the
ratio of (i) the sum of the aggregate outstanding amount of all Indebtedness
of a Person and its Subsidiaries (other than any Indebtedness
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of a General Partner Subsidiary to the extent that such Indebtedness has been
incurred in connection with such General Partner Subsidiary's partnership
interest in the Restricted Joint Venture of which such General Partner
Subsidiary is a general partner) determined on a consolidated basis in
accordance with GAAP to (ii) Annualized Pro Forma EBITDA.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary
or that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions actually paid
in cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii) the
Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by such Person or a
consolidated Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount
and expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreement" means, with respect to any Person, any agreement entered
into by and among such Person and one or more commercial banks or financial
institutions, providing for senior term or revolving credit borrowings of a
type similar to credit agreements typically entered into by commercial banks
and financial institutions, including any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such credit agreement and related agreements may be amended,
extended, refinanced, renewed, restated, replaced or refunded from time to
time.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense of the Company paid or accrued by the Company from and after
the first day of the first fiscal quarter beginning after the date of the
Indenture to the end of the fiscal quarter immediately preceding a proposed
Restricted Payment, determined on a consolidated basis in accordance with
GAAP.
"Cumulative Pro Forma EBITDA" means the cumulative EBITDA of the Company
from and after the first day of the first fiscal quarter beginning after the
date of the Indenture to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero.
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"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Senior Notes mature.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period minus (B) all non-cash items
increasing Consolidated Net Income for such period, all for such Person and
its Subsidiaries determined in accordance with GAAP consistently applied.
"Enhanced Services Provider" means (i) !NTERPRISE, a wholly owned subsidiary
of US West, (ii) any nationally recognized Person which provides enhanced
telecommunications services, including but not limited to frame relay,
Asynchronous Transfer Mode data transport, business video conferencing,
private line data interconnect service and LAN connection and monitoring
services, or (iii) any Person that has at least 500 existing enhanced data
services installations in the United States.
"Enhanced Services Venture" means any entity in which any Qualified
Subsidiary or Permitted Joint Venture owns at least 50% of the Equity
Interest, provided that the remainder of the Equity Interest is owned by an
Enhanced Services Provider.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means the Senior Notes and any other Indebtedness of
the Company and its Subsidiaries in existence on the date of the Indenture.
"Existing Networks" means the telecommunications networks operated by all
Joint Ventures, the Company and its Subsidiaries, including all networks under
construction, on the date of the Indenture.
"Fiber Lease Agreements" means the agreements relating to fiber leases as
set forth on Schedule A to the Indenture.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"General Partner Subsidiary" means a direct or indirect Wholly Owned
Subsidiary of the Company that (i) is a general partner or stockholder of a
Restricted Joint Venture and (ii) (a) is not engaged in any trade or business
other than the holding, voting, disposing of or taking any action with respect
to its Equity Interest in such Restricted Joint Venture, (b) has no material
assets other than its Equity Interest in such Restricted Joint Venture, (c)
has no material liabilities other than liabilities arising (A) as a result of
the guarantee by such General Partner Subsidiary's guarantee of Indebtedness
incurred by the Restricted Joint Venture of which such General Partner
Subsidiary is a general partner or (B) by operation of law; provided that, for
purposes of this definition, Hyperion Telecommunications of Virginia, Inc. and
Hyperion Telecommunications of New York, Inc. shall be deemed to be General
Partner Subsidiaries for all purposes in the Indenture so long as Hyperion
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Telecommunications of Virginia, Inc. and Hyperion Telecommunications of New
York, Inc. do not engage in any operations or business that is materially
different from the operations or business engaged in by such companies on the
date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Indebtedness" means, with respect to any Person, (a) any liability of any
Person, whether or not contingent (i) for borrowed money, or under any
reimbursement obligation relating to a letter of credit, bankers' acceptance
or note purchase facility; or (ii) evidenced by a bond, note, debenture or
similar instrument (including a purchase money obligation); or (iii) for the
payment of money relating to a lease that is required to be classified as a
Capitalized Lease Obligation in accordance with GAAP; or (iv) for Disqualified
Stock; or (v) for preferred stock of any Subsidiary (other than preferred
stock held by the Company or any of its Subsidiaries); (b) any liability of
others described in the preceding clause (a) that the Person has guaranteed,
that is recourse to such Person or that is otherwise its legal liability; and
(c) any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in clauses (a) and (b)
above.
"Initial Public Offering" means an initial underwritten public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act of 1933, as amended.
"Intercompany Notes" means the intercompany notes issued by Subsidiaries and
Joint Ventures of the Company in favor of the Company or its Subsidiaries to
evidence loans by the Company to such Subsidiary or Joint Venture, in each
case, in the form attached as Annex A to the Indenture.
"Invested Equity Capital" means, with respect to any Company's Subsidiaries
or Joint Ventures as of any date, the sum of (i) the total dollar amount
contributed in cash plus the value of all property contributed (valued at the
lower of fair market value of such property at the time of contribution,
determined in good faith by the Company's Board of Directors, or the book
value of such property at the time of contribution on the books of the Person
making such contribution) to such Subsidiary or Joint Venture, as the case may
be, since the date of its formation in the form of common equity plus, without
duplication, (ii) the total dollar amount contributed in cash plus the value
of all property contributed (valued at the lower of fair market value of such
property at the time of contribution, determined in good faith by the
Company's Board of Directors, or the book value of such property at the time
of contribution on the books of the Person making such contribution) to such
Subsidiary or Joint Venture, as the case may be, since the date of its
formation by Local Partners (and their Affiliates) in consideration of the
issuance of preferred equity on a basis that is substantially proportionate to
their common equity interests plus, without duplication, (iii) the total
dollar amount contributed in cash plus the value of all property contributed
(valued at the lower of fair market value of such property at the time of
contribution, determined in good faith by the Company's Board of Directors, or
the book value of such property at the time of contribution on the books of
the Person making such contribution) to such Subsidiary or Joint Venture since
the date of its formation by the Company in consideration of the issuance of
preferred equity less (iv) the fair market value of all dividends and other
distributions (in respect of any Equity Interest and in whatever form and
however designated) made by such Subsidiary or Joint Venture, as the case may
be, since the date of its formation to the holders of its common equity (and
their Affiliates) provided that in no event shall the aggregate amount of such
dividends and other distributions made by such Subsidiary or Joint Venture, as
the case may be, to any such Person (or its Affiliates) reduce the Invested
Equity Capital of such Subsidiary or Joint Venture, as the case may be, by
more than the total contributions (per clauses (i) through (iii) above) to
such Subsidiary or Joint Venture, as the case may be, by such Person (and its
Affiliates).
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), capital contributions,
purchases or other acquisitions for consideration of
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Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided that an acquisition of assets, Equity Interests
or other securities by the Company for consideration consisting solely of
common equity securities of the Company shall not be deemed to be an
Investment. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed
to have made an Investment on the date of any such sale or disposition equal
to the fair market value of the Equity Interests of such Subsidiary not sold
or disposed of.
"Joint Venture" means a corporation, partnership or other entity engaged in
one or more Telecommunications Businesses (i) in which the Company or its
Subsidiaries owns, directly or indirectly, an Equity Interest with the balance
of the Equity Interest thereof being held by one or more Local Partners and
(ii) that is managed and operated by the Company or any of its Subsidiaries.
"Joint Venture Investment" means Investments in Joint Ventures.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Local Partner" means, with respect to any Joint Venture, (i) the Joint
Venture partners set forth on Schedule B to the Indenture, and (ii) any other
Person, provided that such other Person (a) is a major cable company or
utility that has a substantial presence within the specific market of such
Joint Venture, which presence shall be evidenced, (1) in the case of a cable
company, by such company having a market share consisting of at least 50% of
the total number of cable subscribers in such market and (2) in the case of a
utility company, by such company having at least 75% of the total customer
base of such market or (b) is a Wholly Owned Subsidiary of a major cable
company or utility that (1) meets the criteria set forth in the immediately
preceding clause (a) or (2) has all of its initial capital contributions under
the agreement governing the Joint Venture fully and unconditionally
guaranteed, until such time as all such contributions have been made, by one
or more Persons who meet the criteria set forth in the immediately preceding
clause (a).
"Local Partner Agreements" means the joint venture agreements with Local
Partners, as set forth on Schedule C to the Indenture.
"Management Agreements" means the agreements governing the management of the
networks, as set forth on Schedule D to the Indenture.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale and principal payments
on indebtedness received in any Asset Sale, as and when received), net of the
direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance
with GAAP.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or
loss, together with any related provision for taxes on such gain or loss,
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to Sale and Leaseback Transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any
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Indebtedness of such Person or any of its Subsidiaries and (ii) any
extraordinary or nonrecurring gain or loss, together with any related
provision for taxes on such extraordinary or nonrecurring gain or loss.
"New Telecommunications Service Market" means a Telecommunications Service
Market in an area that is not within ten miles of any of the Company's
Existing Networks.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Subsidiaries nor any of its Permitted Joint Ventures (a)
provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or indirectly
liable (as a guarantor, co-obligor or otherwise) or (c) constitutes the
lender; (ii) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against a Restricted Joint
Venture) would permit (upon notice, lapse of time, the occurrence, or failure
to occur, of any other condition or event or any combination thereof) any
holder of any other Indebtedness of the Company, any of its Subsidiaries or
any of its Permitted Joint Ventures to declare a default on such other
Indebtedness or cause or permit the payment thereof to be accelerated prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company, any of its Subsidiaries or any of its Permitted Joint Ventures;
provided that the recourse (if any) of a holder of such Indebtedness to the
General Partner Subsidiary of a Restricted Joint Venture in which such General
Partner Subsidiary is a general partner as a result of being a general partner
of such Restricted Joint Venture will not be considered credit support or
direct or indirect liability of such General Partner Subsidiary for purposes
of clauses (i)(a), (ii)(b) and (iii) above.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means
(a) any Investment in a Wholly Owned Subsidiary of the Company that is
engaged, either directly or indirectly through a Qualified Subsidiary or
Joint Venture, in the Telecommunications Business;
(b) any Investment in a Qualified Subsidiary of the Company that is
directly engaged in the Telecommunications Business;
(c) any Investment in Cash Equivalents;
(d) any Investment in a Person that is not a Subsidiary of the Company,
if as a result of such Investment (i)(A) such Person becomes a Qualified
Subsidiary or Wholly Owned Subsidiary of the Company or (B) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Qualified Subsidiary and (ii)(A) such Wholly Owned Subsidiary, either
directly or indirectly through a Qualified Subsidiary or a Joint Venture,
is engaged in the Telecommunications Business or (B) such Qualified
Subsidiary is directly engaged in the Telecommunications Business;
(e) any Permitted Joint Venture Investment;
(f) any Investment made as a result of the receipt of non-cash
consideration (whether or not such non-cash consideration is deemed to be
cash for the purposes of such covenant) from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Certain Covenants--Asset Sales"; or
(g) any Investment in an Enhanced Services Venture.
"Permitted Joint Venture" means any Joint Venture in which the Company has,
directly or indirectly, a 45% or greater Equity Interest.
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"Permitted Joint Venture Investment" means any Joint Venture Investment by
the Company or a Wholly Owned Subsidiary of the Company if, after such Joint
Venture Investment, the Company has, directly or indirectly, a 45% or greater
Equity Interest in such Joint Venture.
"Permitted Liens" means
(i) Liens on the property of the Company, any Subsidiary or any Permitted
Joint Venture securing Obligations under Indebtedness that may be incurred
pursuant to clause (i) of the covenant entitled "--Incurrence of
Indebtedness and Issuance of Preferred Stock;"
(ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company, any Subsidiary or any
Permitted Joint Venture; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company, any Subsidiary or any Permitted Joint Venture, provided that such
Liens were in existence prior to the contemplation of such acquisition;
(v) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(vi) Liens existing on the date of the Indenture;
(vii) Liens on property of Subsidiaries and Permitted Joint Ventures
securing Obligations under Indebtedness incurred pursuant to the proviso in
the last paragraph of the covenant entitled "--Incurrence of Indebtedness
and Issuance of Preferred Stock," but only to the extent that (a) in the
case of Subsidiaries and Permitted Joint Ventures that are incurring
Indebtedness other than Related Network Debt, such Liens secure only such
Indebtedness incurred by such Subsidiary or such Joint Venture; and (b) in
the case of Subsidiaries and Joint Ventures that are incurring Related
Network Debt, such Liens secure only such Related Network Debt;
(viii) Liens securing Obligations under the Senior Notes and the
Indenture;
(ix) Liens securing Obligations under Vendor Debt pursuant to clause (ii)
of the covenant entitled "--Incurrence of Indebtedness and Issuance of
Preferred Stock," provided that the principal amount of such Vendor Debt
secured by such Lien does not exceed 100% of the purchase price or cost of
acquisition, construction or improvement of the Telecommunications Related
Assets subject to such Liens;
(x) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(xi) Liens incurred in the ordinary course of business of the Company,
any Subsidiary or any Permitted Joint Venture with respect to obligations
that do not exceed $5.0 million at any one time outstanding and that (a)
are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company, such Subsidiary or such Permitted Joint Venture;
and
(xii) Liens securing Refinancing Indebtedness, but only if, and to the
extent, that such Liens that are incurred in connection with such
Refinancing Indebtedness do not encumber any assets or properties (or
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interests therein) other than those assets or properties (or interests
therein) subject to Liens pursuant to the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Preferred Stock" for any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares
of Capital Stock of any other class of such Person.
"Principals" means John J. Rigas and members of his immediate family, any of
their respective spouses, estates, lineal descendants, heirs, executors,
personal representatives, administrators, trusts for any of their benefit and
charitable foundations to which shares of the Company's Capital Stock
beneficially owned by any of the foregoing have been transferred.
"Pro Forma EBITDA" means, for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis in accordance with GAAP
consistently applied, after giving effect to the following: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have made any
Asset Sale, Pro Forma EBITDA for such Person and its Subsidiaries for such
period shall be reduced by an amount equal to the Pro Forma EBITDA (if
positive) directly attributable to the assets which are the subject of such
Asset Sale for the period or increased by an amount equal to the Pro Forma
EBITDA (if negative) directly attributable thereto for such period and (ii)
if, during or after such period, such Person or any of its Subsidiaries
completes an acquisition of any Person or business which immediately after
such acquisition is a Subsidiary of such Person or a Subsidiary of such
Person, Pro Forma EBITDA shall be computed so as to give pro forma effect to
such Asset Sale or the acquisition of such Person or business, as the case
maybe.
"Qualified Subsidiary" means any Subsidiary of the Company in which a Local
Partner or Local Partners own at least 5% but less than 50% of the Equity
Interests of such Subsidiary; provided that such Subsidiary remains a
Subsidiary of the Company at all times for purposes of the Indenture.
"Refinancing Indebtedness" means any Indebtedness of the Company, any of its
Subsidiaries or any of its Permitted Joint Ventures issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company, any of its Subsidiaries
or any of its Permitted Joint Ventures; provided that: (i) the principal
amount (or accreted value, if applicable) of such Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith);
(ii) such Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Senior Notes, such
Refinancing Indebtedness has a final maturity date later than the final
maturity date of the Senior Notes, and is subordinated in right of payment to
the Senior Notes on terms at least as favorable to the holders of Senior Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iv) to the
extent that the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded was secured by Liens, any Liens being incurred in
connection with such Refinancing Indebtedness do not encumber any assets or
properties (or interests therein) other than those assets or properties (or
interests therein) subject to Liens pursuant to the documentation governing
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (v) such Indebtedness is incurred either by the Company, the
Subsidiary or the Permitted Joint Venture who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Related Network Debt" means any Credit Agreement entered into by and among
the Qualified Subsidiaries and/or Permitted Joint Ventures that comprise a
Related Network.
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"Related Networks" means any group of Qualified Subsidiaries or Permitted
Joint Ventures in which the same Local Partner owns, or the same group of
Local Partners own, all the Equity Interests of each such Qualified Subsidiary
or Permitted Joint Venture that comprise such Related Network that are not
owned by the Company.
"Required Capital Contribution" means any capital contribution made by
Hyperion Telecommunications, Inc. of Florida, pursuant to that certain
partnership agreement, relating to TCG South Florida, dated November 1, 1993.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Joint Venture" means any Joint Venture that is not a Permitted
Joint Venture, but only if such Joint Venture: (a) has no Indebtedness other
than Non-Recourse Debt; (b) is not a party to any agreement, contract,
arrangement or understanding with the Company, any of its Subsidiaries or any
of its Permitted Joint Ventures unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company,
such Subsidiary or such Permitted Joint Venture than those that might be
obtained at the time from Persons who are not Affiliates of the Company; and
(c) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company, any of its Subsidiaries or any of
its Permitted Joint Ventures. If, at any time, a Restricted Joint Venture
fails to meet the requirements of a Restricted Joint Venture by becoming a
Permitted Joint Venture or otherwise, it shall thereafter cease to be a
Restricted Joint Venture for purposes of the Indenture and (i) all of the then
outstanding Indebtedness of such entity shall be deemed to be incurred as of
the date on which such entity becomes a Permitted Joint Venture or otherwise
ceases to be a Restricted Joint Venture for purposes of the covenant entitled
"--Incurrence of Indebtedness and Issuance of Preferred Stock" (and if such
Indebtedness is not permitted to be incurred as of such date under such
covenant, the Company shall be in default of such covenant) and (ii) all of
the then outstanding Investments made by such entity since the date of the
Indenture, shall be deemed to have been made as of the date that such
Restricted Joint Venture becomes a Permitted Joint Venture or otherwise ceases
to be a Restricted Joint Venture for purposes of the covenant entitled "--
Restricted Payments" (and if such Investments are not permitted to be made as
of such date under such covenant, the Company shall be in default of such
covenant).
"Restricted Joint Venture Investment" means any Joint Venture Investment by
a General Partner Subsidiary if, after such Joint Venture Investment, such
Joint Venture is a Restricted Joint Venture.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which
has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any Person
to whom funds have been or are to be advanced by lender or investor on the
security of such property or asset. The stated maturity of such arrangement
shall be the date of the last payment of rent or any other amount due under
such arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"Significant Subsidiary" means, any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means with respect to any debt security, the date
specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable.
"Strategic Investor" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses that has, or 80% or more
of the voting power of the Capital Stock of which is owned by a Person that
has, an equity market capitalization, at the time (i) of its initial
Investment in the
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Company or (ii) it purchases an Equity Interest in a Subsidiary or Joint
Venture of the Company, as the case may be, in excess of $2.0 billion.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership of which more than 50% of the partnership's capital accounts,
distribution rights or general or limited partnership interests are owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Telecommunications Business" means the business of (i) transmitting, or
providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software and other devices
for use in a telecommunications business or (iii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified in (i) or (ii) above; provided that the determination of what
constitutes a Telecommunications Business shall be made in good faith by the
Board of Directors of the Company.
"Telecommunications Related Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended
for use in connection with a Telecommunications Business.
"Telecommunications Service Market" means a network built by the Company to
service a market.
"Vendor Debt" means any purchase money Indebtedness of the Company or any
Subsidiary incurred in connection with the acquisition of Telecommunications
Related Assets and which purchase money Indebtedness was extended by the
vendor of such Telecommunications Related Assets or an affiliate thereof.
"Voting Stock" of any person means Capital Stock of such person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such person, whether at all times or only so
long as no senior class of securities has voting power by reason of any
contingency.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests (other than
directors' qualifying shares) of which shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or a
combination thereof.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the New Notes will initially be
issued in the form of one or more registered notes in global form (the "New
Global Note," and together with the global notes representing the Old Notes,
the "Global Note"). The New Global Note will be deposited on the Exchange Date
with, or on behalf of, the Depositary and registered in the name of the Global
Note Holder.
New Notes that were issued as described below under "Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Series B Certificated Securities"). Upon the transfer to a qualified
institutional buyer of Certificated Securities initially issued to a purchaser
of the Units who does not hold its interest in the Units, the Senior Notes and
the Warrants (a "Non-Global Purchaser"), such Certificated Securities
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<PAGE>
may, unless the Global Note has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Note representing the
amount of the Senior Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively,
the "Indirect Participants" or the "Depositary's Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. Persons who are not Participants may beneficially own
securities held by or on behalf of the Depositary only through the
Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary ownership of the Senior Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Holders are advised that the laws of some states
require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Senior Notes
evidenced by the Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Senior
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Senior Notes evidenced by the Global Note. Beneficial owners
of Senior Notes evidenced by the Global Note will not be considered the owners
or Holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the records of the Depositary or for
maintaining, supervising or reviewing any records of the Depositary relating
to the Senior Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidation Damages, if any, on any Senior Notes registered in the name of the
Global Note Holder on the applicable record date will be payable by the
Trustee to or at the direction of the Global Note Holder in its capacity as
the registered Holder under the Indenture. Under the terms of the Indenture,
the Company and the Trustee may treat the Persons in whose names Senior Notes,
including the Global Note, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither the Company nor the
Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of Senior Notes (including principal,
premium, if any, interest and Liquidation Damages, if any). The Company
believes, however, that it is currently the policy of the Depositary to
immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of the Depositary.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Senior Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Senior Notes in the form of Certificated Securities. Upon any
such issuance, the Trustee is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such Person
or Persons (or the nominee of any thereof). If (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as
a depositary and the Company is unable to locate a qualified successor within
90 days or (ii) the Company, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Senior Notes in the form of
Certificated Securities under the
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<PAGE>
Indenture, then, upon surrender by the Global Note Holder of its Global Note,
Senior Notes in such form will be issued to each Person that the Global Note
Holder and the Depositary identify as being the beneficial owner of the
related Senior Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Senior Notes, and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the Global Note Holder or
the Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Senior Notes
represented by the Global Senior Note (including principal, premium, if any,
interest and Liquidated Damages, if any) be made in immediately available
funds. With respect to Certificated Securities, however, the Company will make
all payments of principal, premium, if any, interest and Liquidated Damages,
if any, by mailing a check to each Holder's registered address. Secondary
trading in long-term notes and debentures of corporate issuers is generally
settled in clearinghouse or next-day funds. In contrast, the Senior Notes
represented by the Global Note are expected to be eligible to trade in the
PORTAL Market and to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Senior
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in the
Certificated Securities will also be settled in immediately available funds.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of the Old Notes for the New Notes,
but does not purport to be a complete analysis of all potential tax effects.
The discussion is based upon the Code, Treasury Regulations, Internal Revenue
Service ("IRS") rulings and pronouncements and judicial decisions now in
effect, all of which are subject to change at any time by legislative,
judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the New
Notes. The following discussion assumes that holders hold the Old Notes and
the New Notes as capital assets within the meaning of Section 1221 of the
Code.
The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the exchange of the Old Notes for the New Notes or that any
such position would not be sustained.
The tax treatment of a holder may vary depending on his or its particular
situation or status. This summary does not address the tax consequences to
taxpayers who are subject to special rules such as insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign entities
and individuals, persons holding Old Notes or New Notes as a part of a hedging
or conversion transaction or a straddle and holders whose "functional
currency" is not the U.S. dollar, or aspects of federal income taxation that
may be relevant to a prospective investor based upon such investor's
particular tax situation. In addition, the description does not consider the
effect of any applicable foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE
The exchange of the New Notes for Old Notes should not constitute a
recognition event for federal income tax purposes. Consequently, no gain or
loss should be recognized by holders upon receipt of the New Notes. For
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<PAGE>
purposes of determining gain or loss upon the subsequent exchange of New
Notes, a holder's basis in the New Notes will be the same as a holder's basis
in the Old Notes exchanged therefor. Holders should be considered to have held
the New Notes from the time of their original acquisition of the Old Notes. As
used herein, the term "Senior Note" refers to both an Old Note and a New Note
received in exchange therefor.
THE SENIOR NOTES
Original Issue Discount. The Senior Notes will be issued with original issue
discount ("OID") for federal income tax purposes. Accordingly, a holder
generally will be required to recognize taxable income with respect to the
Senior Notes as the OID accrues, regardless of the holder's method of income
tax accounting.
The amount of OID on a Senior Note will be equal to the excess of the
"stated redemption price at maturity" of the Senior Note over the issue price
of the Senior Note. The stated redemption price at maturity of each Senior
Note will be the sum of all payments, including principal and interest,
required to be made thereunder until maturity. The issue price of a Senior
Note will be equal to that portion of the issue price of the Unit allocable to
the Senior Note. Accordingly, the Senior Notes will be issued with a
substantial amount of OID.
Taxation of Original Issue Discount. A holder of a Senior Note is required
to include in gross income an amount equal to the sum of the "daily portions"
of the OID for the Senior Note for all days during the taxable year in which
such holder holds the Senior Note ("accrued OID") without regard to when the
cash to which such income is attributable is received. The daily portion of
OID is determined by allocating to each day in any "accrual period" a pro rata
portion of OID allocable to that accrual period. The amount of OID allocable
to any full accrual period is an amount equal to the product of the Senior
Note's adjusted issue price at the beginning of such accrual period and its
yield to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period).
OID allocable to the final accrual period is the difference between the amount
payable at maturity and the adjusted issue price at the beginning of the final
accrual period. Special rules apply for calculating OID for an initial short
accrual period. The "adjusted issue price" of a Senior Note at the beginning
of any accrual period is equal to its issue price increased by the accrued OID
for each prior accrual period and reduced by the amount of any payments made
on such Senior Note on or before the first day of the accrual period. The
yield-to-maturity is the discount rate that, when used in computing the
present value of all principal and interest payments to be made on the Senior
Note, produces an amount equal to its issue price.
The accrual period generally is the six-month period ending on the day in
each calendar year corresponding to the day before the maturity date of the
Senior Note or the date six months before such day. The initial accrual period
of a Senior Note is the short period beginning on the issue date and ending
before the first day of the first full accrual period.
Applicable High Yield Discount Obligation
If the yield-to-maturity on the Senior Notes equals or exceeds the sum of
(x) the applicable federal long-term rate (a rate published by the IRS each
month for application during the following month) in effect at the time of
issuance of the Senior Notes (the "AFR") plus (y) five percentage points, the
Senior Notes will be considered "applicable high yield discount obligations"
under Section 163(i) of the Code. If so, the Company will not be allowed to
take a deduction for interest (including OID) accrued on the Senior Notes for
federal income tax purposes until such time as the Company actually pays such
interest (including OID) in cash or in other property (other than stock or
debt of the Company or certain related persons).
Moreover, if the yield-to-maturity on the Senior Notes exceeds the sum of
(x) the AFR and (y) 6% (such excess shall be referred to hereafter as the
"Disqualified Yield"), the deduction for interest (including OID) accrued on
the Senior Notes will be permanently disallowed (regardless of whether the
Company actually pays such interest or OID in cash or in other property) for
federal income tax purposes to the extent such interest or
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OID is attributable to the Disqualified Yield on the Senior Notes ("Dividend-
Equivalent Interest"). For purposes of the dividends-received deduction, such
Dividend-Equivalent Interest will be treated as a dividend to the extent it is
deemed to have been paid out of the Company's current or accumulated earnings
and profits. Accordingly, a holder of a Senior Note that is a corporation may
be entitled to take a dividends-received deduction with respect to any
Dividend-Equivalent Interest received by such corporate holder on such Senior
Note.
Sale, Redemption, Retirement or Other Taxable Disposition of Senior
Notes. In general, the holder of a Senior Note will recognize gain or loss
upon the sale, redemption, retirement or other taxable disposition of the
Senior Note measured by the difference between (i) the amount of cash and the
fair market value of property received in exchange therefor and (ii) the
holder's adjusted tax basis in the Senior Note.
An initial holder's tax basis in a Senior Note will generally be equal to
the portion of the issue price of a Unit allocated to such Senior Note
increased by the OID previously includible in gross income and reduced by any
payments on the Senior Note.
Any gain or loss on the sale, redemption, retirement or other taxable
disposition of a Senior Note should be capital gain or loss, provided the
Senior Note was a capital asset in the hands of the holder. Any capital gain
or loss will be long-term capital gain or loss if the Senior Note has been
held for more than one year and otherwise will be short-term capital gain or
loss.
Holders should be aware that the resale of a Senior Note may be affected by
the "market discount" rules of the Code under which a subsequent purchaser of
Senior Note acquiring the Senior Note at a market discount generally would be
required to include as ordinary income a portion of the gain realized upon the
disposition or retirement of such Senior Note to the extent of the market
discount that has accrued while the debt instrument was held by such holder.
INFORMATION REPORTING; BACKUP WITHHOLDING
The Company is required to furnish certain information to the IRS, and will
furnish annually to record holders of the Senior Notes, other than
corporations and other exempt holders, information with respect to interest
paid and the amount of OID accrued on the Senior Notes. Holders who purchase
Senior Notes for an amount other than the adjusted issue price and/or on a
date other than the first day of an accrual period are required to determine
for themselves the amount of OID, if any, they are required to include in
gross income for federal income tax purposes.
The backup withholding rules require a payor to deduct and withhold a tax if
(i) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor, (ii) the IRS notifies the payor that the TIN furnished by the payee is
incorrect, (iii) the payee has failed to report properly the receipt of a
"reportable payment" on one or more occasions and the IRS has notified the
payor that withholding is required, or (iv) there has been a failure of the
payee to certify under the penalty of perjury that the payee is not subject to
withholding under Section 3406 of the Code. If any one of the foregoing events
occurs, the Company, its paying agent or other withholding agent will be
required to withhold a tax equal to 31% of any "reportable payment" made in
connection with the Senior Notes. A "reportable payment" includes, among other
things, interest (including OID) paid in respect of a Senior Note and amounts
paid through brokers in retirement of a Senior Note. Any amounts withheld from
a payment to a holder under the backup withholding rules will be allowed as a
refund or credit against such holder's federal income tax, provided that the
required information is furnished to the IRS. Certain holders (including,
among others, corporations and certain tax-exempt organizations) are not
subject to the backup withholding and information reporting requirements. A
holder should consult his or its tax advisor as to his or its qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption.
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DEDUCTIBILITY OF ORIGINAL ISSUE DISCOUNT
The deduction by the Company in respect of OID accrued with respect to the
Senior Notes will be limited in part and deferred in part if the Senior Notes
are "applicable high yield discount obligations." The Company anticipates that
the Senior Notes will be applicable high yield discount obligations because,
among other things, it is expected that the yield to maturity of the Senior
Notes will exceed the sum of the AFR plus five percentage points. If the
Senior Notes are applicable high yield discount obligations, then (i) if the
yield to maturity of the Senior Notes exceeds the sum of the AFR plus six
percentage points (such excess referred to below as the "Disqualified Yield"),
the deduction for OID accrued on the Senior Notes will be permanently
disallowed to the extent such OID is attributable to the Disqualified Yield,
and such OID would be treated as dividends to corporate holders of the Senior
Notes for purposes of the dividends-received deduction (to the extent that
such amounts would have been treated as dividends had they been distributions
made by the Company with respect to its stock), and (ii) the remainder of the
OID on the Senior Notes would not be deductible by the Company until paid.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes
acquired as a result of market-making activities or other trading activities.
The Company has agreed that it will make this Prospectus available to any
broker-dealer for use in connection with any such resale for a period of 365
days after the Expiration Date or until all participating broker-dealers have
so resold.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concession from any
such broker-dealer and/or the purchasers of any New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker-dealer that participates in a
distribution of New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of New Notes and
any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the
Exchange Offer.
LEGAL MATTERS
The validity of the New Notes will be passed upon on behalf of the Company
by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania.
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EXPERTS
The financial statements as of March 31, 1994 and 1995 and December 31, 1995
and for each of the two years in the period ended March 31, 1995 and the nine
months ended December 31, 1995 included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein (which report expresses an unqualified opinion and includes
an explanatory paragraph referring to a change in the method of accounting for
income taxes), and have been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets, March 31, 1994, 1995 and December 31, 1995.... F-3
Consolidated Statements of Operations, Years Ended March 31, 1994 and 1995
and the Nine Months Ended December 31, 1995............................... F-4
Consolidated Statements of Stockholders' Equity (Deficiency), Years Ended
March 31, 1994 and 1995 and the Nine Months Ended December 31, 1995....... F-5
Consolidated Statements of Cash Flows, Years Ended March 31, 1994 and 1995
and the Nine Months Ended December 31, 1995............................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Hyperion Telecommunications, Inc.:
We have audited the accompanying consolidated balance sheets of Hyperion
Telecommunications, Inc. and subsidiaries as of March 31, 1994 and 1995 and
December 31, 1995 and the related consolidated statements of operations,
stockholders' equity (deficiency) and cash flows for the years ended March 31,
1994 and 1995 and the nine months ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Hyperion Telecommunications,
Inc. and subsidiaries at March 31, 1994 and 1995 and December 31, 1995 and the
results of their operations and their cash flows for the years ended March 31,
1994 and 1995 and the nine months ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, effective
April 1, 1993, the Company changed its method of accounting for income taxes.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania February 16, 1996 (March 19, 1996 as to Note 5; May
16, 1996 as to Notes 3 and 4).
F-2
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
---------------- DECEMBER 31,
1994 1995 1995
------- ------- ------------
<S> <C> <C> <C>
ASSETS:
- -------
Current assets:
Cash and cash equivalents..................... $ -- $ -- $ --
Other current assets.......................... 132 511 433
Due from affiliates--net...................... 2,053 1,799 --
------- ------- -------
Total current assets........................ 2,185 2,310 433
Investments..................................... 6,837 12,564 18,510
Property, plant and equipment--net.............. 5,085 7,538 11,259
Other assets--net............................... 607 712 593
Deferred income taxes--net...................... 51 88 153
------- ------- -------
Total....................................... $14,765 $23,212 $30,948
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY):
- ------------------------------------
Current liabilities:
Accounts payable.............................. $ 670 $ 1,169 $ 3,016
Due to affiliates--net........................ -- -- 1,368
Other current liabilities..................... 138 205 184
------- ------- -------
Total current liabilities................... 808 1,374 4,568
Note payable--Adelphia.......................... 19,968 35,541 49,946
------- ------- -------
Total liabilities........................... 20,776 36,915 54,514
------- ------- -------
Commitments and contingencies (Note 6)
Stockholders' equity (deficiency):
Common stock, $.01 par value, 30,000,000
shares authorized, 10,000,000 shares
outstanding................................ 100 100 100
Accumulated deficit........................... (6,111) (13,803) (23,666)
------- ------- -------
Total stockholders' equity (deficiency)..... (6,011) (13,703) (23,566)
------- ------- -------
Total....................................... $14,765 $23,212 $30,948
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED MARCH 31, ENDED
---------------------- DECEMBER 31,
1994 1995 1995
---------- ---------- ------------
<S> <C> <C> <C>
Revenues.................................. $ 434 $ 1,768 $ 2,496
---------- ---------- -------
Operating expenses:
Network operations...................... 330 1,382 1,878
Selling, general and administrative..... 2,045 2,524 2,375
Depreciation and amortization........... 189 463 861
---------- ---------- -------
Total................................. 2,564 4,369 5,114
---------- ---------- -------
Operating loss............................ (2,130) (2,601) (2,618)
---------- ---------- -------
Other (expense):
Interest expense and fees............... (2,164) (3,321) (4,152)
Equity in net loss of joint ventures.... (528) (1,799) (3,151)
---------- ---------- -------
Total................................. (2,692) (5,120) (7,303)
---------- ---------- -------
Loss before income taxes and cumulative
effect of change
in accounting principle.................. (4,822) (7,721) (9,921)
Income tax benefit........................ 55 29 58
---------- ---------- -------
Loss before cumulative effect of change in
accounting principle...................... (4,767) (7,692) (9,863)
Cumulative effect of change in accounting
for income taxes.......................... 42 -- --
---------- ---------- -------
Net loss.................................. $(4,725) $(7,692) $(9,863)
========== ========== =======
Loss per weighted average share of common
stock before cumulative effect of change
in accounting principle.................. $ (0.48) $ (0.77) $ (0.99)
Cumulative effect per weighted average
share of common stock of change in
accounting for income taxes.............. 0.01 -- --
---------- ---------- -------
Net loss per weighted average share of
common stock.............................. $ (0.47) $ (0.77) $ (0.99)
========== ========== =======
Weighted average shares of common stock
outstanding............................... 10,000 10,000 10,000
========== ========== =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON ACCUMULATED STOCKHOLDERS'
STOCK DEFICIT EQUITY (DEFICIENCY)
------ ----------- -------------------
<S> <C> <C> <C>
Balance, March 31, 1993.................. $100 $ (1,386) $ (1,286)
Net loss............................... -- (4,725) (4,725)
---- -------- --------
Balance, March 31, 1994.................. 100 (6,111) (6,011)
Net loss............................... -- (7,692) (7,692)
---- -------- --------
Balance, March 31, 1995 100 (13,803) (13,703)
Net loss............................... -- (9,863) (9,863)
---- -------- --------
Balance, December 31, 1995............... $100 $(23,666) $(23,566)
==== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, NINE MONTHS ENDED
--------------------- DECEMBER 31,
1994 1995 1995
---- ---- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(4,725) $ ( 7,692) $( 9,863)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation...................... 183 397 752
Amortization...................... 6 66 109
Equity in net loss of joint
ventures........................ 528 1,799 3,151
Non-cash interest expense......... 2,164 3,321 4,152
Cumulative effect of accounting
change.......................... (42) -- --
Deferred income taxes............. (9) (37) (65)
Changes in operating assets and
liabilities:
Other assets--net............... (535) (550) 88
Accounts payable................ 223 499 1,847
Other liabilities--net.......... 86 67 (21)
--------- ---------- --------
Net cash (used in) provided by
operating activities.................. (2,121) (2,130) 150
--------- ---------- --------
Cash flows from investing activities:
Expenditures for property, plant
and equipment.................... (3,097) (2,850) (4,473)
Investments in joint ventures...... (5,510) (7,526) (9,097)
--------- ---------- --------
Cash used in investing activities..... (8,607) (10,376) (13,570)
--------- ---------- --------
Cash flows from financing activities:
Borrowings on notes payable--
Adelphia......................... 12,990 12,252 11,776
Advances from (to) related parties. (2,381) 254 1,644
--------- ---------- --------
Net cash provided by financing
activities.......................... 10,609 12,506 13,420
--------- ---------- --------
Net decrease in cash and cash
equivalents......................... (119) -- --
Cash and cash equivalents beginning of
year................................ 119 -- --
--------- ---------- --------
Cash and cash equivalents end of year. $ -- $ -- $ --
========= ========== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(1)THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The consolidated financial statements include the accounts of Hyperion
Telecommunications, Inc. and its wholly-owned subsidiaries (the "Company").
All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company was formed in 1991 and is an 89% owned subsidiary
of Adelphia Communications Corporation ("Adelphia"). The remaining 11% is
owned by certain key Company officers.
The Company provides telecommunications service through its subsidiaries and
joint ventures, in which it has less than a majority equity interest. The
Company's efforts have been directed primarily toward becoming an owner and
manager of competitive access providers ("CAP") of business telecommunications
services in selected mid-sized cities. The Company generally partners with a
local cable television or utility company, whose fiber facilities are located
in the market areas, to build competitive access fiber optic networks. The
Company then operates the networks for a management fee. Each network provides
local special access, carrier-to-carrier, and point-to-point
telecommunications services to major businesses and government customers. The
Company's revenues are derived from a combination of direct business
telecommunication services provided by its subsidiaries and management fees
from its unconsolidated joint ventures.
Joint ventures in which the Company does not have a majority interest are
accounted for under the equity method of accounting.
Cash and cash equivalents
Cash and cash equivalents generally consist of highly liquid instruments
with an initial maturity date of three months or less.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Costs capitalized include amounts directly associated with
network engineering, design and construction.
Provision for depreciation of property, plant and equipment is computed
using the straight-line method over the estimated useful lives of the assets
beginning in the month the asset is available for use or is acquired.
The estimated useful lives of the Company's principal classes of property,
plant and equipment are as follows:
<TABLE>
<S> <C>
Telecommunications networks...................................... 10-20 years
Network monitoring equipment..................................... 5-10 years
Other............................................................ 3-10 years
</TABLE>
Revenue Recognition
The Company recognizes revenues related to management and network monitoring
of the joint ventures in the month that the related services are provided. The
Company recognizes revenue from telecommunications services in the month the
related service is provided. Revenues on billings to customers for services in
advance of providing such services are deferred and recognized when earned.
F-7
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(1)THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Loss Per Common Share
The computation of loss per common share is based upon the weighted average
number of common shares outstanding. All references in the accompanying
consolidated financial statements to the number of shares of common stock have
been retroactively restated to reflect the stock split (See Note 5).
Income Taxes
Deferred income taxes are recognized for the tax effects of temporary
differences between financial statement and income tax bases of assets and
liabilities and for loss carryforwards for which income tax benefits are
expected to be realized in future years. A valuation allowance is established
to reduce deferred tax assets to the net amount that management believes will
more likely than not be realized. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
Other Assets
Costs incurred in developing new networks or expanding existing networks,
including network design, negotiating rights-of-way and obtaining
legal/regulatory authorizations are deferred and amortized over five years.
Pre-operating costs represent certain nondevelopment costs incurred during the
pre-operating phase of a newly constructed network and are amortized over
five-year periods commencing with the start of operations.
Asset Impairments
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." In
accordance with SFAS No. 121, the Company reviews the carrying amounts of its
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Measurement of any
impairment would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life of the assets with their
net carrying value. The adoption of SFAS No. 121 in the year ended March 31,
1995 had no effect on the consolidated financial statements of the Company.
Financial Instruments
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of accounts receivable. Concentration of
credit risk with respect to accounts receivable is limited due to the
dispersion of the Company's customer base among different entities and
geographic areas. The carrying value of the Note Payable--Adelphia (see Note
4) at March 31, 1994 and 1995 and December 31, 1995 approximates its fair
value based upon the terms of the note in comparison with other similar
instruments.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(2)PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------- DECEMBER 31,
1994 1995 1995
------ ------ ------------
<S> <C> <C> <C>
Telecommunications networks...................... $1,592 $1,704 $ 5,635
Network monitoring equipment..................... 1,778 3,244 4,652
Construction in process.......................... 1,735 2,910 1,937
Other............................................ 173 270 377
------ ------ -------
5,278 8,128 12,601
Less accumulated depreciation.................... (193) (590) (1,342)
------ ------ -------
Total.......................................... $5,085 $7,538 $11,259
====== ====== =======
</TABLE>
(3)INVESTMENTS
The equity method of accounting is used to account for investments in joint
ventures in which the Company owns less than a majority interest. Under this
method, the Company's initial investment is recorded at cost and subsequently
adjusted for the amount of its equity in the net income or losses of its joint
ventures. Dividends or other distributions are recorded as a reduction of the
Company's investment. Investments in joint ventures accounted for using the
equity method reflect the Company's equity in their underlying net assets.
The Company's nonconsolidated investments are as follows:
<TABLE>
<CAPTION>
MARCH 31,
OWNERSHIP --------------- DECEMBER 31,
PERCENTAGE 1994 1995 1995
---------- ------ ------- ------------
<S> <C> <C> <C> <C>
EQUITY BASIS INVESTMENTS:
Continental Fiber Technologies
(Jacksonville)........................ 20% $1,296 $ 1,467 $ 4,093
Multimedia Hyperion Telecommunications
(Wichita)............................. 49.9% 647 1,445 2,470
Louisville Lightwave.................. 20% -- 531 896
NewChannels Hyperion
Telecommunications (Albany)........... 50% 97 924 924
NewChannels Hyperion
Telecommunications (Binghamton)....... 20% 266 355 505
NHT Partnership (Buffalo)............. 40% 778 1,369 2,282
NewChannels Hyperion
Telecommunications (Syracuse)......... 50% 1,625 2,957 3,215
Hyperion of Harrisburg................ 50% -- 701 1,200
Hyperion of Tennessee (Nashville)..... 25% 509 695 1,295
Alternet of Virginia (Richmond)....... 37% 1,060 1,633 2,427
New Jersey Fiber Technologies (New
Brunswick)............................ 19.7% 3 9 541
TCG of South Florida.................. 15.7% 1,250 2,981 4,008
Other ................................ Various 28 18 326
------ ------- -------
7,559 15,085 24,182
Cumulative equity in net losses....... (722) (2,521) (5,672)
------ ------- -------
Total Investments..................... $6,837 $12,564 $18,510
====== ======= =======
</TABLE>
F-9
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(3)INVESTMENTS, CONTINUED
Summarized combined unaudited financial information for the Company's
investments being accounted for using the equity method of accounting as of
and for the years ended March 31, 1994 and 1995 and the nine months ended
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------- DECEMBER 31,
1994 1995 1995
------- ------- ------------
<S> <C> <C> <C>
Current assets................................ $ 7,278 $ 6,842 $ 6,354
Non-current assets............................ 29,410 59,870 98,771
Current liabilities........................... 10,345 6,444 15,361
Non-current liabilities....................... 2,743 20,858 22,659
Revenues...................................... 1,028 3,894 7,657
Net loss...................................... (2,059) (7,319) (10,781)
</TABLE>
On May 16, 1996, the Company sold its 15.7% interest in TCG of South Florida
to a third party for approximately $11,618 cash resulting in a pre-tax gain of
approximately $8,400. Amounts related to TCG of South Florida included in the
Company's investments and equity in net loss of joint ventures as of and for
the nine months ended December 31, 1995 were $2,947 and $582, respectively.
(4)FINANCING ARRANGEMENTS
Note Payable--Adelphia
The Company has an unsecured credit arrangement with Adelphia which had no
repayment terms prior to April 15, 1996. On April 15, 1996, $25,000 of the
proceeds from the sale of the 13% Senior Discount Notes and Warrants discussed
below were used to repay a portion of this obligation. Interest expense and
fees on this credit arrangement were based upon the weighted average cost of
unsecured borrowings of Adelphia during the corresponding periods.
Interest at 11.28% per annum plus fees was charged on the Note Payable--
Adelphia for the years ended March 31, 1994 and 1995 and the nine months ended
December 31, 1995. The total amount of interest converted to note principal at
December 31, 1995 is $8,098.
Effective April 15, 1996, the remaining balance due on the Note Payable--
Adelphia is evidenced by an unsecured subordinated note due April 16, 2003.
This obligation bears interest at 16.5% per annum with interest payable
quarterly in cash; by issuing additional subordinated notes; or a combination
of cash and additional subordinated notes, all of which is at the Company's
option.
13% Senior Discount Notes and Warrants
On April 15, 1996, the Company issued $329,000 of 13% Senior Discount Notes
(the "Senior Notes") due April 15, 2003 and 329,000 warrants to purchase an
aggregate of 613,427 shares of its common stock. Proceeds to the Company, net
of discounts, commissions, and other transaction costs were approximately
$168,600. Such net proceeds were used to pay $25,000 of the Note Payable--
Adelphia discussed above, to make loans of $3,000 to certain key Company
officers (see Note 5) and to be used to fund the Company's capital
expenditures, working capital requirements, operating losses and its pro-rata
investments in joint ventures. Use of proceeds from the Senior Notes also
included the repayment of amounts related to capital expenditures, working
capital requirements, operating losses and pro-rata investments in joint
ventures totaling $12,800 incurred during the period from January 1, 1996 to
April 15, 1996. These amounts had been funded during the same time period
through advances from Adelphia.
F-10
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(4) FINANCING ARRANGEMENTS, CONTINUED
Prior to April 15, 2001, interest on the Senior Notes is not payable in
cash, but is added to principal. Thereafter, interest is payable semi-annually
commencing October 15, 2001. The Senior Notes are unsecured and are senior to
the Note Payable--Adelphia and all future subordinated indebtedness. On or
before April 15, 1999 and subject to certain restrictions, the Company may
redeem, at its option, up to 25% of the aggregate principal amount of the
Senior Notes at a price of 113% of the Accreted Value (as defined in the
Indenture). On or after April 15, 2001, the Company may redeem, at its option,
all or a portion of the Senior Notes at 106.5% which declines to par in 2002,
plus accrued interest.
The holders of the Senior Notes may put the Senior Notes to the Company at
any time at a price of 101% upon the occurrence of a Change of Control (as
defined in the Indenture). In addition, the Company will be required to offer
to purchase Senior Notes at a price of 100% with the proceeds of certain asset
sales (as defined in the Indenture).
The Indenture stipulates, among other things, limitations on additional
borrowings, issuance of equity instruments, payment of dividends and other
distributions, repurchase of equity interests or subordinated debt, sale and
lease back transactions, liens, transactions with affiliates, sales of Company
assets, mergers and consolidations.
In accordance with a registration rights agreement, the Company has agreed
to file a registration statement offering to exchange the Senior Notes for
Series B Senior Discount Notes registered under the Securities Act of 1933, as
amended (the "Securities Act"). Terms of the Series B Senior Discount Notes
will be substantially the same as the Senior Notes. Under certain
circumstances, if the above exchange is not consummated or such registration
is not filed or effective within the time periods stipulated in the agreement,
the Company must pay liquidated damages to the holders of the Senior Notes
ranging from .5% per annum to 2.0% per annum based on the amount of additional
time required to consummate the exchange. The Company is in the process of
filing the required registration statement and does not expect to incur any
liquidated damages.
The Warrants are exercisable at $.01 per share upon the earlier of May 1,
1997 or a Change of Control. Unless exercised, the Warrants expire on April 1,
2001. The number of shares and the exercise price for which a warrant is
exercisable are subject to adjustment under certain circumstances. In
accordance with a registration rights agreement, the Company has agreed to
file shelf registration statements under the Securities Act covering the
Warrants and the Warrant Shares. Under certain circumstances, if the shelf
registrations are not effective within the time period specified in the
agreement, the Company must pay liquidated damages to the holders of the
Warrants or Warrant Shares ranging from $.0025 to $.0125 per week per Warrant
or per Warrant Share then issuable based on the amount of additional time
required to accomplish the shelf registrations.
If the Senior Notes and Warrants had been issued on April 1, 1995, interest
expense would have been $20,076 for the nine months ended December 31, 1995.
F-11
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(4) FINANCING ARRANGEMENTS, CONTINUED
The following unaudited pro forma balance sheet has been prepared assuming
that the issuance of the Senior Notes and Warrants had occurred on December
31, 1995.
PRO FORMA BALANCE SHEET DECEMBER 31, 1995 (DOLLARS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
AS PRO FORMA PRO
REPORTED ADJUSTMENTS(A) FORMA
-------- -------------- --------
<S> <C> <C> <C>
Cash and cash equivalents.................... $ -- $140,631 $140,631
Other current assets......................... 433 -- 433
-------- -------- --------
Total current assets......................... 433 140,631 141,064
-------- -------- --------
Other assets................................. 30,515 6,195 36,710
-------- -------- --------
$ 30,948 $146,826 $177,774
======== ======== ========
Current liabilities.......................... $ 4,568 $ -- $ 4,568
Senior Notes................................. -- 163,705 163,705
Notes Payable--Adelphia...................... 49,946 (25,000) 24,946
-------- -------- --------
Total liabilities............................ 54,514 138,705 193,219
-------- -------- --------
Stockholders' equity (deficiency):
Common Stock.............................. 100 -- 100
(474)
Warrants.................................. -- 11,595 11,121
Loans to stockholders..................... -- (3,000) (3,000)
Accumulated deficit....................... (23,666) -- (23,666)
-------- -------- --------
Total Stockholders equity (deficiency)....... (23,566) 8,121 (15,445)
-------- -------- --------
$ 30,948 $146,826 $177,774
======== ======== ========
</TABLE>
- --------
(a) Amounts represent sources and uses of funds provided by the issuance of
the Senior Notes and Warrants as follows:
<TABLE>
<S> <C>
Proceeds from Senior Notes.................................................. $163,705
Proceeds from Warrants...................................................... 11,595
Underwriters' fee and transaction costs applicable to Senior Notes.......... (6,195)
Underwriters' fee and transaction costs applicable to Warrants.............. (474)
Repayment of portion of Note Payable--Adelphia.............................. (25,000)
Loans to stockholders....................................................... (3,000)
--------
Net cash proceeds........................................................... $140,631
========
</TABLE>
F-12
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(5)STOCKHOLDERS' EQUITY
The common stock of the Company held by Adelphia and certain key Company
officers (the "Officers") is subject to sale and transfer restriction
provisions. These provisions state that none of the Officers may transfer any
shares unless they have offered to sell such shares to Adelphia (or the other
remaining Officers if Adelphia declines) at a price per share equal to the
terms of the proposed third party sale or exchange.
In accordance with a shareholder agreement, upon termination of employment
or at any time after October 7, 1996, the Officers could have required
Adelphia to purchase all their outstanding shares (the "Officers' Option"). At
any time after October 7, 2001, Adelphia could have required the Officers to
sell all of their outstanding shares to Adelphia (the "Adelphia Option"). The
price per share shall be equal to the fair market value of the shares as
determined by a nationally recognized financial advisor selected by Adelphia
and the Officers.
On March 19, 1996, such shareholder agreement was amended primarily to (i)
grant the Officers certain registration rights regarding their common stock;
(ii) extend the Officers' Option date until after October 7, 1998; (iii)
extend the Adelphia Option date until after October 7, 2003 and (iv) provide
for aggregate loans to the Officers of $3,000 from the proceeds received from
the private placement of the Senior Notes and Warrants discussed in Note 4.
Such loans, including accrued interest at a rate equal to the rate which the
Company is able to invest cash on a short-term basis, are secured by a pledge
of each Officer's common stock in the Company and are payable to the Company
on the earlier of October 8, 1998 or the date of the registration of an equity
security of the Company as described below. Also, an amount equal to the
interest that accrues on such loans from the date six months after the date
the loans are made until due and payable will be satisfied through additional
compensation to the Officers. The shareholder agreement is terminated upon the
registration of an equity security of the Company under the Federal Securities
Act of 1933, as amended, or the Federal Securities Exchange Act of 1934, as
amended, which equity security is of the same class as the equity security
held by the Officers.
On March 19, 1996, the Board of Directors of the Company approved a ten
thousand-for-one stock split of its common stock and the reduction of the par
value from $1.00 per share to $.01 per share. All references in the
accompanying consolidated financial statements to the number of shares of
common stock and the par value have been retroactively restated to reflect
this stock split and par value reduction. In addition, on March 19, 1996, the
Board of Directors approved charter amendments to increase the Company's
authorized shares of common stock from 1,000 shares to 30,000,000 shares and
authorized 5,000,000 shares of preferred stock with terms of such preferred
stock to be determined by the Board of Directors of the Company. No preferred
stock has been issued by the Company.
(6)COMMITMENTS AND CONTINGENCIES
The Company rents office space, node space and fiber under leases with terms
which are generally less than one year or under agreements that are generally
cancelable on short notice. Total rental expense under all operating leases
aggregated $65, $478, and $906 for the years ended March 31, 1994 and 1995 and
the nine months ended December 31, 1995, respectively.
F-13
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(6) COMMITMENTS AND CONTINGENCIES, CONTINUED
The minimum future lease obligations under the noncancelable operating
leases as of December 31, 1995 are approximately:
<TABLE>
<CAPTION>
PERIOD ENDING MARCH 31,
-----------------------
<S> <C>
1996................................................. $ 35
1997................................................. 140
1998................................................. 14
1999................................................. 13
2000................................................. 4
2001................................................. 4
Thereafter........................................... --
</TABLE>
Under certain investment agreements, the Company has committed to make
specific capital contributions to the joint ventures. Total capital
commitments to be made as a result of these agreements at December 31, 1995
was $1,278.
Certain investors in two of the joint ventures have the right after a
specified period of time to sell their interest to the Company. Under one
agreement, the sales price represents the investor's aggregate capital
contribution less distributions plus interest accrued at the prime rate. The
Company's obligation under this commitment at December 31, 1995 was
approximately $2,700. The sales price under the second agreement is equal to
the fair market value of such investor's interest.
The Company has agreed that it will make all required capital contributions
to Louisville Lightwave that are necessary to increase its ownership to 50%.
The Company expects these capital contributions will aggregate approximately
$2,700.
Under a letter of intent signed on February 12, 1996, the Company agreed to
increase its ownership in Hyperion of Tennessee to at least 51% and as much as
95% by purchasing interests held by another existing owner of Hyperion of
Tennessee at the option of such other owner. The Company expects these capital
contributions will aggregate a maximum of approximately $4,900.
The consummation of any of the proposed transactions described above is
subject to the negotiation and execution of definitive, binding agreements and
to numerous other terms and conditions.
The Company has entered into employment agreements with certain key Company
officers, the terms of which expire on October 20, 1998, as amended. The
employment agreements provide for base salary, benefits and bonuses payable if
specified management goals are attained. In addition, the employment
agreements contain noncompetition and nondisclosure provisions.
The President of the Company has an employment agreement with Adelphia where
he is a vice president and secretary. His agreement provides for base salary,
benefits and insurance premium payments. The Company reimburses Adelphia for
such payments.
The Company's operations and the operations of its joint ventures may be
adversely affected by changes and developments in governmental regulation,
competitive forces and technology. The telecommunications industry is subject
to extensive regulation at the federal, state and local levels. On February 8,
1996, President
F-14
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(6) COMMITMENT AND CONTINGENCIES, CONTINUED
Clinton signed the Telecommunications Act of 1996 (the "Telecommunications
Act"), the most comprehensive reform of the nation's telecommunications laws
since the Communications Act of 1934.
The more significant provisions of the Telecommunications Act and certain
of its possible effects are as follows:
The Telecommunications Act removes legal barriers of entry in local
telephone markets. This provision should enable the Company to provide a
full range of services in any state while potentially increasing the level
of competition the Company faces in all its markets.
The Telecommunications Act requires incumbent Local Exchange Company's
("LECs") to "interconnect" with competitors which will provide access to
certain networks under reasonable rates, terms and conditions. It is
uncertain how effective these requirements will be or their impact on the
Company until the FCC completes its rulemaking proceedings requiring the
LECs to provide telephone number portability, dialing parity, reciprocal
compensation, resale, access to rights-of-way and unbundling of network
services.
The Telecommunications Act establishes procedures for LEC and Bell
Operating Company ("BOC") entry into new markets, including long distance
and cable television service. The Company's management believes LECs are
now more likely to invest in fiber optic networks and enter the video
market which will generate a revenue stream previously unavailable to them.
These facilities can then also be used to provide services that compete
with the Company. By allowing the BOC to enter the long distance market,
this may reduce the market share of the major long distance carriers (the
Company's joint ventures' primary customers) and have adverse consequences
on the Company's joint ventures' ability to generate revenues from the long
distance carriers.
The Telecommunications Act eliminates the requirement that LECs obtain FCC
authorization before constructing new facilities for interstate services
and limits the FCC's ability to review LEC tariff filings. The changes will
increase the speed with which the LECs are able to introduce new service
offerings and new pricing of existing services, thereby increasing the
LEC's ability to compete with the Company.
The Telecommunications Act requires the FCC to establish an explicit
mechanism for subsidizing service to markets that are less desirable,
either because of the high cost of providing service or the limited
revenues that might be available. This could be advantageous to the Company
or it could be beneficial to the Company's competitors depending on the
geographic areas and the type of customers for which subsidies are
available.
F-15
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(7)RELATED PARTY TRANSACTIONS
The following table summarizes the transactions with related parties which
are included in the Company's consolidated financial statements:
<TABLE>
<CAPTION>
MARCH 31,
------------- DECEMBER 31,
1994 1995 1995
------ ------ ------------
<S> <C> <C> <C>
REVENUES:
Management fees................................. $ 261 $1,045 $1,311
Network monitoring fees......................... 51 217 328
Special access fees............................. -- 189 591
Interest........................................ -- 65 158
------ ------ ------
Total........................................... $ 312 $1,516 $2,388
====== ====== ======
EXPENSES:
Interest expense and fees....................... $2,164 $3,321 $4,152
Allocated corporate costs....................... 214 209 250
Fiber leases.................................... -- 303 766
------ ------ ------
Total........................................... $2,378 $3,833 $5,168
====== ====== ======
</TABLE>
Management fees from related parties represent fees received by the Company
from its unconsolidated joint ventures for the performance of financial,
legal, regulatory and other administrative services.
Network monitoring fees represent fees received by the Company for technical
support for the monitoring of each individual joint venture's
telecommunications system.
Interest represents interest charged on certain affiliate receivable
balances with joint ventures.
Special access fees represent amounts charged to joint ventures for use of
the network of a wholly-owned subsidiary of the Company.
Interest expense and fees relate to the Note Payable--Adelphia (See Note 4).
Allocated corporate costs represent costs incurred by Adelphia on behalf of
the Company for the administration and operation of the Company. These costs
include charges for office space and shared services such as finance
activities, information systems, computer services, human resources, and
taxation. Such costs were estimated by Adelphia and do not necessarily
represent the actual costs required for these services.
Fiber lease expense represents amounts paid to various subsidiaries of
Adelphia for the utilization of existing cable television plant for
development and operation of the consolidated operating networks.
(8)INCOME TAXES
The Company and its corporate subsidiaries adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
effective April 1, 1993. The cumulative effect of adopting SFAS No. 109 at
April 1, 1993 was to decrease net loss by $42 for the year ended March 31,
1994. Adoption of SFAS No. 109 had no other effect on net loss for the year
ended March 31, 1994.
F-16
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(8)INCOME TAXES, CONTINUED
Adelphia and its corporate subsidiaries (including the Company) file a
consolidated federal income tax return. For financial reporting purposes,
current and deferred income tax assets and liabilities are computed on a
separate company basis. The valuation allowance is adjusted for benefits
associated with filing a consolidated income tax return, similar to provisions
of the Internal Revenue Code. At December 31, 1995, the Company had net
operating loss carryforwards for federal income tax purposes of $24,778
expiring through 2010.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes and
(b) operating loss carryforwards.
Temporary differences and carryforwards that give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------- DECEMBER 31,
1994 1995 1995
------- ------- ------------
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Differences between book and tax basis of
intangible assets......................... $ 380 $ 404 $ 448
Net operating loss carryforwards............ 1,770 4,823 9,540
Other....................................... 4 27 27
------- ------- -------
Total...................................... 2,154 5,254 10,015
Valuation allowance......................... (2,004) (4,499) (8,071)
------- ------- -------
Total...................................... 150 755 1,944
------- ------- -------
DEFERRED TAX LIABILITIES:
Differences between book and tax basis of
property, plant and equipment................ 99 198 690
Investments in partnerships................. -- 469 1,101
------- ------- -------
Total...................................... 99 667 1,791
------- ------- -------
Net deferred tax asset....................... $ 51 $ 88 $ 153
======= ======= =======
</TABLE>
The net change in the total valuation allowance for the years ended March
31, 1994 and 1995 and the nine months ended December 31, 1995 was an increase
of $1,849, $2,495 and $3,572, respectively.
Income tax benefit for the years ended March 31, 1994 and 1995 and the nine
months ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
MARCH 31,
--------- DECEMBER 31,
1994 1995 1995
---- ---- ------------
<S> <C> <C> <C>
Current................................................ $46 $(8) $(7)
Deferred............................................... 9 37 65
--- --- ---
Total.................................................. $55 $29 $58
=== === ===
</TABLE>
F-17
<PAGE>
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1994 AND 1995 AND THE NINE MONTHS ENDED DECEMBER
31, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(8) INCOME TAXES, CONTINUED
A reconciliation of the statutory federal income tax rate and the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------ DECEMBER 31,
1994 1995 1995
----- ----- ------------
<S> <C> <C> <C>
Statutory federal income tax rate.................. 35.0% 35.0% 35.0%
Change in valuation allowance...................... (37.0) (34.6) (34.4)
State taxes, net of federal benefit and other...... 3.1 -- --
----- ----- -----
Income tax benefit................................. 1.1% .4% .6%
===== ===== =====
</TABLE>
F-18
<PAGE>
APPENDIX A
GLOSSARY
Access Charges--The fees paid by long distance carriers to LECs for
originating and terminating long distance calls over the LECs' local networks.
ATM (Asynchronous Transfer Mode)--A recently commercialized switching and
transmission technology that is one of a general class of packet technologies
that relay traffic by way of an address contained within the first five bits
of a standard fifty-three bit-long packet or cell. ATM-based packet transport
was specifically developed to allow switching and transmission of mixed voice,
data and video (sometimes referred to as "multi-media" information) at varying
rates. The ATM format can be used by many different information systems,
including LANs.
Broadband--Broadband communications systems can transmit large quantities of
voice, data and video by way of digital or analog signals. Examples of
broadband communication systems include DS-3 fiber optic systems, which can
transmit 672 simultaneous voice conversations, or a broadcast television
station signal, that transmits high resolution audio and video signals into
the home. Broadband connectivity is also an essential element for interactive
multimedia applications.
CAP (Competitive Access Provider)--A company that provides its customers
with an alternative to the incumbent local telephone company for local
transport of private line, special access and interstate transport of switched
access telecommunications services. CAPs are also referred to in the industry
as alternative local telecommunications service providers (ALTs), metropolitan
area network providers (MANs) and alternative access vendors (AAVs).
Central Offices or LEC-COs--The switching centers or central switching
facilities of the LECs or CLECs.
Centrex--Centrex is a service that offers features similar to those of a
Private Branch Exchange (PBX), except the equipment is located at the
carrier's premises and not at the premises of the customer. These features
include direct dialing within a given phone system, direct dialing of incoming
calls, and automatic identification of outbound calls. This is a value-added
service that LECs and CLECs can provide to a wide range of customers who do
not have the size or the funds to support their own on-site PBX.
CLEC (Competitive Local Exchange Carrier)--A CAP that also provides switched
local telecommunications services.
Collocation--The ability of a CAP, IXC or end user to connect its network to
a LEC-COs. Physical collocation occurs when a CAP places its network
connection equipment inside the LEC-COs. Virtual collocation is an alternative
to physical collocation pursuant to which the LEC permits a CAP to connect its
network to the LEC-COs on comparable terms, even though the CAP's network
connection equipment is not physically located inside the central offices.
Dedicated Lines--Telecommunications lines dedicated or reserved for use
exclusively by particular customers along predetermined routes (in contrast to
telecommunications lines within the public switched network).
Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary code digits 0 and 1. Digital transmission and switching technologies
employ a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. Digital transmission and switching
technologies offer a threefold improvement in speed and capacity over analog
techniques, allowing much more efficient and cost-effective transmission of
voice, video and data.
A-1
<PAGE>
Dialing Parity--Dialing parity exists when a customer calling to or from the
network of a CLEC is not required to dial any more digits than for a
comparable call originating and terminating on the incumbent LEC's network.
Diverse Access Routing--A telecommunications network configuration in which
signals are transported simultaneously along two different paths so that if
one cable is cut, traffic can continue in the other direction without
interruption to its destination. The Company's networks generally provide
diverse access routing.
DS-0, DS-1, DS-3--Standard telecommunications industry digital signal
formats, which are distinguishable by bit rate (the number of binary digits (0
and 1) transmitted per second). DS-0 service has a bit rate of 64 kilobits per
second. DS-1 service has a bit rate of 1.544 megabits per second and DS-3
service has a bit rate of 45 megabits per second.
FCC--Federal Communications Commission
Fiber Mile--The number of route miles installed (excluding pending
installations) along a telecommunications path multiplied by the number of
fibers along that path. See the definition of "route mile" below.
Fiber Optics--Fiber optic cable is the medium of choice for the
telecommunications and cable industries. Fiber is immune to electrical
interference and environmental factors that affect copper wiring and satellite
transmission. Fiber optic technology involves sending laser light pulses
across glass strands in order to transmit digital information. A strand of
fiber optic cable is as thick as a human hair yet is said to have more
bandwidth capacity than copper cable the size of a telephone pole.
Fiber Optic Ring Network--Most CAPs have built their networks in ring
configurations in order to ensure that, if one segment of a network is damaged
or cut, the traffic is simply re-routed and sent to its destination in the
opposite direction. The Company uses a "self-healing" optical fiber ring
architecture known as SONET.
Frame Relay--Frame relay is a high speed data packet switching service used
to transmit data between computers. Frame relay supports data units of
variable lengths at access speeds ranging from 56 kilobits to 1.5 megabits.
This service is appropriate for connecting LANs, but is not appropriate for
voice and video applications due to the variable delays which can occur. Frame
relay was designed to operate at higher speeds on modern fiber optic networks.
Frame Relay Service--Data communications service that functions as a fast
packet transport service of variable length data packets between customer
designated locations and supports the establishment of software defined
logical connections and circuits that act as private facilities on a public
platform.
Hubs--Collection centers located centrally in an area where
telecommunications traffic can be aggregated at a central point for transport
and distribution.
Interconnection Decisions--Rulings by the FCC announced in September 1992
and August 1993, which require the RBOCs and most other LECs to provide
interconnection in LEC-COs to any CAP, IXC or end user seeking such
interconnection for the provision of interstate special access and switched
access transport services.
lnterLATA Calls--InterLATA calls are calls that pass from one LATA to
another. Typically, these calls are referred to as long distance calls. The
Telecommunications Act establishes procedures under which the RBOCs can
receive authority to provide interLATA services.
A-2
<PAGE>
IntraLATA Calls--IntraLATA calls, also known as short haul calls, are those
calls that originate and terminate within the same LATA. All states allow
intraLATA competition, but dialing parity still does not exist in most states
and very little LEC intraLATA revenue has been won by competitors.
IXC (Interexchange or Long Distance Carriers)--Usually referred to as long
distance carriers. There are many facilities-based IXCs, including AT&T, MCI,
WorldCom and Sprint, as well as a select few CAPs that provide interexchange
service.
Kilobit--One thousand bits of information. The information-carrying capacity
(i.e., bandwidth of a circuit may be measured in "kilobits per second.")
LANs (Local Area Networks)--The interconnection of computers for the purpose
of sharing files, programs and various devices such as work stations, printers
and high-speed modems. LANs may include dedicated computers or file servers
that provide a centralized source of shared files and programs.
LATAs--The geographically defined Local Access and Transport Areas in which
LECs are authorized by the MFJ to provide local exchange services. These LATAs
roughly reflect the population density of their respective states (for example
California has 11 LATAs while Wyoming has one). There are 164 LATAs in the
United States.
LEC (Local Exchange Carrier)--A company providing local telephone services.
LEC-COs--Local Exchange Carrier's central office.
Local Exchange Areas--A geographic area determined by the appropriate state
regulatory authority in which local calls generally are transmitted without
toll charges to the calling or called party.
Megabit--One million bits of information. The information-carrying capacity
(i.e., bandwidth) of a circuit may be measured in "megabits per second."
MFJ (Modified Final Judgment)--The MFJ was a consent decree entered into in
1982 between AT&T and the Department of Justice which forced the breakup of
the old Bell System through the divestiture of the seven separate Regional
Bell Operating Companies (RBOCs) from AT&T. Divestiture resulted in two
distinct segments of the telecommunications service market: local and long
distance. This laid the groundwork for intense competition in the long
distance industry, but essentially created seven separate regionally-based
local exchange service monopolies. The Telecommunications Act removes most MFJ
restrictions on a prospective basis from AT&T and the RBOCs.
Network Systems Integration--Involves the creation of a turnkey
telecommunications network including (i) route and site selection and
obtaining rights of way and legal authorizations to install the network; (ii)
design and engineering of the system, including technology and vendor
assessment and selection, determining fiber optic circuit capacity, and
establishing reliability/flexibility standards; and (iii) project and
construction management, including contract negotiations, purchasing and
logistics, installation as well as testing and construction management.
Number Portability--The ability of an end user to change local exchange
carriers while retaining the same telephone number.
Off-Net--A customer that is not physically connected to one of the Company's
networks but who is accessed through interconnection with a LEC network.
On-Net--A customer that is physically connected to one of the Company's
networks.
A-3
<PAGE>
PCS (Personal Communications Service)--A type of wireless telephone system
that uses light, inexpensive handheld sets and communicates via low power
antennas.
PBX--A Private Branch Exchange is a switching system within an office
building which allows calls from outside to be routed directly to the
individual instead of through a central number. A PBX also allows for calling
within an office by way of four digit extensions. Centrex is a service which
can simulate this service from an outside switching source, thereby
eliminating the need for a large capital expenditure on a PBX.
Physical Collocation--Physical Collocation occurs when a CAP places its own
network connection equipment inside the LEC-CO. The Telecommunications Act
gives the FCC authority to mandate physical collocation. See Virtual
Collocation.
POPs (Points of Presence)--Locations where an IXC has installed transmission
equipment in a service area that serves as, or relays calls to, a network
switching center of that IXC.
Private Line--A private, dedicated telecommunications connection between
different end user locations (excluding IXC POPs).
Private Line Data Interconnect Service--A data transport service utilizing
data products and on-net private line facilities that are packaged together
with data products.
Public Switched Network--That portion of a LEC's network available to all
users generally on a shared basis (i.e., not dedicated to a particular user).
Public Utility Commission--A state regulatory body which regulates
utilities, including telephone companies providing intrastate services. In
some states this regulatory body may have a different name, such as public
service commission.
RBOCs (Regional Bell Operating Companies)--The seven local telephone
companies established by the MFJ. The RBOCs were prohibited from providing
interLATA services and from manufacturing telecommunications equipment under
the MFJ, but the Telecommunications Act of 1996 establishes procedures for
lifting these restrictions.
Reciprocal Compensation--The compensation paid by a local carrier for
termination of a local call on the network of a competing carrier which is
obligated to pay a comparable charge to terminate traffic on the network of
the first carrier. Reciprocal compensation is distinct from the one way access
charges by which the IXCs compensate LEC's for originating or terminating
traffic.
Redundant Electronics--A telecommunications facility using two separate
electronic devices to transmit a telecommunications signal so that if one
device malfunctions, the signal may continue without interruption.
Route Miles--The number of miles of the telecommunications path in which
fiber optic cables are installed as it would appear on a network map.
Second and Third Tier Markets--Metropolitan markets in the United States
with population bases ranging from 250,000 to two million.
Special Access Services--The lease of private, dedicated telecommunications
lines or "circuits" along the network of a LEC or a CAP, which lines or
circuits run to or from the IXC POPs. Examples of special access services are
telecommunications lines running between POPs of a single IXC, from one IXC
POP to the POP of another IXC or from an end user to its IXC POP. Special
access services do not require the use of switches.
A-4
<PAGE>
SONET (Synchronous Optical Network)--SONET is the electronics and network
architecture which enable transmission of voice, video and data (multimedia)
at very high speeds. This state-of-the-art self-healing ring network offers
advantages over older linear networks in that a cut line or equipment failure
can be overcome by re-routing calls within the network. If the line is cut,
the traffic is simply reversed and sent to its destination around the other
side of the ring.
Switch--A sophisticated computer that accepts instructions from a caller in
the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits
or selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnecting circuits to form a transmission path
between users. Switches allow local telecommunications service providers to
connect calls directly to their destination, while providing advanced features
and recording connection information for future billing.
Switched Access Transport Services--Transportation of switched traffic along
dedicated lines between the LEC central offices and IXC POPs.
Switched Services--Services which utilize a switch, as opposed to dedicated
services which are non-switch. These services are the greatest source of
revenue for carriers.
Switched Traffic--Telecommunications traffic along a switched network.
Virtual Collocation--Virtual collocation is an alternative to physical
collocation in which the CAPs connect their equipment to the LECs facilities
from a remote location and request that the LEC install the necessary
electronics in its central office which is then leased by the LEC to the CAP
for charges which are generally higher than the charges for physical
collocation. However, the CAP avoids payment of the initial capital costs for
the leased facilities which the CAP must incur under physical collocation.
Voice Grade Equivalent Circuit--One DS-0. One voice grade equivalent circuit
is equal to 64 kilobits of bandwidth per second.
A-5
<PAGE>
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
HYPERION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER
OF TRANSMITTAL NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
HYPERION SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NEITHER THIS PROSPECTUS
NOR THE ACCOMPANYING LETTER OF TRANSMITTAL CONSTITUTES AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
------------
TABLE OF CONTENTS
Page
<TABLE>
<S> <C>
Available Information....................................................... 1
Prospectus Summary.......................................................... 2
Risk Factors................................................................ 14
The Exchange Offer.......................................................... 20
Use of Proceeds............................................................. 28
Capitalization.............................................................. 29
Selected Consolidated Financial and
Operating Data............................................................. 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................. 32
Business.................................................................... 38
Competition................................................................. 53
Regulation.................................................................. 53
Management.................................................................. 59
Certain Relationships and Transactions...................................... 62
Ownership of Capital Stock.................................................. 63
Description of the Senior Notes............................................. 63
Certain Federal Income Tax Considerations................................... 92
Plan of Distribution........................................................ 95
Legal Matters............................................................... 95
Experts..................................................................... 96
Index to Financial Statements............................................... F-1
Glossary.................................................................... A-1
</TABLE>
===============================================================================
===============================================================================
LOGO
HYPERION TELECOMMUNICATIONS, INC.
13% SENIOR DISCOUNT NOTES DUE 2003, SERIES B
----------------
PROSPECTUS
----------------
, 1996
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides in general that
a corporation may indemnify its directors, officers, employees or agents
against expenditures (including judgments, fines, amounts paid in settlement
and attorneys' fees) made by them in connection with certain lawsuits to which
they may be made parties by reason of their being directors, officers,
employees or agents and shall so indemnify such persons against expenses
(including attorneys' fees) if they have been successful on the merits or
otherwise. The bylaws of Hyperion provide for indemnification of the officers
and directors of Hyperion to the full extent permissible under Delaware law.
Hyperion's Certificate of Incorporation also provides, pursuant to Section
102(b)(7) of the Delaware General Corporation Law, that directors of Hyperion
shall not be personally liable to Hyperion or its stockholders for monetary
damages for breach of fiduciary duty as a director for acts or omissions,
provided that directors shall nonetheless be liable for breaches of the duty
of loyalty, bad faith, intentional misconduct, knowing violations of law,
unlawful distributions to stockholders, or transactions from which a director
derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Purchase Agreement dated as of April 10, 1996 between the
Registrant and Bear, Stearns & Co. Inc., Chase Securities Inc. and
NationsBanc Capital Markets, Inc. (collectively, the "Initial
Purchasers").
2.1* Purchase Agreement effective as of May 13, 1996 between Teleport
Communications Group Inc. and Hyperion Telecommunications of
Florida, Inc.
3.1* Certificate of Incorporation of Registrant, together with all
amendments thereto.
3.2* Bylaws of Registrant.
4.1* Indenture, dated as of April 15, 1996, between the Registrant and
Bank of Montreal Trust Company.
4.2 Form of Note (contained in Indenture filed as Exhibit 4.1).
4.3* Registration Rights Agreement dated as of April 15, 1996, between
the Registrant and the Initial Purchasers.
4.4* Subordinated Note dated April 15, 1996 by the Company in favor of
Adelphia.
5.1* Opinion of Buchanan Ingersoll Professional Corporation.
10.1* Employment Agreement between the Registrant and Charles R.
Drenning.
10.2* Employment Agreement between the Registrant and Paul D. Fajerski.
10.3* Employment Agreement between the Registrant and Randolph S.
Fowler.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.4 Employment Agreement dated July 1, 1986 between Adelphia and
Daniel R. Milliard. Exhibit 10.15 to Adelphia's Registration
Statement No. 33-6974 on Form S-1 is incorporated herein by
reference.
10.5** Amended and Restated Pre-Incorporation and Shareholder Restrictive
Agreement between Adelphia, Paul D. Fajerski, Charles R. Drenning
and Randolph S. Fowler.
10.6* Term Loan Note dated May 10, 1996 between Charles R. Drenning in
favor of Registrant in the amount of $1,000,000.
10.7* Term Loan Note dated May 10, 1996 between Paul D. Fajerski in
favor of Registrant in the amount of $1,000,000.
10.8* Term Loan Note dated May 10, 1996 between Randolph S. Fowler in
favor of Registrant in the amount of $1,000,000.
10.9* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Charles R. Drenning.
10.10* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Paul D. Fajerski.
10.11* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Randolph S. Fowler.
10.12** Registration Rights Agreement dated , 1996 between the
Registrant, Charles R. Drenning, Paul D. Fajerski, Randolph S.
Fowler and Adelphia.
10.13* Warrant Agreement dated as of April 15, 1996, by and among
Hyperion Telecommunications, Inc. and Bank of Montreal Trust
Comapny.
10.14* Warrant Registration Rights Agreement dated as of April 15, 1996,
by and among Hyperion Telecommunications, Inc. and the Initial
Purchasers.
12.1* Calculation of Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Buchanan Ingersoll Professional Corporation (contained
in its opinion filed as Exhibit 5.1 hereto).
23.2* Consent of Deloitte & Touche LLP.
24.1* Power of Attorney (appearing on Signature Page).
25.1* Form T-1 Statement of Eligibility of Trustee.
27.1* Financial Data Schedule.
99.1* Form of Letter of Transmittal and Notice of Guaranteed Delivery.
</TABLE>
- --------
*Filed herewith.
**To be filed by Amendment.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the prospectus pursuant to Item 4, 10(b),
11, or 13 of this form, within one business day of receipt of such request,
and to send the incorporated documents by first-class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed part of the Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, 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 such time shall be
deemed to be the initial bona fide offering thereof.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (3)(i) and (3)(ii) above do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(6) For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Coudersport,
Commonwealth of Pennsylvania, on the 26 day of June, 1996.
HYPERION TELECOMMUNICATIONS, INC.
/s/ Daniel R. Milliard
By: ________________________________
Daniel R. Milliard President and
Chief Executive Officer
POWER OF ATTORNEY
Known All Men By These Presents that each person whose signature appears
below constitutes and appoints James J. Rigas, Timothy J. Rigas and Daniel R.
Milliard, and each of them, such person's true and lawful attorneys-in-fact
and agents, with full power of substitution and revocation, for such person
and in such person's name, place and stead, in any and all amendments
(including post-effective amendments to this Registration Statement) and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as such person might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
/s/ John J. Rigas Chairman and Director June 26, 1996
- -------------------------
John J. Rigas
/s/ Michael J. Rigas Vice Chairman, Executive Vice June 26, 1996
- ------------------------- President and Director
Michael J. Rigas
/s/ Timothy J. Rigas Vice Chairman, Executive Vice June 26, 1996
- ------------------------- President, Treasurer, Chief
Timothy J. Rigas Financial Officer and Director
/s/ James P. Rigas Vice Chairman, Executive Vice June 26, 1996
- ------------------------- President and Director
James P. Rigas
/s/ Daniel R. Milliard President, Secretary, Chief June 26, 1996
- ------------------------- Executive Officer and Director
Daniel R. Milliard
/s/ Charles R. Drenning Vice President and Director June 26, 1996
- -------------------------
Charles R. Drenning
/s/ Paul D. Fajerski Vice President and Director June 26, 1996
- -------------------------
Paul D. Fajerski
/s/ Randolph S. Fowler Vice President and Director June 26, 1996
- -------------------------
Randolph S. Fowler
/s/ Edward E. Babcock Principal Accounting Officer June 26, 1996
- -------------------------
Edward E. Babcock
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
1.1* Purchase Agreement dated as of April 10, 1996 between the
Registrant and Bear, Stearns & Co. Inc., Chase Securities Inc.
and NationsBanc Capital Markets, Inc. (collectively, the
"Initial Purchasers").
2.1* Purchase Agreement effective as of May 13, 1996 between
Teleport Communications Group Inc. and Hyperion
Telecommunications of Florida, Inc.
3.1* Certificate of Incorporation of Registrant, together with all
amendments thereto.
3.2* Bylaws of Registrant.
4.1* Indenture, dated as of April 15, 1996, between the Registrant
and Bank of Montreal Trust Company.
4.2 Form of Note (contained in Indenture filed as Exhibit 4.1).
4.3* Registration Rights Agreement dated as of April 15, 1996,
between the Registrant and the Initial Purchasers.
4.4* Subordinated Note dated April 15, 1996 by the Company in favor
of Adelphia.
5.1* Opinion of Buchanan Ingersoll Professional Corporation.
10.1* Employment Agreement between the Registrant and Charles R.
Drenning.
10.2* Employment Agreement between the Registrant and Paul D.
Fajerski.
10.3* Employment Agreement between the Registrant and Randolph S.
Fowler.
10.4 Employment Agreement dated July 1, 1986 between Adelphia and
Daniel R. Milliard. Exhibit 10.15 to Adelphia's Registration
Statement No. 33-6974 on Form S-1 is incorporated herein by
reference.
10.5** Amended and Restated Pre-Incorporation and Shareholder
Restrictive Agreement between Adelphia, Paul D. Fajerski,
Charles R. Drenning and Randolph S. Fowler.
10.6* Term Loan Note dated May 10, 1996 between Charles R. Drenning
in favor of Registrant in the amount of $1,000,000.
10.7* Term Loan Note dated May 10, 1996 between Paul D. Fajerski in
favor of Registrant in the amount of $1,000,000.
10.8* Term Loan Note dated May 10, 1996 between Randolph S. Fowler in
favor of Registrant in the amount of $1,000,000.
10.9* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Charles R. Drenning.
10.10* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Paul D. Fajerski.
10.11* Term Loan and Stock Pledge Agreement dated May 10, 1996 between
the Registrant and Randolph S. Fowler.
10.12** Registration Rights Agreement dated , 1996 between the
Registrant, Charles R. Drenning, Paul D. Fajerski, Randolph S.
Fowler and Adelphia.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.13* Warrant Agreement dated as of April 15, 1996, by and among
Hyperion Telecommunications, Inc. and Bank of Montreal Trust
Comapny.
10.14* Warrant Registration Rights Agreement dated as of April 15,
1996, by and among Hyperion Telecommunications, Inc. and the
Initial Purchasers.
12.1* Calculation of Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of Registrant.
23.1* Consent of Buchanan Ingersoll Professional Corporation
(contained in its opinion filed as Exhibit 5.1 hereto).
23.2* Consent of Deloitte & Touche LLP.
24.1* Power of Attorney (appearing on Signature Page).
25.1* Form T-1 Statement of Eligibility of Trustee.
27.1* Financial Data Schedule.
99.1* Form of Letter of Transmittal and Notice of Guaranteed
Delivery.
</TABLE>
- --------
*Filed herewith.
**To be filed by Amendment.
<PAGE>
EXHIBIT 1.1
HYPERION TELECOMMUNICATIONS, INC.
329,000 Units consisting of
$329,000,000 of
13% Series A Senior Discount Notes due 2003
and
Warrants to Purchase 613,427 Shares of Common Stock
Purchase Agreement
April 10, 1996
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
================================================================================
<PAGE>
HYPERION TELECOMMUNICATIONS, INC.
329,000 Units consisting of
$329,000,000 of
13% Series A Senior Discount Notes due 2003
and
Warrants to Purchase 613,427 Shares of Common Stock
PURCHASE AGREEMENT
------------------
April 10, 1996
New York, New York
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Hyperion Telecommunications, Inc., a Delaware corporation (the "Company"),
-------
proposes to issue and sell to Bear, Stearns & Co. Inc., Chase Securities Inc.
and NationsBanc Capital Markets, Inc. (together, the "Initial Purchasers")
------------------
329,000 units (the "Units") consisting of $329,000,000 aggregate principal
-----
amount of 13% Series A Senior Discount Notes due 2003 (the "Series A Senior
---------------
Notes") and warrants (the "Warrants") to purchase an aggregate of 613,427 shares
- ----- --------
of common stock (the "Common Stock"), $.01 par value, of the Company (the
"Warrant Shares"), subject to the terms and conditions set forth herein. Each
- ---------------
Unit will consist of $1,000 principal amount of Series A Senior Notes and one
Warrant. The Series A Senior Notes will be issued pursuant to an indenture (the
"Indenture"), to be dated the Closing Date (as defined below), between the
---------
Company and Bank of Montreal Trust Company, as trustee (the "Trustee"). The
-------
Warrants will be issued pursuant to a warrant agreement (the "Warrant
-------
Agreement") to be dated the Closing Date, between the Company and Bank of
- ---------
Montreal Trust Company, as warrant agent (the "Warrant Agent"). The Series A
-------------
Senior Notes and the Warrants will not trade separately until the earlier of (i)
90 days from the date of issuance, (ii) such date as the Initial Purchasers may,
in their discretion, deem appropriate, (iii) in the event a Change of Control
occurs, the date the Company mails notice thereof to holders of the Senior Notes
and (iv) the date on which the Exchange Offer (as defined) is consummated (such
date, the "Separation Date"). The Units, the Series A Senior Notes and the
---------------
Warrants are more fully described in the Offering Memorandum referred to below.
The Series A Senior Notes and the Series B Senior Notes issuable in exchange
therefor are collectively referred to herein as the "Senior Notes." The Units,
------------
the Senior Notes and the Warrants are collectively referred to herein as the
"Securities." Capitalized terms used but not otherwise defined herein shall have
- -----------
the meanings given to such terms in the Indenture.
1. Issuance of Securities. The Company proposes to, upon the terms and
----------------------
subject to the conditions set forth herein, issue and sell to the Initial
Purchasers 329,000 Units consisting of $329,000,000 in
<PAGE>
aggregate principal amount at maturity of Series A Senior Notes and Warrants to
purchase 613,427 shares of Common Stock. The proceeds to the Company from the
sale to the Initial Purchasers of the Units will be used for capital
expenditures and working capital by the Company, its Subsidiaries (as defined)
and the Joint Ventures (as defined) as more fully set forth in the Offering
Memorandum, under the caption entitled "Use of Proceeds."
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Act"), the Units, the Senior Notes, the Warrants and the
---
Warrant Shares (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR").
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (Y) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY, (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Z) IT WILL NOTIFY
ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY, PRIOR TO CLOSING OF ANY
SALE, OF THE RESALE RESTRICTIONS SET FORTH IN (Y) ABOVE."
2. Offering. The Units will be offered and sold to the Initial Purchasers
--------
pursuant to an exemption from the registration requirements under the Act. The
Company has prepared a preliminary Offering Memorandum, dated March 20, 1996
(the "Preliminary Offering Memorandum") and a final offering memorandum, dated
-------------------------------
April 10, 1996 (the "Offering Memorandum"), relating to the Company, the Units,
-------------------
the Senior Notes and the Warrants.
The Initial Purchasers have advised the Company that the Initial Purchasers
will make offers (the "Exempt Resales") of the Units on the terms set forth in
--------------
the Offering Memorandum, as amended or
2
<PAGE>
supplemented, solely to persons whom the Initial Purchasers reasonably believe
to be "qualified institutional buyers," as defined in Rule 144A under the Act
("QIBs"), and to a limited number of persons who have represented to the Company
----
that they are institutional "Accredited Investors" referred to in Rule
501(a)(1), (2), (3) or (7) under the Act (each, an "Accredited Investor"). The
-------------------
QIBs and the Accredited Investors are referred to herein as the "Eligible
--------
Purchasers." The Initial Purchasers will offer the Units to such QIBs and
- ----------
Accredited Investors initially the price set forth herein. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Senior Notes will have
the registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement") in substantially the form of
-----------------------------
Exhibit A hereto, and holders (including subsequent transferees) of the Warrants
- ---------
will have the registration rights set forth in the registration rights agreement
relating thereto (the "Warrant Registration Rights Agreement"), in each case, to
-------------------------------------
be dated the Closing Date, in substantially the form of Exhibit B hereto, for so
---------
long as such Senior Notes, Warrants or any Warrant Shares constitute "Transfer
Restricted Securities" (as defined in each such agreement, respectively).
Pursuant to the Registration Rights Agreement, the Company will agree to file
with the Securities and Exchange Commission (the "Commission"), under the
----------
circumstances set forth therein, (i) a registration statement under the Act (the
"Exchange Offer Registration Statement") relating to the Series B Senior Notes
-------------------------------------
to be offered in exchange for the Series A Senior Notes (the "Exchange Offer")
--------------
and (ii) a shelf registration statement pursuant to Rule 415 under the Act (the
"Shelf Registration Statement") relating to the resale by certain holders of the
----------------------------
Senior Notes, and to use its best efforts to cause such registration statements
to be declared effective and consummate the Exchange Offer. Pursuant to the
Warrant Registration Rights Agreement, the Company will agree to file with the
Commission, under the circumstances set forth therein, shelf registration
statements pursuant to Rule 415 under the Act (the "Warrant Shelf Registration
--------------------------
Statements") relating to the resale by certain holders of the Warrants and the
- ----------
Warrant Shares, and to use its best efforts to cause such Warrant Shelf
Registration Statements to be declared effective.
This Agreement, the Securities, the Warrant Shares, the Indenture, the
Warrant Agreement, the Registration Rights Agreement and the Warrant
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
-------------------
3. Purchase, Sale and Delivery. (a) On the basis of the representations,
---------------------------
warranties and covenants contained in this Agreement, and subject to its terms
and conditions, the Company agrees to issue and sell to the Initial Purchasers,
and each Initial Purchaser agrees severally and not jointly to purchase from the
Company, that amount of Units set forth opposite its name on Schedule I hereto.
The purchase price for the Units shall be $514.07 per Unit.
(b) Delivery of the Units shall be made, against payment of the purchase
price therefor, at the offices of Latham & Watkins at 885 Third Avenue, New
York, New York or such other location as may be mutually acceptable. Such
delivery and payment shall be made at 10:00 a.m., New York time, on April 15,
1996 or at such other time as shall be agreed upon by the Initial Purchasers and
the Company. The time and date of such delivery and payment are herein called
the "Closing Date."
------------
(c) One or more Units in definitive form, registered in the name of Cede &
Co., as nominee of The Depository Trust Company ("DTC"), having an aggregate
---
amount corresponding to the aggregate amount of the Units sold pursuant to
Exempt Resales to QIBs and Accredited Investors (collectively, the "Global
------
Unit"), each such Global Unit consisting of $1,000 aggregate principal amount at
- ----
maturity of Senior Notes in definitive form, registered in the name of Cede &
Co., as nominee of DTC (the aggregate of a such Senior Notes is hereinafter
referred to as the "Global Senior Note"), and one Warrant in definitive form,
------------------
registered in the name of Cede & Co., as nominee of DTC (the aggregate of a such
Warrants is hereinafter referred to as the "Global Warrant") shall be delivered
--------------
by the Company to the
3
<PAGE>
Initial Purchasers (or as the Initial Purchasers direct), against payment by the
Initial Purchasers of the purchase price therefor, by wire transfer of
immediately available funds to the Company's account, provided that the Company
shall give at least two business days' prior written notice to the Initial
Purchasers of the information required to effect such wire transfers. The Global
Unit shall be made available to the Initial Purchasers for inspection not later
than 9:30 a.m. on the business day immediately preceding the Closing Date.
4. Agreements of the Company. The Company covenants and agrees with the
-------------------------
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing of; (i) the issuance by
any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Securities for
offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority; and (ii) the happening of any event that, in the reasonable
opinion of either counsel to the Company or counsel to the Initial
Purchasers, makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires the
making of any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Securities under any state securities or Blue Sky laws and, if at any time
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption of any Securities under
any state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish the Initial Purchasers and those persons identified
by the Initial Purchasers to the Company, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection
with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless the Initial
Purchasers shall previously have been advised thereof and shall not have
objected thereto within a reasonable time after being furnished a copy
thereof. The Company shall promptly prepare, upon the Initial Purchasers'
request, any amendment or supplement to the Preliminary Offering Memorandum
or the Offering Memorandum that may be necessary or reasonably requested by
the Initial Purchasers in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resale, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of either counsel to the Company or
counsel to the Initial Purchasers, it becomes necessary or advisable to
amend or supplement the Preliminary Offering Memorandum or Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser which is a prospective purchaser, not misleading, or if it is
necessary or advisable to amend or supplement the Preliminary Offering
Memorandum or Offering Memorandum to comply with applicable law, (i) notify
the Initial Purchasers and (ii) forthwith to prepare an appropriate
amendment or supplement to such Offering
4
<PAGE>
Memorandum so that the statements therein as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be
misleading, or so that such Offering Memorandum will comply with applicable
law.
(e) To cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the qualification or registration of
the Units, the Series A Senior Notes and the Warrants under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may
reasonably request and to continue such qualification in effect so long as
required for the Exempt Resales; provided that the Company shall not be
required to take any action that would subject it to service of process in
suits or taxation, other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales,
in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay
all costs, expenses, fees and taxes incident to the performance of the
obligations of the Company hereunder, including in connection with: (i) the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum and the Offering Memorandum (including, without limitation,
financial statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of all preliminary and final Blue Sky
memoranda prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery by the Company of the
Securities to the Initial Purchasers, (iv) the qualification or registration
of the Securities for offer and sale under the securities or Blue Sky laws
of the several states (including, without limitation, the cost of printing
and mailing a preliminary and final Blue Sky Memorandum and the reasonable
fees and disbursements of counsel to the Initial Purchasers relating to such
qualification or registration), (v) furnishing such copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be requested for use in
connection with Exempt Resales, (vi) the preparation of certificates for the
Securities (including, without limitation, printing and engraving thereof),
(vii) the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with the
application for quotation of the Securities in the National Association of
Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
----
("PORTAL"), (ix) all fees and expenses (including fees and expenses of
------
counsel to the Company) of the Company in connection with the approval
of the Securities by DTC for "book-entry" transfer, (x) the rating of the
Securities by rating agencies, (xi) the reasonable fees and expenses of the
Trustee and its counsel in connection with the Indenture and the Senior
Notes, (xii) the reasonable fees and expenses of the Warrant Agent and its
counsel in connection with the Warrant Agreement and the Warrants, (xiii)
the performance by the Company of its other obligations under this Agreement
and the other Operative Documents and (xiv) "roadshow" travel and other
expenses incurred in connection with the marketing and sale of the Units,
the Senior Notes and the Warrants.
(g) To use the proceeds from the sale of the Units in the manner
described in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Units.
5
<PAGE>
(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Units in a manner that would require the
registration under the Act of the sale to the Initial Purchasers, the QIBs
or the Accredited Investors of the Units, the Senior Notes or the Warrants
or to take any other action that would result in the Exempt Resales not
being exempt from registration under the Act.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to
------------
make available to any QIB or beneficial owner of Units, Senior Notes or
Warrants in connection with any sale thereof and any prospective purchaser
of such Units, Senior Notes or Warrants from such QIB or beneficial owner,
the information required by Rule 144A(d)(4) under the Act.
(l) To cause the Exchange Offer to be made in the appropriate form
to permit registered Series B Senior Notes to be offered in exchange for
the Series A Senior Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(m) To comply with all of its agreements set forth in the Registration
Rights Agreement and the Warrant Registration Rights Agreement and all
agreements set forth in the representation letters of the Company to DTC
relating to the approval of the Securities by DTC for "book-entry"
transfer.
(n) To use its best efforts to effect the inclusion of the Units, the
Senior Notes and the Warrants in PORTAL and to obtain approval of the
Securities by DTC for "book-entry" transfer.
(o) During a period of five years following the Closing Date, to
deliver without charge to each of the Initial Purchasers, as they may
reasonably request, promptly upon their becoming available, copies of (i)
all reports or other publicly available information that the Company shall
mail or otherwise make available to its securityholders and (ii) all
reports, financial statements and proxy or information statements filed by
the Company with the Commission or any national securities exchange and
such other publicly available information concerning the Company or its
subsidiaries, including without limitation, press releases.
(p) Prior to the Closing Date, to furnish to each of the Initial
Purchasers, as soon as they have been prepared in the ordinary course by
the Company, copies of any unaudited interim financial statements for any
period subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(q) Neither the Company nor any of its Subsidiaries nor any of the
Joint Ventures (as defined) will take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities. Except as permitted by
the Act, the Company will not distribute any preliminary offering
memorandum, offering memorandum or other offering material in connection
with the offering and sale of the Securities.
(r) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer or
dispose of any Securities or any other debt or equity security issued by
the Company for a period of 180 days after the Closing Date, without the
prior written consent of the Initial Purchasers, except for the issue and
exchange of Series B Senior Notes for Series A Senior Notes in the Exchange
Offer.
6
<PAGE>
(s) To comply with the agreements in the Indenture, the Warrant
Agreement, the Registration Rights Agreement and the Warrant Registration
Rights Agreement and each other Operative Document.
(t) To reserve and continue to reserve as long as any Warrants are
outstanding, a sufficient number of shares of Common Stock for issuance
upon exercise of the Warrants.
5. Representations and Warranties. (a) The Company represents and
------------------------------
warrants to each of the Initial Purchasers that:
(i) The Preliminary Offering Memorandum and the Offering Memorandum
(and each supplement and amendment thereto) have been prepared in
connection with the Exempt Resales. The Preliminary Offering Memorandum and
the Offering Memorandum do not, and any supplement or amendment to them
will not, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this paragraph
shall not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to the Initial Purchasers furnished to the Company in writing by or on
behalf of the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting
that any of the transactions contemplated by this Agreement are subject to
the registration requirements of the Act, has been issued.
(ii) When the Units, the Senior Notes and the Warrants are issued and
delivered pursuant to this Agreement, no Unit, Senior Note or Warrant will
be of the same class (within the meaning of Rule 144A under the Act) as
securities of the Company that are listed on a national securities exchange
registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.
(iii) Each of the Company and its Subsidiaries (as defined) (A) has
been duly organized, is validly existing as a corporation in good standing
under the laws of its respective jurisdiction of incorporation, (B) has all
requisite corporate power and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum and
to own, lease and operate its properties and (C) is duly qualified and in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification except, with respect to
this clause (C), where the failure of the Company and its Subsidiaries to
be so qualified or in good standing does not and could not reasonably be
expected to (x) individually or in the aggregate, result in a material
adverse effect on the assets, liabilities, business, results of operations,
condition (financial or otherwise), cash flows, affairs or prospects of the
Company and the Subsidiaries, taken as a whole, (y) interfere with or
adversely affect the issuance or marketability of the Securities or (z) in
any manner draw into question the validity of this Agreement or any other
Operative Document or the ability to conduct its business in the manner set
forth in the Offering Memorandum (any of the events set forth in clauses
(x), (y) or (z), a "Material Adverse Effect"). The Company has no direct or
-----------------------
indirect subsidiaries as of the Closing Date other than those set forth on
Schedule II hereto (referred to herein collectively as "Subsidiaries" and
individually as a "Subsidiary").
7
<PAGE>
(iv) Each of the Joint Ventures (as defined) (A) has been duly formed
as a partnership or corporation, as applicable, under the laws of its
respective jurisdiction of formation, (B) has all requisite partnership or
corporate power and authority, as applicable, to carry on its business as
it is currently being conducted and as described in the Offering Memorandum
and to own, lease and operate its properties and (C) is duly qualified and
in good standing as a foreign partnership authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification except, with respect to
this clause (C), where the failure to be so qualified or in good standing
does not and could not reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor its Subsidiaries has any ownership
interest in any Joint Venture other than those set forth on Schedule III
hereto (referred to herein collectively as "Joint Ventures" and
individually a "Joint Venture"), except for TCG Pittsburgh, a New York
general partnership ("TGC Pittsburgh").
(v) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. At December 31, 1995, on a combined basis, after giving effect to
the issuance and sale of the Units pursuant hereto, the Company had an
authorized and outstanding consolidated capitalization as set forth in the
Offering Memorandum under the caption "Capitalization."
(vi) All of the outstanding capital stock of each Subsidiary is owned
by the Company, free and clear of any security interest, claim, lien,
limitation on voting rights or other charge or encumbrance. Except as
disclosed in the Offering Memorandum, there are not currently, and will not
be as a result of the Offering, any outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any capital stock or other equity
interest of the Company or any Subsidiary.
(vii) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indenture, the Warrant Agreement, the Registration Rights Agreement, the
Warrant Registration Rights Agreement and the other Operative Documents and
to consummate the transactions contemplated hereby and thereby, including,
without limitation, the corporate power and authority to issue, sell and
deliver the Securities as provided herein and therein.
(viii) This Agreement has been duly and validly authorized, executed
and delivered by Company and is the legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except insofar as indemnification and contribution provisions may be
limited by applicable law or public policy or equitable principles and
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity.
(x) The Units have been duly and validly authorized by the Company.
The Series A Senior Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and authenticated in accordance with the terms
8
<PAGE>
of the Indenture and delivered against payment therefor in accordance with
the terms hereof and thereof, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the Series A Senior Notes
in the Offering Memorandum is accurate in all material respects.
(xi) The Series B Senior Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, will be
the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity. The
description of the Series B Senior Notes in the Offering Memorandum is
accurate in all material respects.
(xii) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the Registration Rights
Agreement in the Offering Memorandum is accurate in all material respects.
(xiii) The Warrant Agreement has been duly and validly authorized by
the Company and, when duly executed and delivered by the Company, will be
the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting
the rights of creditors generally and subject to general principles of
equity. The description of the Warrant Agreement in the Offering Memorandum
is accurate in all material respects.
(xiv) The Warrants have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to this
Agreement and, when issued and countersigned in accordance with the terms
of the Warrant Agreement and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Warrant
Agreement, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity. The
description of the Warrants in the Offering Memorandum is accurate in all
material respects.
(xv) The Warrants are exercisable into Warrant Shares in accordance
with the terms of the Warrant Agreement. The Warrant Shares have been duly
authorized for issuance by the Company and, when issued and paid for upon
exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and nonassessable, free of any preemptive or
similar rights.
(xvi) The Warrant Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered by
the Company, will be the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or
9
<PAGE>
similar laws affecting the rights of creditors generally and subject to
general principles of equity. The description of the Warrant Registration
Rights Agreement in the Offering Memorandum is accurate in all material
respects.
(xvii) None of the Company, the Subsidiaries or the Joint Ventures is
and, after giving effect to the Offering will be (A) in violation of its
charter and bylaws or partnership agreement, as applicable, (B) in default
in the performance of any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties is subject, or (C) in
violation of any local, state or Federal law, statute, ordinance, rule,
regulation, requirement, judgment or court decree (including, without
limitation, the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 (the "Telecommunications Act"), and the
----------------------
rules and regulations of the Federal Communications Commission (the "FCC")
---
and environmental laws, statutes, ordinances, rules, regulations, judgments
or court decrees) applicable to the Company, any Subsidiary, any Joint
Venture or any of their respective assets or properties (whether owned or
leased) other than, in the case of clauses (B) and (C), any default or
violation that could not reasonably be expected to have a Material Adverse
Effect. There exists no condition that, with notice, the passage of time or
otherwise, would constitute a default under any such document or instrument
that could reasonably be expected to have a Material Adverse Effect.
(xviii) None of (A) the execution, delivery or performance by the
Company and the Subsidiaries, as the case may be, of this Agreement and the
other Operative Documents, (B) the issuance and sale of the Securities and
(C) consummation by the Company, the Subsidiaries and the Joint Ventures of
the transactions described in the Offering Memorandum violate, conflict
with or constitute a breach of any of the terms or provisions of, or a
default under (or an event that with notice or the lapse of time, or both,
would constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of the Company, any
Subsidiary or any Joint Venture, or an acceleration of any indebtedness of
the Company, any Subsidiary or any Joint Venture pursuant to, (i) the
charter or bylaws of the Company or any Subsidiary or the partnership
agreement governing any Joint Venture, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company, any Subsidiary or any Joint Venture is a party or by
which any of them or their property is or may be bound, (iii) any local,
state or Federal law, statute, ordinance, rule, regulation or requirement
(including, without limitation, the Telecommunications Act and the rules
and regulations of the FCC and environmental laws, statutes, ordinances,
rules or regulations) applicable to the Company, any Subsidiary, any Joint
Venture or any of their respective assets or properties or (iv) any
judgment, order or decree of any court or governmental agency or authority
having jurisdiction over the Company, the Subsidiaries, the Joint Ventures
or any of their assets or properties, except in the case of clauses (ii),
(iii) and (iv) for such violations conflicts, breaches, defaults, consents,
impositions of liens or accelerations that would not singly, or in the
aggregate, have a Material Adverse Effect. Other than as described in the
Offering Memorandum, no consent, approval, authorization or order of, or
filing, registration, qualification, license or permit of or with, (A) any
court or governmental agency, body or administrative agency (including,
without limitation, the FCC) or (B) any other person is required for (1)
the execution, delivery and performance by the Company of this Agreement
and the other Operative Documents or (2) the issuance and sale of the
Securities and the transactions contemplated hereby and thereby, except (x)
such as have been obtained and made (or, in the case of the Registration
Rights Agreement and the Warrant Registration Rights Agreement, will be
obtained and made) under the Act, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and state securities or Blue Sky laws
-------------------
and regulations or such as may be required by the NASD or (y) where the
failure to obtain any such
10
<PAGE>
consent, approval, authorization or order of, or filing registration,
qualification, license or permit would not reasonably be expected to result
in a Material Adverse Effect.
(xix) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or threatened or contemplated to which the Company,
any of the Subsidiaries or any of the Joint Ventures is or may be a party
or to which the business or property of the Company, any Subsidiary or any
Joint Venture is subject, (ii) no local, state or Federal law, statute,
ordinance, rule, regulation, requirement, judgment or court decree
(including, without limitation, the Telecommunications Act and the rules
and regulations of the FCC) or order that has been enacted, adopted or
issued by any governmental agency or, to the best of the Company's
knowledge, that has been proposed by any governmental body or (iii) no
injunction, restraining order or order of any nature by a federal or state
court or foreign court of competent jurisdiction to which the Company, any
Subsidiary or any Joint Venture is or could reasonably be expected to be
subject or to which the business, assets, or property of the Company, any
Subsidiary or any Joint Venture are could reasonably be expected to be
subject, that, in the case of clauses (i), (ii) and (iii) above, (y) is
required to be disclosed in the Preliminary Offering Memorandum and the
Offering Memorandum and that is not so disclosed, or (z) could reasonably
be expected to individually or in the aggregate, result in a Material
Adverse Effect.
(xx) No action has been taken and no local, state or Federal law,
statute, ordinance, rule, regulation, requirement, judgment or court decree
has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Securities or prevents or suspends the use of
the Offering Memorandum; no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction has been
issued that prevents the issuance of the Securities or prevents or suspends
the sale of the Securities in any jurisdiction referred to in Section 4(e)
hereof; and every request of any securities authority or agency of any
jurisdiction for additional information has been complied with in all
material respects.
(xxi) There is (i) no unfair labor practice complaint pending against
the Company, any Subsidiary or any Joint Venture or threatened, before the
National Labor Relations Board, any state or local labor relations board or
any foreign labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company, any Subsidiary or
any Joint Venture threatened, (ii) no significant strike, labor dispute,
slowdown or stoppage pending against the Company, any Subsidiary or any
Joint Venture threatened against the Company, any Subsidiary or the Joint
Venture and (iii) no union representation question existing with respect to
the employees of the Company, any Subsidiary or any Joint Venture that, in
the case of clauses (i), (ii) or (iii), could reasonably be expected to
result in a Material Adverse Effect. To the best of the Company's
knowledge, no collective bargaining organizing activities are taking place
with respect to the Company, the Subsidiaries or the Joint Ventures. None
of the Company, any Subsidiary or any Joint Venture has violated (A) any
federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour laws
or (C) any provision of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules and regulations thereunder, which
-----
in the case of clause (A), (B) or (C) above could reasonably be expected to
result in a Material Adverse Effect.
(xxii) None of the Company, any Subsidiary or any Joint Venture has
violated any environmental, safety or similar law or regulation applicable
to it or its business or property relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), lacks any
-------------
permit, license
11
<PAGE>
or other approval required of it under applicable Environmental Laws is
violating any term or condition of such permit, license or approval which
could reasonably be expected to, either individually or in the aggregate,
have a Material Adverse Effect.
(xxiii) Each of the Company, the Subsidiaries and the Joint Ventures
has (i) good and marketable title to all of the properties and assets
described in the Offering Memorandum as owned by it, free and clear of all
liens, charges, encumbrances and restrictions, except such as are described
in the Offering Memorandum or as would not have a Material Adverse Effect,
(ii) peaceful and undisturbed possession under all leases to which any of
them is a party as lessee, (iii) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made
all declarations and filings with, all federal, state and local authorities
(including, without limitation, the FCC), all self-regulatory authorities
and all courts and other tribunals (each an "Authorization") necessary to
-------------
engage in the business as presently conducted by any of them in the manner
described in the Offering Memorandum, except as described in the Offering
Memorandum or where failure to hold such Authorizations would not,
individually or in the aggregate, have a Material Adverse Effect and (iv)
no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such Authorization. Except where the
failure to be in full force and effect would not have a Material Adverse
Effect, all such Authorizations are valid and in full force and effect and
each of the Company, the Subsidiaries and the Joint Ventures is in
compliance with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto. All leases to which the Company, the
Subsidiaries and the Joint Ventures is a party are valid and binding and no
default by the Company, any Subsidiary or any Joint Venture has occurred
and is continuing thereunder and no defaults by the landlord are existing
under any such lease that could reasonably be expected to result in a
Material Adverse Effect.
(xxiv) Each of the Company, the Subsidiaries and the Joint Ventures
owns, possesses or has the right to employ all patents, patent rights,
licenses (including all FCC, state, local or other jurisdictional
regulatory licenses), inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, software, systems or procedures), trademarks,
service marks and trade names, inventions, computer programs, technical
data and information (collectively, the "Intellectual Property") presently
---------------------
employed by the Company, its Subsidiaries or the Joint Ventures in
connection with the businesses now operated by it or which are proposed to
be operated by the Company, its Subsidiaries or the Joint Ventures free and
clear of and without violating any right, claimed right, charge,
encumbrance, pledge, security interest, restriction or lien of any kind of
any other person and none of the Company, any Subsidiary or any Joint
Venture has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing except as
could not reasonably be expected to have a Material Adverse Effect. The use
of the Intellectual Property in connection with the business and operations
of the Company, the Subsidiaries and the Joint Ventures does not infringe
on the rights of any person, except would not have a Material Adverse
Effect.
(xxv) None of the Company, any Subsidiary, any Joint Venture or any of
their respective officers, directors, partners, employees, agents or
affiliates or any other person acting on behalf of the Company, any
Subsidiary or any Joint Venture, as the case may be, has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course of
business) to any customer, supplier, employee or agent of a customer or
supplier, official or employee of any governmental agency (domestic or
foreign), instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other
person who was, is or may be in a position to help or hinder the business
of the Company, any Subsidiary or any Joint Venture (or assist the
12
<PAGE>
Company, any Subsidiary or any Joint Venture in connection with any actual
or proposed transaction) which (i) might subject the Company, any
Subsidiary, or any other individual or entity to any damage or penalty in
any civil, criminal or governmental litigation or proceeding (domestic or
foreign), (ii) if not given in the past, could reasonably be expected to
have had a Material Adverse Effect on the assets, business or operations of
the Company, any Subsidiary or any Joint Venture or (iii) if not continued
in the future, could reasonably be expected to have a Material Adverse
Effect.
(xxvi) All tax returns required to be filed by the Company, each of
the Subsidiaries and each of the Joint Ventures in all jurisdictions have
been so filed. All taxes, including withholding taxes, penalties and
interest, assessments, fees and other charges due or claimed to be due from
such entities or that are due and payable have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided or those currently payable without penalty or interest. There are
no proposed additional tax assessments against the Company, any Subsidiary,
any Joint Venture or the assets or property of the Company, any Subsidiary
or any Joint Venture.
(xxvii) None of the Company, the Subsidiaries or the Joint Ventures is
(i) an "investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or (ii) a "holding company" or a
----------------------
"subsidiary company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended (the
"PUC Act"), except for TCG Pittsburgh, a New York general partnership ("TGC
Pittsburgh").
(xxviii) There are no holders of securities of the Company, the
Subsidiaries or the Joint Ventures who, by reason of the execution by the
Company of this Agreement or any other Operative Document to which it is a
party or the consummation by the Company of the transactions contemplated
hereby and thereby, have the right to request or demand that the Company,
any of the Subsidiaries or any of the Joint Ventures register any of its
securities under the Act.
(xxix) Each of the Company, the Subsidiaries and the Joint Ventures
maintains a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect thereto.
(xxx) Each of the Company, the Subsidiaries and the Joint Ventures
maintains insurance covering its properties, operations, personnel and
businesses. Such insurance insures against such losses and risks as are
adequate in accordance with customary industry practice to protect the
Company, the Subsidiaries, the Joint Ventures and their respective
businesses. None of the Company, any Subsidiary or any Joint Venture has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof.
(xxxi) None of the Company, any Subsidiary or any Joint Venture has
(i) taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in
13
<PAGE>
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Units, the Senior Notes or the
Warrants or (ii) since the date of the Preliminary Offering Memorandum (A)
sold, bid for, purchased or paid any person any compensation for soliciting
purchases of, the Units, the Senior Notes or the Warrants or (B) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
(xxxii) No registration under the Act of the Units, the Senior Notes
or the Warrants is required for the sale of the Units to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming (i)
that the purchasers who buy the Units in the Exempt Resales are either QIBs
or Accredited Investors and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in connection
with the sale of Units to the Initial Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general advertising
was used by the Company or any of its representatives (other than the
Initial Purchasers, as to which the Company makes no representation or
warranty) in connection with the offer and sale of any of the Securities in
connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Securities have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof.
(xxxiii) Set forth on Exhibit C hereto is a list of each employee
---------
pension or benefit plan with respect to which the Company or any
corporation considered an affiliate of the Company within the meaning of
Section 407(d)(7) of ERISA (an "ERISA Affiliate") is a party in interest or
---------------
disqualified person. The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Units to be purchased by the
QIBs and the Accredited Investors will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986. The representation made by the Company
in the preceding sentence is made in reliance upon and subject to the
accuracy of, and compliance with, the representations and covenants made or
deemed made by the QIBs and the Accredited Investors as set forth in the
Offering Memorandum under the caption "Notice to Investors."
(xxxiv) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of
its date, contains the information specified in, and meets the requirements
of, Rule 144A(d)(4) under the Act.
(xxxv) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as set
forth in the Offering Memorandum, (i) none of the Company, any Subsidiary
or any Joint Venture has incurred any liabilities or obligations, direct or
contingent, which are material, individually or in the aggregate, to the
Company, the Subsidiaries and the Joint Ventures taken as a whole, nor
entered into any transaction not in the ordinary course of business, (ii)
there has not been, singly or in the aggregate, any change or development
which could reasonably be expected to result in a Material Adverse Effect,
(iii) there has been no dividend or distribution of any kind declared, paid
or made by the Company or its Subsidiaries on any class of capital stock
and (iv) there has been no distribution of profits or return of capital
contribution by any Joint Venture.
(xxxvi) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation
of the transactions contemplated thereby as set forth in the
14
<PAGE>
Offering Memorandum, will violate Regulations G, T, U or X promulgated by
the Board of Governors of the Federal Reserve System or analogous foreign
laws and regulations.
(xxxvii) The accountants who have certified or will certify the
financial statements included or to be included as part of the Offering
Memorandum are independent accountants. The historical financial statements
of the Company and each of the Subsidiaries comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-4 under the Act and present fairly in all material
respects the financial position and results of operations of the Company
and each of its Subsidiaries, at the respective dates and for the
respective periods indicated. Such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods presented. The other financial
information and data included in the Offering Memorandum, historical and
pro forma, are accurately presented in all material respects and prepared
on a basis consistent with the financial statements, historical and pro
forma, included in the Offering Memorandum and the books and records of the
Company, each of its Subsidiaries and each of its Joint Ventures, as
applicable. The statistical information and data included in the Offering
Memorandum are accurately presented in all material respects.
(xxxviii) The Company does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay such debts as they mature. The
present fair saleable value of the assets of the Company on a consolidated
basis exceeds the amount that will be required to be paid on or in respect
of the existing debts and other liabilities (including contingent
liabilities) of the Company on a consolidated basis as they become absolute
and matured. The assets of the Company on a consolidated basis do not
constitute unreasonably small capital to carry out the business of the
Company, the Subsidiaries and the Joint Ventures, taken as a whole, as
conducted or as proposed to be conducted. Upon the issuance of the Units,
the present fair saleable value of the assets of the Company on a
consolidated basis will exceed the amount that will be required to be paid
on or in respect of the existing debts and other liabilities (including
contingent liabilities) of the Company on a consolidated basis as they
become absolute and matured. Upon the issuance of the Units, the assets of
the Company on a consolidated basis will not constitute unreasonably small
capital to carry out its businesses as now conducted, including the capital
needs of the Company on a consolidated basis, taking into account the
projected capital requirements and capital availability.
(xxxix) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company, any of its Subsidiaries
or any of its Joint Ventures and any other person that would give rise to a
valid claim against the Company or either of the Initial Purchasers for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Securities.
(xl) Each of the Company, the Subsidiaries and the Joint Ventures has
complied with all provisions of Section 517.075, Florida Statutes, relating
to doing business with the Government of Cuba or with any affiliate located
in Cuba.
(xli) Except as disclosed in the Offering Memorandum, there are no
business relationships or related party transactions required to be
disclosed therein pursuant to Item 404 of Regulation S-K of the Commission
(assuming for purposes of this paragraph 5(xli) that Regulation S-K is
applicable to the Offering Memorandum).
(xlii) Each of the Company and Hyperion Telecommunications of
Pennsylvania, Inc. will be released from all of their obligations under the
agreement governing the TCG Pittsburgh Joint
15
<PAGE>
Venture pursuant to an amendment to such partnership agreement to be
effective as of January 1, 1995, which amendment shall be promptly
executed.
Each certificate signed by any officer of the Company and delivered to
the Initial Purchasers or counsel for the Initial Purchasers pursuant to this
Agreement shall be deemed to be a representation and warranty by the Company to
the Initial Purchasers as to the matters covered thereby.
The Company acknowledges that each of the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to the Company and counsel to the Initial Purchasers,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
(b) Each of the Initial Purchasers severally and not jointly represents,
warrants and covenants to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Units.
(ii) Such Initial Purchaser (A) is not acquiring the Units with a view
to any distribution thereof that would violate the Act or the securities
laws of any state of the United States or any other applicable jurisdiction
and (B) will be reoffering and reselling the Units only to QIBs in reliance
on the exemption from the registration requirements of the Act provided by
Rule 144A and to Accredited Investors in a private placement exempt from
the registration requirements of the Act.
(iii) No form of general solicitation or general advertising has been
or will be used by any of the Initial Purchasers or any of their
representatives in connection with the offer and sale of any of the Units,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(iv) In connection with the Exempt Resales, such Initial Purchaser
will solicit offers to buy the Units only from, and will offer to sell the
Units only to, QIBs and Accredited Investors. Such Initial Purchaser
further agreed (A) that it will offer to sell the Units only to, and will
solicit offers to buy the Units only from (1) QIB's who in purchasing such
Units will be deemed to have represented and agreed that they are
purchasing the Units for their own accounts or accounts with respect to
which they exercise sole investment discretion and that they or such
accounts are QIBs and (2) Accredited Investors who make the representations
contained in, and execute and return to one of the Initial Purchasers, a
certificate in the form of Annex A attached to the Offering Memorandum and
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(B) that, in the case of such QIBs and Accredited Investors, acknowledges
and agrees that such Units will not have been registered under the Act and
may be resold, pledged or otherwise transferred only (x)(I) to a person who
the seller reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A or (II) in a transaction meeting the requirements
of Rule 144 or (III) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel
if the Company so requests), (y) to the Company or (z) pursuant to an
effective registration statement under the Act and, in each case, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction and (C) that the holder will,
and each subsequent holder is required to, notify any purchaser of the
security evidenced thereby of the resale restrictions set forth in (B)
above.
16
<PAGE>
Each of the Initial Purchasers understands that the Company and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby expressly consents to such reliance.
6. Indemnification.
---------------
(a) The Company and its Subsidiaries, jointly and severally, agree to
indemnify and hold harmless (i) each Initial Purchaser, (ii) each person,
if any, who controls an Initial Purchaser within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and (iii) the respective
officers, directors, partners, employees, representatives and agents of any
Initial Purchaser or any controlling person to the fullest extent lawful,
from and against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of any
claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided
that the Company will not be liable in any such case to the extent, but
only to the extent, that (i) any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of the Initial Purchasers expressly for use therein and (ii)
the foregoing indemnity with respect to any untrue statement contained in
or omitted from the Preliminary Offering Memorandum shall not inure to the
benefit of any Initial Purchaser (or any person controlling such Initial
Purchasers), from whom the person asserting any such loss, liability,
claim, damage or expense purchased any of the Units which are the subject
thereof if it is finally judicially determined that such loss, liability,
claim, damage or expense resulted solely from the fact that such Initial
Purchaser sold Units to the person asserting such loss, liability, claim,
damage or expense, who was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Offering Memorandum, as amended or
supplemented, and (x) the Company shall have previously and timely
furnished sufficient copies of the Offering Memorandum, as so amended or
supplemented, to such Initial Purchaser in accordance with this Agreement
and (y) the Offering Memorandum, as so amended or supplemented, would have
completely corrected such untrue statement or omission of a material fact.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have, including, under this Agreement.
(b) Each Initial Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to attorneys' fees and
any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened,
or any claim whatsoever and any and all amounts paid in settlement of any
claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue
17
<PAGE>
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Initial
Purchaser expressly for use therein; provided that in no case shall any
Initial Purchaser be liable or responsible for any amount in excess of the
discounts and commissions received by such Initial Purchasers, as set forth
on the cover page of the Offering Memorandum. This indemnity will be in
addition to any liability which any of the Initial Purchasers may otherwise
have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not
relieve it from any liability which it may have under this Section 6 except
to the extent that it has been actually prejudiced in any material respect
by such failure or from any liability which it may otherwise have). In case
any such action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the
defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case
the indemnifying party or parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of counsel shall be borne by the
indemnifying parties. The indemnifying party under subsection (a) or (b)
above, shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought; provided that the
indemnifying party shall be liable for separate counsel for any indemnified
party in a jurisdiction, if counsel to the indemnified parties shall have
reasonably concluded that there may be defenses available to such
indemnified party that are difference from or additional to those available
to one or more of the other indemnified parties and that separate counsel
for such indemnified party is prudent under the circumstances. Anything in
this subsection to the contrary notwithstanding, an indemnifying party
shall not be liable for any settlement of any claim or action effected
without its prior written consent; provided that such consent was not
unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances in
------------
which the indemnification provided for in Section 6 is for any reason held to be
unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Initial Purchasers shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated
18
<PAGE>
by such indemnification provision (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claims asserted, but after deducting in the
case of losses, claims, damages, liabilities and expenses suffered by the
Company, any contribution received by the Company from persons, other than the
Initial Purchasers, who may also be liable for contribution, including persons
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act) to which the Company and one or more of the Initial
Purchasers may be subject, in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Initial Purchasers from the
offering of the Units or, if such allocation is not permitted by applicable law
or indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 6, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company and the Initial Purchasers in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Initial Purchasers shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering of Units (net of discounts but before deducting expenses) received by
the Company and (y) the discounts received by the Initial Purchasers,
respectively, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and of the Initial
Purchasers shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (i) in no case shall any Initial Purchaser be required to
contribute any amount in excess of the amount by which the discount applicable
to the Units purchased by such Initial Purchaser pursuant to this Agreement
exceeds the amount of any damages which such Initial Purchaser has otherwise
been required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 7, (A) each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and (B) the respective officers, directors,
partners, employees, representatives and agents of any Initial Purchaser or any
controlling person shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as the Company, subject in each case to clauses (i)
and (ii) of this Section 7. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this Section 7, notify such party or
parties from whom contribution may be sought, but the failure to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 7 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its prior written consent; provided that such written
consent was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The several obligations
---------------------------------------------
of the Initial Purchasers to purchase and pay for the Units, as provided herein,
shall be subject to the satisfaction of the following conditions:
(a) All of the representations and warranties of the Company contained
in this Agreement shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the
date hereof and the Closing Date, respectively. The Company shall
19
<PAGE>
have performed or complied with all of the agreements herein contained and
required to be performed or complied with by it at or prior to the Closing
Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York
City time, on the day following the date of this Agreement or at such later
date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the
Units, the Senior Notes or the Warrants in any jurisdiction referred to in
Section 4(e) shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no local, state or Federal
law, statute, ordinance, rule, regulation, requirement, judgment or court
decree shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of the
Units, the Senior Notes or the Warrants; no action, suit or proceeding
shall have been commenced and be pending against or affecting or, to the
best knowledge of the Company, threatened against, the Company, the
Subsidiaries or the Joint Ventures before any court or arbitrator or any
governmental body, agency or official (including, but not limited to the
FCC or any state regulatory authority or body) that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and no stop order shall have been issued preventing the use of the
Offering Memorandum, or any amendment or supplement thereto, or which could
reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or
any development that is reasonably likely to result in a material adverse
change, in the capital stock or the long-term debt, or material increase in
the short-term debt, of the Company, the Subsidiaries or the Joint Ventures
from that set forth in the Offering Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Company or any Subsidiary on any class of its capital stock, (iii) neither
the Company nor any Subsidiary nor any Joint Venture shall have incurred
any liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company, the Subsidiaries and the
Joint Ventures taken as a whole, and that are required to be disclosed on a
balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance sheet or
notes thereto included in the Offering Memorandum. Since the date hereof
and since the dates as of which information is given in the Offering
Memorandum, there shall not have occurred any Material Adverse Change.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by (i) the President and
(ii) a Vice President, Secretary or Assistant Secretary, in form and
substance reasonably satisfactory to the Initial Purchasers, confirming, as
of the Closing Date, the matters set forth in paragraphs (a), (b), (c) and
(d) of this Section 8, certain incumbency matters and that, as of the
Closing Date, the obligations of the Company to be performed hereunder on
or prior thereto have been duly performed.
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers, of Buchanan
Ingersoll, counsel for the Company, to the effect set forth in Exhibit D
---------
hereto.
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial
20
<PAGE>
Purchasers, of Dow Lohnes & Albertson, special regulatory counsel to the
Company, to the effect set forth in Exhibit E hereto.
---------
(h) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance satisfactory to the
Initial Purchasers and counsel to the Initial Purchasers, of each of
Pennington, Culpepper, Moore, Wilkinson, Dunbar & Dunlap, P.A.; Roland,
Fogel, Koblenz & Carr; Sonneschein, Nath & Rosenthal; Downs Rachlin &
Martin; Swidler Berlin; and Gullett Sanford Robinson & Martin, each of whom
are special state regulatory counsel for the Company, to the effect set
forth in Exhibit E hereto.
---------
(i) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Latham & Watkins, counsel to the Initial Purchasers,
covering such matters as are customarily covered in such opinions.
(j) At the time this Agreement is executed and at the Closing Date the
Initial Purchasers shall have received from Deloitte & Touche, independent
public accountants for the Company dated as of the date of this Agreement
and as of the Closing Date, a customary comfort letter addressed to the
Initial Purchasers and in form and substance satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers with respect to the
financial statements and certain financial information of the Company, the
Subsidiaries and the Joint Ventures contained in the Offering Memorandum.
(k) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 8 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(l) Prior to the Closing Date, the Company, the Subsidiaries and the
Joint Ventures shall have furnished to the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers may
reasonably request.
(m) The Company and the Trustee shall have entered into each of the
Indenture, the Registration Rights Agreement, the Warrant Agreement and the
Warrant Registration Rights Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(n) On the Closing Date, concurrently with the sale of the Units, the
Company shall have (i) repaid $25.0 million of the principal amount of the
indebtedness owed by the Company to Adelphia (all such indebtedness
referred to herein as the "Adelphia Indebtedness") and evidence of such
repayment, in form and substance reasonably satisfactory to the Initial
Purchasers and counsel to the Initial Purchasers, shall have been provided
to the Initial Purchasers and (ii) executed and delivered a written
subordinated promissory note evidencing the Adelphia Indebtedness
containing terms and provisions (including subordination provisions
pursuant to which the Adelphia Indebtedness is expressly subordinate in
right of payment to the Senior Notes) in form and substance reasonably
satisfactory to the Initial Purchasers and counsel to the Initial
Purchasers.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers. The Company will furnish the Initial
21
<PAGE>
Purchasers with such conformed copies of such opinions, certificates, letters
and other documents as it shall reasonably request.
9. Initial Purchasers' Information. For the purposes of Sections 4(a) and
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6(b) herein and otherwise, the Company and the Initial Purchasers severally
acknowledge that the statements with respect to the offering of the Units set
forth in the last paragraph of the cover page and the third paragraph and the
sixth paragraph under the caption "Plan of Distribution" in such Offering
Memorandum constitute the only information furnished in writing by or on behalf
of the Initial Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
------------------------------------------
warranties, covenants and agreements of the Initial Purchasers and the Company
contained in this Agreement, including, without limitation, the representations
and warranties and agreements contained in Sections 4(f) and 11(d), the
indemnity agreements contained in Section 6 and the contribution agreements
contained in Section 7, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Initial Purchasers
any controlling person thereof or by or on behalf of the Company or any
controlling person thereof, and shall survive delivery of and payment for the
Units to and by the Initial Purchasers. The representations contained in Section
5 and the agreements contained in Sections 4(f), 6, 7 and 11(d) shall survive
the termination of this Agreement, including any termination pursuant to Section
11.
11. Effective Date of Agreement; Termination
----------------------------------------
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company
from the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to the Company if, on or
prior to such date, (i) the Company shall have failed, refused or been
unable to perform in any material respect any agreement on its part to be
performed hereunder, (ii) any other condition to the obligations of the
Initial Purchasers hereunder as provided in Section 8 is not fulfilled when
and as required in any material respect, (iii) in the reasonable judgment
of the Initial Purchasers any material adverse change shall have occurred
since the respective dates as of which information is given in the Offering
Memorandum in the condition (financial or otherwise), business, properties,
assets, liabilities, prospects, net worth, results of operations or cash
flows of the Company and the Subsidiaries taken as a whole, other than as
set forth in the Offering Memorandum, or (iv)(A) any domestic or
international event or act or occurrence has materially disrupted, or in
the opinion of the Initial Purchasers will in the immediate future
materially disrupt, the market for the Company's securities or for
securities in general; or (B) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market shall have been suspended or materially limited, or minimum or
maximum prices for trading shall have been established, or maximum ranges
for prices for securities shall have been required, on such exchange, or by
such exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by
Federal or state authorities, or a moratorium in foreign exchange trading
by major international banks or persons shall have been declared; or (D)
there is an outbreak or escalation of armed hostilities involving the
United States on or after the date hereof, or there has been a declaration
by the United States of a national emergency or war, the effect of which
shall, in the Initial Purchasers' judgment, make it inadvisable or
impracticable to proceed with the offering or delivery of the Units on the
terms and in the manner contemplated in the Offering Memorandum; or (E)
there has been a material adverse change in general economic, political or
financial conditions in the United States, or the effect of
22
<PAGE>
international conditions on the financial markets in the United States
shall be such that, it is, in the Initial Purchasers' judgment, inadvisable
or impracticable to proceed with the delivery of the Units as contemplated
hereby.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to any of clauses (iii) or (iv)
of Section 11(b), in which case each party will be responsible for its own
expenses), or if the sale of the Units provided for herein is not
consummated because any condition to the obligations of the Initial
Purchasers set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Company to perform any agreement
herein or comply with any provision hereof, the Company will, subject to
demand by the Initial Purchasers, reimburse the Initial Purchasers for all
out-of-pocket expenses (including the reasonable fees and expenses of
Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
------
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied and
confirmed in writing to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, Attention: Corporate Finance Department, telecopy number: (212) 272-
3092; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to Hyperion
Telecommunications, Inc., 5 West 3rd Street, Coudersport, Pennsylvania 16915,
Attention: Daniel Milliard, telecopy number: (814) 274-8631, with a copy to
Buchanan Ingersoll, One Oxford Centre, 301 Grant street, 20th Floor, Pittsburgh,
Pennsylvania 15219-1410, Attention: Carl E. Rothenberger, Jr.; provided that any
notice pursuant to Section 7 shall be mailed, delivered or telexed, telegraphed
or telecopied and confirmed in writing.
13. Parties. This Agreement shall inure solely to the benefit of, and shall
-------
be binding upon, the Initial Purchasers and the Company and the controlling
persons and agents referred to in Sections 6 and 7, and their respective
successors and assigns, and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained. The term "successors
and assigns" shall not include a purchaser, in its capacity as such, of Units
from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with the
------------
internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are included solely
--------
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
------------
which together shall constitute one and the same instrument.
[Signature pages follow]
23
<PAGE>
If the foregoing correctly sets forth the understanding among the
Initial Purchasers, the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
Hyperion Telecommunications, Inc.
By: /s/ Daniel R. Milliard
------------------------------
Name: Daniel R. Milliard
Title: President and Secretary
Accepted and agreed to as of
the date first above written:
Bear, Stearns & Co. Inc.
By: /s/ Donald R. Mullen, Jr.
-------------------------------
Name: Donald R. Mullen, Jr.
Title: Senior Managing Director
Chase Securities Inc.
By: /s/ S. Cuskley
-------------------------------
Name: S. Cuskley
Title: MD
NationsBanc Capital Markets, Inc.
By: /s/ Thomas Mooney
-------------------------------
Name: Thomas Mooney
Title: Senior Vice President
<PAGE>
Schedule I
<TABLE>
<CAPTION>
Number of
Units to
Initial Purchasers be Purchased
- ------------------ ------------
<S> <C>
Bear, Stearns & Co. Inc. 197,400
Chase Securities Inc. 65,800
NationsBanc Capital Markets, Inc. 65,800
- ----------------------------- -------
Total 329,000
=======
</TABLE>
<PAGE>
Schedule II
Subsidiaries
Hyperion Enhanced Networks of Virginia, Inc.
Hyperion Telecommunications of Florida, Inc.
Hyperion Telecommunications of Kansas, Inc.
Hyperion Telecommunications of Kentucky, Inc.
Hyperion Telecommunications of Massachusetts, Inc.
Hyperion Telecommunications of Michigan, Inc.
Hyperion Telecommunications of New Jersey, Inc.
Hyperion Telecommunications of New York, Inc.
Hyperion Telecommunications of North Carolina, Inc.
Hyperion Telecommunications of Ohio, Inc.
Hyperion Telecommunications of Pennsylvania, Inc.
Hyperion Telecommunications of South Carolina, Inc.
Hyperion Telecommunications of Tennessee, Inc.
Hyperion Telecommunications of Vermont, Inc.
Hyperion Telecommunications of Virginia, Inc.
<PAGE>
Schedule III
Joint Ventures
Alternet of Virginia
AVR of Tennessee, L.P., d/b/a Hyperion of Tennessee, L.P.
Continental Fiber Technologies, Inc.
Hyperion Telecommunications of Harrisburg
Louisville Lightwave
Multimedia Hyperion Telecommunications
NewChannels Hyperion Telecommunications of New York
New Jersey Fiber Technologies
NHT Partnership
PECO Hyperion Telecommunications
TCG South Florida
<PAGE>
Exhibit A
Form of Registration Rights Agreement
<PAGE>
Exhibit B
Form of Warrant Registration Rights Agreement
<PAGE>
Exhibit C
List of Employee Pension and Benefit Plans
of Hyperion Telecommunications, Inc.
and its Subsidiaries
Adelphia Communications Corporation Employee Benefit Plan
Adelphia Communications Corporation 401(k) Savings and Protection Profit
Sharing Plan
<PAGE>
EXHIBIT D
Form of Opinion of Buchanan Ingersoll
1. Each of the Company and its Subsidiaries is duly incorporated and
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to carry on its business as it is being conducted and as described in
the Offering Memorandum and to own, lease and operate its properties, and is
duly qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not, singly or in the aggregate, have a
material adverse effect on the business, financial condition or results of
operations of the Company, the Subsidiaries and the Joint Ventures, taken as a
whole.
2. Each of the Joint Ventures is duly formed and valid existing as a general
partnership in good standing under the laws of its jurisdiction of formation,
and has all requisite partnership power and authority to carry on its business
as it is being conducted and as described in the Offering Memorandum and to own,
lease and operate its properties, and is duly qualified and in good standing as
a partnership authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not, singly or
in the aggregate, have a material adverse effect on the business, financial
condition or results of operations of the Company, the Subsidiaries and the
Joint Ventures, taken as a whole.
3. The authorized, issued and outstanding capital stock of the Company is as
set forth in the Offering Memorandum under the caption "Capitalization." All of
the outstanding shares of capital stock of the Company have been duly
authorized, validly issued, and are fully paid and nonassessable and were not
issued in violation of any preemptive rights or similar rights.
4. All of the partnership interests owned by the Company and each Subsidiary
have been duly authorized and validly issued and, except as set forth in the
Offering Memorandum, are owned by each of the Company and its Subsidiaries, as
the case may be, free and clear of any security interest, charge, claim, lien,
limitation on voting rights or encumbrance.
5. All of the outstanding capital stock of each Subsidiary is owned by the
Company, free and clear of any security interest, charge, claim, lien,
limitation on voting rights or encumbrance. To our knowledge, there are not
currently, and will not be following the Offering, any outstanding
subscriptions, rights, warrants, calls, commitments of sale or options to
acquire, or instruments convertible into or exercisable or exchangeable for, any
capital stock or other equity interest of the Company or any Subsidiary.
6. When the Series A Senior Notes are issued and delivered pursuant to the
Agreement, no Series A Senior Note will be of the same class (within the meaning
of Rule 144A under the Act) as securities of the Company that are listed on a
national securities exchange registered under Section 6 of the Exchange Act or
that are quoted in a United States automated inter-dealer quotation system.
7. The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreement, the Indenture, the
Senior Notes, the
<PAGE>
Registration Rights Agreement and the other Operative Documents, as applicable,
and to consummate the transactions contemplated thereby, including, without
limitation, the corporate power and authority to issue, sell and deliver the
Senior Notes as provided herein and therein.
8. The Agreement has been duly and validly authorized, executed and
delivered by the Company.
9. Each of the Indenture and the Registration Rights Agreement has been duly
and validly authorized, executed and delivered by the Company and is the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited (a) by
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights and remedies generally, (b) by the effects of
general principals of equity, whether enforcement is considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought, (c) by the enforceability of the waiver of rights or
defenses contained in Section 4.06 of the Indenture, (d) under certain
circumstances of provisions providing for the indemnification of or contribution
to a party with respect to a liability where such indemnification or
contribution may be contrary to public policy and (e) by the effects of an
implied covenant of good faith and fair dealing.
10. The Series A Senior Notes have been duly and validly authorized for
issuance and sale to the Initial Purchasers by the Company pursuant to the
Agreement and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the terms of
the Agreement and the Indenture, will be the valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms, and
will be entitled to the benefits of the Indenture, except as such enforceability
may be limited (a) by the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights and remedies generally, (b) by
the effects of general principals of equity, whether enforcement is considered
in a proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought, (c) by the enforceability of the
waiver of rights or defenses contained in Section 4.06 of the Indenture, (d)
under certain circumstances of provisions providing for the indemnification of
or contribution to a party with respect to a liability where such
indemnification or contribution may be contrary to public policy and (e) by the
effects of an implied covenant of good faith and fair dealing.
11. The Series B Senior Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, will be the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, and will be entitled to the benefits of the Indenture, except as
such enforceability may be limited (a) by the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights and remedies
generally, (b) by the effects of general principals of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought, (c)
by the enforceability of the waiver of rights or defenses contained in Section
4.06 of the Indenture, (d) under certain circumstances of provisions providing
for
<PAGE>
the indemnification of or contribution to a party with respect to a liability
where such indemnification or contribution may be contrary to public policy and
(e) by the effects of an implied covenant of good faith and fair dealing.
12. The summary of each of the Series A Notes, the Indenture and the
Registration Rights Agreement contained in the Offering Memorandum is accurate
and complete in all material respects.
13. No registration under the Act of the Senior Notes is required for the
sale of the Senior Notes to the Initial Purchasers as contemplated by the
Agreement or for the Exempt Resales assuming (i) that the Initial Purchasers are
Qualified Institutional Buyers, as defined in Rule 144A under the Act ("QIB"),
(ii) that the purchasers who buy the Senior Notes in the Exempt Resales are
either QIBs or Accredited Investors, (iii) the accuracy of the Initial
Purchasers' representations regarding the absence of general solicitation in
connection with the sale of the Senior Notes to the Initial Purchasers and the
Exempt Resales contained in the Agreement, (iv) the accuracy of the Company's
representations in Sections 5(a)(ii), (xxiii), (xxxi) and (xxxv) (other than
with respect to the first sentence) of the Agreement and (v) with respect to
Accredited Investors, the accuracy of the representations made by each
Accredited Investor as set forth in the letters of representation executed by
such Accredited Investor in the form of Annex A to the Offering Memorandum.
-----
14. The Offering Memorandum, as of its date (except for the financial
statements (including the notes thereto) and supporting schedules and other
financial, statistical and accounting data included therein or omitted
therefrom, as to which no opinion need be expressed), and each amendment or
supplement thereto (if any), as of its date, contains all the information
specified in, and meets the requirements of, Rule 144A(d)(4) under the Act.
15. Prior to the Exchange Offer or the effectiveness of the Shelf
Registration Statement, the Indenture is not required to be qualified under the
Trust Indenture Act.
16. None of (A) the execution, delivery or performance by the Company of the
Agreement and the other Operative Documents, as applicable, (B) the issuance and
sale of the Senior Notes or (C) consummation by the Company, the Subsidiaries
and the Joint Ventures of the transactions described in the Offering Memorandum
violates, conflicts with or constitutes a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the lapse of
time, or both, would constitute a default under), or require consent under, or
result in the imposition of a lien or encumbrance on any properties of the
Company, any Subsidiary or any Joint Venture, or an acceleration of any
indebtedness of the Company, any Subsidiary or any Joint Venture pursuant to,
(i) the charter or bylaws or partnership agreement of the Company, any
Subsidiary or any Joint Venture, as applicable, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company, any Subsidiary or any Joint Venture is a party or by which it or its
property is or may be bound identified to such counsel as material (assuming all
of such agreements are governed by Pennsylvania law), (iii) any local, state or
Federal law, statute, ordinance, requirement, administrative statute, rule or
regulation applicable to the Company, any Subsidiary or any Joint Venture or its
assets or properties (except with respect to the matters set forth in the
opinion of Dow, Lohnes & Albertson, as to which no opinion need be expressed) or
(iv) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company, any Subsidiary or any Joint
Venture or its
<PAGE>
assets or properties. Assuming compliance with applicable state securities and
Blue Sky laws, as to which such counsel need express no opinion, and except for
the filing of a registration statement under the Act and qualification of the
Indenture under the Trust Indenture Act of 1939, as amended, in connection with
the Registration Rights Agreement, no consent, approval, authorization or order
of, or filing, registration, qualification, license or permit of or with, any
court or governmental agency, body or administrative agency is required for (1)
the execution, delivery and performance by the Company of the Agreement and the
other Operative Documents, as applicable, (2) the issuance and sale of the
Senior Notes or (3) consummation by the Company, the Subsidiaries and the Joint
Ventures of the transactions described in the Offering Memorandum, except such
as have been obtained and made or have been disclosed in the Offering
Memorandum.
17. None of the Company, the Subsidiaries or the Joint Ventures is (i) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
18. None of the execution, delivery and performance of the Agreement, the
issuance and sale of the Senior Notes, the application of the proceeds from the
issuance and sale of the Senior Notes and the consummation of the transactions
contemplated thereby as set forth in the Offering Memorandum, will violate
Regulations G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
We have participated in conferences with officers and other representatives
of the Company, representatives of the independent certified public accountants
of the Company, the Initial Purchasers and the representatives of the Initial
Purchasers at which the contents of the Preliminary Offering Memorandum and the
Offering Memorandum and related matters were discussed and, although we have not
undertaken to investigate or verify independently, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Preliminary Offering Memorandum or the Offering Memorandum
(except as indicated in paragraphs 12 and 14 above), on the basis of the
foregoing, no facts have come to our attention which led us to believe that the
Preliminary Offering Memorandum or the Offering Memorandum, as of its date or
the Closing Date, contained an untrue statement of a material fact or omitted to
state any fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except as to financial statements and related notes, the financial
statement schedules and other financial and statistical data included therein).
<PAGE>
Exhibit E
Form of Opinion of Dow, Lohnes & Albertson
1. Each of the Company, the Subsidiaries and the Joint Ventures has all of
the licenses, permits and authorizations, if any, required by the FCC and the
State Regulatory Agencies for the provision of telecommunications services
except where the failure to obtain or hold such license, permit or authority
would not have a Material Adverse Effect on the Company, the Subsidiaries and
the Joint Ventures, taken as a whole.
2. Neither the Company, any Subsidiaries nor any Joint Ventures is subject
to any pending complaint or investigation before the FCC or, to the best
knowledge of counsel, to any threatened complaint or investigation before the
FCC, or, any pending or threatened complaint or investigation before any State
Regulatory Agencies based on any alleged violation by the Company, the
Subsidiaries or the Joint Ventures in connection with their provision of or
failure to provide telecommunications services of a character required to be
disclosed in the Offering Memorandum.
3. The statements in the Offering Memorandum under the heading of ["Risk
Factors Regulation" and "Business - Government Regulation"] fairly and
accurately summarize the matters therein described.
4. The Company, the Subsidiaries and the Joint Ventures have the consents,
approvals, authorizations, licenses, certificates, permits, or orders of the FCC
or any State Regulatory Agency, if any, for the consummation of the transactions
contemplated in the Purchase Agreement except where the failure to obtain the
consents, approvals, authorizations, licenses, certificates, permits or orders
would not have a Material Adverse Effect on the Company, the Subsidiaries and
the Joint Ventures, taken as a whole.
5. Neither the execution and delivery of the Purchase Agreement nor the sale
of the Senior Notes contemplated thereby will conflict with or result in a
violation of any order or regulation of the FCC or any State Regulatory Agency
applicable to the Company, its Subsidiaries or the Joint Ventures except where
the conflict with or the violation of which would not have a material adverse
impact on the Company, the Subsidiaries and the Joint Ventures, taken as a
whole.
<PAGE>
EXHIBIT 2.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of May 13, 1996, by and between TELEPORT
COMMUNICATIONS GROUP INC., a Delaware corporation (the "Company"),and HYPERION
-------
TELECOMMUNICATIONS OF FLORIDA, INC., a Florida corporation (the "Local
-----
Partner").
- -------
RECITALS:
--------
A. The Local Partner and one or more affiliates of the Company are
partners of TCG SOUTH FLORIDA, a New York general partnership (the
"Partnership"). The Local Partner holds a 15.7% partnership interest in the
-----------
Partnership (the "Partnership Interest").
--------------------
B. The Company desires to acquire all of the partnership interests in the
Partnership not directly or indirectly owned by it, including the Local
Partner's Partnership Interest, and the Local Partner desires to transfer the
Partnership Interest to the Company, in exchange for the Purchase Price as set
forth in Section 2.2.
AGREEMENTS:
----------
In consideration of the foregoing and of the covenants contained in this
Agreement, the parties agree as follows:
SECTION 1 DEFINITIONS.
-----------
For purposes of this Agreement, the following terms shall have the
following meanings:
"Agreement" means this Purchase Agreement, as it may be amended, restated,
---------
modified or supplemented from time to time in accordance with its terms.
"Business Day" means any day (other than a day which is a Saturday or
------------
Sunday) on which banks are permitted to be open for business in the City of New
York.
"Closing" has the meaning assigned to it in Section 4.1.
-------
"Closing Date" means the date on which the Closing occurs.
------------
"Material Adverse Effect" means, when used with respect to either the
-----------------------
Company or the Local Partner, a material adverse change in, or material adverse
effect on, the business, assets, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or the Local Partner, as
the case may be, other than any changes in, or effects on, the Company or the
Local Partner, as the case may be, arising primarily out of or resulting
primarily from (a)
<PAGE>
general economic or industry conditions or (b) any action the Company or the
Local Partner takes or omits to take pursuant to this Agreement or with the
consent of the other party.
"Partnership Agreement" means the Partnership Agreement dated as of
---------------------
November 1, 1993, among the partners of the Partnership, pursuant to which the
Partnership was established, as the same may be amended from time to time.
"Person" means any individual, general partnership, limited partnership,
------
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association, or any other legal entity.
"Subsidiary" of any Person means any other Person (a) more than fifty
----------
percent of the outstanding shares or securities of which (representing the right
to vote for the election of directors or other managing authority) are owned or
controlled, directly or indirectly through one or more Subsidiaries, by the
first specified Person or (b) which does not have outstanding shares or
securities, but more than fifty percent of the ownership interests of which
representing the right to make the decisions for such Person are owned or
controlled, directly or indirectly through one or more Subsidiaries, by the
first specified Person.
SECTION 2 TRANSFER OF PARTNERSHIP INTEREST TO THE COMPANY.
-----------------------------------------------
2.1 Transfer of Partnership Interest to the Company. On the Closing Date,
-----------------------------------------------
(a) the Local Partner shall transfer to the Company its entire Partnership
Interest and (b) the Company shall pay to the Local Partner, in exchange for the
transfer to it of the Partnership Interest, the Purchase Price set forth in
Section 2.2.
2.2 Purchase Price. The purchase price for the Partnership Interest shall
--------------
be Eleven Million Six Hundred Eighteen Thousand Dollars ($11,618,000) (the
"Purchase Price"), which shall be payable on the Closing Date in immediately
available funds via wire transfer.
SECTION 3 OTHER AGREEMENTS.
----------------
3.1 Transfer Restrictions. The Local Partner hereby waives any
---------------------
restrictions on transfer contained in the Partnership Agreement or any other
organizational document of the Partnership to the extent required to consummate
the transaction contemplated by this Agreement or any other aspect of the
Company's acquisition of the remaining partnership interests in the Partnership.
3.2 Cooperation. The parties shall cooperate with each other in their
-----------
efforts to obtain all necessary consents and approvals for the consummation of
the transaction contemplated hereby, including making qualified personnel
available for attending hearings and meetings respecting such required consents.
Subject to the other provisions of this Section 3.2, neither party will take any
action that will have the effect of delaying, impairing or impeding the receipt
of any required approvals or consents.
-2-
<PAGE>
3.3 Facilities Agreements. The Local Partner, or an affiliate of the
---------------------
Local Partner, has leased to the Partnership fiber optic facilities pursuant to
one or more Facilities Agreements. Each Facilities Agreement provides that it
terminates upon the termination of the Partnership. On the Closing Date, the
Local Partner shall, and agrees to cause its affiliate to, enter into an
amendment (in form and substance reasonably satisfactory to each of the Company
and the Local Partner) to the Facilities Agreement to which they are parties
(a) to prevent the termination of such Facilities Agreement upon any such
termination of the Partnership and (b) to permit the Partnership to assign all
of its right, title and interest in the Facilities Agreement to the Company or
any Subsidiary of the Company. The amendment to the Facilities Agreement shall
further affirm that the Facilities Agreement does not obligate the Local
Partner to construct additional facilities in the future.
3.4 Waiver of Non-Compete Restrictions. At Closing, the Company shall
----------------------------------
deliver to the Local Partner a waiver, executed by the Partnership, the Company
and each of the other partners in the Partnership, of the provisions of Sections
7.1, 7.4 and 7.7 of the Partnership Agreement.
SECTION 4 CONDITIONS PRECEDENT AND CLOSING.
--------------------------------
4.1 Closing. Subject to the satisfaction of the conditions specified in
-------
Section 4.2, the closing of the transaction contemplated by Section 2.1 (the
"Closing") shall occur at 10:00 a.m., local time at the offices of Dow, Lohnes &
- --------
Albertson, 1200 New Hampshire Avenue, N.W., Washington, D.C., or at such other
location as shall be specified by the Company by written notice to the Local
Partner, on a date to be specified by the Company on at least two Business Days
written notice to the Local Partner or on such other date as shall be specified
by the Company or the Local Partner by written notice to the other, which date
shall not be more than ten Business Days after the date hereof.
4.2 Conditions for Closing. The obligation of each party to consummate
----------------------
the transaction contemplated by this Agreement to occur at the Closing is
subject to the prior or simultaneous performance by the other party of its
obligations at the Closing and the satisfaction or waiver of each of the
following conditions:
a. Representations. All representations and warranties of the
---------------
other party contained in this Agreement shall be true and complete in all
material respects at and as of the Closing as though made at and as of that
time;
b. Performance of Agreements. All covenants and agreements of the
-------------------------
other party contained in this Agreement and required to be performed on or
before the Closing Date shall have been performed on or prior to the Closing
Date, except for such failures to perform the foregoing which, in the aggregate,
do not represent a Material Adverse Effect on the Company or the Local Partner,
as the case may be;
-3-
<PAGE>
c. Certificate. The other party shall have delivered to such party a
-----------
certificate dated as of the Closing Date certifying as to the satisfaction by it
of the conditions set forth in Sections 4.2(a) and (b);
d. Legal Matters. All legal matters incident to this Agreement and
-------------
the consummation of the transaction contemplated by this Agreement shall be
reasonably satisfactory to counsel to such party in all material respects; and
e. Other Documents. Such party shall have received from the other
---------------
party such certificates, agreements and documents, in form and substance
reasonably satisfactory to such party, as such party shall have reasonably
requested.
4.3 Transactions Occurring at the Closing. Subject to the terms and
-------------------------------------
conditions set forth in this Agreement, each of the parties to this Agreement
agrees to take the actions specified below at the Closing. All transactions
described in this Section 4.3 shall be deemed to take place simultaneously, and
no such transaction shall be deemed to have been completed until all such
transactions have been completed, and no document required to effectuate any
such transaction shall be deemed to have been delivered until all documents
necessary to effectuate all such transactions shall have been delivered.
a. Partnership Interest. The Local Partner shall transfer to the
--------------------
Company the Partnership Interest, free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges or
encumbrances of any nature whatsoever (other than any restrictions imposed
pursuant to the Partnership Agreement), pursuant to appropriate instruments of
conveyance, accompanied by other appropriate lien searches, certificates,
agreements and documents, all reasonably satisfactory to the Company in form and
substance. The Company shall assume and undertake to pay, discharge and perform
all obligations and liabilities of the Local Partner relating to the Partnership
Interest and the Partnership Agreement arising from and after the date of
Closing.
b. Payment of Purchase Price. The Company shall pay to the Local
-------------------------
Partner the Purchase Price as set forth in Section 2.2.
c. Releases. The Company shall cause the Partnership to execute and
--------
deliver, and the Local Partner shall execute and deliver, a mutual release in
form and substance reasonably satisfactory to each party pursuant to which the
Partnership and the Local Partner release each other for any claims arising
under the Partnership Agreement or the Local Partner's Partnership Interest in
the Partnership other than any claims arising out of a breach by the Local
Partner or the Partnership of any provision of the Partnership Agreement.
d. Waiver. The Company shall cause the delivery to the Local
------
Partner of the waiver of the non-compete restrictions as set forth in Section
3.4.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
------------------------------
-4-
<PAGE>
5.1 The Company. The Company represents and warrants to the Local Partner
-----------
as follows:
a. Organization, Standing and Authority. The Company is duly
------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to execute and deliver this
Agreement and the documents contemplated hereby, and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with by
it hereunder and thereunder.
b. Authorization and Binding Obligation. The execution, delivery and
------------------------------------
performance of this Agreement by the Company have been duly authorized by all
necessary actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms except
as the enforceability of this Agreement may be affected by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by judicial
discretion in the enforcement of equitable remedies.
c. Absence of Conflicting Agreements or Restrictions. The execution,
-------------------------------------------------
delivery and performance of this Agreement (with or without the giving of
notice, the lapse of time, or both):
1. do not conflict with any provision of the Certificate of
Incorporation or By-laws of the Company; and
2. do not conflict with or constitute a default under any
agreement to which the Company is a party or by which the Company is bound,
except where any such conflict or default would not reasonably be expected to
have a Material Adverse Effect on the Company.
d. Consents. No third party or governmental authorization, consent,
--------
license, exemption of, or filing or registration with any court or governmental
agency of any jurisdiction is or will be necessary in connection with the
execution, delivery or performance by the Company of this Agreement, except such
authorizations, consents, licenses, exemptions, filings or registrations as have
been obtained or made.
e. Breaches of Partnership Agreement. The Company is not aware of
---------------------------------
any breach by it or by the Local Partner of any provision of the Partnership
Agreement.
5.2 The Local Partner. The Local Partner represents and warrants to the
-----------------
Company as follows:
a. Organization, Standing and Authority. The Local Partner is duly
------------------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite power and authority to execute and deliver
this Agreement and the documents
-5-
<PAGE>
contemplated hereby, and to perform and comply with all of the terms, covenants
and conditions to be performed and complied with by the Local Partner hereunder
and thereunder.
b. Authorization and Binding Obligation. The execution, delivery and
------------------------------------
performance of this Agreement by the Local Partner have been duly authorized by
all necessary actions on the part of the Local Partner. This Agreement has been
duly executed and delivered by the Local Partner and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms except as the enforceability of this Agreement may be affected by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by judicial discretion in the enforcement of equitable remedies.
c. Title to Partnership Interests. The Local Partner holds the
------------------------------
Partnership Interest free and clear of all claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, and encumbrances of
any nature whatsoever (other than any restrictions imposed pursuant to the
Partnership Agreement). The Local Partner has no partnership interest in the
Partnership except for the Partnership Interest.
d. Consents. No third party or governmental authorization, consent,
--------
license, exemption of, or filing or registration with any court or governmental
agency of any jurisdiction is or will be necessary in connection with the
execution, delivery or performance by the Local Partner of this Agreement,
except such authorizations, consents, licenses, exemptions, filings or
registrations as have been obtained or made or which are required to be obtained
by the Partnership pursuant to any governmental authorization, permit or license
issued to or held by the Partnership.
e. Breaches of Partnership Agreement. The Local Partner is not
---------------------------------
aware of any breach by it or by the Company of any provision of the Partnership
Agreement.
SECTION 6 EXTENT AND SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
-----------------------------------------------------------------
AGREEMENTS; INDEMNIFICATION
---------------------------
6.1 Scope of Representations of the Parties. Except as and to the extent
---------------------------------------
set forth in this Agreement, neither party makes any representation, warranty,
covenant or agreement whatsoever, and each party disclaims all liability and
responsibility for any representation, warranty, covenant, agreement or
statement made or information communicated (orally or in writing) to the other
party (including any opinion, information or advice which may have been provided
to the other party or any affiliate thereof by any stockholder, partner,
director, officer, employee, accounting firm, legal counsel or any other agent,
consultant or representative of a party). Each party expressly agrees and
acknowledges that, in consummating the transaction contemplated hereby, it is
only relying on the representations and warranties of the other party made in
this Agreement and is not relying on any other representation or warranty of any
present, former or future stockholder or partner, director, officer, employee,
accounting firm, legal counsel or any other agent, consultant or representative
of the other party or any of its affiliates.
-6-
<PAGE>
6.2 Indemnification of Parties. Following the Closing and subject to the
--------------------------
other terms and conditions of this Agreement, each party agrees to indemnify,
defend and hold harmless the other party, and its successors and assigns (each
an "Indemnified Party") from and against any and all losses, claims, costs,
-----------------
fines, damages, liabilities and deficiencies, including reasonable legal and
other fees and expenses incurred in the investigation and defense of claims and
actions, and amounts paid as indemnification to directors, officers, employees
or agents, whether such claims and actions are brought by third parties or
parties hereto, incurred by an Indemnified Party and arising out of or resulting
from (a) any breach of any of such party's representations or warranties in this
Agreement or any other agreement or documents executed or delivered pursuant
hereto or (b) any failure to perform by such party of any of its covenants or
agreements contained in this Agreement.
6.3 Survival. All representations and warranties contained herein shall
--------
survive the execution hereof and the Closing without limitation. The agreement
of either party to proceed to the Closing notwithstanding its knowledge of any
breach of any representation, warranty, covenant or agreement of any other party
shall not, in the absence of an express written waiver of such breach,
constitute a waiver of such breach.
SECTION 7 MISCELLANEOUS.
-------------
7.1 Additional Documents. At any time and from time to time after the
--------------------
date of this Agreement, upon the request of a party, the other party shall do
and perform, or cause to be done and performed, all such additional acts and
deeds, and shall execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, all such additional instruments and documents, as
may be required to best effectuate the purposes and intent of this Agreement.
7.2 Assignment. The provisions of this Agreement shall be binding upon
----------
and inure to the benefit of the parties and their respective successors and
permitted assigns. Notwithstanding the preceding sentence, neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be assignable by the Company or the Local Partner without
the prior written consent of the other party, provided, however, that the
-------- -------
Company may assign this Agreement to any of its Subsidiaries without the consent
of the Local Partner upon the execution of this Agreement by such Subsidiary,
provided the Company remains primarily liable to fully perform the terms and
obligations of this Agreement.
7.3 Notices. All notices and other communications given or made pursuant
-------
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered if delivered by hand, by telecopier device (confirmed
by hand delivery or overnight courier service) or by overnight courier service
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
-7-
<PAGE>
if to the Company, to:
Teleport Communications Group Inc.
Two Teleport Drive, Suite 301
Staten Island, NY 10311-1011
Attention: Robert Annunziata, Chairman and Chief Executive Officer
(with a copy similarly addressed to the attention of
the Teleport Communications Group Inc. Legal Department)
Fax: 718-355-4595
with a copy to:
Kevin F. Reed, Esq.
Dow, Lohnes & Albertson
1200 New Hampshire Ave., Suite 800
Washington, DC 20036
Fax 202-776-2222
if to the Local Partner, to:
Hyperion Telecommunications, Inc.
5 West 3rd Street
Coudersport, PA 16915
Attention: Daniel R Milliard
Fax: 814-274-8631
with a copy to:
Bruce I. Booken, Esq.
Buchanan Ingersoll Professional Corporation
301 Grant St., 20th Floor
Pittsburgh, PA 15219
Fax: 412-562-1041
7.4 Entire Agreement. This Agreement represents the entire understanding
----------------
of the parties with reference to the matters set forth herein. This Agreement
supersedes all prior negotiations, discussions, correspondence, communications
and prior agreements among the parties relating to the subject matter herein.
7.5 Amendment and Waiver. This Agreement may not be amended or modified
--------------------
in any respect except by an instrument in writing signed by each party. Any
failure of either party to comply with any obligation, covenant, agreement or
condition contained herein may be waived by the other party, but such waiver or
failure to insist upon strict compliance with such
-8-
<PAGE>
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent breach or other failure.
7.6 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York (without regard to its laws
pertaining to conflicts of law) applicable to contracts executed in and to be
performed entirely in such state.
7.7 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transaction contemplated hereby is not affected in any manner adverse to
either party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transaction contemplated hereby are fulfilled to the greatest extent
possible.
7.8 Consent to Jurisdiction; Specific Performance. Each party hereby
---------------------------------------------
irrevocably submits to the non-exclusive jurisdiction of any New York State or
Federal court in any action or proceeding arising out of or relating to this
Agreement, and each party hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York State
or Federal court. Each party hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Nothing in this Section 7.8 shall
affect the right of either party to serve legal process in any other manner
permitted by law or affect the right of either party to bring any action or
proceeding against the other party or its property in the courts of any other
jurisdictions. The consents to jurisdiction set forth in this Section 7.8 shall
not constitute general consents to service of process in the State of New York,
shall have no effect for any purpose except as provided in this Section 7.8 and
shall not be deemed to confer rights on any Person other than the parties to
this Agreement. Without intending to limit the remedies available to either
party, each party acknowledges and agrees that a violation by such party of any
term of this Agreement will cause the other party irreparable injury for which
an adequate remedy at law is not available. Therefore, the parties agree that
each party shall be entitled to an injunction, restraining order or other form
of equitable relief from any court of competent jurisdiction restraining the
other party from committing any breach or threatened breach of, or otherwise
specifically to enforce, any provision of this Agreement.
7.9 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement.
7.10 Headings. The section headings used in this Agreement are for
--------
reference purposes only and shall not affect the meaning or interpretation of
any term or provision of this Agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement as of
the date and year first above written.
TELEPORT COMMUNICATIONS GROUP INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
HYPERION TELECOMMUNICATIONS OF FLORIDA, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
-10-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
HYPERION TELECOMMUNICATIONS INC,
The undersigned, in order to form a corporation pursuant to Section
102 of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: The name of the corporation is:
HYPERION TELECOMMUNICATIONS, INC.
SECOND: The address of the corporation's registered office in
Delaware is 32 Loockerman Square, Suite L-100, City of Dover, County of Kent,
Delaware 19901. The name of the registered agent at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The corporation shall have authority to issue one thousand
shares of common stock with a par value of $1.00 per share.
FIFTH: The name and mailing address of the incorporator are as
follows:
Patricia A, Junker
Klett Lieber Rooney & Schorling
One Oxford Centre, 40th Floor
Pittsburgh, PA 15219
<PAGE>
SIXTH: The names and mailing addresses of the persons who are to
serve as directors until the first annual meeting of stockholders or until their
successors are elected and qualify are as follows:
Paul D. Fajerski
331 Alamo Drive
Upper St. Clair, PA 15241
Charles R. Drenning
1443 Old Meadow Road
Upper St. Clair, PA 15241
Randolph S. Fowler
338 Catalina Drive
Upper St. Clair, PA 15241
SEVENTH: The Board of Directors of the corporation from time to time
may make, alter or repeal by-laws of the corporation, except as such power may
be limited by any one or more by-laws adopted by the stockholders.
EIGHTH: Elections of directors of the corporation need not be by
written ballot unless the by-laws of the corporation will so provide.
NINTH: No person who is or shall have been a director of the
corporation shall be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty by such director as a
director; provided however, that this Ninth Article shall not eliminate or limit
the liability of such director (i) under applicable law, for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) under
applicable law, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) under applicable
law, for any transaction from which the director derived an improper personal
benefit. No amendment or repeal of this Ninth Article, or subsequently adopted
inconsistent
<PAGE>
provision of the Certificate of Incorporation shall decrease the protection
afforded to such director by this Article with respect to any act or omission of
such director occurring prior to such amendment, repeal, or adoption of such
provision.
IN WITNESS WHEREOF, the undersigned sole incorporator has signed this
Certificate this 8th day of October, 1991.
/s/ Patricia A. Junker
-------------------
Patricia A. Junker
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HYPERION TELECOMMUNICATIONS, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Hyperion Telecommunications, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article FOURTH thereof and amending and restating it in its
entirety to read as follows:
"FOURTH: The total number of shares of capital stock of all classes which
the Corporation shall have authority to issue is 35,000,000 shares which shall
be divided as follows: (i) 30,000,000 shares of Common Stock, par value $0.01
per share (the "Common Stock"); and (ii) 5,000,000 shares of Preferred Stock,
par value $0.01 per share (the "Preferred Stock"). The designations and the
powers, preferences and relative, participating, optional or other rights of the
capital stock and the qualifications, limitations or restrictions thereof are as
follows:
COMMON STOCK PROVISIONS
Voting Rights. Except as otherwise required by law or expressly provided
-------------
herein, the holder of each share of the Common Stock shall have one vote on each
matter submitted to a vote of the stockholders of the Corporation.
Dividend Rights. The holders of the Common Stock shall be entitled to
---------------
receive dividends at such times and in such amounts as may be determined by the
Board of Directors of the Corporation.
Liquidation Rights. In the event of any liquidation, dissolution or
------------------
winding up of the Corporation, whether voluntary or involuntary, and subject to
the preferential rights, if any, of any outstanding Preferred Stock, such
preferential rights to be determined by the Board, the holders of the Common
Stock shall be entitled to share ratably in the remaining assets of the
Corporation.
PREFERRED STOCK PROVISIONS
The Board of Directors is hereby expressly authorized, at any time or from
time to time, to divide any or all of the shares of Preferred Stock into one or
more series, and in the resolution or resolutions establishing a particular
series, before issuance of any of the shares thereof, to fix and determine the
number of shares and the designation of such series, so as to distinguish it
<PAGE>
from the shares of all other series and to fix and determine the voting rights
(which may be full, limited, multiple or fractional or none), designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, restrictions and other special or relative rights of the Preferred Stock
of such series, to the fullest extent now or hereafter permitted by the laws of
the State of Delaware; provided, however that neither the terms of the class nor
-------- -------
any such series shall be established by the Board of Directors without the
approval of the holders of the series Preferred Stock then outstanding, voting
separately as a class, if such approval would then be required by law to
authorize a class or series of stock having such terms, and until such approval
shall have been obtained the class or any such series of Preferred Stock shall
not be deemed to be authorized. The Board of Directors may in its discretion,
at any time or from time to time, issue or cause to be issued all or any part of
the authorized and unissued shares of Preferred Stock for consideration of such
character and value as the Board of Directors shall from time to time fix or
determine."
3. The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed on April 4, 1996.
HYPERION TELECOMMUNICATIONS, INC.
By: /s/ Michael J. Rigas
---------------------
Name: Michael J. Rigas
Title: Executive Vice President
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
HYPERION TELECOMMUNICATIONS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held in the City of Coudersport, Commonwealth of Pennsylvania, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1992,
shall be held on the third Monday of July if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 10:00 a.m., or at such other
date and time as shall be designated from time to time by the board of directors
and stated in the notice of the meeting, at which they shall elect by a
plurality vote a board of directors, and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 50 days before the date of the
meeting.
<PAGE>
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
majority of the board of directors, or at the request in writing of stockholders
owning a majority in amount of the entire capital stock of the corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than 10 nor more than 50 days before the date of the
meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
-2-
<PAGE>
Section 10. Unless otherwise provided in the certificate of incorporation,
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The initial board of directors of the corporation shall consist
of three (3) directors until the first meeting of stockholders at which time the
Board shall consist of not less than seven (7) nor more than eleven (11)
directors. Each director shall be elected at the annual meeting of the
stockholders to hold office until the annual meeting of the stockholders
following his election, and until his successor is elected and qualified.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by its board
of directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
-3-
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 7. Special meetings of the board may be called by the president on
one day's notice to each director, either personally or by mail or by telegram;
special meetings shall be called by the president or secretary in like manner
and on like notice on the written request of two directors.
Section 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 10. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
-4-
<PAGE>
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 11. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the certificate of
incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or by law, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the
-5-
<PAGE>
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be president, a vice-president, a secretary and a treasurer.
The board of directors may also choose additional vice-presidents, and one or
more assistant secretaries and assistant treasurers. Any number of offices may
be held by the same person, unless the certificate of incorporation or these by-
laws otherwise provide. The board of directors may elect from among the members
of the board a chairman of the board and a vice chairman of the board who shall
be officers of the corporation.
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, one or more vice-presidents, a
secretary and a treasurer.
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
THE CHAIRMAN AND THE VICE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board or, in the absence of the chairman,
the vice chairman of the board, shall preside at all meetings of the
stockholders and of the board of directors and shall perform such other duties
as may from time to time be requested by the board of directors.
-6-
<PAGE>
THE PRESIDENT
Section 7. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 8. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE-PRESIDENT
Section 9. In the absence of the president or in the event of his inability
or refusal to act, the vice-president (or in the event there be more than one
vice-president, the vice-presidents in the order designated, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The vice-presidents shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 10. The Secretary shall attend all meetings of the board of
directors and all meetings of the corporation and shall maintain a record of all
meetings in a book to be kept for that purpose and shall perform like duties for
the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 11. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
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<PAGE>
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 15. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND REPRESENTATIVES
Section 1. The corporation shall indemnify each director and officer, and
it may indemnify each employee and representative, of the corporation to the
fullest extent now permitted by the Delaware General Corporation Law, or any
other applicable law or statute, of the State of Delaware, or as thereafter
amended, against all liabilities and expenses, including, without limitation,
judgments, fines, penalties, attorney's fees and amounts paid in settlement,
imposed upon or reasonably incurred by him in connection with or resulting from
any threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (whether brought by or in the
right of the corporation or otherwise), in which he may become involved as a
party or otherwise by reason of his being or having been such director, officer,
employee or representative or by reason of his serving or having served at the
request of the corporation as a director, officer, employee or other
representative of another corporation, partnership, joint venture, trust or
other enterprise; provided, however, that the
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<PAGE>
foregoing indemnification provisions shall not apply to a threatened, pending
or completed claim, action, suit or proceeding which is initiated by him.
Section 2. The indemnification provided or permitted by Section 1 shall
apply (i) whether or not the director, officer, employee or representative
continues to be such at the time such liabilities or expenses are imposed or
incurred, whether the act or failure to act which is the subject of such claim,
action, suit or proceeding occurred before or after the adoption of this by-law,
and whether or not the indemnified liability or expenses arose or arise from a
threatened, pending or completed claim, action, suit or proceeding by or in the
right of the corporation, and (ii) both to acts or omissions in his official
capacity and to acts or omissions in another capacity while holding such office.
Section 3. Expenses incurred by a director, officer, employee or
representative of the corporation in defending a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 4. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall not be exclusive of any other rights
to which persons seeking indemnification or advancement of expenses may be
entitled under any provision of law, agreement, vote of shareholders or
directors or otherwise, both as to an act or omission in his official capacity
and as to an act or omission in another capacity while holding such office, and
shall inure to the benefit of the heirs, executors, administrators and other
legal representatives of such person.
Section 5. The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or representative of
the corporation or who is or was serving at the request of the corporation as a
director, officer, employee or other representative of another corporation,
partnership, joint venture, trust or other enterprise, for any liability
asserted against such director, officer, employee or representative and incurred
by him in any capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the laws of the State of Delaware.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
him in the corporation.
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<PAGE>
Certificates may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect if as he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
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<PAGE>
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall commence on the first
day of April and end on the last day of March in each year.
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<PAGE>
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new by-
laws may be adopted by the stockholders or by the board of directors, when such
power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
Dated: October 9, 1991
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<PAGE>
EXHIBIT 4.1
SERIES A AND SERIES B
13% SENIOR DISCOUNT NOTES DUE 2003
_________________
INDENTURE
Dated as of April 15, 1996
_________________
_________________
BANK OF MONTREAL TRUST COMPANY
_________________
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1).................... 7.10
(a)(2).................... 7.10
(a)(3).................... N.A.
(a)(4).................... N.A.
(a)(5).................... 7.10
(b)....................... 7.10
(c)....................... N.A.
311 (a)....................... 7.11
(b)....................... 7.11
(c)....................... N.A.
312 (a)....................... 2.05
(b)....................... 10.03
(c)....................... 10.03
313 (a)....................... 7.06
(b)(1).................... N.A.
(b)(2).................... 7.06
(c)....................... 7.06;10.02
(d)....................... 7.06
314 (a)....................... 4.03;10.02
(b)....................... N.A.
(c)(1).................... 10.04
(c)(2).................... 10.04
(c)(3).................... N.A.
(d)....................... N.A.
(e)....................... 10.05
(f)....................... N.A.
315 (a)....................... 7.01
(b)....................... 7.05,10.02
(c)....................... 7.01
(d)....................... 7.01
(e)....................... 6.11
316 (a)(last sentence)........ 2.09
(a)(1)(A)................. 6.05
(a)(1)(B)................. 6.04
(a)(2).................... N.A.
(b)....................... 6.07
(c)....................... 2.12
317 (a)(1).................... 6.08
(a)(2).................... 6.09
(b)....................... 2.04
318 (a)....................... 10.01
(b)....................... N.A.
(c)....................... 10.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.............................................................. 1
Section 1.02. Other Definitions........................................................ 16
Section 1.03. Incorporation by Reference of Trust Indenture Act........................ 17
Section 1.04. Rules of Construction.................................................... 17
ARTICLE 2
THE SENIOR NOTES
Section 2.01. Form and Dating.......................................................... 18
Section 2.02. Execution and Authentication............................................. 18
Section 2.03. Registrar and Paying Agent............................................... 19
Section 2.04. Paying Agent to Hold Money in Trust...................................... 19
Section 2.05. Holder Lists............................................................. 19
Section 2.06. Transfer and Exchange.................................................... 20
Section 2.07. Replacement Senior Notes................................................. 25
Section 2.08. Outstanding Senior Notes................................................. 26
Section 2.09. Treasury Senior Notes.................................................... 26
Section 2.10. Temporary Senior Notes................................................... 26
Section 2.11. Cancellation............................................................. 26
Section 2.12. Record Date.............................................................. 27
Section 2.13. Defaulted Interest....................................................... 27
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee....................................................... 27
Section 3.02. Selection of Senior Notes to Be Redeemed................................. 27
Section 3.03. Notice of Redemption..................................................... 28
Section 3.04. Effect of Notice of Redemption........................................... 28
Section 3.05. Deposit of Redemption Price.............................................. 29
Section 3.06. Senior Notes Redeemed in Part............................................ 29
Section 3.07. Optional Redemption...................................................... 29
Section 3.08. Mandatory Redemption..................................................... 30
Section 3.09. Offer to Purchase by Application of Excess Proceeds...................... 30
ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Notes.................................................. 32
Section 4.02. Maintenance of Office or Agency.......................................... 32
Section 4.03. Reports.................................................................. 33
Section 4.04. Compliance Certificate................................................... 33
Section 4.05. Taxes.................................................................... 34
Section 4.06. Stay, Extension and Usury Laws........................................... 34
Section 4.07. Restricted Payments...................................................... 34
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries............................................................. 36
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock.................................................................... 37
Section 4.10. Asset Sales.............................................................. 39
Section 4.11. Transactions with Affiliates............................................. 41
Section 4.12. Liens.................................................................... 41
Section 4.13. Line of Business......................................................... 42
Section 4.14. Corporate Existence...................................................... 42
Section 4.15. Offer to Purchase Upon Change of Control................................. 42
Section 4.16. Limitations on Sale and Leaseback Transactions........................... 43
Section 4.17. Loans to Subsidiaries and Joint Ventures................................. 43
Section 4.18. Limitation on Status as Investment Company............................... 44
Section 4.19. Payments for Consent..................................................... 44
Section 4.20. Independent Directors.................................................... 44
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets................................. 44
Section 5.02. Successor Corporation Substituted........................................ 45
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default........................................................ 45
Section 6.02. Acceleration............................................................. 47
Section 6.03. Other Remedies........................................................... 48
Section 6.04. Waiver of Past Defaults.................................................. 48
Section 6.05. Control by Majority...................................................... 48
Section 6.06. Limitation on Suits...................................................... 48
Section 6.07. Rights of Holders of Senior Notes to Receive Payment..................... 49
Section 6.08. Collection Suit by Trustee............................................... 49
Section 6.09. Trustee May File Proofs of Claim......................................... 49
Section 6.10. Priorities............................................................... 50
Section 6.11. Undertaking for Costs.................................................... 50
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee........................................................ 51
Section 7.02. Rights of Trustee........................................................ 52
Section 7.03. Individual Rights of Trustee............................................. 52
Section 7.04. Trustee's Disclaimer..................................................... 52
Section 7.05. Notice of Defaults....................................................... 53
Section 7.06. Reports by Trustee to Holders of the Senior Notes........................ 53
Section 7.07. Compensation and Indemnity............................................... 53
Section 7.08. Replacement of Trustee................................................... 54
Section 7.09. Successor Trustee by Merger, etc......................................... 55
Section 7.10. Eligibility; Disqualification............................................ 55
Section 7.11. Preferential Collection of Claims Against The
Company.................................................................. 55
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance............................................................... 55
Section 8.02. Legal Defeasance and Discharge........................................... 56
Section 8.03. Covenant Defeasance...................................................... 56
Section 8.04. Conditions to Legal or Covenant Defeasance............................... 56
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions............................ 58
Section 8.06. Repayment to The Company................................................. 58
Section 8.07. Reinstatement............................................................ 59
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Senior Notes........................... 59
Section 9.02. With Consent of Holders of Senior Notes.................................. 60
Section 9.03. Compliance with Trust Indenture Act...................................... 61
Section 9.04. Revocation and Effect of Consents........................................ 61
Section 9.05. Notation on or Exchange of Senior Notes.................................. 61
Section 9.06. Trustee to Sign Amendments, etc.......................................... 61
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls............................................ 62
Section 10.02. Notices................................................................. 62
Section 10.03. Communication by Holders of Senior Notes with
Other Holders of Senior Notes........................................... 63
Section 10.04. Certificate and Opinion as to Conditions Precedent...................... 63
Section 10.05. Statements Required in Certificate or Opinion........................... 63
Section 10.06. Rules by Trustee and Agents............................................. 64
Section 10.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.............................................. 64
Section 10.08. Governing Law........................................................... 64
Section 10.09. No Adverse Interpretation of Other Agreements........................... 64
Section 10.10. Successors.............................................................. 64
Section 10.11. Severability............................................................ 64
Section 10.12. Counterpart Originals................................................... 65
Section 10.13. Table of Contents, Headings, etc........................................ 65
</TABLE>
<PAGE>
EXHIBITS
Exhibit A FORM OF SENIOR NOTE
Exhibit B CERTIFICATE OF TRANSFEROR
ANNEXES
Annex A FORM OF INTERCOMPANY NOTE
SCHEDULES
Schedule A Fiber Lease Agreements
Schedule B Local Partners
Schedule C Local Partner Agreements
Schedule D Management Agreements
Schedule E Form of Financial Information and Operating Data
of the Subsidiaries and the Joint Ventures
Presented by Cluster
<PAGE>
INDENTURE dated as of April 15, 1996 between HYPERION
TELECOMMUNICATIONS, INC., a Delaware corporation (the "Company") and BANK OF
MONTREAL TRUST COMPANY, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the holders (the "Holders") of
the 13% Series A Senior Discount Notes due 2003 (the "Series A Senior Notes")
and the 13% Series B Senior Discount Notes due 2003 (the "Series B Senior Notes"
and, together with the Series A Senior Notes, the "Senior Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions .
"Accreted Value" means, as of any date of determination prior to April
15, 2001, with respect to any Senior Note, the sum of (a) the initial offering
price (which shall be calculated by discounting the aggregate principal amount
at maturity of such Senior Note at a rate of 13% per annum, compounded semi-
annually on each April 15 and October 15 from April 15, 2001 to the date of
issuance) of such Senior Note and (b) the portion of the excess of the principal
amount of such Senior Note over such initial offering price which shall have
been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate of 13% per annum of the initial offering price of such
Senior Note, compounded semi-annually on each April 15 and October 15 from the
date of issuance of the Senior Notes through the date of determination, computed
on the basis of a 360-day year of twelve 30-day months.
"Acquired Indebtedness" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. For purposes of this
Indenture, beneficial ownership of 10% or more of the Voting Stock of a Person
shall be deemed to be control; provided, that no Local Partner will be deemed an
affiliate of a Subsidiary or a Joint Venture solely
<PAGE>
as a result of such Local Partner's ownership of more than 10% of the Voting
Stock of such Subsidiary or Joint Venture.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Annualized Pro Forma EBITDA" means with respect to any Person, such
Person's Pro Forma EBITDA for the latest fiscal quarter for which internal
financial statements are then available multiplied by four.
"Asset Sale" means
(i) the sale, lease, conveyance, disposition or other transfer of
any assets (including, without limitation, by way of a Sale and
Leaseback Transaction) other than (a) sales of inventory in the
ordinary course of business consistent with past practices and (b)
issuances and sales by the Company of its Equity Interests (provided
that the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company and its Subsidiaries
taken as a whole shall be governed by Sections 4.15 and 5.01 of the
Indenture), and
(ii) the issuance or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries
or Joint Ventures, in the case of either clause (i) or (ii), whether
in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net
proceeds in excess of $1.0 million.
Notwithstanding the foregoing: (x) a transfer of assets by the Company to a
Wholly Owned Subsidiary or by a Subsidiary to the Company or to another Wholly
Owned Subsidiary, (y) an issuance of Equity Interests by a Subsidiary to the
Company or to a Wholly Owned Subsidiary and (z) a Restricted Payment that is
permitted by Section 4.07 will not be deemed to be Asset Sales.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
<PAGE>
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more that one year from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the date
of acquisition, bankers' acceptances with maturities not exceeding one year and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500,000,000 and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from either Moody's Investors Service, Inc. or Standard &
Poor's Corporation and, in each case, maturing within six months after the date
of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Affiliates, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person", other than the
Principals and their Affiliates, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the voting power of the Capital Stock of the
Company, (iv) the consummation of the first transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" becomes the "beneficial owner," directly or indirectly, of more of the
voting power of the Capital Stock of the Company than is at the time
"beneficially owned" by the Principals and their Affiliates in the aggregate or
(v) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors. For purposes of this definition,
any transfer of an Equity Interest of an entity that was formed for the purpose
of acquiring voting power of Capital Stock of the Company shall be deemed to be
a transfer of such portion of such voting power of Capital Stock as corresponds
to the portion of the equity of such entity that has been so transferred.
"Consolidated Interest Expense" means, for any Person, for any period,
the aggregate of the following for such Person for such period determined on a
<PAGE>
consolidated basis in accordance with GAAP: (a) the amount of interest in
respect of Indebtedness (including amortization of original issue discount,
amortization of debt issuance costs and non-cash interest payments on any
Indebtedness and the interest portion of any deferred payment obligation) and
(b) the interest component of rentals in respect of any Capital Lease Obligation
paid, in each case whether accrued or scheduled to be paid or accrued by such
Person during such period to the extent such amounts were deducted in computing
Consolidated Net Income, determined on a consolidated basis in accordance with
GAAP. For purposes of this definition, interest on a Capital Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by such
Person to be the rate of interest implicit in such Capital Lease Obligation in
accordance with GAAP consistently applied.
"Company" means Hyperion Telecommunications, Inc. a Delaware
corporation.
"Consolidated Leverage Ratio" means, for any Person, as of any date,
the ratio of (i) the sum of the aggregate outstanding amount of all Indebtedness
of a Person and its Subsidiaries (other than any Indebtedness of a General
Partner Subsidiary to the extent that such Indebtedness has been incurred in
connection with such General Partner Subsidiary's partnership interest in the
Restricted Joint Venture of which such General Partner Subsidiary is a general
partner) determined on a consolidated basis in accordance with GAAP to (ii)
Annualized Pro Forma EBITDA.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions actually
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-
<PAGE>
ups of tangible assets of a going concern business made within 12 months after
the acquisition of such business) subsequent to the date of the Indenture in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments) and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means, with respect to any Person, any agreement
entered into by and among such Person and one or more commercial banks or
financial institutions, providing for senior term or revolving credit borrowings
of a type similar to credit agreements typically entered into by commercial
banks and financial institutions, including any related notes, Guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such credit agreement and related agreements may be amended,
extended, refinanced, renewed, restated, replaced or refunded from time to time.
"Cumulative Pro Forma EBITDA" means the cumulative EBITDA of the
Company from and after the first day of the first fiscal quarter beginning after
the date of the Indenture to the end of the fiscal quarter immediately preceding
the date of a proposed Restricted Payment, or, if such cumulative EBITDA for
such period is negative, minus the amount by which such cumulative EBITDA is
less than zero.
"Cumulative Interest Expense" means the aggregate amount of
Consolidated Interest Expense of the Company paid or accrued by the Company from
and after the first day of the first fiscal quarter beginning after the date of
the Indenture to the end of the fiscal quarter immediately preceding a proposed
Restricted Payment, determined on a consolidated basis in accordance with GAAP.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Senior Notes" means Senior Notes that are in the form of
the Senior Notes attached hereto as Exhibit A, that do not include the
information called for by footnotes 1 and 2 thereof.
"Depository" means, with respect to the Senior Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depository with respect to the Senior Notes, until a successor
shall have been
<PAGE>
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock which, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature.
"EBITDA" means, for any Person, for any period, an amount equal to (A)
the sum of (i) Consolidated Net Income for such period plus (ii) the provision
for taxes for such period based on income or profits to the extent such income
or profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period minus (B) all non-cash items increasing
Consolidated Net Income for such period, all for each such Person and its
Subsidiaries determined in accordance with GAAP consistently applied.
"Enhanced Services Venture" means any entity in which any Qualified
Subsidiary or Permitted Joint Venture owns at least 50% of the Equity Interests,
provided that the remainder of the Equity Interests are owned by an Enhanced
Services Provider.
"Enhanced Services Provider" means (i) !NTERPRISE, a wholly owned
subsidiary of US West, (ii) any nationally recognized Person which provides
enhanced telecommunications services, including but not limited to, frame relay,
Asynchronous Transfer Mode data transport, business video conferencing, private
line data interconnect service and LAN connection and monitoring services, or
(iii) any Person that has least 500 existing enhanced data services
installations in the United States.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series A Senior Notes
for Series B Senior Notes.
"Existing Indebtedness" means the Senior Notes and any other
Indebtedness of the Company and its Subsidiaries in existence on the date
hereof.
<PAGE>
"Existing Networks" means the telecommunications networks operated by
the Company, its Subsidiaries and Joint Ventures, including, but not limited to,
all networks under construction, on the date hereof.
"Fiber Lease Agreements" means the agreements relating to fiber leases
as set forth on Schedule A hereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"General Partner Subsidiary" means a direct or indirect Wholly Owned
Subsidiary of the Company that (i) is a general partner or stockholder of a
Restricted Joint Venture and (ii) (a) is not engaged in any trade or business
other than the holding, voting, disposing of or taking any action with respect
to its Equity Interest in such Restricted Joint Venture, (b) has no material
assets other than its Equity Interest in such Restricted Joint Venture, (c) has
no material liabilities other than liabilities arising (1) as a result of the
guarantee by such General Partner Subsidiary of Indebtedness incurred by the
Restricted Joint Venture of which such General Partner Subsidiary is a general
partner or (2) by operation of law; provided that, for purposes of this
definition, Hyperion Telecommunications of Virginia, Inc. and Hyperion
Telecommunications of New York, Inc. shall be deemed to be General Partner
Subsidiaries for all purposes so long as Hyperion Telecommunications of
Virginia, Inc. and Hyperion Telecommunications of New York, Inc. do not engage
in any operations or business that is materially different from the operations
or business engaged in by such companies on the date hereof.
"Global Note" means a Senior Note that contains the paragraph referred
to in footnote 1 and the additional schedule referred to in footnote 2 to the
form of the Senior Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Holder" means a Person in whose name a Senior Note is registered.
"Indebtedness" means, with respect to any Person, (a) any liability of
any Person, whether or not contingent (i) for borrowed money, or under any
reimbursement obligation relating to a letter of credit, bankers' acceptance or
note purchase facility; or (ii) evidenced by a bond, note, debenture or similar
instrument
<PAGE>
(including a purchase money obligation); or (iii) for the payment of money
relating to a lease that is required to be classified as a Capitalized Lease
Obligation in accordance with GAAP; (iv) for Disqualified Stock; or (v) for
preferred stock of any Subsidiary (other than preferred stock held by the
Company or any of its Subsidiaries); (b) any liability of others described in
the preceding clause (a) that the Person has guaranteed, that is recourse to
such Person or that is otherwise its legal liability; and (c) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (a) and (b) above.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Initial Public Offering" means an initial underwritten public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
"Intercompany Notes" means the intercompany notes issued by
Subsidiaries and Joint Ventures of the Company in favor of the Company or its
Subsidiaries to evidence loans by the Company to such Subsidiary or Joint
Venture, in each case, in the form attached as Annex 1 hereto.
"Invested Equity Capital" means, with respect to any Company's
Subsidiaries or Joint Ventures as of any date, the sum of (i) the total dollar
amount contributed in cash plus the value of all property contributed (valued at
the lower of fair market value of such property at the time of contribution,
determined in good faith by the Company's Board of Directors, or the book value
of such property at the time of contribution on the books of the Person making
such contribution) to such Subsidiary or Joint Venture, as the case may be,
since the date of its formation in the form of common equity plus, without
duplication, (ii) the total dollar amount contributed in cash plus the value of
all property contributed (valued at the lower of fair market value of such
property at the time of contribution, determined in good faith by the Company's
Board of Directors, or the book value of such property at the time of
contribution on the books of the Person making such contribution) to such
Subsidiary or Joint Venture, as the case may be, since the date of its formation
by Local Partners (and their Affiliates) in consideration of the issuance of
preferred equity on a basis that is substantially proportionate to their common
equity interests plus, without duplication, (iii) the total dollar amount
contributed in cash plus the value of all property contributed (valued at the
lower of fair market value of such property at the time of contribution,
determined in good faith by the Company's Board of Directors, or the book value
of such property at the time of contribution on the books of the Person making
such contribution) to such Subsidiary or Joint Venture since the date of its
formation by the Company in consideration of the issuance of preferred equity
less (iv) the fair market value of all dividends and other distributions (in
respect of any Equity Interest and in whatever form and however designated) made
by such Subsidiary or Joint Venture, as the case may be, since the date of its
formation to the holders of its common equity (and their Affiliates); provided
that in no event shall the aggregate amount of such dividends and other
distributions made by such Subsidiary or Joint Venture, as the case may be, to
any such Person (or its Affiliates) reduce the Invested Equity Capital of such
Subsidiary or Joint Venture, as the case may be, by more than
<PAGE>
the total contributions (per clauses (i) through (iii) above) to such Subsidiary
or Joint Venture, as the case may be, by such Person (and its Affiliates).
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), capital contributions,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting solely of common equity securities of
the Company shall not be deemed to be an Investment. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Subsidiary of the Company such that, after giving effect
to any such sale or disposition, such Person is no longer a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of.
"Joint Venture" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses (i) in which the Company or
its Subsidiaries owns, directly or indirectly, an Equity Interest with the
balance of the Equity Interest thereof being held by one or more Local Partners
and (ii) that is managed and operated by the Company or any of its Subsidiaries.
"Joint Venture Investment" means any Investment in a Joint Venture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Local Partner" means, with respect to any Joint Venture (i) the Joint
Venture partners set forth on Schedule B hereto, and (ii) any other Person,
provided that such other Person (a) is a major cable company or utility that has
a substantial presence within the specific market of such Joint Venture, which
presence shall be
<PAGE>
evidenced, in the case of a cable company, by such company having a market share
consisting of at least 50% of the total number of cable subscribers in such
market and in the case of a utility company, by such company having at least 75%
of the total customer base of such market or (b) is a Wholly Owned Subsidiary of
a major cable company or utility that (1) meets the criteria set forth in the
immediately preceding clause (a) or (2) has all of its initial capital
contributions under the agreement governing the Joint Venture fully and
unconditionally guaranteed, until such time as all such contributions have been
made, by one or more Persons who meet the criteria set forth in the immediately
preceding clause (a).
"Local Partner Agreements" means the joint venture agreements with
Local Partners, as set forth on Schedule C hereto.
"Management Agreements" means the agreements governing the management
of the networks, as set forth on Schedule D hereto.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale and principal payments on
debt, as and when received), net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements) and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to Sale and Leaseback Transactions), or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Subsidiaries, and (ii) any
extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss.
"New Telecommunications Service Market" means a Telecommunications
Service Market in an area that is not within ten miles of any of the Company's
Existing Networks.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Company nor any of its Subsidiaries nor any of its Permitted Joint Ventures (a)
provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly or indirectly
liable (as a guarantor, co-obligor or otherwise) or (c) constitutes the lender;
(ii) as to which no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against a Restricted Joint
Venture) would permit (upon notice, lapse of time, the occurrence or failure to
occur, of any other condition or event or any
<PAGE>
combination thereof) any holder of any other Indebtedness of the Company, any of
its Subsidiaries or any of its Permitted Joint Ventures to declare a default on
such other Indebtedness or cause or permit the payment thereof to be accelerated
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company, any of its Subsidiaries or any of its Permitted Joint Ventures;
provided that the recourse (if any) of a holder of such Indebtedness to the
General Partner Subsidiary of a Restricted Joint Venture in which such General
Partner Subsidiary is a general partner as a result of being a general partner
of such Restricted Joint Venture will not be considered credit support or direct
or indirect liability of such General Partner Subsidiary for purposes of clauses
(i)(a), (ii)(b) and (iii) above.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 10.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
10.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means
(a) ..........................................................
any Investment in a Wholly Owned Subsidiary of the Company
that is engaged, either directly or indirectly through a
Qualified Subsidiary or Joint Venture, in the Telecommunications
Business;
(b) ..........................................................
any Investment in a Qualified Subsidiary of the Company that is
directly engaged in the Telecommunications Business;
(c) ..........................................................
any Investment in Cash Equivalents;
(d) ..........................................................
any Investment in a Person that is not a Subsidiary of the
Company, if as a result of such Investment (i)(A) such Person
becomes a Qualified
<PAGE>
Subsidiary or Wholly Owned Subsidiary of the Company or (B) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Qualified Subsidiary and
(ii)(A) such Wholly Owned Subsidiary, either directly or
indirectly through a Qualified Subsidiary or a Joint Venture, is
engaged in the Telecommunications Business or (B) such Qualified
Subsidiary is directly engaged in the Telecommunications
Business;
(e) ..........................................................
any Permitted Joint Venture Investment;
(f) ..........................................................
any Investment made as a result of the receipt of non-cash
consideration (whether or not such non-cash consideration is
deemed to be cash for the purposes of Section 4.10) from an Asset
Sale that was made pursuant to and in compliance with Section
4.10 hereof; or
(g) ..........................................................
any Investment in an Enhanced Services Venture.
"Permitted Joint Venture" means any Joint Venture in which the Company
has, directly or indirectly, a 45% or greater Equity Interest.
"Permitted Joint Venture Investment" means any Joint Venture
Investment by the Company or a Wholly Owned Subsidiary of the Company if, after
such Joint Venture Investment, the Company has, directly or indirectly, a 45% or
greater Equity Interest in such Joint Venture.
"Permitted Liens" means
(i) Liens on the property of the Company, any Subsidiary or any
Permitted Joint Venture securing Obligations under Indebtedness
that may be incurred pursuant to clause (i) of Section 4.09
hereof;
(ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company, any
Subsidiary or any Permitted Joint Venture; provided that such
Liens were in existence prior to the contemplation of such merger
or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company;
(iv) Liens on property existing at the time of acquisition
thereof by the Company, any Subsidiary or any Permitted Joint
Venture, provided that such Liens were in existence prior to the
contemplation of such acquisition;
<PAGE>
(v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business;
(vi) Liens existing on the date of this Indenture;
(vii) Liens on property of Subsidiaries and Permitted
Joint Ventures securing Obligations under Indebtedness incurred
pursuant to clause (viii) of Section 4.09 hereof but only to the
extent that (a) in the case of Subsidiaries and Permitted Joint
Ventures that are incurring Indebtedness other than Related
Network Debt, such Liens secure only such Indebtedness incurred
by such Subsidiary or such Joint Venture; and (b) in the case of
Subsidiaries and Joint Ventures that are incurring Related
Network Debt, such Liens secure only such Related Network Debt;
(viii) Liens securing Obligations under the Senior Notes and
this Indenture;
(ix) Liens securing Obligations under Vendor Debt pursuant to
clause (ii) of Section 4.09 hereof; provided that the principal
amount of such Vendor Debt secured by such Lien does not exceed
100% of the purchase price or cost of acquisition, construction
or improvement of the Telecommunications Related Assets subject
to such Liens;
(x) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(xi) Liens incurred in the ordinary course of business
of the Company, any Subsidiary or any Permitted Joint Venture
with respect to obligations that do not exceed $5.0 million at
any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially
detract from the value of the property or materially impair the
use thereof in the operation of business by the Company, such
Subsidiary or such Permitted Joint Venture; or
(xii) Liens securing Refinancing Indebtedness, but only
if, and to the extent, that such Liens that are incurred in
connection with such Refinancing Indebtedness are at least as
favorable to the Holders of Senior Notes as those contained in
the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
<PAGE>
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Preferred Stock" for any Person means Capital Stock of such Person
of any class or classes (however designated) that ranks prior, as to the payment
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Principals" means John J. Rigas and members of his immediate family,
any of their respective spouses, estates, lineal descendants, heirs, executors,
personal representatives, administrators, trusts for any of their benefit and
charitable foundations to which shares of the Company's Capital Stock
beneficially owned by any of the foregoing have been transferred.
"Pro Forma EBITDA" means, for any Person, for any period, the EBITDA
of such Person as determined on a consolidated basis in accordance with GAAP
consistently applied, after giving effect to the following: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have made any
Asset Sale, Pro Forma EBITDA for such Person and its Subsidiaries for such
period shall be reduced by an amount equal to the Pro Forma EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset Sale for
the period or increased by an amount equal to the Pro Forma EBITDA (if negative)
directly attributable thereto for such period and (ii) if, during or after such
period, such Person or any of its Subsidiaries completes an acquisition of any
Person or business which immediately after such acquisition is a Subsidiary of
such Person or a Subsidiary of such Person, Pro Forma EBITDA shall be computed
so as to give pro forma effect to such Asset Sale or the acquisition of such
Person or business, as the case maybe.
"Qualified Subsidiary" means any Subsidiary in which a Local Partner
or Local Partners own at least 5% but less than 50% of the Equity Interests of
such Subsidiary; provided that such Subsidiary remains a Subsidiary of the
Company at all times for purposes of this Indenture.
"Refinancing Indebtedness" means any Indebtedness of the Company, any
of its Subsidiaries or any of its Permitted Joint Ventures issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company, any of its Subsidiaries or
any of its Permitted Joint Ventures; provided that: (i) the principal amount
(or accreted value, if applicable) of such Refinancing Indebtedness does not
exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith); (ii)
such Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness
<PAGE>
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Refinancing
Indebtedness has a final maturity date later than the final maturity date of the
Senior Notes, and is subordinated in right of payment to the Senior Notes on
terms at least as favorable to the Holders of Senior Notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iv) to the extent that the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
was secured by Liens, any Liens being incurred in connection with such
Refinancing Indebtedness are at least as favorable to the Holders of Senior
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (v) such
Indebtedness is incurred either by the Company, the Subsidiary or the Permitted
Joint Venture who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 15, 1996, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Related Networks" means any group of Qualified Subsidiaries or
Permitted Joint Ventures in which the same Local Partner owns, or the same group
of Local Partners own, all the Equity Interests of each such Qualified
Subsidiary or Permitted Joint Venture that comprise such Related Network that
are not owned by the Company.
"Related Network Debt" means any Credit Agreement entered into by and
among the Qualified Subsidiaries and/or Permitted Joint Ventures that comprise a
Related Network.
"Required Capital Contribution" means any capital contribution made by
Hyperion Telecommunications Inc. of Florida, pursuant to that certain
partnership agreement relating to TCG South Florida, dated November 1, 1993.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Joint Venture" means any Joint Venture that is not a
Permitted Joint Venture, but only if such Joint Venture: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not a party to any agreement, contract,
arrangement or understanding with the Company, any of its Subsidiaries or any of
its Permitted Joint Ventures unless the terms of any such agreement, contract,
arrangement or
<PAGE>
understanding are no less favorable to the Company, such Subsidiary or such
Permitted Joint Venture than those that might be obtained at the time from
Persons who are not Affiliates of the Company; and (c) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company, any of its Subsidiaries or any of its Permitted Joint Ventures. If,
at any time, a Restricted Joint Venture would fail to meet the requirements of a
Restricted Joint Venture by becoming a Permitted Joint Venture or otherwise, it
shall thereafter cease to be a Restricted Joint Venture for purposes of this
Indenture and (i) all of the then outstanding Indebtedness of such entity shall
be deemed to be incurred as of the date on which such entity becomes a Permitted
Joint Venture or otherwise ceases to be a Restricted Joint Venture for purposes
of Section 4.09 hereof subject to the provisions of Section 6.01(d) hereof(and
if such Indebtedness is not permitted to be incurred as of such date, the
Company shall be in default of such covenant) and (ii) all of the then
outstanding Investments made by such entity since the date of this Indenture
shall be deemed to have been made as of the date that such Restricted Joint
Venture becomes a Permitted Joint Venture or otherwise ceases to be a Restricted
Joint Venture for purposes of Section 4.07 hereof (and if such Investments are
not permitted to be made as of such date under Section 4.07 hereof, the Company
shall be in default of such covenant); provided that if a Restricted Joint
Venture ceases to be a Restricted Joint Venture as a result of (i) the loss of
its Local Partner or (ii) the loss of management control of such Restricted
Joint Venture, then the provisions of Section 4.07 shall not be applied to such
entity.
"Restricted Joint Venture Investment" means any Joint Venture
Investment by a General Partner Subsidiary if, after such Joint Venture
Investment, such Joint Venture is a Restricted Joint Venture.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such Person
which has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any Person to whom funds
have been or are to be advanced by lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Note Custodian" means the Trustee, as custodian with respect
to the Senior Notes in global form, or any successor entity thereto.
"Senior Notes" means the Company's 13% Series A Senior Discount Notes
due 2003 issued pursuant to this Indenture and 13% Series B Senior Discount
Notes due 2003 issued in exchange for 13% Series A Senior Discount Notes.
<PAGE>
"Separation Date" means, with respect to the date on which the Senior
Notes and the Warrants shall become separable, the earlier of (i) 90 days from
the date of issuance, (ii) such date as the Initial Purchasers may, in their
discretion, deem appropriate, (iii) in the event a Change of Control occurs, the
date the Company mails notice thereof to holders of the Senior Notes and (iv)
the date on which the Exchange Offer is consummated.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable.
"Strategic Investor" means a corporation, partnership or other entity
engaged in one or more Telecommunications Businesses that has, or 80% or more of
the voting power of the Capital Stock of which is owned by a Person that has, an
equity market capitalization, at the time (i) of its initial Investment in the
Company or (ii) it purchases an Equity Interest in a Subsidiary or Joint Venture
of the Company, as the case may be, in excess of $2.0 billion.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity (other than a partnership) of which more
than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership of which more
than 50% of the partnership's capital accounts, distribution rights or general
or limited partnership interests are owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased transmission facilities, (ii) creating, developing or
marketing communications related network equipment, software and other devices
for use in a telecommunications business or (iii) evaluating, participating or
pursuing any other activity or opportunity that is primarily related to those
identified in (i) or (ii) above; provided that the determination of what
constitutes a Telecommunications Business shall be made in good faith by the
Board of Directors of the Company.
"Telecommunications Related Assets" means all assets, rights
(contractual or otherwise) and properties, whether tangible or intangible, used
or intended for use in connection with a Telecommunications Business.
"Telecommunications Service Market" means a network built by the
Company to service a market.
<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Vendor Debt" means any purchase money Indebtedness of the Company or
any Subsidiary incurred in connection with the acquisition of Telecommunications
Related Assets and which purchase money Indebtedness was extended by the vendor
of such Telecommunications Related Assets or an affiliate thereof.
"Voting Stock" of any person means Capital Stock of such person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such person, whether at all times or only so long as no
senior class of securities has voting power by reason of any contingency.
"Warrant" means any Warrant (as defined in the Warrant Agreement) from
time to time outstanding pursuant to the Warrant Agreement.
"Warrant Agreement" means the warrant agreement, dated as of April 15,
1996, between the Company and Bank of Montreal Trust Company, as Warrant Agent.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"........... 4.11
"Asset Sale"...................... 4.10
"Asset Sale Offer"................ 3.09
"Bankruptcy Law".................. 4.01
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"Change of Control Offer"......... 4.15
"Change of Control Payment"....... 4.15
"Change of Control Payment Date".. 4.15
"Covenant Defeasance"............. 8.03
"Custodian"....................... 4.13
"Event of Default"................ 6.01
"Excess Proceeds"................. 4.10
"incur"........................... 4.09
"Legal Defeasance"................ 8.02
"Offer Amount".................... 3.09
"Offer Period".................... 3.09
"Paying Agent".................... 2.03
"Purchase Date"................... 3.09
"Registrar"....................... 2.03
"Restricted Payments"............. 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Senior Notes;
"indenture security Holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Senior Notes means the Company and any successor obligor
upon the Senior Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
<PAGE>
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE SENIOR NOTES
Section 2.01. Form and Dating.
The Senior Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Senior Notes may have
---------
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Senior Note shall be dated the date of its authentication. The
Senior Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Senior Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Senior Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto). Senior Notes issued in the form of registered definitive certificates
shall be substantially in the form of Exhibit A attached hereto (but without
---------
including the text referred to in footnotes 1 and 2 thereto). Each Global Note
shall represent such of the outstanding Senior Notes as shall be specified
therein and each shall provide that it shall represent the aggregate amount of
outstanding Senior Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Senior Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Senior Notes represented
thereby shall be made by the Trustee or the Senior Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Senior Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Senior Notes
and may be in facsimile form.
If an Officer whose signature is on a Senior Note no longer holds that
office at the time a Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
<PAGE>
A Senior Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Senior Note
has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Senior Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Senior Notes. The aggregate
principal amount of Senior Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Senior Notes. An authenticating agent may authenticate Senior
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where Senior Notes may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
office or agency where Senior Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar" includes any co-
registrar and the term "Paying Agent" includes any additional paying agent. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company shall notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Senior Note Custodian with respect to the Global
Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Senior Notes, and will
notify the Trustee of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate
<PAGE>
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Senior Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of all Holders
and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the
Registrar, the Company shall furnish to the Trustee at least seven Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Senior Notes and
the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange .
(a) Transfer and Exchange of Definitive Senior Notes. When Definitive
Senior Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Senior Notes; or
(y) to exchange such Definitive Senior Notes for an equal principal
amount of Definitive Senior Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Senior Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar duly executed
by such Holder or by his attorney, duly authorized in writing;
and
(ii) in the case of a Definitive Senior Notes that is a Transfer
Restricted Security, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered to
the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Security is being transferred
to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A
under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144
<PAGE>
under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
---------
(C) if such Transfer Restricted Security is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect from such Holder (in substantially the form of
Exhibit B hereto) and an Opinion of Counsel from such
---------
Holder or the transferee reasonably acceptable to the
Company and to the Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Transfer of Definitive Senior Notes for a Beneficial Interest in a
Global Note. Definitive Senior Notes may not be exchanged for a beneficial
interest in a Global Note except upon satisfaction of the requirements set forth
below. Upon receipt by the Trustee of Definitive Senior Notes, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Senior Notes are Transfer Restricted Securities,
a certification from the Holder thereof (in substantially the form
of Exhibit B hereto) to the effect that such Definitive Senior
Notes are being transferred by such Holder to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Senior Notes are Transfer Restricted
Securities, written instructions from the Holder thereof directing
the Trustee to make, or to direct the Senior Note Custodian to
make, an endorsement on the Global Note to reflect an increase in
the aggregate principal amount of the Senior Notes represented by
the Global Note,
in which case the Trustee shall cancel such Definitive Senior Notes in
accordance with Section 2.11 hereof and cause, or direct the Senior Note
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depository and the Senior Note Custodian, the aggregate
principal amount of Senior Notes represented by the Global Note to be increased
accordingly. If no Global Notes are then outstanding, the Company shall issue
and, upon receipt of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate a new Global Note in the appropriate
principal amount.
(c) Transfer and Exchange of a Global Note. The transfer and exchange of a
Global Note or beneficial interests therein shall be effected through the
Depository, in accordance with this Indenture and the procedures of the
Depository therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act.
(d) Transfer of a Beneficial Interest in a Global Note for Definitive
Senior Note.
<PAGE>
(i) Any Person having a beneficial interest in a Global Note may upon
request exchange such beneficial interest for Definitive Senior
Notes. Upon receipt by the Trustee of written instructions or such
other form of instructions as is customary for the Depository, from
the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Note, and, in the case of Transfer
Restricted Securities, the following additional information and
documents (all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a
certification to that effect from such Person (in substantially
the form of Exhibit B hereto); or
---------
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act or pursuant
to an effective registration statement under the Securities
Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
---------
(C) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B hereto) and
an Opinion of Counsel from the transferee or transferor
reasonably acceptable to the Company and to the Registrar to
the effect that such transfer is in compliance with the
Securities Act,
in which case the Trustee or the Senior Note Custodian, at the
direction of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depository and the
Senior Note Custodian, cause the aggregate principal amount of a
Global Note to be reduced accordingly and, following such
reduction, the Company shall execute and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the
Trustee shall authenticate and deliver to the transferee Definitive
Senior Notes in the appropriate principal amount.
(ii) Definitive Senior Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as
the Depository, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Definitive Senior Notes to the Persons
in whose names such Definitive Senior Notes are so registered.
<PAGE>
(e) Restrictions on Transfer and Exchange of a Global Note. Notwithstanding
any other provision of this Indenture (other than the provisions set forth in
subsection (f) of this Section 2.06), a Global Note may not be transferred as a
whole except by the Depository to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository.
(f) Authentication of Definitive Senior Notes in Absence of Depository.
If at any time:
(i) the Depository for the Senior Notes notifies the Company that the
Depository is unwilling or unable to continue as Depository for the
Global Note and a successor Depository for the Global Note is not
appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Senior
Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Senior Notes in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for such Global Note.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii) and (iii),
each Senior Note certificate evidencing a Global Note and
Definitive Senior Notes (and all Senior Notes issued in exchange
therefor or substitution thereof) shall bear legends in
substantially the following form:
"THE SENIOR NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE SENIOR NOTE EVIDENCED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. BY ITS ACQUISITION HEREOF, THE HOLDER OF THE SENIOR
NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF HYPERION
TELECOMMUNICATIONS, INC. (THE "COMPANY") THAT (A) SUCH SENIOR NOTE
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (A) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE
<PAGE>
REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (C) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE."
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH
ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS
SECURITY, THE ISSUE PRICE IS $532.72, THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $467.28, THE ISSUE DATE IS APRIL 15, 1996 AND THE YIELD
TO MATURITY IS 13% PER ANNUM."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Note) pursuant to Rule 144 under the Securities Act or pursuant to
an effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Securities that are
Definitive Senior Notes, the Registrar shall permit the Holder
thereof to exchange such Transfer Restricted Securities for
Definitive Senior Notes that do not bear the first legend set
forth in (i) above and rescind any restriction on the transfer
of such Transfer Restricted Securities; and
(B) in the case of any Transfer Restricted Securities represented
by a Global Note, such Transfer Restricted Securities shall not
be required to bear the first legend set forth in (i) above,
but shall continue to be subject to the provisions of Section
2.06(c) hereof; provided, however, that with respect to any
request for an exchange of Transfer Restricted Securities that
are represented by a Global Note for Definitive Senior Notes
that do not bear the first legend set forth in (i) above, which
request is made in reliance upon Rule 144, the Holder thereof
shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
---------
(iii) Notwithstanding the foregoing, upon consummation of the Exchange
Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the
Trustee shall authenticate Series B Senior Notes in exchange for
Series A Senior
<PAGE>
Notes accepted for exchange in the Exchange Offer, which Series B
Senior Notes shall not bear the first legend set forth in (i)
above, and the Registrar shall rescind any restriction on the
transfer of such Senior Notes, in each case unless the Holder of
such Series A Senior Notes is either (A) a broker-dealer, (B) a
Person participating in the distribution of the Series A Senior
Notes or (C) a Person who is an affiliate (as defined in Rule 144A)
of the Company.
(h) Cancellation and/or Adjustment of a Global Note. At such time as all
beneficial interests in a Global Note have been exchanged for Definitive Senior
Notes, redeemed, repurchased or cancelled, such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for Definitive Senior Notes, redeemed, repurchased or
cancelled, the principal amount of Senior Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note, by the Trustee or the Senior Notes Custodian, at the direction of the
Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Senior
Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer
pursuant to Sections 3.07, 4.10, 4.15 and 9.05 hereto).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Senior Note selected for redemption in whole or in
part, except the unredeemed portion of any Senior Note being
redeemed in part.
(iv) All Definitive Senior Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive Senior Notes or
Global Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Definitive Senior Notes or Global Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to exchange Senior
Notes during a period beginning at the opening of business 15
days before the day of any selection of Senior Notes for
<PAGE>
redemption under Section 3.02 hereof and ending at the close of
business on the day of selection; or
(B) to register the transfer of or to exchange any Senior Note so
selected for redemption in whole or in part, except the
unredeemed portion of any Senior Note being redeemed in part;
or
(C) to register the transfer of or to exchange a Senior Note
between a record date and the next succeeding interest payment
date.
(vi) Prior to due presentment for the registration of a transfer of any
Senior Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Senior Note is registered as the
absolute owner of such Senior Note for the purpose of receiving
payment of principal of and interest on such Senior Notes, and
neither the Trustee, any Agent nor the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Definitive Senior Notes and a Global
Note in accordance with the provisions of Section 2.02 hereof.
(j) The Senior Notes and the Warrants will not be separately exchangeable or
transferable prior to the Separation Date, at which time the Senior
Notes shall become separately exchangeable and transferable. Prior to
the Separation Date, Senior Notes will be exchangeable and transferable
only together with the Warrants related thereto as set forth herein and
in the Warrant Agreement.
Section 2.07. Replacement Senior Notes.
If any mutilated Senior Note is surrendered to the Trustee, or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Senior Note, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers of the Company, shall
authenticate a replacement Senior Note if the Trustee's requirements are met.
If required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Senior Note is replaced. The Company
may charge for its expenses in replacing a Senior Note.
Every replacement Senior Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Senior Notes duly issued hereunder.
<PAGE>
Section 2.08. Outstanding Senior Notes.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Senior Note does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of
any thereof) holds, on a redemption date or maturity date, money sufficient to
pay Senior Notes payable on that date, then on and after that date such Senior
Notes shall be deemed to be no longer outstanding and shall cease to accrete or
accrue interest.
Section 2.09. Treasury Senior Notes.
In determining whether the Holders of the required principal amount of
Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company, or by any Affiliate thereof shall be considered as though
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Senior Notes that a Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Senior Notes.
Until definitive Senior Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Senior Notes upon a written
order of the Company signed by two Officers of the Company. Temporary Senior
Notes shall be substantially in the form of definitive Senior Notes but may have
variations that the Company considers appropriate for temporary Senior Notes and
as shall be reasonably acceptable to the Trustee. Without unreasonable delay,
the Company shall prepare and the Trustee shall authenticate definitive Senior
Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior
<PAGE>
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Senior Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Senior Notes (subject to the record retention
requirement of the Exchange Act). Certification of the destruction of all
cancelled Senior Notes shall be delivered to the Company. The Company may not
issue new Senior Notes to replace Senior Notes that it has paid or that have
been delivered to the Trustee for cancellation.
Section 2.12. Record Date.
The record date for purposes of determining the identity of Holders of the
Senior Notes entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA (S) 316 (c).
Section 2.13. Defaulted Interest.
If the Company defaults in a payment of interest on the Senior Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Senior Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Senior Note and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Senior Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Senior Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Senior Notes to Be Redeemed.
If less than all of the Senior Notes are to be redeemed at any time, the
Trustee shall select the Senior Notes to be redeemed among the Holders of the
Senior Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed or, if the
Senior Notes are not so listed, on a pro
<PAGE>
rata basis, by lot or in accordance with any other method the Trustee considers
fair and appropriate. In the event of partial redemption by lot, the particular
Senior Notes to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Senior Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Senior Notes
selected for redemption and, in the case of any Senior Note selected for partial
redemption, the principal amount thereof to be redeemed. Senior Notes and
portions of Senior Notes selected shall be in amounts of $1,000 or whole
multiples of $1,000; except that if all of the Senior Notes of a Holder are to
be redeemed, the entire outstanding amount of Senior Notes held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Senior Notes
called for redemption also apply to portions of Senior Notes called for
redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Senior Notes are to be redeemed at its registered address.
The notice shall identify the Senior Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date upon surrender of such Senior Note, a new Senior Note or Senior
Notes in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Senior Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Senior Notes and/or Section of this Indenture
pursuant to which the Senior Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Senior
Notes.
<PAGE>
At the Company's request, the Trustee shall give the notice of redemption in
the Company's name and at its expense; provided, however, that the Company shall
have delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Senior Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Senior Notes to be redeemed on that date.
The Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, accrued interest on and
Liquidated Damages, if any, all Senior Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Senior
Notes or the portions of Senior Notes called for redemption. If a Senior Note
is redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest and Liquidated
Damages, if any, shall be paid to the Person in whose name such Senior Note was
registered at the close of business on such record date. If any Senior Note
called for redemption shall not be so paid upon surrender for redemption because
of the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Senior Notes and in
Section 4.01 hereof.
Section 3.06. Senior Notes Redeemed in Part.
Upon surrender of a Senior Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Senior Note equal in
principal amount to the unredeemed portion of the Senior Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Senior Notes prior to April 15, 2001.
Thereafter, the Company shall have the option to redeem the Senior Notes, in
whole or in part, upon not less than 30 nor more than 60 days notice, at the
redemption prices (expressed as
<PAGE>
percentages of principal amount, of, if such redemption occurs prior to April
15, 2001, the Accreted Value) set forth below plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001....................................... 106.5%
2002 and thereafter........................ 100.0%
</TABLE>
(b) Notwithstanding the foregoing, the Company, on or prior to April 15,
1999, may redeem up to a maximum of 25% of the aggregate principal amount of the
Senior Notes then outstanding at a redemption price of 113.0% of the Accreted
Value thereof, with the net proceeds from either (i) an Initial Public Offering
of the common stock of the Company or (ii) a sale of the Capital Stock (other
than Disqualified Stock) of the Company to a Strategic Investor in a single
transaction or a series of related transactions for at least $25.0 million;
provided that, in either case, at least 75% in aggregate principal amount of the
Senior Notes remain outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 90
days of the date of the closing of such Initial Public Offering or such sale to
a Strategic Investor, as the case may be.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.15 hereof, the Company shall
not be required to make mandatory redemption or sinking fund payments with
respect to the Senior Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Senior Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Senior Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Senior Notes tendered in response to the
Asset Sale Offer. Payment for any Senior Notes so purchased shall be made in
the same manner as interest payments are made.
<PAGE>
The Company shall comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with any offer
required to be made by the Company to repurchase the Senior Notes as a result of
an Asset Sale Offer. To the extent that the provisions of any securities laws
or regulations conflict with provisions of this Section 3.09, the Company shall
comply with the applicable securities laws or regulations and shall not be
deemed to have breached its obligations hereunder by virtue thereof.
If the Purchase Date is on or after an interest record date and on or before
the related interest payment date, any accrued and unpaid interest shall be paid
to the Person in whose name a Senior Note is registered at the close of business
on such record date, and no additional interest shall be payable to Holders who
tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Senior Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Senior Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Note completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Senior Note the
<PAGE>
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Senior Note purchased;
(h) that, if the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select the
Senior Notes to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Senior Notes in denominations
of $1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased portion
of the Senior Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Senior Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Senior Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Senior Notes or portions thereof were accepted for payment by the Company
in accordance with the terms of this Section 3.09. The Company, the Depository
or the Paying Agent, as the case may be, shall promptly (but in any case not
later than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Senior Notes tendered by
such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Senior Note, and the Trustee, upon written request from the
Company shall authenticate and mail or deliver such new Senior Note to such
Holder, in a principal amount equal to any unpurchased portion of the Senior
Note surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Notes.
The Company shall pay or cause to be paid the principal of, premium, if any,
and interest on the Senior Notes (including any additional interest required to
be paid pursuant to the provisions of the Registration Rights Agreement) on the
dates and in the manner provided in the Senior Notes. Principal, premium, if
any, and interest shall be considered paid on the date due if the Paying Agent,
if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m.
Eastern Time on the due date money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal, premium,
if any, and interest then due.
<PAGE>
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Senior Notes
to the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Senior Notes may be surrendered
for registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Senior Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Senior Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03 hereof.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Senior Notes are outstanding, the Company shall furnish to the
Holders of Senior Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-
K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants; (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports; and (iii) on a quarterly basis, certain financial information
and operating data with respect to each Subsidiary and Joint Venture engaged in
a Telecommunications Business, in the form specified by Schedule E hereto. In
addition, whether or not required by the rules and regulations of the SEC the
Company shall file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and make such
<PAGE>
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA (S) 314(a).
(b) For so long as any Senior Notes remain outstanding, the Company shall
furnish to all Holders and to securities analysts and prospective investors,
promptly upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company, its Subsidiaries and Joint Ventures during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Senior Notes is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries and Joint
Ventures to pay, prior to delinquency, all material taxes, assessments, and
governmental levies, except such as are contested in good faith and by
appropriate
<PAGE>
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of Senior Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and (i) shall not permit any of its Subsidiaries or
Joint Ventures to, directly or indirectly: (a) declare or pay any dividend or
make any other payment or distribution on account of the Company's Equity
Interests (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or dividends or distributions
payable to the Company or any Wholly Owned Subsidiary); (b) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or any
direct or indirect parent of the Company (other than Equity Interests owned by
the Company or any Wholly Owned Subsidiary of the Company); or (c) purchase,
redeem or otherwise acquire or retire for value, prior to a scheduled mandatory
sinking fund payment date or maturity date, any Indebtedness of the Company
which ranks subordinated in right to payment to the Senior Notes and (ii) shall
not permit any of its Subsidiaries or Permitted Joint Ventures to, make any
Investment other than a Permitted Investment (all such payments and other
actions set forth in clauses (i) and (ii) above being collectively referred to
as "Restricted Payments") unless, at the time of and after giving effect to such
Restricted Payment:
(x) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(y) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments (including, without limitation, all Restricted
Payments referred to in clauses (a), (b) and (c)(1) below but excluding those
made under clauses (c)(2), (d) and (e) below) made by the Company and its
Subsidiaries after the date of the Indenture is less than the sum of: (1) the
excess of (A) Cumulative Pro Forma EBITDA over (B) 2.0 times Cumulative Interest
Expense plus (2) the aggregate net cash proceeds received by the Company (other
than from a Subsidiary or Joint Venture) (A) as capital contributions to the
Company, (B) from the issuance and sale of Equity Interest, other than
Disqualified Stock, and (C) from the issuance and sale of Indebtedness that is
convertible into Capital Stock (other than Disqualified Stock), to the extent
such Indebtedness is actually converted into such Capital Stock (clauses (A),
(B) and (C) collectively referred to as "Equity Issuances"), other than any such
net cash proceeds from Equity Issuances that were used as set forth in clause
(c) and (d) below; and
<PAGE>
(z) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness other than Permitted
Indebtedness.
The foregoing provisions shall not prohibit:
(a) the payment of any Required Capital Contribution;
(b) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with this Section 4.07;
(c) so long as no Default or Event of Default shall have occurred and be
continuing, Restricted Joint Venture Investments, which at the time
any such Restricted Joint Venture Investment was made, did not cause
the aggregate amount of all Restricted Joint Venture Investments made
on or after the date of this Indenture and then outstanding under
this clause (c) to exceed (1) $20.0 million plus (2) the net cash
proceeds from Equity Issuances not used as set forth in clause (y)
above and clause (d) below;
(d) so long as no Default or Event of Default shall have occurred and be
continuing, the making of any Investment in a Telecommunications
Business out of the net cash proceeds from Equity Issuances not used
as set forth in clauses (y) and (c)(2) above; or
(e) so long as no Default or Event of Default shall have occurred and be
continuing, the making of loans and advances to the senior management
of the Company in an amount not to exceed $3.0 million in aggregate
principal amount.
(f) all payments pursuant to the Athird sentence of Section 15 of the
Warrant Agreement, dated April 15, 1996, between the Company and the
Bank of Montreal Trust Company, as Warrant Agent.
For purposes of this Section 4.07, in the event that a Restricted Joint
Venture becomes a Permitted Joint Venture or otherwise ceases to be a Restricted
Joint Venture, all of the then outstanding Investments made by such entity since
the date of the Indenture shall be deemed to have been made as of the date that
such Restricted Joint Venture becomes a Permitted Joint Venture or otherwise
ceases to be a Restricted Joint Venture; provided that if a Restricted Joint
Venture ceases to be a Restricted Joint Venture as a result of (i) the loss of
its Local Partner or (ii) the loss of management control of such Restricted
Joint Venture, then the provisions of this paragraph shall not be applied to
such entity.
The amount of all Restricted Payments, other than cash, shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of such
Restricted Payment of the asset(s) proposed to be transferred by the Company or
such Subsidiary, as the case may
<PAGE>
be, pursuant to such Restricted Payment. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, which calculations may be based upon the Company's latest available
financial statements.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:
(i) (a) pay dividends or make any other distributions to the Company
or any of its Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or
any of its Subsidiaries;
(ii) make loans or advances to the Company or any of its Subsidiaries;
(iii) grant liens or grant security interests on its asset in favor of
the Holders of Senior Notes or guarantee the payment of the Senior
Notes; or
(iv) transfer any of its properties or assets to the Company or any of
its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the date of this Indenture;
(b) any Credit Agreement creating or evidencing Indebtedness permitted by
clause (i) of Section 4.09 and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof;
(c) the Indenture and the Senior Notes;
(d) applicable law;
(e) by reason of customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past
practices;
(f) purchase money obligations or Vendor Debt for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (iv) above on the property so acquired;
(g) Indebtedness incurred pursuant to the clause (viii) of Section 4.09;
provided that such encumbrance or restriction only relates to the
Subsidiary or Permitted Joint Venture incurring such Indebtedness; and
<PAGE>
(h) Refinancing Indebtedness, provided that such encumbrances or
restrictions are no more restrictive than those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries or Joint
Ventures to, directly or indirectly, create, incur, issue, assume, guaranty or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including, without
limitation, Acquired Indebtedness) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries or Joint Ventures
to issue any shares of Preferred Stock; provided that the Company may incur
Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified
Stock if the Company's Consolidated Leverage Ratio as of the last day of the
Company's most recently ended fiscal quarter for which internal financial
statements are available immediately preceding the date on which such
Indebtedness is incurred, or such Disqualified Stock is issued, as the case may
be, would have been (a) greater than zero and less than 5.5 to 1.0, if such
incurrence or issuance is on or prior to March 31, 1999, and (b) greater than
zero and less than 5.0 to 1.0, if such incurrence or issuance is after March 31,
1999, determined on a pro forma basis (including pro forma application of the
net proceeds therefrom) as if such Indebtedness had been incurred, or such
Disqualified Stock had been issued, as the case may be, at the beginning of such
fiscal quarter.
The foregoing provisions shall not apply to:
(i) the incurrence of Indebtedness by the Company, any Subsidiary
(other than a General Partner Subsidiary) or any Permitted Joint
Venture pursuant to Credit Agreement(s), provided that the
aggregate principal amount of such Credit Agreement(s) at any one
time outstanding under this clause (i) does not exceed $50.0
million for the Company, all of its Subsidiaries (other than a
General Partner Subsidiary) and all of its Permitted Joint
Ventures combined;
(ii) the incurrence of Vendor Debt by the Company, any Subsidiary
(other than a General Partner Subsidiary) or any Permitted Joint
Venture, provided that the aggregate principal amount of such
Vendor Debt does not exceed 80% of the purchase price or cost of
the construction, acquisition or improvement of the applicable
Telecommunications Related Assets;
(iii) Refinancing Indebtedness;
(iv) the incurrence of Indebtedness by the Company not to exceed, at
any one time outstanding, 2.0 times the net cash proceeds
received by the Company from the issuance and sale of its Capital
Stock (other than Disqualified Stock) to a Person other than a
Subsidiary or a Joint
<PAGE>
Venture of the Company, provided that such Indebtedness (y) does
not mature prior to the Stated Maturity of the Senior Notes and
has a Weighted Average Life to Maturity longer than the Senior
Notes and (z) is subordinated to the Senior Notes;
(v) the incurrence by the Company of Indebtedness (in addition to
Indebtedness permitted by any other clause of this paragraph) in
an aggregate principal amount (or accreted value, as applicable)
at any time outstanding not to exceed $10.0 million;
(vi) the incurrence by any Restricted Joint Venture of Non-Recourse
Debt, provided that if any Non-Recourse Debt of a Restricted
Joint Venture ceases to be Non-Recourse Debt, such event shall be
deemed to constitute an incurrence of Indebtedness as of the date
such Indebtedness ceases to be Non-Recourse Debt;
(vii) the guarantee of Indebtedness by a General Partner Subsidiary in
connection with the incurrence of Indebtedness by the Restricted
Joint Venture of which such General Partner Subsidiary is a
general partner;
(viii) the incurrence by the Company's Subsidiaries (other than General
Partner Subsidiaries) and Permitted Joint Ventures of
Indebtedness (including Acquired Indebtedness) so long as all of
the net proceeds of such incurrence are used by such Subsidiary
or Permitted Joint Venture, as the case may be, directly in
connection with the design, construction, development or
acquisition of a Telecommunications Service Market; provided
that, as of the last day of the Company's most recently ended
fiscal quarter for which internal financial statements are
available immediately preceding the date on which such
Indebtedness is incurred, either: (a) the aggregate principal
amount of all Indebtedness of such Subsidiary or such Permitted
Joint Venture does not exceed 1.75 times the Invested Equity
Capital of such Subsidiary or such Permitted Joint Venture; or
(b) the Consolidated Leverage Ratio of such Subsidiary or such
Permitted Joint Venture would not have been greater than 3.5 to
1.0, in each case determined on a pro forma basis (including pro
forma application of the net proceeds therefrom) as if such
Indebtedness had been incurred at the beginning of such fiscal
quarter; provided, further that any Indebtedness incurred by any
Subsidiary of the Company or any Permitted Joint Venture (other
than Related Networks) pursuant to this clause (viii) shall be
non-recourse with respect to the Company or any other Subsidiary
of the Company or any other Joint Venture; and
(ix) the incurrence by the Company of the Existing Indebtedness.
For purposes of this Section 4.09, in the event that the Company proposes to
incur Indebtedness pursuant to clause (iv) above, the Company shall,
simultaneously with the incurrence of such Indebtedness, deliver to the Trustee
a resolution of the Board of Directors set forth in an Officers' Certificate
stating that the sale or sales
<PAGE>
of Capital Stock forming the basis for the incurrence of such Indebtedness (i)
constitutes a long term investment in the Company and (ii) has not been made for
the purpose of circumventing this Section 4.09. In the event that the Company
rescinds, reverses or unwinds such sale of Capital Stock or otherwise returns or
refunds all or any portion of the net cash proceeds of such sale of Capital
Stock (whether by dividend, distribution or otherwise) within 270 days of the
date of the incurrence of such Indebtedness, such Indebtedness will be deemed to
be incurred on the date of, and immediately after giving effect to, such
rescission, reversal, unwinding, return or refund.
For purposes of this Section 4.09, in the event that a Restricted Joint
Venture becomes a Permitted Joint Venture or otherwise ceases to be a Restricted
Joint Venture, all of the then outstanding Indebtedness of such entity shall be
deemed to have been incurred as of the date that such Restricted Joint Venture
becomes a Permitted Joint Venture or otherwise ceases to be a Restricted Joint
Venture.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any Subsidiary to, directly or
indirectly, whether in a single transaction or a series of related transactions
occurring within any twelve-month period, make any Asset Sale, unless:
(i) the Company or the Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to
the fair market value (as determined in good faith by the Board
of Directors) for the shares or assets sold or otherwise disposed
of; and
(ii) at least 90% of such consideration consists of cash, provided
that
(A) an amount equal to the fair market value (as determined in good
faith by the Board of Directors) of:
(1) Telecommunications Related Assets received by the Company or
any Subsidiary from the transferee that will be used by the
Company or such Subsidiary in the operation of a
Telecommunications Business;
(2) the Voting Stock of any Person engaged in a Telecommunications
Business received by the Company or any Subsidiary; provided
that on the date such Voting Stock is received, such Investment
in Voting Stock constitutes a Permitted Joint Venture
Investment; or
(3) the publicly tradeable Voting Stock of any person engaged in
the Telecommunications Business received by the Company or any
Subsidiary as consideration for a sale of an Equity Interest in
any Restricted Joint Venture,
<PAGE>
shall, for the purposes of this Section 4.10, be deemed to be cash which
was applied in accordance with the first sentence of the penultimate
paragraph of this Section 4.10; and
(B) in the event that any of Hyperion Telecommunications of
Pennsylvania, Inc., Hyperion Telecommunications of Tennessee, Inc.
or Hyperion Telecommunications of New York, Inc. sell their
respective partnership interests in the partnerships to which each
is a partner to the respective partnerships in the manner specified
by the applicable partnership agreement, (1) the principal amount of
any seller note issued to the Company or any of its Wholly Owned
Subsidiaries shall be deemed to be cash for purposes of this Section
4.10 and (2) the payments of principal pursuant to such seller note
shall be deemed to be Net Cash Proceeds (for purposes of the
penultimate paragraph of this Section 4.10) as and when such
payments are received.
For purposes of this Section 4.10, the first $1.0 million of Net Cash
Proceeds received from Asset Sales in any fiscal year shall not be subject to
the restrictions contained in this section.
In determining the fair market value with respect to any Asset Sale or
series of related Asset Sales involving aggregate consideration in excess of
$10.0 million, the Board of Directors of the Company must obtain an opinion as
to the fairness to the Holders of Senior Notes of such Asset Sales from a
financial point of view issued by a nationally recognized investment banking
firm with total assets in excess of $1.0 billion; provided that no such opinion
shall be required if such Asset Sale is in accordance with the terms of any
Local Partnership Agreement to which the Company or any of its Subsidiaries is a
party on the date hereof.
The Company may apply the Net Cash Proceeds from any Asset Sale to an
investment in Telecommunications Related Assets in a Telecommunications Service
Market within 180 days after such Asset Sale; provided that if the Company
determines to make such investment in a New Telecommunications Service Market,
the Company shall be deemed to have complied with the first clause of this
sentence if, the Company (y) within 180 days of such Asset Sale, delivers to the
Trustee a resolution adopted by a majority of the Board of Directors set forth
in an Officer's Certificate certifying that the Company intends to utilize the
Net Cash Proceeds of such Asset Sale to invest in a specific new
Telecommunications Service Market and (z) completes such investment within 360
days of such Asset Sale. The Company shall be deemed to have completed its
investment for purposes of the preceding clause (z), so long as the Company has
(i) a business plan that sets forth the Company's investment plans for the
applicable Telecommunications Service Market and (ii) issued all material
purchase orders to the appropriate parties that are necessary to complete such
business plan. Any Net Cash Proceeds from an Asset Sale that are not invested
as provided in the two preceding sentences shall constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $2.5 million, the Company
shall commence an Asset Sale Offer to purchase the maximum principal amount of
Senior Notes that may be purchased out of the Excess Proceeds, at an offer price
in cash equal to 100% of aggregate principal amount thereof, plus accrued and
unpaid interest to the date of repurchase (or, in the case of repurchases of
Senior Notes prior to April 15, 2001, at a purchase price equal to 100% of the
Accreted Value thereof as of the date of repurchase) in accordance with the
procedures set forth in this Indenture. To the extent that the aggregate
principal amount thereof, plus accrued and unpaid interest to the date of
repurchase (or, in the
<PAGE>
case of repurchases of Senior Notes prior to April 15, 2001, the Accreted Value
thereof as of the date of repurchase) of the Senior Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Company may use such
remaining Excess Proceeds for any purpose not prohibited by this Indenture. If
the aggregate principal amount thereof, plus accrued and unpaid interest to the
date of repurchase (or, in the case of repurchases of Senior Notes prior to
April 15, 2001, the Accreted Value thereof as of the date of repurchase) of
Senior Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Senior Notes to be purchased on a pro
rata basis. Upon completion of such offer, the amount of Excess Proceeds shall
be reset at zero. Pending application of the Net Cash Proceeds as set forth
above from Asset Sales, all such Net Cash Proceeds shall be placed in escrow for
the benefit of the Holders of Senior Notes.
Notwithstanding the foregoing, the Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, make any Asset Sale of any Equity
Interests of any Subsidiary (at least 80% of the voting power of the Capital
Stock of which is owned by the Company) except pursuant to an Asset Sale of all
of the Equity Interests of such Subsidiary; provided that any sale of any Equity
Interest of any such Subsidiary to a Strategic Investor shall be deemed not to
be an Asset Sale for purposes of this Section 4.10, so long as such sale of such
Equity Interests does not result in such Subsidiary ceasing to be a Subsidiary
of the Company.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary, other than those that would have
been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution
adopted by a majority of the disinterested members of the Board of
Directors and a majority of the Independent Directors of the Company set
forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above; and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, an opinion
as to the fairness to the Holders of Senior Notes of such Affiliate
Transaction from a financial point of view issued by
<PAGE>
a nationally recognized consulting firm, business valuation firm or
investment banking firm;
provided that: (i) all agreements and arrangements with Affiliates, including
without limitation the Local Partner Agreements, the Fiber Lease Agreements, the
Management Agreements, network monitoring agreements and transactions in
connection therewith or pursuant thereto existing on the date of this Indenture
and through the current term thereof; (ii) all arrangements and transactions
with Adelphia, including existing intercompany Indebtedness, overhead charges
made in the ordinary course of business, fiber lease arrangements and similar
services existing on the date of this Indenture and through the current term
thereof; (iii) all employment arrangements approved by the Board of Directors;
(iv) all restricted Payments made pursuant to the Section 4.07 hereof; (v)
transactions between or among the Company and/or its Wholly Owned Subsidiaries;
(vi) transactions between a General Partner Subsidiary and the Restricted Joint
Venture of which such General Partner Subsidiary is a general partner; and (vii)
management and network monitoring agreements between the Company and any of its
Joint Ventures, shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Subsidiaries or
Permitted Joint Ventures to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Section 4.13. Line of Business.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than Telecommunications Business and such business
activities as are incidental or related thereto.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Senior
Notes.
Section 4.15. Offer to Purchase Upon Change of Control.
<PAGE>
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer (the "Change of Control Offer") to each holder of Senior Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Senior Notes at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase (or, in the case of repurchases of
Senior Notes prior to April 15, 2001, at a purchase price equal to 101% of the
Accreted Value thereof as of the date of repurchase) (in either case, the
"Change of Control Payment"). Within ten days following any Change of Control,
the Company shall mail a notice to each Holder stating: (1) that the Change of
Control Offer is being made pursuant to this Section 4.15 and that all Senior
Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no later than 30 business days from the date such
notice is mailed (the "Change of Control Payment Date"); (3) that any Senior
Note not tendered will continue to accrete or accrue interest; (4) that, unless
the Company defaults in the payment of the Change of Control Payment, all Senior
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrete or accrue interest after the Change of Control Payment Date; (5) that
Holders electing to have any Senior Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Senior Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Senior Notes delivered for purchase, and a statement that
such Holder is withdrawing his election to have the Senior Notes purchased; and
(7) that Holders whose Senior Notes are being purchased only in part will be
issued new Senior Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered, which unpurchased portion must be equal to $1,000
in principal amount or an integral multiple thereof. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Senior Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Senior Notes so tendered payment in an amount equal to the
purchase price for the Senior Notes, and the Trustee shall promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new Senior
Note equal in principal amount to any unpurchased portion of the Senior Notes
surrendered by such Holder, if any; provided, that each such new Senior Note
shall be in a principal amount of $1,000 or an integral multiple thereof. The
<PAGE>
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
Section 4.16. Limitations on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any Sale and Leaseback Transaction; provided that the Company or any
Subsidiary (other than a General Partner Subsidiary) may enter into a Sale and
Leaseback Transaction if (i) the Company or other entity could have incurred the
Indebtedness relating to such Sale and Leaseback Transaction pursuant to
Sections 4.09 and 4.12 hereof to incur secured Indebtedness in an amount equal
to the Attributable Debt with respect to such transaction, (ii) the net proceeds
of such Sale and Leaseback Transaction are at least equal to the fair market
value of such property as determined in good faith by the Board of Directors of
the Company and (iii) such proceeds are applied in accordance with the Section
4.10 hereof.
Section 4.17. Loans to Subsidiaries and Joint Ventures.
All loans to Subsidiaries or Joint Ventures made by the Company from time to
time after the date of this Indenture shall be evidenced by Intercompany Notes
in favor of the Company. All loans (unless secured on the date hereof) by the
Company to any Subsidiary or Joint Venture outstanding on the date hereof shall
be evidenced by an unsecured Intercompany Note. The Company shall not, and
shall not permit any of its Subsidiaries to, make any loans by Subsidiaries to
other Subsidiaries and by Subsidiaries to Joint Ventures in which such
Subsidiary does not have an Equity Interest, except that such loans may be (i)
incurred and maintained between and among the Company, its Subsidiaries and
Joint Permitted Ventures in connection with the incurrence of Indebtedness
pursuant to clause (i) of Section 4.09 hereof or (ii) incurred and maintained
between and among Related Networks in connection with the incurrence of
Indebtedness by such Related Networks pursuant to the proviso in clause (viii)
of Section 4.09 hereof. A form of Intercompany Note is attached as an annex
hereto.
Section 4.18. Limitation on Status as Investment Company.
The Company shall not, and shall not permit any of its Subsidiaries to,
conduct its business in a fashion that would cause it to be required to register
as an "investment company" (as that term is defined in the Investment Company
Act of 1940, as amended) or otherwise become subject to regulation under the
Investment Company Act of 1940.
Section 4.19. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Senior Notes for or as
inducement to any consent, waiver or amendment of any terms or provisions or the
Senior Notes unless such consideration is offered to be paid or agreed to be
paid to all Holders of Senior Notes which so consent,
<PAGE>
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
Section 4.20. Independent Directors.
The Company shall, no later than 360 days from the date hereof, have at
least two members of its Board of Directors who are neither officers nor
employees of the Company or its Affiliates (the "Independent Directors"). Any
transaction requiring the approval of the majority of the Independent Directors
shall be prohibited at any time that there are not at least two Independent
Directors on the Company's Board of Directors. If the Company fails to comply
with this Section 4.20, the Company shall pay Liquidated Damages to each Holder
of the Senior Notes (i) with respect to the first 90-day period immediately
following the occurrence of such default at a rate of 0.5% per annum, determined
daily, on the Accreted Value of the Senior Notes (or after April 15, 2001, on
the principal amount of the Senior Notes) and (ii) at the beginning of each
subsequent 90-day period at a rate increased by an additional 0.25% per annum up
to a maximum aggregate increase of 2.0% per annum until such default has been
cured.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Senior Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will, at the
time of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.09 hereof.
<PAGE>
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Senior Notes except in the case of a sale of
all of the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Senior Notes and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Senior Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an
offer to purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of Section
4.07, 4.10, 4.15 or 5.01 hereof;
(d) the Company fails to comply with the provisions described under
Section 4.09; provided that, for purposes of the last paragraph of
Section 4.09, in the event that the Company fails to comply with such
section because Indebtedness is deemed to be incurred by a Restricted
Joint Venture solely as a result of such Restricted Joint Venture
ceasing to be a Restricted Joint Venture as a result of (i) the loss of
a Local Partner or (ii) the loss of management control of such
Restricted Joint Venture, such failure continues for 90 days;
(e) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the
Senior Notes
<PAGE>
for 30 days after notice to the Company by the Trustee or the Holders
of at least 25% in principal amount of the Senior Notes then
outstanding;
(f) default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(g) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the
Company or any of its Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Subsidiary and such judgment or
judgments are not paid within, discharged by or stayed for a period of
60 days, provided that the aggregate of all such undischarged judgments
exceeds $5.0 million;
(h) the Company or any of its Significant Subsidiaries or any of its
Joint Ventures that would, if it were a Subsidiary constitute a
Significant Subsidiary, or any group of Subsidiaries or Joint Ventures
that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any of its Joint Ventures that would, if it were a
Subsidiary constitute a Significant Subsidiary, or any group of
Subsidiaries or Joint
<PAGE>
Ventures that, taken as a whole, would constitute a Significant
Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its Significant
Subsidiaries or any of its Joint Ventures that would, if it were a
Subsidiary constitute a Significant Subsidiary, or any group of
Subsidiaries or Joint Ventures that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all
of the property of the Company or any of its Significant
Subsidiaries or any of its Joint Ventures that would, if it were a
Subsidiary constitute a Significant Subsidiary, or any group of
Subsidiaries or Joint Ventures that, taken as a whole, would
constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any of its Joint Ventures that would, if
it were a Subsidiary constitute a Significant Subsidiary, or any
group of Subsidiaries or Joint Ventures that, taken as a whole,
would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(h) or (i) of Section 6.01 hereof with respect to the Company, any Significant
Subsidiary or any of its Joint Ventures that would, if it were a Subsidiary
constitute a Significant Subsidiary, or any group of Subsidiaries or Joint
Ventures that, taken as a whole, would constitute a Significant Subsidiary)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Senior Notes may declare all the Senior
Notes to be due and payable immediately; upon any such declaration, the Senior
Notes shall become due and payable immediately. Notwithstanding the foregoing,
if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof
occurs with respect to the Company, any of its Significant Subsidiaries or any
of its Joint Ventures that would, if it were a Subsidiary constitute a
Significant Subsidiary, or any group of Subsidiaries or Joint Ventures that,
taken as a whole, would constitute a Significant Subsidiary, all outstanding
Senior Notes shall be due and payable immediately without further action or
notice. Holders of the Senior Notes may not enforce this Indenture or the
Senior Notes except as provided in this Indenture. The Holders of a majority in
aggregate principal amount of the then outstanding Senior Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Senior Notes pursuant to
Section 3.07 hereof, an equivalent premium shall also become and be immediately
due and payable to the
<PAGE>
extent permitted by law upon the acceleration of the Senior Notes. If an Event
of Default occurs prior to April 15, 2001 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition of redemption of the Senior Notes prior to April 15,
2001, then the premium payable for purposes of this paragraph for the period
beginning of the date hereof and ending on April 14, 2001 shall be 106.5% of the
amount that would otherwise be due but for the provisions of this paragraph,
plus accrued interest, if any, to the date of payment. the
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Senior Notes or to enforce the performance of any provision of
the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the
Senior Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Senior Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Senior Notes by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Senior Notes (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Senior Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration in accordance with Section 6.02 hereof). Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Senior
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it.
<PAGE>
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture that the Trustee determines may be unduly prejudicial to the
rights of other Holders of Senior Notes or that may involve the Trustee in
personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Senior Note may pursue a remedy with respect to this Indenture
or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the rights of
another Holder of a Senior Note or to obtain a preference or priority over
another Holder of a Senior Note.
Section 6.07. Rights of Holders of Senior Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Senior Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Senior Note, on or after the respective due
dates expressed in the Senior Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Senior Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
<PAGE>
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Senior Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay out
the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid on the Senior
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for principal, premium and Liquidated
Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Senior Notes pursuant to this Section 6.10.
<PAGE>
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder of a Senior Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others,
and no implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
<PAGE>
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to take
in good faith that it believes to be authorized or within the rights or powers
conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
<PAGE>
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Senior Notes and may otherwise deal with the Company or any Affiliate
of the Company with the same rights it would have if it were not Trustee.
However, in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Senior Notes, it shall not be
accountable for the Company's use of the proceeds from the Senior Notes or any
money paid to the Company or upon the Company's direction under any provision of
this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Senior
Notes or any other document in connection with the sale of the Senior Notes or
pursuant to this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to Holders of Senior Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Senior Note, the Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Senior Notes.
Section 7.06. Reports by Trustee to Holders of the Senior Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Senior Notes remain outstanding, the
Trustee shall mail to the Holders of the Senior Notes a brief report dated as of
such reporting date that complies with TIA (S) 313(a) (but if no event described
in TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Senior
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Senior Notes are listed in accordance with TIA (S) 313(d).
The Company shall promptly notify the Trustee when the Senior Notes are listed
on any stock exchange.
<PAGE>
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. To
the extent permitted by law, the Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation for
its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Senior Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
<PAGE>
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Senior Notes
of a majority in principal amount of the then outstanding Senior Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holders of a
majority in principal amount of the then outstanding Senior Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Senior Notes of at least 10% in principal amount of the then
outstanding Senior Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Senior Note who has
been a Holder of a Senior Note for at least six months, fails to comply with
Section 7.10, such Holder of a Senior Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company. Thereupon, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and the duties of the Trustee under this Indenture.
The successor Trustee shall mail a notice of its succession to the Holders of
the Senior Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided that all sums owing to
the Trustee hereunder have been paid and subject to the Lien provided for in
Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
<PAGE>
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities. The Trustee and its direct parent shall at all times have a
combined capital surplus of at least fifty million dollars. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
purposes of this Section 7.10 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published.
This Indenture shall always have a Trustee who satisfies the requirements of
TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against The Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Senior Notes
upon compliance with the conditions set forth below in this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Senior Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Senior Notes to receive solely from the trust fund described in
Section 8.04 hereof, and
<PAGE>
as more fully set forth in such Section, payments in respect of the principal
of, premium, if any, and interest on such Senior Notes when such payments are
due, (b) the Company's obligations with respect to such Senior Notes under
Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) this Article Eight. Subject to compliance with this Article
Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 hereof with respect to the outstanding
Senior Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Senior Notes shall thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Senior Notes
shall not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Senior Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Senior Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(d) through 6.01(g) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accounts, to pay the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes are being defeased to maturity or to a particular
redemption date;
<PAGE>
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same time
as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Senior Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(h) and 6.01(i)
hereof are concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not result in a breach
or violation of, or constitute a default under any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Senior Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
<PAGE>
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Senior Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to The Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Senior Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest or Liquidated Damages, if any, has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Senior Note shall thereafter, as a secured creditor, look only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental
<PAGE>
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Senior Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the
case may be; provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest or Liquidated Damages, if any, on any
Senior Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Senior Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of the Senior Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee
may amend or supplement this Indenture or the Senior Notes without the consent
of any Holder of a Senior Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Senior Notes in the case of a merger or consolidation
pursuant to Article Five hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely
affect the legal rights hereunder of any Holder of the Senior Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
<PAGE>
Section 9.02. With Consent of Holders of Senior Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture and the Senior Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Senior Notes then outstanding (including consents obtained in
connection with a purchase of or a tender offer or exchange offer for the Senior
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Senior Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Senior Notes may be waived with the
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Senior Notes (including consents obtained in connection with a
purchase of or a tender offer or exchange offer for the Senior Notes).
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Senior Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 9.06 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Senior Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Senior Note affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Senior Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Senior Notes. However, without the
consent of each Holder affected, an amendment, supplement or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or extend the fixed maturity of any
Senior Note or alter or waive any of the provisions with respect to the
redemption of the Senior Notes except as provided above with respect to
Sections 3.09, 4.10 and 4.15 hereof;
<PAGE>
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Senior Notes (except a
rescission of acceleration of the Senior Notes by the Holders of at
least a majority in aggregate principal amount of the then outstanding
Senior Notes and a waiver of the payment default that resulted from
such acceleration);
(e) make any Senior Note payable in money other than that stated in
the Senior Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of or premium, if any, or interest on the
Senior Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions; or
(h) waive a redemption payment with respect to any Senior Note (other
than a payment required by Sections 3.09, 4.10 and 4.15 hereof).
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Senior Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Senior Note is a continuing consent by the Holder and every
subsequent Holder of a Senior Note or portion of a Senior Note that evidences
the same debt as the consenting Holder's Senior Note, even if notation of the
consent is not made on any Senior Note. However, any such Holder or subsequent
Holder of a Senior Note may revoke the consent as to its Senior Note if the
Trustee receives written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Holder.
Section 9.05. Notation on or Exchange of Senior Notes.
The Trustee may place an appropriate notation about an amendment, supplement
or waiver on any Senior Note thereafter authenticated. The Company in exchange
for all Senior Notes may issue and the Trustee shall authenticate new Senior
Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note shall
not affect the validity and effect of such amendment, supplement or waiver.
<PAGE>
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon, an Officer's Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
MISCELLANEOUS
Section 10.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 10.02. Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in Person or mailed by first class mail
(registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, Pennsylvania 16915
Telecopy: (814) 274-8631
Attention: Daniel R. Milliard
<PAGE>
With a copy to:
Buchanan Ingersoll
One Oxford Centre
301 Grant Street
20th Floor
Pittsburgh, Pennsylvania 15219-1410
Attention: Carl E. Rothenberger, Jr.
If to the Trustee:
Bank of Montreal Trust Company
77 Water Street
New York, New York 10005
Telecopier No.: (212) 701-7684
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class mail,
certified or registered, return receipt requested, or by overnight air courier
guaranteeing next day delivery to its address shown on the register kept by the
Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA (S) 313(c), to the extent required by the TIA. Failure to mail
a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 10.03. Communication by Holders of Senior Notes with Other Holders of
Senior Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Senior Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
<PAGE>
Section 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section
10.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 10.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 10.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Senior Notes by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the
<PAGE>
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
SEC that such a wavier is against public policy.
Section 10.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE SENIOR NOTES.
Section 10.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 10.10. Successors.
All agreements of the Company in this Indenture and the Senior Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 10.11. Severability.
In case any provision in this Indenture or in the Senior Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 10.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 10.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of April 15, 1996 HYPERION
TELECOMMUNICATIONS, INC.
Issuer
By: /s/ Daniel R. Milliard
---------------------------
Name: Daniel R. Milliard
Title: President and Secretary
Attest:
/s/ Randolph S. Fowler (SEAL)
- ------------------------
Dated as of April 15, 1996 BANK OF MONTREAL TRUST COMPANY
Trustee
By: /s/ Therese Gaballah
---------------------------
Name: Therese Gaballah
Title: Vice President
Attest:
________________________
<PAGE>
EXHIBIT A
(Face of Senior Note)
THE SENIOR NOTES EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE WARRANTS ORIGINALLY SOLD AS A UNIT WITH SUCH
SENIOR NOTES UNTIL THE EARLIER OF (i) 90 DAYS FROM THE DATE OF
ISSUANCE, (ii) SUCH DATE AS THE BEAR, STEARNS & CO. INC, CHASE
SECURITIES INC. AND NATIONSBANC CAPITAL MARKETS, INC. MAY, IN THEIR
DISCRETION, DEEM APPROPRIATE, (iii) IN THE EVENT A CHANGE OF CONTROL
(AS DEFINED IN THE INDENTURE) OCCURS, THE DATE THE COMPANY MAILS
NOTICE THEREOF TO HOLDERS OF THE SENIOR NOTES AND (iv) THE DATE ON
WHICH THE EXCHANGE OFFER (AS DEFINED IN THE INDENTURE) IS CONSUMMATED.
FOR PURPOSES OF SECTION 1272, 1273 AND 1275 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL
ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE
ISSUE PRICE IS $532.07, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$467.28, THE ISSUE DATE IS __________, 1996 AND THE YIELD TO MATURITY
IS 13% PER ANNUM.
13% Series [A/B] Senior Discount Notes due 2003
No. $_______________
CUSIP NO. __________
HYPERION TELECOMMUNICATIONS, INC.
promises to pay to _____________________________________
or registered assigns,
the principal sum of $
dollars on April 15, 2003.
Interest Payment Dates: April 15 and October 15, of each year,
commencing October 15, 2001.
Record Dates: April 1 and October 1
Dated: __________, 1996
HYPERION TELECOMMUNICATIONS, INC.
By:______________________________
Name: Daniel R. Milliard
Title: President and Secretary
By:______________________________
Name: Randolph S. Fowler
Title: Vice President and
Assistant Secretary
(SEAL)
This is one of the Global
Senior Notes referred to in the
within-mentioned Indenture:
BANK OF MONTREAL TRUST COMPANY
as Trustee
<PAGE>
By:__________________________________
Name:
Title:
<PAGE>
(Back of Senior Note)
13% Series [A/B] Senior Discount Notes due 2003
[Unless and until it is exchanged in whole or in part for Senior Notes in
definitive form, this Senior Note may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]/1/
THE SENIOR NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SENIOR NOTE EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SENIOR NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SENIOR NOTE EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF HYPERION TELECOMMUNICATIONS, INC. (THE "COMPANY")
THAT (A) SUCH SENIOR NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (A) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN OF RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (C) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
________________________
1. This paragraph should be included only if the Senior Note is issued in
global form.
<PAGE>
ANY PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. Interest. Hyperion Telecommunications, Inc., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Senior Note
in the manner specified below. Interest will not accrue prior to April 15, 2001.
Thereafter, interest will accrue at the rate of 13% per annum from April 15,
2001 until maturity (including any additional interest required to be paid
pursuant to the provisions of the Registration Rights Agreement) and will be
payable semi-annually in cash on April 15 and October 15 of each year, or if any
such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"), commencing April 15, 2001. Interest on the Senior
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; provided that if there
is no existing Default in the payment of interest, and if this Senior Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date or if no interest has been paid, from April 15,
2001. The Company will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it will pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Senior Notes
(except defaulted interest) to the Persons who are registered Holders of Senior
Notes at the close of business on the April 1 or October 1 next preceding the
Interest Payment Date, even if such Senior Notes are cancelled after such record
date and on or before such Interest Payment Date, except as provided in Section
2.13 of the Indenture with respect to defaulted interest. The Senior Notes shall
be payable as to principal, premium and interest at the office or agency of the
Company maintained for such purpose within or without the City and State of New
York, or, at the option of the Company, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders;
provided that payment by wire transfer of immediately available funds shall be
required with respect to principal of, and interest and premium on, all Global
Notes and all other Senior Notes the Holders of which shall have provided wire
transfer instructions to the Company or the Paying Agent. Such payment shall be
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, Bank of Montreal Trust Company,
the Trustee under the Indenture, shall act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
<PAGE>
4. Indenture. The Company issued the Senior Notes under an Indenture dated
as of April 15, 1996 ("Indenture") between the Company and the Trustee. The
terms of the Senior Notes include those stated in the Indenture and those made a
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Senior Notes are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. The Senior Notes are senior unsecured obligations
of the Company limited to $329.0 million in aggregate principal amount at
maturity.
5. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the Company
shall not have the option to redeem the Senior Notes prior to April 15, 2001.
Thereafter, the Company shall have the option to redeem the Senior Notes, in
whole or in part, upon not less than 30 nor more than 60 days notice, at the
redemption prices (expressed as percentages of principal amount, of, if such
redemption occurs prior to April 15, 2001, the Accreted Value) set forth below
plus accrued and unpaid interest thereon and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001................................... 106.5%
2002 and thereafter.................... 100.0%
</TABLE>
(b) Notwithstanding the foregoing, the Company, on or prior to April 15,
1999, may redeem up to a maximum of 25% of the aggregate principal amount of the
Senior Notes then outstanding at a redemption price of 113.0% of the Accreted
Value thereof, with the net proceeds from either (i) an Initial Public Offering
of the common stock of the Company or (ii) a sale of the Capital Stock (other
than Disqualified Stock) of the Company to a Strategic Investor in a single
transaction or a series of related transactions for at least $25.0 million;
provided that, in either case, at least 75% in aggregate principal amount of the
Senior Notes remain outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 90
days of the date of the closing of such Initial Public Offering or such sale to
a Strategic Investor, as the case may be.
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption or sinking fund payments with respect to the Senior
Notes.
<PAGE>
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to each Holder of the
Senior Notes to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Senior Notes at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase (or, in the case of
repurchases of the Senior Notes prior to April 15, 2001, at a purchase price
equal to 101% of the Accreted Value thereof as of the date of repurchase) (in
either case, the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or any Subsidiary consummates any Asset Sales, within
five Business Days of each date on which the aggregate amount of Excess Proceeds
exceeds $2.5 million, the Company shall offer to purchase from all Holders of
Senior Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture
the maximum principal amount of Senior Notes that may be purchased out of the
Excess Proceeds at an offer price in cash equal to 100% of aggregate principal
amount thereof, plus accrued and unpaid interest to the date of repurchase (or,
in the case of repurchases of the Senior Notes prior to April 15, 2001, at a
purchase price equal to 100% of the Accreted Value thereof as of the date of
repurchase), in accordance with the procedures set forth in the Indenture. To
the extent that the aggregate amount thereof, plus accrued and unpaid interest
to the date of repurchase (or, in the case of repurchases of the Senior Notes
prior to April 15, 2001, at a purchase price equal to 100% of the Accreted Value
thereof as of the date of repurchase) is less than the Excess Proceeds, the
Company may use such remaining Excess Proceeds for any purpose not prohibited by
the Indenture. If the aggregate amount of Senior Notes surrendered by Holders
thereof plus accrued and unpaid interest to the date of repurchase (or, in the
case of repurchases of Senior Notes prior to April 15, 2001, the Accreted Value
thereof as of the date of repurchase) exceeds the amount of Excess Proceeds, the
Trustee shall select the Senior Notes to be purchased on a pro rata basis.
Holders of the Senior Notes that are the subject of an offer to purchase shall
receive an Asset Sale Offer from the Company prior to any related purchase date
and may elect to have such Senior Notes purchased by completing the form titled
"Option of Holder to Elect Purchase" on the reverse of the Senior Notes.
8. Notice of Redemption. Notice of redemption shall be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Senior Notes are to be redeemed at its registered address. Senior Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on the
Senior Notes or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Senior Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of the Senior Notes may be registered and the Senior Notes
may be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Holder,
<PAGE>
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Senior Note or portion of a Senior Note selected for redemption,
except for the unredeemed portion of any Senior Note being redeemed in part.
Also, it need not exchange or register the transfer of any Senior Notes for a
period of 15 days before a selection of Senior Notes to be redeemed or during
the period between a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Senior Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Senior Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Senior Notes, and any existing default or compliance with any provision of the
Indenture or the Senior Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Senior Notes.
Without the consent of any Holder of a Senior Note, the Indenture or the Senior
Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes, to provide for the assumption of the
Company's obligations to Holders of the Senior Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest on, or Liquidated Damages with respect
to, the Senior Notes; (ii) default in payment when due of principal of or
premium, if any, on the Senior Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise, (iii) failure by the Company to comply with Section 4.07, 4.10, 4.15
or 5.01 of the Indenture; (iv) failure by the Company to comply with Section
4.09 of the Indenture; provided that in the event that the Company fails to
comply with Section 4.09 of the Indenture because indebtedness is deemed to be
incurred by a Restricted Joint Venture solely as a result of such Restricted
Joint Venture ceasing to be a Restricted Joint Venture as a result of (x) the
loss of a Local Partner or (y) the loss of management control of such Restricted
Joint Venture, and such failure continues for 90 days; (v) failure by the
Company for 30 days after notice to the Company by the Trustee or the Holders of
at least 25% in principal amount of the Senior Notes then outstanding to comply
with certain other agreements in the Indenture or the Senior Notes; (vi) default
under certain other agreements relating to Indebtedness of the Company which
default results in the acceleration of such Indebtedness prior to its express
maturity; (vii) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; and (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries or
any of its Joint Ventures that would, if it were a Subsidiary, constitute a
Significant Subsidiary. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
<PAGE>
outstanding Senior Notes may declare all the Senior Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any of its Significant Subsidiaries or any Joint Venture that would, if
it were a Subsidiary constitute a Significant Subsidiary, or any group of
Subsidiaries or Joint Ventures that, taken together, would, constitute a
Significant Subsidiary, all outstanding Senior Notes shall become due and
payable without further action or notice. Holders of the Senior Notes may not
enforce the Indenture or the Senior Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Senior Notes may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders of the Senior Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Senior Notes then outstanding by notice to the Trustee
may on behalf of the Holders of all of the Senior Notes waive any existing
Default or Event of Default and its consequences under the Indenture, except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Senior Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer, employee, incorporator
or stockholder, of the Company, as such, shall not have any liability for any
obligations of the Company under the Senior Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
15. Authentication. This Senior Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. Additional Rights of Holders of Transfer Restricted Securities. In
addition to the rights provided to Holders of the Senior Notes under the
Indenture, Holders of Transferred Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement dated as of April 15,
1996, between the Company and the parties named on the signature pages thereof
(the "Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
<PAGE>
numbers in notices of redemption as a convenience to the Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Senior Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, Pennsylvania 16915
Telecopy: (814) 274-8631
Attention: Daniel R. Milliard
<PAGE>
Assignment Form
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
________________________________________________________________________________
Date:____________________
Your Signature:________________________________
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Senior Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date:____________________ Your Signature:______________________
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:____________________
Signature Guarantee.
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SENIOR
NOTES
Re: 13% Senior Discount Notes due 2003 of Hyperion Telecommunications, Inc.
This Certificate relates to $329,000,000 principal amount of Senior Notes
held in * ________ book-entry or *_______ definitive form by ___________________
(the "Transferor").
The Transferor*:
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depository a Senior Note or
Senior Notes in definitive, registered form of authorized denominations in an
aggregate principal amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or
[_] has requested the Trustee by written order to exchange or register the
transfer of a Senior Note or Senior Notes.
In connection with such request and in respect of each such Senior Note,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Senior Notes and as provided in
Section 2.06 of such Indenture, the transfer of this Senior Note does not
require registration under the Securities Act (as defined below) because:*
<PAGE>
[_] Such Senior Note is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section 2.06(d)(i)(A) of
the Indenture).
[_] Such Senior Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i)(B) of the Indenture).
_______________
*Check applicable box.
<PAGE>
[_] Such Senior Note is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[_] Such Senior Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the Securities Act, other
than Rule 144A or Rule 144 under the Securities Act. An Opinion of Counsel to
the effect that such transfer does not require registration under the Securities
Act accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or
Section 2.06(d)(i)(C) of the Indenture).
_______________________________________
[INSERT NAME OF TRANSFEROR]
By:_____________________________________
Date:____________________
_______________
<PAGE>
*Check applicable box.
<PAGE>
ANNEX A
Form of Intercompany Note
FOR VALUE RECEIVED, __________________, a _______________ corporation (the
"Maker"), promises to pay Hyperion Telecommunications, Inc., a Delaware
corporation (the "Lender"), or order to be paid, all cash advanced, from time to
time, together with interest on the unpaid principal amount at a rate per annum
equal to ___%, to the date of payment. All principal and accrued interest under
this Note shall be due and payable [on demand][on ____________].
This Note may be prepaid in whole or in part at any time without penalty or
premium.
The right to please any and all statutes of limitations as a defense to
demand hereunder is hereby waived to the extent permitted by law. The Maker,
for itself and its successors and assigns, waives presentment, demand, protest
and notice thereof or of dishonor, and waives the right to be released by reason
of any extension of time or change in the terms of payment or any change,
alteration, or release of any security given for the payment hereof.
This Note shall be governed by and construed in accordance with the laws of
the State of New York.
[MAKER]
By: ____________________________
Name:
Title:
Hyperion Telecommunications, Inc.
By: ____________________
Name:
Title:
<PAGE>
SCHEDULE A
Fiber Lease Agreements
1. Lease Agreement, dated as of December 12, 1995, by and between PECO Energy
Company and PECO Hyperion Telecommunications.
2. Lease Agreement, dated as of September 29, 1995, by and between Capital
Telecommunications, Inc. and Hyperion Telecommunications of Harrisburg.
3. Facilities Lease Agreement, dated as of June 1, 1995, by and between TRK
Cable Company and New Jersey Fiber Technologies.
4. Lease Agreement, dated 1993, by and between Multimedia Cablevision, Inc. and
Multimedia Hyperion Telecommunications.
5. Facilities Agreement, dated as of June 30, 1994, by and between
International Cablevision, Inc. and NHT Partnership.
6. Fiber Usage Master Agreement, dated as of August 1, 1992, by and between
NewChannels Corp. and NewChannels/Hyperion Telecommunications of New York.
7. Fiber Usage Master Agreement, dated as of August 1, 1992, by and between
NewChannels/Hyperion Telecommunications of New York and Ionian
Communications, L.P. d/b/a Adelphia Cable Communications.
8. License Agreement, dated as of 1992, by and between Continental Cablevision
of Jacksonville, Inc. and Continental Fiber Technologies, Inc.
9. Facilities Lease Agreement, dated as of January 30, 1995, by and between TCI
TKR of Jefferson County, Inc. and Louisville Lightwave.
10. Contract for the Use of Capacity, dated as of May 1, 1994, by and between
Viacom International, Inc. and AVR, L.P., d/b/a Hyperion of Tennessee, L.P.
11. Facilities Agreement, dated as of November 1, 1993, by and between Southeast
Florida Cable, Inc., d/b/a Adelphia Cable Communications, Inc. and TCG South
Florida.
12. Facilities Agreement dated as of September 20, 1993, between TCI of New
York, Inc. and NHT Partnership.
13. License Agreement dated November 1, 1992, between Continental Cablevision of
Virginia, Inc. and Alternet of Virginia.
<PAGE>
SCHEDULE B
Local Partners
1. PECO Energy Company
2. Capital Telecommunications, Inc.
3. Sutton Capital Associates, Inc.
4. KRC/CCC Investment Partnership
5. A.C. Communications Inc.
6. Continental Telecommunications Corp. of Virginia
7. Multimedia Telecommunications, Inc.
8. TCI Telephony, Inc.
9. NewChannels Telecommunications of New York, Inc.
10. Continental Cablevision Investments, Inc.
11. TKR Cable of Kentucky, Inc.
12. Viacom Telecom Inc.
13. Robin Media Group, Inc.
14. Any other Local Partners listed under, or who are parties to the Local
Partner Agreements listed on, Schedule C.
<PAGE>
SCHEDULE C
Local Partner Agreements
1. Partnership Agreement of PECO Hyperion Telecommunications, dated as of
October 9, 1995, by and between Hyperion Telecommunications of Pennsylvania,
Inc. and PECO Energy Company.
2. Partnership Agreement of Hyperion Telecommunications of Harrisburg, dated as
of September 25, 1994 between Hyperion Telecommunications of Pennsylvania,
Inc. and Capital Telecommunications, Inc.
3. New Jersey Fiber Technologies Partnership Agreement, dated as of June 1994,
by and among Hyperion Telecommunications of New Jersey, Inc., Sutton Capital
Associates, Inc., KRC/CCC Investment Partnership and A.C. Communications
Inc.
4. Joint Venture Agreement of Alternet of Virginia, dated as of November 1,
1992, by and between Hyperion Telecommunications of Virginia, Inc. and
Continental Telecommunications Corp. of Virginia.
5. General Partnership Agreement of Multimedia Hyperion Telecommunications,
dated as of September 1, 1993, by and between Hyperion Telecommunications,
Inc. and Multimedia Telecommunications, Inc.
6. NHT Partnership Agreement, dated as of September 20, 1993, by and among
Hyperion Telecommunications of New York, Inc., TCI Telephony, Inc. and
NewChannels Telecommunications of New York, Inc.
7. NewChannels/Hyperion Telecommunications of New York Agreement of General
Partnership, dated as of August 1, 1992 between Hyperion Telecommunications
of New York, Inc. and NewChannels Telecommunications of New York, Inc., as
amended.
8. Continental Fiber Technologies, Inc. Stock Purchase and Stockholders'
Agreement, dated as of August 31, 1992, by and among Hyperion
Telecommunications of Florida, Inc., Continental Cablevision Investments,
Inc. and Continental Fiber Technologies, Inc.
9. Limited Partnership Agreement of Hyperion of Tennessee, L.P., dated as of
November 15, 1993, by and among Hyperion Telecommunications of Tennessee,
Inc., Viacom Telecom Inc. and Robin Media Group, Inc., as amended.
10. Louisville Lightwave General Partnership Agreement, dated as of July 20,
1994, by and between Hyperion Telecommunication of Kentucky, Inc. and TKR
Cable of Kentucky, Inc.
<PAGE>
SCHEDULE D
Management Agreements
1. Management Agreement, dated as of October 1995, by and between Hyperion
Telecommunications, Inc. and PECO Hyperion Telecommunications.
2. Management Agreement, dated as of September 29, 1995, by and between
Hyperion Telecommunications, Inc. and Hyperion Telecommunications of
Harrisburg.
3. Management Agreement, dated as of June 1995, by and between Hyperion
Telecommunications, Inc. and New Jersey Fiber Technologies.
4. Management and Consulting Agreement, dated as of November 1, 1992, by and
between Hyperion Telecommunications of Virginia, Inc. and Alternet of
Virginia.
5. Services Agreement, dated as of November 18, 1993, by and between Hyperion
Telecommunications, Inc. and Multimedia Hyperion Telecommunications.
6. Management Agreement, dated as of June 30, 1994, by and between Hyperion
Telecommunications of New York, Inc. and NHT Partnership.
7. Letter Agreement, dated as of July 13, 1994, and among Hyperion
Telecommunications, Inc. and NewChannels Hyperion Telecommunications (re:
accounting).
8. Network Monitoring Agreement, dated as of October 1, 1994, by and among
Hyperion Telecommunications, Inc. and NewChannels Hyperion
Telecommunications, Inc.
9. Network Monitoring Agreement, dated as of August 1, 1993, between EMI
Communications Corp. and NewChannels/Hyperion Communications of New York.
10. Letter Agreement, dated August 16, 1993, as amended November 1994, between
Hyperion Telecommunications, Inc. and NewChannels Hyperion
Telecommunications (re: accounting).
11. Letter Agreement, dated February 28, 1995, between Hyperion
Telecommunications, Inc. and NewChannels Hyperion Telecommunications (re:
accounting).
12. Network Monitoring Agreement, dated as of October 1, 1993, by and between
Hyperion Telecommunications, Inc. and Continental Fiber Technologies d/b/a
AlterNet.
13. Management Agreement, dated as of January 30, 1995, by and between Hyperion
Telecommunications, Inc. and Louisville Lightwave.
14. Management Agreement, dated as of November 15, 1993, by and between Hyperion
Telecommunications, Inc. and AVR, L.P., d/b/a Hyperion of Tennessee, L.P.,
as amended.
15. Management Agreement, dated as of January 1, 1995, by and between Hyperion
Telecommunications, Inc. and Hyperion Telecommunications of Vermont, Inc.
16. Management Agreement, dated as of June 27, 1995, by and between Hyperion
Telecommunications, Inc. and Hyperion Telecommunications of Virginia, Inc.
17. Network Monitoring Agreement, dated as of October 1, 1993, between Hyperion
Telecommunications, Inc. and Alternet of Virginia.
18. Management and Consulting Agreement, dated as of June 1992, by and between
Hyperion Telecommunications of Florida, Inc. and Continental Fiber
Technologies, Inc.
19. Network Monitoring Agreement, dated as of December 1, 1994, between Hyperion
Telecommunications, Inc. and NewChannels Hyperion Telecommunications.
<PAGE>
SCHEDULE E
Form of Financial Information and Operating Data
of the Subsidiaries and the Joint Ventures Presented by Cluster
Data presented for the fiscal period ended _______________:
<TABLE>
<CAPTION>
==================================================================
NORTH MID- OTHER
FINANCIAL DATA EAST ATLANTIC MID-SOUTH NETWORKS
__________________________________________________________________
<S> <C> <C> <C> <C>
Total Revenue
__________________________________________________________________
Total Capital
Expenditures
__________________________________________________________________
Total EBITDA
__________________________________________________________________
Proportional Revenue*
__________________________________________________________________
Proportional Capital
Expenditures*
__________________________________________________________________
Proportional EBITDA*
__________________________________________________________________
STATISTICAL DATA
__________________________________________________________________
Route Miles
__________________________________________________________________
Fiber Miles
__________________________________________________________________
Buildings connected
__________________________________________________________________
LEC-COs collocated**
__________________________________________________________________
Voice Grade Equivalent
Circuits
==================================================================
</TABLE>
______________
* Represents portion of revenue attributable to the Company.
** Local Exchange Carrier's central office.
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
Dated as of April 15, 1996
by and among
Hyperion Telecommunications, Inc.,
and
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of April 15, 1996, by and among Hyperion Telecommunications, Inc., a
Delaware corporation (the "Company"), Bear, Stearns & Co. Inc., Chase Securities
-------
Inc. and NationsBanc Capital Markets, Inc. (each, an "Initial Purchaser" and,
-----------------
collectively, the "Initial Purchasers"), each of whom has agreed to purchase an
------------------
aggregate of 329,000 Units consisting of an aggregate of $329,000,000 in
aggregate principal amount at maturity of the Company's 13% Series A Senior
Discount Notes due 2003 and warrants (the "Warrants") to purchase an aggregate
--------
of 613,427 shares of the Company's Common Stock, $.01 par value, pursuant to the
Purchase Agreement (as defined below)
This Agreement is made pursuant to the Purchase Agreement, dated April 10,
1996 (the "Purchase Agreement"), by and among the Company and the Initial
------------------
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Senior Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 3 of
the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Accreted Value: As defined in the Indenture.
--------------
Act: The Securities Act of 1933, as amended.
---
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Broker-Dealer Transfer Restricted Securities: Series B Senior Notes that
--------------------------------------------
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Senior Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Senior
Notes acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Senior Notes to be issued in the Exchange Offer, (b) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange
Offer open for a period not less than the minimum period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Senior Notes in the same
<PAGE>
aggregate principal amount as the aggregate principal amount of Series A Senior
Notes tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Senior Notes, each
--------------------
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by the Company under the Act of the
--------------
Series B Senior Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Series B Senior Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Series A Senior Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3), (5) and (7) of
Regulation D under the Act.
Global Note Holder: As defined in the Indenture.
------------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated the Closing Date, among the Company and
---------
Bank of Montreal Trust Company, as trustee (the "Trustee"), pursuant to which
-------
the Senior Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Senior Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
-------------
is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
<PAGE>
Registration Statement: Any registration statement of the Company
----------------------
relating to (a) an offering of Series B Senior Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
------------------------
Transfer Restricted Securities.
Senior Notes: The Series A Senior Notes and the Series B Senior Notes.
------------
Series B Senior Notes: The Company's 13% Senior B Senior Secured Discount
---------------------
Notes due 2003 to be issued pursuant to the Indenture (i) in the Exchange Offer
or (ii) upon the request of any Holder of Series A Senior Notes covered by a
Shelf Registration Statement, in exchange for such Series A Senior Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest to
------------------------------
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such Senior Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Senior Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Senior Note is distributed to
the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 90 days after the
Closing Date, the Exchange Offer Registration Statement, (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
Closing Date, (iii) in connection with the foregoing, (A) file all pre-effective
<PAGE>
amendments to such Exchange Offer Registration Statement as may be necessary in
order to cause such Exchange Offer Registration Statement to become effective,
(B) file, if applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings, if any, in connection with the registration and qualification
of the Series B Senior Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Series B Senior Notes to be
offered in exchange for the Series A Senior Notes that are Transfer Restricted
Securities and to permit sales of Broker-Dealer Transfer Restricted Securities
by Restricted Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Senior Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Senior Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Senior Notes (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company) pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with its
initial sale of each Series B Senior Note received by such Broker-Dealer in the
Exchange Offer, which prospectus delivery requirement may be satisfied by the
delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Senior Notes held by any such Broker-Dealer, except to the extent required by
the Commission as a result of a change in policy after the date of this
Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated.
The Company shall promptly provide sufficient copies of the latest version
of such Prospectus to such Restricted Broker-Dealers promptly upon request, and
in no event later than one day after such request, at any time during such one-
year period in order to facilitate such sales.
<PAGE>
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
------------------
Exchange Offer Registration Statement with respect to the Series B Senior Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Senior Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
such Holder is a Broker-Dealer and holds Series A Senior Notes acquired directly
from the Company or one of its affiliates, then the Company shall:
(x) cause to be filed on or prior to 30 days after the date on which the
Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 30 days after the
date on which the Company receives the notice specified in clause (ii) above
a shelf registration statement pursuant to Rule 415 under the Act (which may
be an amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement")), relating to all Transfer
-----------------------------
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and shall
(y) use its best efforts to cause such Shelf Registration Statement to
become effective on or prior to 30 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement.
If, after the Company has filed an Exchange Offer Registration Statement
which satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer shall not be permitted under applicable federal law, then the
filing of the Exchange Offer Registration Statement shall be deemed to satisfy
the requirements of clause (x) above. Such an event shall have no effect on the
requirements of clause (y) above. The Company shall use its best efforts to
keep the Shelf Registration Statement discussed in this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years (as extended pursuant to Section 6(c)(i))
following the date on which such Shelf Registration Statement first becomes
effective under the Act; provided that in the event such applicable policies,
rules and regulations of the Commission are amended to provide for a period of
less than three years, then such period shall be deemed to be in effect for
purposes of this Section 4(a).
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in item 507 of Regulation S-K under the Act for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such information.
Each Holder as to which any Shelf
<PAGE>
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
-------------------------
not been Consummated within 30 Business Days of the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement is first declared
effective by the Commission or (iv) any Registration Statement required by this
Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that is itself declared effective immediately (each such
event referred to in clauses (i) through (iv), a "Registration Default"), then
--------------------
the Company hereby agrees to pay liquidated damages, in cash, to each Holder of
Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of such Registration Default, at a rate of
0.5% per annum, determined daily, on the Accreted Value of the Series A Senior
Notes (or after April 15, 2001, on principal amount of the Series A Senior
Notes) as of the immediately preceding Interest Payment Date. Such interest rate
will increase by an additional 0.25% per annum at the beginning of each
subsequent 90-day period up to a maximum aggregate increase of 2.0% per annum
until all Registration Defaults have been cured, at which time the interest rate
borne by the Series A Senior Notes will be reduced to the original interest
rate. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued liquidated damages will be paid by the Company on each Damages
Payment Date to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
mailing checks to their registered addresses, as provided in the Indenture. All
obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and to
permit the sale of Broker-Dealer Transfer Restricted Securities being sold in
<PAGE>
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof there has been published a change in
Commission policy with respect to exchange offers such as the Exchange Offer,
such that in the reasonable opinion of counsel to the Company there is a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action letter
or other favorable decision from the Commission allowing the Company to
Consummate an Exchange Offer for such Series A Senior Notes. The Company
hereby agrees to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company hereby agrees to
take all such other actions as are requested by the Commission or otherwise
required in connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the Commission,
(B) delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the Exchange Offer pursuant
to the terms of this Agreement, each Holder of Transfer Restricted Securities
shall furnish, upon the request of the Company, prior to the Consummation of
the Exchange Offer, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of the
Company, (B) it is not engaged in, and does not intend to engage in, and has
no arrangement or understanding with any person to participate in, a
distribution of the Series B Senior Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Senior Notes in its ordinary course of
business. Each Holder hereby acknowledges and agrees that any Broker-Dealer
and any such Holder using the Exchange Offer to participate in a distribution
of the securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
----------------------------
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
----------------------------------
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above), and
(2) must comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of Series B
Senior Notes obtained by such Holder in exchange for Series A Senior Notes
acquired by such Holder directly from the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the Commission
(A) stating that the Company are registering the Exchange Offer in reliance
on the position of the Commission enunciated in Exxon Capital Holdings
----------------------
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available
----------- ----------------------------
June 5, 1991) and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that the Company has not
entered into any arrangement or understanding with any Person to distribute
the Series B Senior Notes to be received in the Exchange Offer and that, to
the best of the Company's information and belief, each Holder participating in
the Exchange Offer is acquiring the Series B Senior Notes in its ordinary
course of business and has no arrangement or understanding with any Person to
participate in the distribution of the Series B Senior Notes received in the
Exchange Offer
<PAGE>
and (C) any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to clause
(i) above.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus, to the extent that the
same are required to be available to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement continuously
effective and provide all requisite financial statements for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement or
the Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such Registration
Statement, (1) in the case of clause (A), correcting any such misstatement or
omission, and (2) in the case of clauses (A) and (B), use its best efforts to
cause such amendment to be declared effective and such Registration Statement
and the related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
the Registration Statement effective for the applicable period set forth in
Section 3 or 4 hereof, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Registration Statement have
been sold; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Act, and to comply fully with Rules 424, 430A and 462, as applicable, under
the Act in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended method
or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any Registration Statement or any post-
effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities
<PAGE>
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement thereto or
any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the making of
any additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) furnish to the Initial Purchaser(s), each selling Holder named in
any Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing of
such Registration Statement), which documents will be subject to the review
and comment of such Holders and underwriter(s) in connection with such sale,
if any, for a period of at least five Business Days, and the Company will not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which the selling Holders of the
Transfer Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, provide
copies of such document to the selling Holders and to the underwriter(s) in
connection with such sale, if any, make the Company's representatives
available for discussion of such document and other customary due diligence
matters, and include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any, reasonably may
request;
(vi) subject to the entry of appropriate confidentiality agreements,
make available at reasonable times for inspection by the selling Holders, any
managing underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such selling
Holders or any of such underwriter(s), all financial and other records,
pertinent corporate documents and properties of the Company and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or accountant
in connection with such Registration Statement or any post-effective amendment
thereto subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment
if necessary, such information as such selling Holders and underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information
<PAGE>
relating to the "Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being paid
therefor and any other terms of the offering of the Transfer Restricted
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein
and all exhibits (including exhibits incorporated therein by reference);
(ix) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use (in
accordance with law) of the Prospectus and any amendment or supplement thereto
by each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement) and
make such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder of
Transfer Restricted Securities or underwriter in connection with any sale or
resale pursuant to any Registration Statement contemplated by this Agreement,
and in such connection, whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten Registration, the
Company shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its best
efforts to furnish) to each selling Holder and each underwriter, if any,
upon the effectiveness of the Shelf Registration Statement and to each
Restricted Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, signed on behalf of the Company by (x)
the President and (y) the Secretary, any Vice President or any
Assistant Secretary of the Company, confirming, as of the date
thereof, the matters set forth in paragraphs (a), (b), (c) and (d) of
Section 8 of the Purchase Agreement and such other similar matters as
the Holders, underwriter(s) and/or Restricted Broker Dealers may
reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company covering
matters similar to those set forth in paragraphs f and g of Section 8
of the Purchase Agreement and such other matter as the Holders,
underwriters and/or Restricted Broker Dealers may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
public accountants for the Company and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the
<PAGE>
accuracy, completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as to
materiality to a large extent upon facts provided to such counsel by
officers and other representatives of the Company and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective and, in the
case of the Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration
Statement as of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 8(i) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all parties
to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriter(s), if any,
and Restricted Broker Dealers, if any, to evidence compliance with clause
(A) above and with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company pursuant to this
clause (x).
The above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company contemplated in (A)(1) above cease
to be true and correct, the Company shall so advise the underwriter(s), if any,
the selling Holders and each Restricted Broker-Dealer promptly and if requested
by such Persons, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and it counsel
in connection with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s), if any, may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not be
required
<PAGE>
to register or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Senior Notes
covered by any Shelf Registration Statement contemplated by this Agreement,
Series B Senior Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Senior Notes surrendered to the Company
by such Holder in exchange therefor or being sold by such Holder; such Series B
Senior Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Senior Notes, as the case may be; in return, the Series A
Senior Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if any,
to facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the Holders or the underwriter(s), if any, may
request at least two Business Days prior to such sale of Transfer Restricted
Securities;
(xiv) use their respective best efforts to cause the disposition of the
Transfer Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of a Registration Statement covering such Transfer
Restricted Securities and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a form eligible
for deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD, and use
their respective best efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xviii) otherwise use their respective best efforts to comply with all
applicable rules and regulations of the Commission, and make generally available
to its security holders with regard to any
<PAGE>
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date of
the Registration Statement (as such term is defined in paragraph (c) of Rule 158
under the Act);
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders of Senior Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms of
the TIA; and execute and use its best efforts to cause the Trustee to execute,
all documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section 15(d)
of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (the "Advice"). If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of either such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof
or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any
Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of
any "qualified independent underwriter") and its counsel that may be required by
the rules and regulations of the NASD); (ii) all fees and expenses of compliance
with federal securities and state Blue Sky or securities laws; (iii) all
expenses of printing (including printing certificates for the Series B Senior
Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing the Senior Notes
on a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
<PAGE>
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Company and its Subsidiaries agree, jointly and severally, to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any of the persons referred to in this
clause (i), (ii) or (iii) may hereinafter be referred to as an "Indemnified
Holder") to the fullest extent lawful, from and against any and all losses,
liabilities, claims, damages and expenses whatsoever (including but not limited
to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, as
originally filed or any amendment thereof, or any related preliminary prospectus
or the Prospectus, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that the Company and its Subsidiaries will not be liable in
any such case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Holder expressly for use
therein.
(b) Each Holder, severally and not jointly, agrees to indemnify and hold
harmless the Company and its Subsidiaries and any of their respective directors,
officers, and any person controlling (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) the Company, and the its officers,
directors, partners, employees, representatives and agents of each such person,
to the same extent as the foregoing indemnity from the Company and its
Subsidiaries to each of the indemnified Holders, but only with respect to claims
and actions based on information relating to such Holder furnished in writing by
such Holder expressly for use in any Registration Statement. In case any action
or proceeding shall be brought against the Company or its Subsidiaries or any of
their respective directors or officers or any such controlling person in respect
of which indemnity may be sought against a Holder, such Holder shall have the
rights and duties given the Company and its Subsidiaries and the Company, such
Subsidiaries, such directors or officers or such controlling person shall have
the rights and duties given to each Holder by the preceding paragraph. In no
event shall any Holder be liable or responsible for any amount in excess of the
dollar amount of the proceeds received by such Holder upon its sale of the
Transfer Restricted Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 6 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
<PAGE>
it may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties. The indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought; provided that the
indemnifying party shall be liable for separate counsel for any indemnified
party in a jurisdiction, if counsel to the indemnified parties shall have
reasonably concluded that there may be defenses available to such indemnified
party that are difference from or additional to those available to one or more
of the other indemnified parties and that separate counsel for such indemnified
party is prudent under the circumstances. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent;
provided that such consent was not unreasonably withheld.
In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and the each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Holder who may also be liable for contribution, including persons
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act) to which the Company and one or more of the Holders
may be subject, in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Holder or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in this Section 8,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Holder in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The Company and the Holders agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding
the provisions of this Section 8, (i) no Holder or its related indemnified
Holders shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such Holder with respect to the
sale of its Transfer Restricted Securities pursuant to a Registration Statement
exceeds the sum of (A) the amount paid by such Holder for such Transfer
Restricted Securities plus (B) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent
<PAGE>
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Series A Notes held by each of the Holders hereunder and not joint.
For purposes of this Section 8, (A) each person, if any, who controls any
Holder within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and (B) the respective officers, directors, partners, employees,
representatives and agents of any Initial Purchaser or any controlling person
shall have the same rights to contribution as such Initial Purchaser, and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act shall have the same rights to
contribution as the Company, subject in each case to clauses (i) and (ii) of
this Section 8. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this Section 8, notify such party or parties from whom
contribution may be sought, but the failure to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise. No party
shall be liable for contribution with respect to any action or claim settled
without its prior written consent; provided that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Securities Exchange Act, to
make available, upon request of any Holder of Transfer Restricted Securities, to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment bankers
and manager or managers for any Underwritten Offering that will administer such
offering will be selected by the Holders of a majority in aggregate principal
amount of the Transfer Restricted Securities included in such offering. Such
investment bankers and managers are referred to herein as the "underwriters."
<PAGE>
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
--------
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by them of the provisions of this Agreement and hereby
agree to waive the defense in any action for specific performance that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, on or after the
--------------------------
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) Adjustments Affecting the Senior Notes. The Company will not take any
--------------------------------------
action, or voluntarily permit any change to occur, with respect to the Senior
Notes that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer and
that does not affect directly or indirectly the rights of other Holders whose
securities are not being tendered pursuant to such Exchange Offer may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Hyperion Telecommunications, Inc.
Boyce Plaza III
2570 Boyce Plaza Road
Pittsburgh, PA 15241
Attention: Daniel R. Milliard
<PAGE>
With a copy to:
Buchanan Ingersoll
One Oxford Centre
301 Grant Street
20th Floor
Pittsburgh, PA 15219-1410
Attention: Carl E. Rothenberger, Jr.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HYPERION TELECOMMUNICATIONS, INC.
By: /s/ Daniel R. Milliard
Name: Daniel R. Milliard
Title: President and Secretary
BEAR, STEARNS & CO. INC.
By: /s/ Donald R. Mullen Jr.
-------------------------------
Name: Donald R. Mullen Jr.
Title: Senior Managing Director
CHASE SECURITIES INC.
By: /s/ Stephanie Culsky
-------------------------------
Name: Stephanie Culsky
Title: Managing Director
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Tom Mooney
-------------------------------
Name: Tom Mooney
Title: Senior Vice President
<PAGE>
EXHIBIT 4.4
SUBORDINATED NOTE
-----------------
$26,135,524.00 Coudersport, Pennsylvania
April 15, 1996
For value received, the undersigned, Hyperion Telecommunications, Inc. a
Delaware corporation ("Company"), promises to pay to the order of Adelphia
Communications, Inc., a Delaware corporation ("Lender"), in accordance with the
terms hereof, TWENTY-SIX MILLION ONE HUNDRED THIRTY FIVE THOUSAND FIVE HUNDRED
TWENTY FOUR AND NO/100 DOLLARS ($26,135,524.00) on April 16, 2003. Company
further promises to pay to the order of Lender interest on the unpaid principal
amount hereof from time to time outstanding at the rate of SIXTEEN AND ONE HALF
PERCENT (16.5%) per annum, payable on the last day of each March, June,
September and December after the date hereof. Interest on this Subordinated
Note may be paid in cash, through the issuance of additional principal amount of
Subordinated Notes identical hereto (valued at 100% of their principal amount),
or in any combination thereof at the option of the Company.
All payments of principal and interest on this Subordinated Note are hereby
expressly subordinated to the prior payment in full in cash of all sums owing on
or with respect to the Series A and Series B 13% Senior Discount Subordinated
Notes due 2003 (the "Senior Indebtedness") issued pursuant to that certain
Indenture dated April 15, 1996 between Company and Bank of Montreal Trust
Company, as trustee (the "Trustee") in accordance with the following:
1. Upon the occurrence of any default in the payment of any obligation
under or with respect to Senior Indebtedness, no payment or distribution of any
assets of the Company of any kind or character may be made on account of the
principal of or premium, if any, or interest on or any other obligation under or
with respect to, this Subordinated Note or on account of the purchase,
redemption, defeasance or other acquisition of or in respect of, this
Subordinated Note unless and until such default shall have been cured or waived
or shall have ceased to exist or such Senior Indebtedness shall have been
discharged or paid in full, in cash or, as acceptable to each and every holder
of Senior Indebtedness, in any other manner, after which the Company may resume
making any and all required payments in respect of this Subordinated Note,
including any missed payments.
<PAGE>
2. Upon the occurrence and during the continuance of any non-payment
default with respect to any Senior Indebtedness pursuant to which the maturity
thereof may be accelerated (a "Non-payment Default"), no payment or distribution
of any assets of the Company of any kind or character (excluding distributions
of equity interests or securities subordinated to the same extent as this
Subordinated Note) may be made on account of the principal of or premium, if
any, or interest on, or any other obligation under, this Subordinated Note or on
account of the purchase, redemption, defeasance or other acquisition of, or in
respect of, this Subordinated Note for the period hereafter specified (the
"Payment Blockage Period"). The Payment Blockage Period shall commence upon the
receipt of notice of the Non-payment Default by the Company from the Trustee and
shall end on the earliest of (i) the 179th day after such commencement, (ii) the
date on which such Non-payment Default (and all Non-payment Defaults as to which
notice is also given after such Payment Blockage Period is initiated) is cured,
waived or ceases to exist or on which such Senior Indebtedness is discharged or
paid in full or (iii) the date on which such Payment Blockage Period (and all
Non-payment Defaults as to which notice is given after such Payment Blockage
Period is initiated) shall have been terminated by written notice to the Company
from the Trustee initiating such Payment Blockage Period, after which, in the
case of each of clauses (i), (ii) and (iii) the Company may resume making any
and all required payments in respect of the Subordinated Note, including any
missed payments. In no event will a Payment Blockage Period extend beyond 179
days from the date of the receipt by the Company of the notice initiating such
Payment Blockage Period (such 179-day period referred to as the "Initial
Period"), unless in the case of each of the foregoing clauses (i), (ii) and
(iii), the maturity of any Senior Indebtedness shall have been accelerated or
any payment default thereunder shall exist. Any number of notices of Non-
payment Defaults may be given during the Initial Period; provided that during
any period of 365 consecutive days only one Payment Blockage Period, during
which payment of principal of, or premium, if any, or interest on, the
Subordinated Note may not be made, may commence and the duration of such period
may not exceed 179 days, unless in the case of each of clauses (i), (ii) and
(iii), the maturity of any Senior Indebtedness shall have been accelerated or
any payment default thereunder shall exist. No Non-payment Default will respect
to any Senior Indebtedness that exists or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be, made the basis
for the commencement of a second Payment Blockage Period, whether or not within
a period of 365 consecutive days.
3. In the event of any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or its assets, or
any liquidation, dissolution or other winding up of the Company, whether
<PAGE>
voluntary or involuntary, and whether or not involving insolvency or bankruptcy,
or any assignment for the benefit of creditors of any other marshaling of assets
or liabilities of the Company, all Senior Indebtedness must be paid in full, in
cash or, as acceptable to each and every holder of Senior Indebtedness, in any
other manner, before any payment or distribution is made on account of the
principal of or premium, if any, or interest on or any other obligation under or
with respect to the Subordinated Note or on account of the purchase, redemption,
defeasance or other acquisition of, or in respect of, this Subordinated Note.
4. In the event that the Lender receives any payment of principal of,
interest on, or premium, if any, with respect to the Subordinated Note at a time
when such Lender, has actual knowledge that such payment is prohibited by the
terms of this Note, such payment shall be held by the Lender, in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders of Senior Indebtedness for application to the payment
of all obligations with respect to Senior Indebtedness remaining unpaid to the
extent necessary to pay such obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.
Company hereby expressly waives presentment, demand, notice, protest, and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and an action for amounts due
hereunder shall immediately accrue.
<PAGE>
This Note shall be governed by, construed and enforced in accordance with the
laws of the State of Delaware without regard to principles of choice of law.
HYPERION TELECOMMUNICATIONS, INC.
/s/ Daniel R. Milliard
-----------------------------------
Name: Daniel R. Milliard
Title: President
<PAGE>
EXHIBIT 5.1
June 20, 1996
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, PA 16915
Dear Sirs:
We have acted as counsel to Hyperion Telecommunications, Inc., a Delaware
corporation (the "Company"), in connection with the proposed exchange (the
"Exchange") by the Company of 13% Series B Senior Discount Notes Due 2003 ("New
Notes") for an equal principal amount of its outstanding 13% Senior Discount
Notes Due 2003 ("Old Notes").
In connection with the proposed Exchange, we have examined the Certificate
of Incorporation of the Company, as amended, the Bylaws of the Company, the
relevant corporate proceedings of the Company, the draft Registration Statement
on Form S-4 covering the proposed Exchange (the "Registration Statement"),
including the Prospectus filed as a part of the Registration Statement, the
Indenture dated April 15, 1996 with respect to the Old Notes and New Notes (the
"Indenture"), and such other documents, records, certificates of public
officials, statutes and decisions as we considered necessary to express the
opinions contained herein. In the examination of such documents, we have
assumed the genuiness of all signatures and the authenticity of all documents
submitted to us as originals and the conformity to the original documents of all
documents submitted to us as certified or photostatic copies.
We understand that the New Notes are to be issued to the holders of the Old
Notes in the Exchange and are to be available for resale by such holders, all in
the manner described in the Prospectus which is a part of the Registration
Statement and in the Indenture.
Based on the foregoing, we are of the opinion that:
1. The issuance of the New Notes to the holders of the Old Notes pursuant
to the terms of the Exchange and the Indenture have been duly authorized
by proper corporate action of the Company.
2. When the Registration Statement shall have been declared effective by
order of the Securities and Exchange Commission and the New Notes have
been duly issued to and exchanged for the Old Notes in accordance with
the terms of the Exchange, the Indenture and the Registration Statement,
such New Notes will be validly issued and will constitute binding
obligations of the Company, subject, as to enforcement, (i) to any
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors' rights and remedies
generally and (ii) to general
<PAGE>
principles of judicial discretion and equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to any reference to us in the Prospectus which is a
part hereof.
Sincerely,
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By: /s/ Carl E. Rothenberger, Jr.
Carl E. Rothenberger, Jr.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of October 21, 1991, between CHARLES R.
DRENNING (the "Employee") and HYPERION TELECOMMUNICATIONS, INC. (the "Company"),
a Delaware corporation.
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that
end with the Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement
-----------------
Subject to the terms and conditions hereof, the term of
employment of the Employee under this Employment Agreement shall be for the
period commencing on the date hereof and terminating at midnight on October 20,
1996. Employee may defer commencement for thirty (30) days after the date
hereof.
2. Services to be Rendered
-----------------------
The Company hereby agrees to employ the Employee as an executive
officer to perform services for the Company in such areas as requested by the
Company, exclusive of Allegheny County, Pennsylvania, subject to the terms,
conditions and provisions of
<PAGE>
this Employment Agreement. The Employee hereby accepts such employment and
agrees to devote his full time and attention to rendering services to the
Company under this Employment Agreement. In connection with the rendition of
such services, the Employee shall report to and be subject to the direction of
the President and Board of Directors of the Company, and he shall perform such
services as shall be designated by them.
3. Compensation
------------
3.1 In full payment for services rendered to the Company under this
Employment Agreement, the Company shall pay the Employee a base salary of not
less than $90,000 per year during the term hereof ("Base Salary"), to be paid in
accordance with Company policy. The Base Salary shall be increased by the amount
of Adelphia Communications Corporation wages grid for hourly employees is
increased each year.
3.2 In addition to the compensation otherwise provided for in this
Paragraph 3, the Employee shall, during the term of this Employment Agreement,
also be eligible to be awarded a bonus as provided for in Paragraph 4 of this
Employment Agreement.
3.3 The Employee shall be deemed to be a 10-year employee and shall,
during the term of this Employment Agreement, be entitled to (i) vacations and
fringe benefits, including reimbursement of business expenses, consistent with
the present practice of Adelphia Communications Corporation for its employees as
set forth in the Adelphia Communications Corporation Handbook and (ii) the use
of appropriate office space.
4. Bonus Compensation
------------------
The Company covenants and agrees that, for each fiscal year
during the term of the Employment Agreement, the Employee will be entitled to
receive bonus compensation ("Bonus Compensation") provided the Employee meets
the performance criteria to
-2-
<PAGE>
be mutually agreed upon, with the maximum award not to exceed $20,000 per annum,
payable quarterly.
5. Disability, Death and Termination
---------------------------------
5.1 In the event of the Employee's physical or mental disability
(so that the Employee is not reasonably able to render his full services
hereunder), the Employee's Base Salary shall continue for the period of any such
disability less any disability payments; provided, however, that in the event
any such disability shall continue for a consecutive period of more than one
hundred eighty (180) days, then the Company may, at its election, terminate this
Employment Agreement. In the event of any such termination, the Company shall be
obligated only for compensation earned by the Employee prior to such
termination.
5.2 Upon the death of the Employee, the Company shall continue for
a period of one hundred eighty (180) days from the Employee's date of death to
pay the Base Salary to the Employee's designated beneficiary.
5.3 If any of the following events should occur:
(i) the Employee voluntarily resigns or retires as an employee
of the Company without the prior written consent of the
Company;
(ii) the Company terminates the Employee's employment for cause
which is defined as good and sufficient cause; or
(iii) the Employee materially breaches this Employment Agreement
and fails to cure such breach within thirty (30) calendar
days after receiving written notice of such breach from the
Company;
then the Company's obligations hereunder shall terminate and no further payments
of any kind shall thereafter be made by the Company to the Employee hereunder.
-3-
<PAGE>
6. Employee's Acknowledgments
--------------------------
Employee recognizes and acknowledges that: (a) in the course of
Employee's employment by the Company it will be necessary for Employee to
acquire information which could include, in whole or in part, information
concerning the Company's sales, sales volume, sales methods, sales proposals,
customers and prospective customers; the identity of customers and prospective
customers; the identity of key purchasing personnel in the employ of customers
and prospective customers; the amount or kind of customers' purchases from the
Company; the Company's sources of supply; the Company's computer programs,
system documentation, special hardware and product hardware, related software
development; the Company's manuals, formulae, processes, methods, machines,
compositions, ideas, improvements and inventions; or other confidential or
proprietary information belonging to the Company or relating to the Company's
affairs (collectively referred to herein as the "Confidential Information"); (b)
the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential to the protection of the Company's good will and to the maintenance
of the Company's competitive position that the Confidential Information be kept
secret and that Employee not disclose the Confidential Information to others or
use the Confidential Information to Employee's own advantage or the advantage of
others.
Employee further recognizes and acknowledges that it is
essential for the proper protection of the business of the Company that Employee
be restrained (a) from soliciting or inducing any employee of the Company to
leave the employ of the Company, (b) from hiring or attempting to hire any
employee of the Company, (c) from soliciting the trade of or trading
-4-
<PAGE>
with the customers and suppliers of the Company for any business purpose, and
(d) from competing against the Company for a reasonable period following the
termination of Employee's employment with the Company.
7. Employee's Covenants, Representations and Agreements
----------------------------------------------------
7.1 Non-Disclosure of Confidential Information.
------------------------------------------
Employee agrees to hold and safeguard the Confidential
Information in trust for the Company, its successors and assigns, and agrees
that he shall not, without the prior written consent of the Company,
misappropriate or disclose or make available to anyone for use outside the
Company's organization at any time, either during his employment with the
Company or subsequent to the termination of his employment with the Company for
any reason, including without limitation termination by the Company for cause or
without cause, any of the Confidential Information, whether or not developed by
Employee, except as required in the performance of Employee's duties to the
Company.
7.2 Disclosure of Works and Inventions/Assignment of Patents.
--------------------------------------------------------
Employee shall disclose promptly to the Company or its nominee any and all
works, inventions, discoveries and improvements authorized, conceived or made by
Employee during the period of employment and related to the business or
activities of the Company, and hereby assigns and agrees to assign all his
interest therein to the Company or its nominee. Whenever requested to do so by
the Company, Employee shall execute any and all applications, assignments or
other instruments which the Company shall deem necessary to apply for and obtain
Letters, Patents or Copyrights of the United States or any foreign country or to
otherwise protect the Company's interest therein. Such obligations shall
continue beyond the termination of employment with respect to works, inventions,
discoveries and improvements authored, conceived or made by Employee
-5-
<PAGE>
during the period of employment, and shall be binding upon Employee's assigns,
executors, administrators and other legal representatives.
7.3 Duties. Employee agrees to be a loyal employee of the Company.
------
Employee agrees to devote his best efforts full time to the performance of his
duties for the Company, to give proper time and attention to furthering the
Company's business and to comply with all rules, regulations and instruments
established or issued by the Company. Employee further agrees that during the
term of this Agreement, Employee shall not, directly or indirectly, engage in
any business which would detract from Employee's ability to apply his best
efforts to the performance of his duties hereunder. Employee also agrees that he
shall not usurp any corporate opportunities of the Company.
7.4 Return of Materials. Upon the termination of Employee's
-------------------
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Employee shall promptly
deliver to the Company all correspondence, drawings, blueprints, manuals,
letters, notes, notebooks, reports, flow-charts, programs, proposals and any
documents concerning the Company's customers or concerning products or processes
used by the Company and, without limiting the foregoing, will promptly deliver
to the Company any and all other documents or materials containing or
constituting Confidential Information.
7.5 Restrictions on Competition. Employee covenants and agrees that
---------------------------
during the period of Employee's employment hereunder and for a period of three
(3) years following the termination of Employee's employment, including without
limitation termination as set forth in Paragraph 5.3 hereof, Employee shall not
engage in any competing business, directly or indirectly, whether as principal
or as agent, officer, director, employee, consultant, shareholder or
-6-
<PAGE>
otherwise, alone or in association with any other person, corporation or other
entity, in any city or municipality where the Company is offering its products
or services.
For purposes of this Agreement, the term "competing business"
shall mean any person, corporation or other entity engaged in the business of
(a) providing telecommunications alternate access network systems, or (b)
selling or attempting to sell any product or service which is the same as or
similar to products or services sold by the Company within the last three (3)
years prior to termination of Employee's employment hereunder.
7.6 Non-Solicitation of Customers and Suppliers. Employee agrees
-------------------------------------------
that during his employment with the Company, he shall not, directly or
indirectly, solicit the trade of, or trade with, any customer, prospective
customer, supplier or prospective supplier of the Company for any business
purpose other than for the benefit of the Company. Employee further agrees that
for three (3) years following termination of his employment with the Company,
including without limitation termination by the Company for cause or without
cause, Employee shall not, directly or indirectly, solicit the trade of, or
trade with, any customers or suppliers, or prospective customers or suppliers,
of the Company.
7.7 Non-Solicitation of Employees. Employee agrees that during his
-----------------------------
employment with the Company and for three (3) years following termination of
Employee's employment with the Company, including without limitation termination
by the Company for cause or without cause, Employee shall not, directly or
indirectly, solicit or induce, or attempt to solicit or induce, any employee of
the Company to leave the Company for any reason whatsoever, or hire any employee
of the Company.
-7-
<PAGE>
7.8 Work Made for Hire. Employee agrees that in the event of
------------------
publication by Employee of written or graphic materials, the Company will retain
and own all rights in said materials, including right of copyright.
7.9 No Violation of Other Agreements. Employee represents and
--------------------------------
agrees that by entering into this Agreement he will not violate or breach any
other agreement or contract by which he is bound. Employee further represents
and warrants that his employment with the Company will not require him to
disclose or use any confidential information belonging to prior employers or
other persons or entities.
8. Expenses.
--------
All reasonable travel, entertainment and other expenses
incidental to the rendering of services by the Employee hereunder shall be paid
by the Company in accordance with its normal practices in effect from time to
time. If such expenses are paid in the first instance by the Employee the
Company shall reimburse him promptly therefor upon presentation of proper
invoices.
9. Non-Assignability
-----------------
Except as otherwise provided herein, this Employment Agreement
may not be assigned by either the Company or the Employee.
10. Merger or Consolidation
-----------------------
In the event of the merger or consolidation of the Company with
any other corporation or corporations, or of the sale by the Company of a major
portion of its assets or of its business and good will, this Employment
Agreement shall be assigned and transferred to such successor in interest as an
asset of the Company and such assignee shall assume the Company's obligations
hereunder, in which event the Employee agrees to continue to perform his duties
and
-8-
<PAGE>
obligations according to the terms and conditions hereof for such assignee
or transferee of this Employment Agreement.
11. Notices
-------
All notices and other communications which are required or may be
given under this Employment Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
If to the Company, to it at the following address:
Hyperion Telecommunications, Inc.
Coudersport, PA 16915
If to the Employee, to him at the following address:
Charles R. Drenning
1443 Old Meadow Road
Upper St. Clair, PA 15241
with a copy to:
Bernard Eisen, Esq.
Klett Lieber Rooney & Schorling
40th Floor, One Oxford Centre
Pittsburgh, PA 15219
or to such other place as either party shall have specified by notice in writing
to the other.
12. Governmental Regulation
-----------------------
Nothing contained in this Employment Agreement shall be
construed so as to require the commission of any act contrary to law, and
wherever there is any conflict between any provision of this Employment
Agreement and any statute, law, ordinance, order or regulation, the latter shall
prevail, but in such event any such provision of this Employment
-9-
<PAGE>
Agreement shall be curtailed and limited only to the extent necessary to bring
it within the legal requirements.
13. Governing Law
-------------
This Employment Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
14. Entire Agreement; Amendment
---------------------------
This Employment Agreement sets forth the entire understanding of
the parties in respect of the subject matter contained herein and supersedes all
prior agreements, arrangements and understandings relating to the subject
matter, and may be amended only by a written agreement signed by both parties
hereto or their duly authorized representatives.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
WITNESS:
/s/ FLORENCE MACK /s/ CHARLES R. DRENNING (SEAL)
- ----------------------------------------- ------------------------------------
CHARLES R. DRENNING
ATTEST: HYPERION TELECOMMUNICATIONS, INC.
/s/ DANIEL R. MILLIARD By /s/ JAMES P. RIGAS
- ----------------------------------------- ---------------------
SECRETARY VICE PRESIDENT
(CORPORATE SEAL)
-11-
<PAGE>
EXHIBIT 10.2
------------
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of October 21, 1991, between PAUL D.
FAJERSKI (the "Employee") and HYPERION TELECOMMUNICATIONS, INC. (the "Company"),
a Delaware corporation.
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that
end with the Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement
-----------------
Subject to the terms and conditions hereof, the term of
employment of the Employee under this Employment Agreement shall be for the
period commencing on the date hereof and terminating at midnight on October 20,
1996. Employee may defer commencement for thirty (30) days after the date
hereof.
2. Services to be Rendered
-----------------------
The Company hereby agrees to employ the Employee as an executive
officer to perform services for the Company in such areas as requested by the
Company,
<PAGE>
exclusive of Allegheny County, Pennsylvania, subject to the terms,
conditions and provisions of this Employment Agreement. The Employee hereby
accepts such employment and agrees to devote his full time and attention to
rendering services to the Company under this Employment Agreement. In
connection with the rendition of such services, the Employee shall report to and
be subject to the direction of the President and Board of Directors of the
Company, and he shall perform such services as shall be designated by them.
3. Compensation
------------
3.1 In full payment for services rendered to the Company under this
Employment Agreement, the Company shall pay the Employee a base salary of not
less than $90,000 per year during the term hereof ("Base Salary"), to be paid in
accordance with Company policy. The Base Salary shall be increased by the amount
of Adelphia Communications Corporation wages grid for hourly employees is
increased each year.
3.2 In addition to the compensation otherwise provided for in this
Paragraph 3, the Employee shall, during the term of this Employment Agreement,
also be eligible to be awarded a bonus as provided for in Paragraph 4 of this
Employment Agreement.
3.3 The Employee shall be deemed to be a 10-year employee and shall,
during the term of this Employment Agreement, be entitled to (i) vacations and
fringe benefits, including reimbursement of business expenses, consistent with
the present practice of Adelphia Communications Corporation for its employees as
set forth in the Adelphia Communications Corporation Handbook, and (ii) the use
of appropriate office space.
-2-
<PAGE>
4. Bonus Compensation
------------------
The Company covenants and agrees that, for each fiscal year
during the term of the Employment Agreement, the Employee will be entitled to
receive bonus compensation ("Bonus Compensation") provided the Employee meets
the performance criteria to be mutually agreed upon, with the maximum award
not to exceed $20,000 per annum, payable quarterly.
5. Disability, Death and Termination
---------------------------------
5.1 In the event of the Employee's physical or mental disability (so
that the Employee is not reasonably able to render his full services hereunder),
the Employee's Base Salary shall continue for the period of any such disability
less any disability payments; provided, however, that in the event any such
disability shall continue for a consecutive period of more than one hundred
eighty (180) days, then the Company may, at its election, terminate this
Employment Agreement. In the event of any such termination, the Company shall be
obligated only for compensation earned by the Employee prior to such
termination.
5.2 Upon the death of the Employee, the Company shall continue for a
period of one hundred eighty (180) days from the Employee's date of death to pay
the Base Salary to the Employee's designated beneficiary.
5.3 If any of the following events should occur:
(i) the Employee voluntarily resigns or retires as an employee
of the Company without the prior written consent of the
Company;
(ii) the Company terminates the Employee's employment for cause
which is defined as good and sufficient cause;
-3-
<PAGE>
(iii) the Employee materially breaches this Employment Agreement
and fails to cure such breach within thirty (30) calendar
days after receiving written notice of such breach from
the Company;
then the Company's obligations hereunder shall terminate and no further payments
of any kind shall thereafter be made by the Company to the Employee hereunder.
6. Employee's Acknowledgments
--------------------------
Employee recognizes and acknowledges that: (a) in the course of
Employee's employment by the Company it will be necessary for Employee to
acquire information which could include, in whole or in part, information
concerning the Company's sales, sales volume, sales methods, sales proposals,
customers and prospective customers; the identity of customers and prospective
customers; the identity of key purchasing personnel in the employ of customers
and prospective customers; the amount or kind of customers' purchases from the
Company; the Company's sources of supply; the Company's computer programs,
system documentation, special hardware, product hardware and related software
development; the Company's manuals, formulae, processes, methods, machines,
compositions, ideas, improvements and inventions; or other confidential or
proprietary information belonging to the Company or relating to the Company's
affairs (collectively referred to herein as the "Confidential Information"); (b)
the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential to the protection of the Company's good will and to the maintenance
of the Company's competitive position that the Confidential Information be kept
secret and that Employee not disclose the Confidential
-4-
<PAGE>
Information to others or use the Confidential Information to Employee's own
advantage or the advantage of others.
Employee further recognizes and acknowledges that it is essential
for the proper protection of the business of the Company that Employee be
restrained (a) from soliciting or inducing any employee of the Company to leave
the employ of the Company, (b) from hiring or attempting to hire any employee of
the Company, (c) from soliciting the trade of or trading with the customers and
suppliers of the Company for any business purposes, and (d) from competing
against the Company for a reasonable period following the termination of
Employee's employment with the Company.
7. Employee's Covenants, Representations and Agreements
----------------------------------------------------
7.1 Non-Disclosure of Confidential Information. Employee agrees to
------------------------------------------
hold and safeguard the Confidential Information in trust for the Company, its
successors and assigns, and agrees that he shall not, without the prior written
consent of the Company, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during his
employment with the Company or subsequent to the termination of his employment
with the Company for any reason, including without limitation termination by the
Company for cause or without cause, any of the Confidential Information, whether
or not developed by Employee, except as required in the performance of
Employee's duties to the Company.
7.2 Disclosure of Works and Inventions/Assignment of Patents.
---------------------------------------------------------
Employee shall disclose promptly to the Company or its nominee any and all
works, inventions, discoveries and improvements authorized, conceived or made by
Employee during the period of employment
-5-
<PAGE>
and related to the business or activities of the Company, and hereby assigns and
agrees to assign all his interest therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments which the Company shall deem
necessary to apply for and obtain Letters, Patents or Copyrights of the United
States or any foreign country or to otherwise protect the Company's interest
therein. Such obligations shall continue beyond the termination of employment
with respect to works, inventions, discoveries and improvements authored,
conceived or made by Employee during the period of employment, and shall be
binding upon Employee's assigns, executors, administrators and other legal
representatives.
7.3 Duties. Employee agrees to be a loyal employee of the Company.
-------
Employee agrees to devote his best efforts full time to the performance of his
duties for the Company, to give proper time and attention to furthering the
Company's business and to comply with all rules, regulations and instruments
established or issued by the Company. Employee further agrees that during the
term of this Agreement, Employee shall not, directly or indirectly, engage in
any business which would detract from Employee's ability to apply his best
efforts to the performance of his duties hereunder. Employee also agrees that he
shall not usurp any corporate opportunities of the Company.
7.4 Return of Materials. Upon the termination of Employee's
--------------------
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Employee shall promptly
deliver to the Company all correspondence, drawings, blueprints, manuals,
letters, notes, notebooks, reports, flow-charts, programs, proposals and any
documents concerning the Company's customers or concerning products or
-6-
<PAGE>
processes used by the Company and, without limiting the foregoing, will promptly
deliver to the Company any and all other documents or materials containing or
constituting Confidential Information.
7.5 Restrictions on Competition. Employee covenants and agrees that
----------------------------
during the period of Employee's employment hereunder and for a period of three
(3) years following the termination of Employee's employment, including without
limitation termination as set forth in Paragraph 5.3 hereof, Employee shall not
engage in any competing business, directly or indirectly, whether as principal
or as agent, officer, director, employee, consultant, shareholder or otherwise,
alone or in association with any other person, corporation or other entity, in
any city or municipality where the Company is offering its products or services.
For purposes of this Agreement, the term "competing business" shall
mean any person, corporation or other entity engaged in the business of (a)
providing telecommunications alternate access network systems, or (b) selling or
attempting to sell any product or service which is the same as or similar to
products or services sold by the Company within the last three (3) years prior
to termination of Employee's employment hereunder.
7.6 Non-Solicitation of Customers and Suppliers. Employee agrees
--------------------------------------------
that during his employment with the Company, he shall not, directly or
indirectly, solicit the trade of, or trade with, any customer, prospective
customer, supplier or prospective supplier of the Company for any business
purpose other than for the benefit of the Company. Employee further agrees that
for three (3) years following termination of his employment with the Company,
including without limitation termination by the Company for cause or without
cause, Employee
-7-
<PAGE>
shall not, directly or indirectly, solicit the trade of, or trade with, any
customers or suppliers, or prospective customers or suppliers, of the Company.
7.7 Non-Solicitation of Employees. Employee agrees that during his
------------------------------
employment with the Company and for three (3) years following termination of
Employee's employment with the Company, including without limitation termination
by the Company for cause or without cause, Employee shall not, directly or
indirectly, solicit or induce, or attempt to solicit or induce, any employee of
the Company to leave the Company for any reason whatsoever, or hire any employee
of the Company.
7.8 Work Made for Hire. Employee agrees that in the event of
-------------------
publication by Employee of written or graphic materials, the Company will retain
and own all rights in said materials, including right of copyright.
7.9 No Violation of Other Agreements. Employee represents and
---------------------------------
agrees that by entering into this Agreement, he will not violate or breach any
other agreement or contract by which he is bound. Employee further represents
and warrants that his employment with the Company will not require him to
disclose or use any confidential information belonging to prior employers or
other persons or entities.
8. Expenses
--------
All reasonable travel, entertainment and other expenses incidental to
the rendering of services by the Employee hereunder shall be paid by the Company
in accordance with its normal practices in effect from time to time. If such
expenses are paid in the first instance by the Employee, the Company shall
reimburse him promptly therefor upon presentation of proper invoices.
-8-
<PAGE>
9. Non-Assignability
-----------------
Except as otherwise provided herein, this Employment Agreement
may not be assigned by either the Company or the Employee.
10. Merger or Consolidation
-----------------------
In the event of the merger or consolidation of the Company with
any other corporation or corporations, or of the sale by the Company of a major
portion of its assets or of its business and good will, this Employment
Agreement shall be assigned and transferred to such successor in interest as an
asset of the Company and such assignee shall assume the Company's obligations
hereunder, in which event the Employee agrees to continue to perform his duties
and obligations according to the terms and conditions hereof for such assignee
or transferee of this Employment Agreement.
11. Notices
-------
All notices and other communications which are required or may be
given under this Employment Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
If to the Company, to it at the following address:
Hyperion Telecommunications, Inc.
Coudersport, PA 16915
If to the Employee, to him at the following address:
Paul D. Fajerski
331 Alamo Drive
Upper St. Clair, PA 15241
with a copy to:
-9-
<PAGE>
Bernard Eisen, Esq.
Klett Lieber Rooney & Schorling
40th Floor, One Oxford Centre
Pittsburgh, PA 15219
or to such other place as either party shall have specified by notice in writing
to the other.
12. Governmental Regulation
-----------------------
Nothing contained in this Employment Agreement shall be construed
so as to require the commission of any act contrary to law, and wherever there
is any conflict between any provision of this Employment Agreement and any
statute, law, ordinance, order or regulation, the latter shall prevail, but in
such event any such provision of this Employment Agreement shall be curtailed
and limited only to the extent necessary to bring it within the legal
requirements.
13. Governing Law
-------------
This Employment Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
14. Entire Agreement; Amendment
---------------------------
This Employment Agreement sets forth the entire understanding of
the parties in respect of the subject matter contained herein and supersedes all
prior agreements, arrangements and understandings relating to the subject
matter, and may be amended only by a written agreement signed by both parties
hereto or their duly authorized representatives,
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first above written.
WITNESS:
/s/ FLORENCE MACK /s/ PAUL D. FAJERSKI (SEAL)
- ----------------------------------------- ------------------------------------
PAUL D. FAJERSKI
ATTEST: HYPERION TELECOMMUNICATIONS, INC.
/s/ DANIEL R. MILLIARD By /s/ JAMES P. RIGAS
- ----------------------------------------- ------------------------------------
SECRETARY VICE PRESIDENT
(CORPORATE SEAL)
-11-
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of October 21, 1991, between RANDOLPH
S. FOWLER (the "Employee") and HYPERION TELECOMMUNICATIONS, INC. (the
"Company"), a Delaware corporation.
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires to assure itself of the benefit of the
Employee's services and experience for a period of time; and
WHEREAS, the Employee is willing to enter into an agreement to that
end with the Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement
-----------------
Subject to the terms and conditions hereof, the term of employment
of the Employee under this Employment Agreement shall be for the period
commencing on the date hereof and terminating at midnight on October 20, 1996.
Employee may defer commencement for thirty (30) days after the date hereof.
2. Services to be Rendered
-----------------------
The Company hereby agrees to employ the Employee as an executive
officer to perform services for the Company in such areas as requested by the
Company,
<PAGE>
exclusive of Allegheny County, Pennsylvania, subject to the terms, conditions
and provisions of this Employment Agreement. The Employee hereby accepts such
employment and agrees to devote his full time and attention to rendering
services to the Company under this Employment Agreement. In connection with the
rendition of such services, the Employee shall report to and be subject to the
direction of the President and Board of Directors of the Company, and he shall
perform such services as shall be designated by them.
3. Compensation
------------
3.1 In full payment for services rendered to the Company under
this Employment Agreement, the Company shall pay the Employee a base salary of
not less than $90,000 per year during the term hereof ("Base Salary"), to be
paid in accordance with Company policy. The Base Salary shall be increased by
the amount of Adelphia Communications Corporation wages grid for hourly
employees is increased each year.
3.2 In addition to the compensation otherwise provided for in this
Paragraph 3, the Employee shall, during the term of this Employment Agreement,
also be eligible to be awarded a bonus as provided for in Paragraph 4 of this
Employment Agreement.
3.3 The Employee shall be deemed to be a 10-year employee and shall,
during the term of this Employment Agreement, be entitled to (i) vacations and
fringe benefits, including reimbursement of business expenses, consistent with
the present practice of Adelphia Communications Corporation for its employees as
set forth in the Adelphia Communications Corporation Handbook, and (ii) the use
of appropriate office space.
-2-
<PAGE>
4. Bonus Compensation
------------------
The Company covenants and agrees that, for each fiscal year
during the term of the Employment Agreement, the Employee will be entitled to
receive bonus compensation ("Bonus Compensation") provided the Employee meets
the performance criteria to be mutually agreed upon, with the maximum award not
to exceed $20,000 per annum, payable quarterly.
5. Disability, Death and Termination
---------------------------------
5.1 In the event of the Employee's physical or mental disability
(so that the Employee is not reasonably able to render his full services
hereunder), the Employee's Base Salary shall continue for the period of any such
disability less any disability payments; provided, however, that in the event
any such disability shall continue for a consecutive period of more than one
hundred eighty (180) days, then the Company may, at its election, terminate this
Employment Agreement. In the event of any such termination, the Company shall be
obligated only for compensation earned by the Employee prior to such
termination.
5.2 Upon the death of the Employee, the Company shall continue
for a period of one hundred eighty (180) days from the Employee's date of death
to pay the Base Salary to the Employee's designated beneficiary.
5.3 If any of the following events should occur:
(i) the Employee voluntarily resigns or retires as an
employee of the Company without the prior written
consent of the Company;
(ii) the Company terminates the Employee's employment for
cause which is defined as good and sufficient cause;
-3-
<PAGE>
(iii) the Employee materially breaches this Employment
Agreement and fails to cure such breach within
thirty (30) calendar days after receiving written
notice of such breach from the Company;
then the Company's obligations hereunder shall terminate and no further payments
of any kind shall thereafter be made by the Company to the Employee hereunder.
6. Employee's Acknowledgments
--------------------------
Employee recognizes and acknowledges that: (a) in the course of
Employee's employment by the Company it will be necessary for Employee to
acquire information which could include, in whole or in part, information
concerning the Company's sales, sales volume, sales methods, sales proposals
customers and prospective customers; the identity of customers and prospective
customers; the identity of key purchasing personnel in the employ of customers
and prospective customers; the amount or kind of customers' purchases from the
Company; the Company's sources of supply; the Company's computer programs,
system documentation, special hardware, product hardware and related software
development; the Company's manuals, formulae, processes, methods, machines,
compositions, ideas, improvements and inventions; or other confidential or
proprietary information belonging to the Company or relating to the Company's
affairs (collectively referred to herein as the "Confidential Information"); (b)
the Confidential Information is the property of the Company; (c) the use,
misappropriation or disclosure of the Confidential Information would constitute
a breach of trust and could cause irreparable injury to the Company; and (d) it
is essential to the protection of the Company's good will and to the maintenance
of the Company's competitive position that the Confidential Information be kept
secret and that Employee not disclose the Confidential
-4-
<PAGE>
Information to others or use the Confidential Information to Employee's own
advantage or the advantage of others.
Employee further recognizes and acknowledges that it is essential for
the proper protection of the business of the Company that Employee be restrained
(a) from soliciting or inducing any employee of the Company to leave the employ
of the Company, (b) from hiring or attempting to hire any employee of the
Company, (c) from soliciting the trade of or trading with the customers and
suppliers of the Company for any business purpose, and (d) from competing
against the Company for a reasonable period following the termination of
Employee's employment with the Company.
7. Employee's Covenants, Representations and Agreements
----------------------------------------------------
7.1 Non-Disclosure of Confidential Information. Employee agrees to
------------------------------------------
hold and safeguard the Confidential Information in trust for the Company, its
successors and assigns, and agrees that he shall not, without the prior written
consent of the Company, misappropriate or disclose or make available to anyone
for use outside the Company's organization at any time, either during his
employment with the Company or subsequent to the termination of his employment
with the Company for any reason, including without limitation termination by the
Company for cause or without cause, any of the Confidential Information, whether
or not developed by Employee, except as required in the performance of
Employee's duties to the Company.
7.2 Disclosure of Works and Inventions/Assignment of Patents.
--------------------------------------------------------
Employee shall disclose promptly to the Company or its nominee any and all
works, inventions, discoveries and improvements authorized, conceived or made by
Employee during the period of employment
-5-
<PAGE>
and related to the business or activities of the Company, and hereby assigns and
agrees to assign all his interest therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments which the Company shall deem
necessary to apply for and obtain Letters, Patents or Copyrights of the United
States or any foreign country or to otherwise protect the Company's interest
therein. Such obligations shall continue beyond the termination of' employment
with respect to works, inventions, discoveries and improvements authored,
conceived or made by Employee during the period of employment, and shall be
binding upon Employee's assigns, executors, administrators and other legal
representatives.
7.3 Duties. Employee agrees to be a loyal employee of the Company.
------
Employee agrees to devote his best efforts full time to the performance of his
duties for the Company, to give proper time and attention to furthering the
Company's business and to comply with all rules, regulations and instruments
established or issued by the Company. Employee further agrees that during the
term of this Agreement, Employee shall not, directly or indirectly, engage in
any business which would detract from Employee's ability to apply his best
efforts to the performance of his duties hereunder. Employee also agrees that he
shall not usurp any corporate opportunities of the Company.
7.4 Return of Materials. Upon the termination of Employee's
-------------------
employment with the Company for any reason, including without limitation
termination by the Company for cause or without cause, Employee shall promptly
deliver to the Company all correspondence, drawings, blueprints, manuals,
letters, notes, notebooks, reports, flow-charts, programs, proposals and any
documents concerning the Company's customers or concerning products or
-6-
<PAGE>
processes used by the Company and, without limiting the foregoing, will promptly
deliver to the Company any and all other documents or materials containing or
constituting Confidential Information.
7.5 Restrictions on Competition. Employee covenants and agrees that
---------------------------
during the period of Employee's employment hereunder and for a period of three
(3) years following the termination of Employee's employment, including without
limitation termination as set forth in Paragraph 5.3 hereof, Employee shall not
engage in any competing business, directly or indirectly, whether as principal
or as agent, officer, director, employee, consultant, shareholder or otherwise,
alone or in association with any other person, corporation or other entity, in
any city or municipality where the Company is offering its products or services.
For purposes of this Agreement, the term "competing business" shall
mean any person, corporation or other entity engaged in the business of (a)
providing telecommunications alternate access network systems, or (b) selling or
attempting to sell any product or service which is the same as or similar to
products or services sold by the Company within the last three (3) years prior
to termination of Employee's employment hereunder.
7.6 Non-Solicitation of Customers and Suppliers. Employee agrees that
-------------------------------------------
during his employment with the Company, he shall not, directly or indirectly,
solicit the trade of, or trade with, any customer, prospective customer,
supplier or prospective supplier of the Company for any business purpose other
than for the benefit of the Company. Employee further agrees that for three (3)
years following termination of his employment with the Company, including
without limitation termination by the Company for cause or without cause,
Employee
-7-
<PAGE>
shall not, directly or indirectly, solicit the trade of, or trade with, any
customers or suppliers, or prospective customers or suppliers, of the Company.
7.7 Non-Solicitation of Employees. Employee agrees that during his
-----------------------------
employment with the Company and for three (3) years following termination of
Employee's employment with the Company, including without limitation termination
by the Company for cause or without cause, Employee shall not, directly or
indirectly, solicit or induce, or attempt to solicit or induce, any employee of
the Company to leave the Company for any reason whatsoever, or hire any employee
of the Company.
7.8 Work Made for Hire. Employee agrees that in the event of
------------------
publication by Employee of written or graphic materials, the Company will retain
and own all rights in said materials, including right of copyright.
7.9 No Violation of Other Agreements. Employee represents and agrees
--------------------------------
that by entering into this Agreement, he will not violate or breach any other
agreement or contract by which he is bound. Employee further represents and
warrants that his employment with the Company will not require him to disclose
or use any confidential information belonging to prior employers or other
persons or entities.
8. Expenses.
--------
All reasonable travel, entertainment and other expenses incidental
to the rendering of services by the Employee hereunder shall be paid by the
Company in accordance with its normal practices in effect from time to time. If
such expenses are paid in the first instance by the Employee, the Company shall
reimburse him promptly therefor upon presentation of proper invoices.
-8-
<PAGE>
9. Non-Assignability
-----------------
Except as otherwise provided herein, this Employment Agreement may
not be assigned by either the Company or the Employee.
10. Merger or Consolidation
-----------------------
In the event of the merger or consolidation of the Company with
any other corporation or corporations, or of the sale by the Company of a major
portion of its assets or of its business and good will, this Employment
Agreement shall be assigned and transferred to such successor in interest as an
asset of the Company and such assignee shall assume the Company's obligations
hereunder, in which event the Employee agrees to continue to perform his duties
and obligations according to the terms and conditions hereof for such assignee
or transferee of this Employment Agreement.
11. Notices
-------
All notices and other communications which are required or may be
given under this Employment Agreement shall be in writing and shall be deemed to
have been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
If to the Company, to it at the following address:
Hyperion Telecommunications, Inc.
Coudersport, PA 16915
If to the Employee, to him at the following address:
Randolph S. Fowler
336 Catalina Drive
Upper St. Clair, PA 15241
-9-
<PAGE>
with a copy to:
Charles L. Holsworth, Esq.
Charles L. Holsworth and Associates, P.C.
2550 Brownsville Road
Bavarian Village
Library, PA 15129
or to such other place as either party shall have specified by notice in writing
to the other.
12. Governmental Regulation
-----------------------
Nothing contained in this Employment Agreement shall be construed
so as to require the commission of any act contrary to law, and wherever there
is any conflict between any provision of this Employment Agreement and any
statute, law, ordinance, order or regulation, the latter shall prevail, but in
such event any such provision of this Employment Agreement shall be curtailed
and limited only to the extent necessary to bring it within the legal
requirements.
13. Governing Law
-------------
This Employment Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
14. Entire Agreement; Amendment
---------------------------
This Employment Agreement sets forth the entire understanding of
the parties in respect of the subject matter contained herein and supersedes all
prior agreements, arrangements and understandings relating to the subject
matter, and may be amended only by a written agreement signed by both parties
hereto or their duly authorized representatives.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement as of the date first above written,
WITNESS:
/s/ FLORENCE MACK /s/ RANDOLPH S. FOWLER (SEAL)
- ------------------------------------- -----------------------------------
RANDOLPH S. FOWLER
ATTEST: HYPERION TELECOMMUNICATIONS, INC.
/s/ DANIEL R. MILLIARD By /s/ JAMES P. RIGAS
- ----------------------------------------- ------------------------------------
SECRETARY VICE PRESIDENT
(CORPORATE SEAL)
-11-
<PAGE>
EXHIBIT 10.6
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
May 10, 1996
FOR VALUE RECEIVED, the undersigned CHARLES R. DRENNING, an individual
residing at 1443 Old Meadow Road, Upper St. Clair, PA 15241 (the "'Maker"),
promises to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee")
on the Maturity Date, as defined in the Loan Agreement (as hereinafter defined),
the lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000),
or (ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
B-1
<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
/s/ Charles R. Drenning (SEAL)
------------------------
[Name]
B-2
<PAGE>
EXHIBIT 10.7
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
May 10, 1996
FOR VALUE RECEIVED, the undersigned PAUL D. FAJERSKI, an individual
residing at 331 Alamo Drive, Upper St. Clair, PA 15241 (the "Maker"), promises
to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee") on the
Maturity Date, as defined in the Loan Agreement (as hereinafter defined), the
lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000), or
(ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
B-1
<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
/s/ Paul D. Fajerski (SEAL)
---------------------
[Name]
B-2
<PAGE>
EXHIBIT 10.8
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
May 10, 1996
FOR VALUE RECEIVED, the undersigned RANDOLPH S FOWLER, an individual
residing at 336 Catalina Drive, Upper St. Clair, PA 15241 (the "Maker"),
promises to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee")
on the Maturity Date, as defined in the Loan Agreement (as hereinafter defined),
the lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000),
or (ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
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<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
/s/ Randolph S. Fowler(SEAL)
----------------------
[Name]
B-2
<PAGE>
EXHIBIT 10.9
TERM LOAN AND STOCK PLEDGE AGREEMENT
------------------------------------
THIS TERM LOAN AND PLEDGE AGREEMENT (this "Agreement"), dated as of May 10,
1996, between CHARLES R. DRENNING (the "Borrower"), and HYPERION
TELECOMMUNICATIONS, INC. (the "Lender");
WITNESSETH THAT:
WHEREAS, the Borrower has requested the Lender to make a term loan to
the Borrower and the Lender has agreed to make such term loan;
WHEREAS, the Borrower is the legal and beneficial owner and the holder
of the Collateral (as defined in Section 1 hereof); and
WHEREAS, the obligation of the Lender to make such term loan is
subject to the condition, among others, that the Borrower secure its obligations
to the Lender hereunder and under the Note (as defined in Section 1 hereof),
including securing such obligations in the manner set forth therein and herein;
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto covenant and agree as follows:
1. Definitions.
------------
In addition to the words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof otherwise clearly requires:
(a) "Borrowing Date" shall mean the date on which the Lender
shall make the Loan to the Borrower.
(b) "Code" shall mean the Pennsylvania Uniform Commercial Code
as in effect on the date hereof and as the same may subsequently be amended
from time to time.
(c) "Collateral" shall mean and include (i) the securities
listed on Exhibit B attached hereto and made a part hereof, and all rights and
---------
privileges pertaining thereto, including, without limitation, all securities
and additional securities receivable in respect of or in exchange for such
securities, all rights to subscribe for securities incident to or arising from
ownership of such securities, all cash, interest, stock and other dividends or
distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record
and transfer books, (ii) any and all other securities hereafter pledged to the
Lender to secure the Borrower's Debt, and all rights and privileges pertaining
thereto, including, without limitation, all securities and additional
securities receivable in respect of or in exchange for such securities, all
rights to subscribe for securities incident to or arising from ownership of
such securities, all cash, interest, stock and other dividends or distributions
paid or payable on such securities, and all books and records pertaining to the
foregoing,
<PAGE>
including, without limitation, all stock record and stock transfer books, and
(iii) whatever is received when any of the foregoing is sold, exchanged or
otherwise disposed of, including any proceeds as such term is defined in the
Code.
(d) "Debt" shall mean, collectively, (i) all obligations,
whether of principal, interest, fees, expenses or otherwise, of the Borrower to
the Lender incurred hereunder or under any of the Loan Documents, (ii) all
costs and expenses, including, without limitation, reasonable attorneys' fees
and legal expenses, incurred by the Lender in the collection of any of the
obligations referred to in clause (i) above or in connection with the
enforcement of this Agreement or any of the Loan Documents, and (iii) any
advances made, subsequent to an Event of Default, by the Lender for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including, without limitation, advances for
taxes, insurance and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of the
Collateral.
(e) "Event of Default" shall mean any of the events described
in Section 11(a) hereof.
(f) "Loan" shall mean the loan made by the Lender hereunder as
described in Section 2(a) hereof.
(g) "Loan Documents" shall mean this Agreement, the Note and
each other document executed and delivered pursuant thereto, as any of the same
or any one or more of them may from time to time be amended, modified or
supplemented.
(h) "Maturity Date" shall mean the date on which the first of
the following occurs (i) registration of an equity security by the Lender under
either the Federal Securities Act of 1933, as amended, or the Federal
Securities Exchange Act of 1934, as amended, which equity security is of the
same class as the equity security held by the Individual Shareholders (as
defined in that certain Amended and Restated Pre-Incorporation and Shareholder
Restrictive Agreement, of even date herewith, between Adelphia Communications
Corporation, the Borrower and the other Individual Shareholders signatory
thereto (the "Shareholder Agreement")) and the Individual Shareholders have the
opportunity to sell their Shares (as defined in the Shareholder Agreement)
pursuant to a Registration Rights Agreement to be entered into between such
Shareholders and the Lender, and (ii) October 8, 1998.
(i) "Note" shall mean the promissory note of the Borrower in
substantially the form of Exhibit A attached hereto and made a part hereof,
together with any and all extensions, renewals, refinancings or refundings
thereof in whole or in part.
2. The Loan.
---------
(a) Agreement to Make the Loan; Prepayments & Offset.
-------------------------------------------------
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<PAGE>
The Lender hereby agrees to make a Loan to the Borrower,
on the Borrowing Date subject to and on the terms and conditions set forth
herein, the aggregate principal amount of which shall not exceed $1,000,000.
The Loan is not a revolving credit loan and the Borrower shall not have the
right to borrow, repay and reborrow hereunder. The obligation of the Borrower
to repay the principal amount of the Loan, together with interest thereon,
shall be evidenced by the Note duly executed and delivered by the Borrower with
the blanks appropriately completed. The entire unpaid principal balance of the
Loan and interest accrued thereon shall be due and paid in full on the Maturity
Date. The Borrower shall have the right at its option from time to time to
prepay the Loan in whole or in part. Any interest that accrues on the Loan
from the date six months after the date of the Loan shall be offset by bonus or
additional compensation payable to the Borrower by the Lender (the "Bonus
Payment") which payment shall be payable at the time the principal of and
interest on the Loan are due and payable, whether at the Maturity Date, by
acceleration or otherwise. In addition, the Lender shall make an additional
payment (the "Gross-Up Payment") to the Borrower in an amount equal to the
Federal, state and local income taxes payable by the Borrower with respect to
the Bonus Payment. In computing the Gross-Up Payment, the Bonus Payment shall
be reduced by the amount, if any, of the interest that accrued on the Loan from
the date six months after the date of the Loan that is deductible for Federal,
state or local tax purposes. After the Gross-Up Payment is so determined, the
Borrower shall also be entitled to receive additional payments in an amount
such that after payment by the Borrower of all Federal, state and local income
taxes imposed upon the Gross-Up Payment the Borrower shall retain an amount
equal to the Gross-Up Payment.
(b) Interest Rate.
--------------
The Note shall bear interest on the unpaid principal amount
of the Loan for each day (computed on the basis of the actual number of days
elapsed over a year of 365/366 days) at a rate per annum equal to the average
rate at which Lender is able to invest cash on a short-term basis from time to
time. Interest on the Loan shall be due and payable on the Maturity Date or
upon acceleration of the Note.
3. Pledge.
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As security for the due and punctual payment and performance of the Debt in
full, the Borrower hereby agrees that the Lender shall have, and the Borrower
hereby grants to and creates in favor of the Lender, a first priority security
interest under the Code in and to all of the Collateral.
4. Delivery of Certificates, etc.
------------------------------
Upon the execution and delivery of this Agreement, the Borrower has delivered to
and deposited with the Lender in pledge, stock certificates and any other
instruments evidencing the Collateral, together with undated stock powers signed
in blank by the Borrower as the Lender shall have required.
5. Representations and Warranties.
-------------------------------
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<PAGE>
The Borrower represents and warrants to the Lender as follows:
(a) The Borrower has good and marketable title to all of the
Collateral free and clear of any pledge, lien, security interest, encumbrance,
option or rights of others, except to the extent transfer of the Collateral may
be restricted by the Federal Securities Act of 1933, as amended, and state
securities laws and other than the security interest granted to and created in
favor of the Lender hereunder.
(b) The Borrower (i) is an individual resident of Allegheny
County, Pennsylvania and has the legal capacity, power and authority to borrow
money, to execute and deliver the Note and this Agreement and to assign,
indorse, transfer and deliver, and pledge to Lender the Collateral and
otherwise perform its obligations as provided herein, and (ii) does not require
the approval of or consent to any of such acts by any regulatory agency or
other governmental authority or other third party.
(c) The execution, delivery and performance by the Borrower of t
his Agreement, the Note and the other Loan Documents to which each is a party
are within the legal capacity and power of the Borrower, require no action by
or in respect of, or filing with, any governmental body, agency or official and
do not violate, contravene, or constitute a default under, any provision of any
applicable law or regulation, or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or his properties (except
to the extent that any required consent has been obtained) and will not result
in the creation or imposition of any lien on any asset of the Borrower except
for liens in favor of the Lender created hereunder.
(d) This Agreement, the Note and the other Loan Documents
constitute valid and binding agreements and instruments of the Borrower,
enforceable against the Borrower in accordance with the terms thereof, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or general principles of equity.
(e) The Borrower is not in violation of or breach or default
under any provision of any law, rule or regulation, or any agreement, lease or
other instrument to which the Borrower is a party or by which he or his
properties are bound, which default would materially adversely affect the
Borrower's ability to repay the principal of and interest on the Loan and
pledge the Collateral hereunder.
(f) There is no action, suit or proceeding pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of the Borrower's properties before any court, arbitrator or governmental body,
agency or official which would materially adversely affect the Borrower or the
Collateral.
6. Further Assurances.
-------------------
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<PAGE>
The Borrower will faithfully preserve and protect the Lender's security interest
in the Collateral as a first priority perfected security interest under the
Code, and will do all such other acts and things, and will upon request therefor
by the Lender execute and deliver all such other documents and instruments,
including, without limitation, further pledges, assignments, documents and
powers of attorney with respect to the Collateral consistent with the terms of
this Agreement, as the Lender in its sole discretion may deem necessary or
advisable from time to time in order to preserve, perfect and protect said
security interest.
7. Certain Covenants of the Borrower.
----------------------------------
The Borrower covenants and agrees that (a) he will defend the Lender's right,
title and security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all persons whomsoever; (b) he will have like
title to and right to pledge any other property at any time hereafter pledged to
the Lender pursuant to this Agreement and will likewise defend the Lender's
right thereto and security interest therein; (c) he will not assign, transfer,
pledge, or otherwise encumber any of his right, title or interest under, in or
to the Collateral other than pursuant hereto; (d) he will not take or omit to
take any action, or permit any subsidiary any shares of capital stock of which
constitute a part of the Collateral to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement; (e) he will not, without the prior written
consent of the Lender, waive or release any obligation of any party to the
Collateral; (f) he will execute and deliver to the Lender and record such
supplements to this Agreement and additional assignments as the Lender
reasonably may request to evidence and confirm the pledge herein contained; and
(g) he will promptly give notice in writing to the Lender of the occurrence of
any litigation or proceedings affecting the Borrower or of any dispute between
the Borrower and any governmental or quasi-governmental authority or any other
person (including, without limitation, any material changes in the federal
income tax filings of the Borrower which may be proposed on audit) if such
litigation, proceeding or dispute is one which would, if adversely determined,
have a material adverse effect on the Borrower or the Collateral.
8. Protection of the Lender's Interest in the Collateral Against
-------------------------------------------------------------
Others.
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The Borrower assumes full responsibility for taking any and all necessary steps
to preserve the Lender's rights with respect to the Collateral against all
others. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Lender takes
such action for that purpose as the Borrower shall request in writing, provided
that such requested action will not, in the judgment of the Lender, impair the
security interest in the Collateral created hereby or the Lender's rights in, or
the value of, the Collateral, and provided further that such written request is
received by the Lender in sufficient time to permit the Lender to take the
requested action.
9. Continuation of Perfection of Security Interest.
------------------------------------------------
The Borrower shall at the Borrower's own cost and expense cause the security
interest in the Collateral granted to and created in favor of the Lender under
this Agreement to be perfected and continue to be perfected as long as the Debt
or any part thereof is outstanding and unpaid or not
-5-
<PAGE>
performed in full, and for such purpose the Borrower shall from time to time
deliver possession to the Lender of and execute, deliver and file or record (or
cause to be filed or recorded) such instruments, documents and notices
(including, without limitation, amendments or supplements to this Agreement,
financing statements and continuation statements) as the Lender may deem
necessary or advisable from time to time in order to confirm, perfect and
preserve such security interest. The Lender is hereby irrevocably appointed
attorney-in-fact of the Borrower to do all acts and things which the Lender, in
the exercise of its responsibilities under this Agreement, may deem necessary
or advisable to perfect and continue perfected the Lender's security interest
in the Collateral.
10. Voting Rights; Dividends; etc.
------------------------------
So long as no Event of Default shall have occurred:
(a) The Borrower shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement;
provided, however, that the Borrower shall not exercise or refrain from
exercising any such right if such action or inaction would reasonably be likely
to have a material adverse effect on the value of the Collateral or any part
thereof; and provided, further, that the Borrower shall give the Lender at
least five (5) business days' written notice of the manner in which it intends
to exercise, and the reasons therefor, or the reasons for refraining from
exercising, any such right;
(b) Any and all instruments and other property (other than
cash dividends) received, receivable or otherwise distributed in respect of, or
in exchange for, any of the Collateral shall be forthwith delivered to the
Lender to hold as part of the Collateral and shall, if received by the
Borrower, be received in trust for the benefit of the Lender, be segregated
from the other property or funds of the Borrower, and be forthwith delivered to
the Lender as Collateral in the same form as so received (with any necessary
indorsement); and
(c) The Lender shall execute and deliver (or cause to be
executed and delivered) to the Borrower all such proxies and other instruments
as the Borrower may reasonably request for the purpose of enabling the Borrower
to exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (a) above, and to receive the dividends which he is
authorized to receive and retain pursuant to paragraph (b) above.
11. Defaults.
-----------
(a) An Event of Default shall occur if:
(i) The Borrower shall fail to pay on or before the date
five business days after the date due, whether at maturity, by acceleration or
otherwise, of any principal of or interest on the Note; or
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<PAGE>
(ii) The Borrower shall fail to observe or perform any of
his covenants contained herein, and such failure shall continue for a period of
thirty (30) days after written notice from the Lender to the Borrower; or
(iii) Any representation, warranty, certification or
statement made by the Borrower in this Agreement, or in any certificate,
financial statement or other document delivered to the Lender pursuant to or in
connection with this Agreement or the making of the Loan shall prove to have
been incorrect in any material respect when made; or
(iv) The Borrower shall commence a voluntary case or
other proceeding seeking reorganization or other relief with respect to his
debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, custodian or other similar
official of himself or any substantial part of his property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against him, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay his debts as they become due, or shall take any action to
authorize any of the foregoing; or
(v) an involuntary case or other proceeding shall be
commenced against the Borrower seeking reorganization or other relief with
respect to his debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, custodian or
other similar official of himself or any substantial part of his property, and
such involuntary case or other proceeding shall remain undismissed for a period
of 60 days.
(b) Upon the occurrence of an Event of Default under the terms
of this Agreement:
(i) All rights of the Borrower to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 10(a) and to receive the dividends which it would otherwise
be authorized to receive and retain pursuant to Section 10(b) shall cease, and
all such rights shall, upon notice by the Lender to the Borrower, become vested
in the Lender, who shall thereupon have the sole right to exercise such voting
and other consensual rights and the sole right to receive and hold as
Collateral such dividends and apply them to payment of the Debt; and
(ii) All dividends which are received by the Borrower
contrary to the provisions of paragraph (i) of this Section 11(b) shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Lender as
Collateral in the same form as so received (with any necessary indorsement).
12. Remedies Upon the Occurrence of an Event of Default.
----------------------------------------------------
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<PAGE>
(a) If an Event of Default specified under Section 11(a)(i)
through Section 11(a)(iii) hereof shall occur and be continuing, the Lender may
by written notice to the Borrower, declare the unpaid principal amount of the
Note then outstanding and all interest accrued thereon, any unpaid fees and all
other obligations of the Borrower to the Lender hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Lender without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived; and
(b) If an Event of Default specified under Section 11(a)(iv)
through (v) shall occur, the Lender shall be under no further obligations to
make any Loan hereunder and the unpaid principal amount of the Note then
outstanding and all interest accrued thereon, any unpaid fees and all other
obligations of the Borrower to the Lender hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
(c) If there shall have occurred an Event of Default under the
terms of this Agreement, then the Lender shall have such rights and remedies
with respect to the Collateral or any part thereof and the proceeds thereof as
are provided by the Code and such other rights and remedies with respect
thereto which it may have at law or in equity or under this Agreement,
including without limitation, to the extent not inconsistent with the
provisions of the Code, the right to (i) transfer all or any part of the
Collateral into the Lender's name or into the name of its nominee and
thereafter receive all cash, stock and other dividends or distributions paid or
payable in respect thereof, and otherwise act with respect thereto as the
absolute owner thereof, and (ii) sell, assign, give an option or options to
purchase or otherwise dispose of all or any part of the Collateral at any sale
as provided by the Code at such place or places and at such time or times and
upon such terms, whether for cash or on credit, and in such manner as the
Lender may determine, and apply the proceeds so received (A) first to the
payment of the costs and expenses incurred by the Lender in connection with
such sale and other costs and expenses referred to in clauses (ii) and (iii) of
the definition of "Debt," (B) second to the repayment of all amounts then due
and unpaid on the Debt, whether on account of principal, interest, fees,
expenses or otherwise, and (C) then to pay the balance, if any, as required by
law. The Borrower shall be liable for any deficiency if the proceeds of any
sale, assignment, giving of an option or options to purchase or other
disposition of the Collateral is insufficient to pay all amounts to which the
Lender is entitled. Any excess proceeds from the sale, assignment, giving of
an option or options to purchase or other disposition of the Collateral after
payment of all amounts to which the Lender is entitled shall be paid to
Borrower.
13. Notice of Sale of the Collateral by the Lender.
-----------------------------------------------
If any notification of intended sale of any of the Collateral is required by
law, such notification shall be deemed reasonable if mailed at least ten (10)
days before such sale, postage prepaid, addressed to the Borrower as provided in
Section 17 hereof.
14. Private Sale of the Collateral.
-------------------------------
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<PAGE>
The Borrower recognizes that the Lender may be compelled to resort to one or
more private sales of the Collateral to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Borrower acknowledges and agrees that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall not, for such reason alone, be deemed to have been made
in a commercially unreasonable manner. The Lender shall not be under any
obligation to delay a sale of any of the Collateral for the period of time
necessary to permit the registration of such securities for public sale under
the Federal Securities Act of 1933, as amended, or under applicable state
securities laws.
15. Binding Effect; Termination.
----------------------------
Upon payment in full of the Debt, this Agreement shall terminate and be of no
further force and effect, and the Lender shall thereupon promptly return to the
Borrower such of the Collateral and such other documents delivered by the
Borrower hereunder as may then be in the Lender's possession. Until such time,
however, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective successors and assigns.
16. Non-Waiver; Cumulative Remedies.
--------------------------------
No failure or delay on the part of the Lender in exercising any right, remedy,
power or privilege hereunder shall operate as a waiver thereof or of any other
right, remedy, power or privilege of the Lender hereunder; nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies of the Lender under this Agreement
are cumulative and not exclusive of any rights or remedies which it may
otherwise have.
17. Notices.
--------
All notices and other communications which are required or may be given under
this Agreement shall be in writing and may be delivered by one of the following
methods of delivery: (i) personally; (ii) by registered or certified mail,
return receipt requested, postage prepaid; (iii) by overnight courier; or (iv)
by legible facsimile transmission, in all cases addressed in accordance with
the addresses set forth below or to such other address as such party may
indicate by a notice delivered by the other parties hereto:
If to the Lender, to:
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, PA 16915
Attention: Daniel R. Milliard
If to the Borrower, to:
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<PAGE>
Charles R. Drenning
1443 Old Meadow Road
Upper St. Clair, PA 15241
Notice shall be deemed received the same day (when delivered personally), five
days after mailing (when sent by registered or certified mail), or the next
business day (when sent by facsimile transmission or when delivered by overnight
courier). Any party hereto may change its
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<PAGE>
address to which all notices may be sent hereunder by addressing notices of such
change in the manner provided.
18. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the Lender and
its successors and assigns, and the Borrower and his successors and assigns,
except that the Borrower may not assign or transfer the Borrower's obligations
hereunder or any interest herein.
19. Governing Law.
--------------
This Agreement shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed in accordance with the laws of said Commonwealth excepting its rules
relating to conflicts of law.
20. Unenforceability; Severability.
-------------------------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, have executed and delivered
this Agreement as of the day and year first above set forth.
BORROWER:
/s/ Charles R. Drenning
--------------------------------(SEAL)
CHARLES R. DRENNING
LENDER:
HYPERION TELECOMMUNICATIONS,
INC.
By /s/ Daniel R. Milliard
-----------------------------
Title: President
-------------------------
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<PAGE>
EXHIBIT A
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
____________________, 1996
FOR VALUE RECEIVED, the undersigned __________________________________, an
individual residing at _________________________________________ (the "Maker"),
promises to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee")
on the Maturity Date, as defined in the Loan Agreement (as hereinafter defined),
the lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000),
or (ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
A-1
<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
________________________________(SEAL)
[Name]
A-2
<PAGE>
EXHIBIT B
COLLATERAL
366,660 shares of common stock, par value $.01 per share, of Hyperion
Telecommunications, Inc.
B-1
<PAGE>
EXHIBIT 10.10
TERM LOAN AND STOCK PLEDGE AGREEMENT
------------------------------------
THIS TERM LOAN AND PLEDGE AGREEMENT (this "Agreement"), dated as of May 10,
1996, between PAUL D. FAJERSKI (the "Borrower"), and HYPERION
TELECOMMUNICATIONS, INC. (the "Lender");
WITNESSETH THAT:
WHEREAS, the Borrower has requested the Lender to make a term loan to
the Borrower and the Lender has agreed to make such term loan;
WHEREAS, the Borrower is the legal and beneficial owner and the holder
of the Collateral (as defined in Section 1 hereof); and
WHEREAS, the obligation of the Lender to make such term loan is
subject to the condition, among others, that the Borrower secure its obligations
to the Lender hereunder and under the Note (as defined in Section 1 hereof),
including securing such obligations in the manner set forth therein and herein;
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto covenant and agree as follows:
1. Definitions.
------------
In addition to the words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof otherwise clearly requires:
(a) "Borrowing Date" shall mean the date on which the Lender
shall make the Loan to the Borrower.
(b) "Code" shall mean the Pennsylvania Uniform Commercial Code
as in effect on the date hereof and as the same may subsequently be amended
from time to time.
(c) "Collateral" shall mean and include (i) the securities
listed on Exhibit B attached hereto and made a part hereof, and all rights and
---------
privileges pertaining thereto, including, without limitation, all securities
and additional securities receivable in respect of or in exchange for such
securities, all rights to subscribe for securities incident to or arising from
ownership of such securities, all cash, interest, stock and other dividends or
distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record
and transfer books, (ii) any and all other securities hereafter pledged to the
Lender to secure the Borrower's Debt, and all rights and privileges pertaining
thereto, including, without limitation, all securities and additional
securities receivable in respect of or in exchange for such securities, all
rights to subscribe for securities incident to or arising from ownership of
such securities, all cash, interest, stock and other dividends or distributions
paid or payable on such securities, and all books and records pertaining to the
foregoing, including, without limitation, all stock record and stock transfer
books, and (iii) whatever is
<PAGE>
received when any of the foregoing is sold, exchanged or otherwise disposed of,
including any proceeds as such term is defined in the Code.
(d) "Debt" shall mean, collectively, (i) all obligations,
whether of principal, interest, fees, expenses or otherwise, of the Borrower to
the Lender incurred hereunder or under any of the Loan Documents, (ii) all
costs and expenses, including, without limitation, reasonable attorneys' fees
and legal expenses, incurred by the Lender in the collection of any of the
obligations referred to in clause (i) above or in connection with the
enforcement of this Agreement or any of the Loan Documents, and (iii) any
advances made, subsequent to an Event of Default, by the Lender for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including, without limitation, advances for
taxes, insurance and the like and reasonable expenses incurred to sell or
otherwise realize on, or prepare for sale or other realization on, any of the
Collateral.
(e) "Event of Default" shall mean any of the events described
in Section 11(a) hereof.
(f) "Loan" shall mean the loan made by the Lender hereunder as
described in Section 2(a) hereof.
(g) "Loan Documents" shall mean this Agreement, the Note and
each other document executed and delivered pursuant thereto, as any of the same
or any one or more of them may from time to time be amended, modified or
supplemented.
(h) "Maturity Date" shall mean the date on which the first of
the following occurs (i) registration of an equity security by the Lender under
either the Federal Securities Act of 1933, as amended, or the Federal
Securities Exchange Act of 1934, as amended, which equity security is of the
same class as the equity security held by the Individual Shareholders (as
defined in that certain Amended and Restated Pre-Incorporation and Shareholder
Restrictive Agreement, of even date herewith, between Adelphia Communications
Corporation, the Borrower and the other Individual Shareholders signatory
thereto (the "Shareholder Agreement")) and the Individual Shareholders have the
opportunity to sell their Shares (as defined in the Shareholder Agreement)
pursuant to a Registration Rights Agreement to be entered into between such
Shareholders and the Lender, and (ii) October 8, 1998.
(i) "Note" shall mean the promissory note of the Borrower in
substantially the form of Exhibit A attached hereto and made a part hereof,
together with any and all extensions, renewals, refinancings or refundings
thereof in whole or in part.
2. The Loan.
---------
(a) Agreement to Make the Loan; Prepayments & Offset.
-------------------------------------------------
-2-
<PAGE>
The Lender hereby agrees to make a Loan to the Borrower, on the
Borrowing Date subject to and on the terms and conditions set forth herein, the
aggregate principal amount of which shall not exceed $1,000,000. The Loan is
not a revolving credit loan and the Borrower shall not have the right to borrow,
repay and reborrow hereunder. The obligation of the Borrower to repay the
principal amount of the Loan, together with interest thereon, shall be evidenced
by the Note duly executed and delivered by the Borrower with the blanks
appropriately completed. The entire unpaid principal balance of the Loan and
interest accrued thereon shall be due and paid in full on the Maturity Date.
The Borrower shall have the right at its option from time to time to prepay the
Loan in whole or in part. Any interest that accrues on the Loan from the date
six months after the date of the Loan shall be offset by bonus or additional
compensation payable to the Borrower by the Lender (the "Bonus Payment") which
payment shall be payable at the time the principal of and interest on the Loan
are due and payable, whether at the Maturity Date, by acceleration or otherwise.
In addition, the Lender shall make an additional payment (the "Gross-Up
Payment") to the Borrower in an amount equal to the Federal, state and local
income taxes payable by the Borrower with respect to the Bonus Payment. In
computing the Gross-Up Payment, the Bonus Payment shall be reduced by the
amount, if any, of the interest that accrued on the Loan from the date six
months after the date of the Loan that is deductible for Federal, state or local
tax purposes. After the Gross-Up Payment is so determined, the Borrower shall
also be entitled to receive additional payments in an amount such that after
payment by the Borrower of all Federal, state and local income taxes imposed
upon the Gross-Up Payment the Borrower shall retain an amount equal to the
Gross-Up Payment.
(b) Interest Rate.
--------------
The Note shall bear interest on the unpaid principal amount of the
Loan for each day (computed on the basis of the actual number of days elapsed
over a year of 365/366 days) at a rate per annum equal to the average rate at
which Lender is able to invest cash on a short-term basis from time to time.
Interest on the Loan shall be due and payable on the Maturity Date or upon
acceleration of the Note.
3. Pledge.
-------
As security for the due and punctual payment and performance of the Debt in
full, the Borrower hereby agrees that the Lender shall have, and the Borrower
hereby grants to and creates in favor of the Lender, a first priority security
interest under the Code in and to all of the Collateral.
4. Delivery of Certificates, etc.
------------------------------
Upon the execution and delivery of this Agreement, the Borrower has delivered to
and deposited with the Lender in pledge, stock certificates and any other
instruments evidencing the Collateral, together with undated stock powers signed
in blank by the Borrower as the Lender shall have required.
5. Representations and Warranties.
-------------------------------
-3-
<PAGE>
The Borrower represents and warrants to the Lender as follows:
(a) The Borrower has good and marketable title to all of the
Collateral free and clear of any pledge, lien, security interest, encumbrance,
option or rights of others, except to the extent transfer of the Collateral may
be restricted by the Federal Securities Act of 1933, as amended, and state
securities laws and other than the security interest granted to and created in
favor of the Lender hereunder.
(b) The Borrower (i) is an individual resident of Allegheny
County, Pennsylvania and has the legal capacity, power and authority to borrow
money, to execute and deliver the Note and this Agreement and to assign,
indorse, transfer and deliver, and pledge to Lender the Collateral and
otherwise perform its obligations as provided herein, and (ii) does not require
the approval of or consent to any of such acts by any regulatory agency or
other governmental authority or other third party.
(c) The execution, delivery and performance by the Borrower of
this Agreement, the Note and the other Loan Documents to which each is a party
are within the legal capacity and power of the Borrower, require no action by
or in respect of, or filing with, any governmental body, agency or official and
do not violate, contravene, or constitute a default under, any provision of any
applicable law or regulation, or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or his properties (except
to the extent that any required consent has been obtained) and will not result
in the creation or imposition of any lien on any asset of the Borrower except
for liens in favor of the Lender created hereunder.
(d) This Agreement, the Note and the other Loan Documents
constitute valid and binding agreements and instruments of the Borrower,
enforceable against the Borrower in accordance with the terms thereof, except
as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or general principles of equity.
(e) The Borrower is not in violation of or breach or default
under any provision of any law, rule or regulation, or any agreement, lease or
other instrument to which the Borrower is a party or by which he or his
properties are bound, which default would materially adversely affect the
Borrower's ability to repay the principal of and interest on the Loan and
pledge the Collateral hereunder.
(f) There is no action, suit or proceeding pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of the Borrower's properties before any court, arbitrator or governmental body,
agency or official which would materially adversely affect the Borrower or the
Collateral.
6. Further Assurances.
-------------------
-4-
<PAGE>
The Borrower will faithfully preserve and protect the Lender's security interest
in the Collateral as a first priority perfected security interest under the
Code, and will do all such other acts and things, and will upon request therefor
by the Lender execute and deliver all such other documents and instruments,
including, without limitation, further pledges, assignments, documents and
powers of attorney with respect to the Collateral consistent with the terms of
this Agreement, as the Lender in its sole discretion may deem necessary or
advisable from time to time in order to preserve, perfect and protect said
security interest.
7. Certain Covenants of the Borrower.
----------------------------------
The Borrower covenants and agrees that (a) he will defend the Lender's right,
title and security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all persons whomsoever; (b) he will have like
title to and right to pledge any other property at any time hereafter pledged to
the Lender pursuant to this Agreement and will likewise defend the Lender's
right thereto and security interest therein; (c) he will not assign, transfer,
pledge, or otherwise encumber any of his right, title or interest under, in or
to the Collateral other than pursuant hereto; (d) he will not take or omit to
take any action, or permit any subsidiary any shares of capital stock of which
constitute a part of the Collateral to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement; (e) he will not, without the prior written
consent of the Lender, waive or release any obligation of any party to the
Collateral; (f) he will execute and deliver to the Lender and record such
supplements to this Agreement and additional assignments as the Lender
reasonably may request to evidence and confirm the pledge herein contained; and
(g) he will promptly give notice in writing to the Lender of the occurrence of
any litigation or proceedings affecting the Borrower or of any dispute between
the Borrower and any governmental or quasi-governmental authority or any other
person (including, without limitation, any material changes in the federal
income tax filings of the Borrower which may be proposed on audit) if such
litigation, proceeding or dispute is one which would, if adversely determined,
have a material adverse effect on the Borrower or the Collateral.
8. Protection of the Lender's Interest in the Collateral Against
-------------------------------------------------------------
Others.
-------
The Borrower assumes full responsibility for taking any and all necessary steps
to preserve the Lender's rights with respect to the Collateral against all
others. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Lender takes
such action for that purpose as the Borrower shall request in writing, provided
that such requested action will not, in the judgment of the Lender, impair the
security interest in the Collateral created hereby or the Lender's rights in, or
the value of, the Collateral, and provided further that such written request is
received by the Lender in sufficient time to permit the Lender to take the
requested action.
9. Continuation of Perfection of Security Interest.
------------------------------------------------
The Borrower shall at the Borrower's own cost and expense cause the security
interest in the Collateral granted to and created in favor of the Lender under
this Agreement to be perfected and continue to be perfected as long as the Debt
or any part thereof is outstanding and unpaid or not
-5-
<PAGE>
performed in full, and for such purpose the Borrower shall from time to time
deliver possession to the Lender of and execute, deliver and file or record (or
cause to be filed or recorded) such instruments, documents and notices
(including, without limitation, amendments or supplements to this Agreement,
financing statements and continuation statements) as the Lender may deem
necessary or advisable from time to time in order to confirm, perfect and
preserve such security interest. The Lender is hereby irrevocably appointed
attorney-in-fact of the Borrower to do all acts and things which the Lender, in
the exercise of its responsibilities under this Agreement, may deem necessary
or advisable to perfect and continue perfected the Lender's security interest
in the Collateral.
10. Voting Rights; Dividends; etc.
------------------------------
So long as no Event of Default shall have occurred:
(a) The Borrower shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement;
provided, however, that the Borrower shall not exercise or refrain from
- -------- -------
exercising any such right if such action or inaction would reasonably be likely
to have a material adverse effect on the value of the Collateral or any part
thereof; and provided, further, that the Borrower shall give the Lender at
-------- -------
least five (5) business days' written notice of the manner in which it intends
to exercise, and the reasons therefor, or the reasons for refraining from
exercising, any such right;
(b) Any and all instruments and other property (other than
cash dividends) received, receivable or otherwise distributed in respect of, or
in exchange for, any of the Collateral shall be forthwith delivered to the
Lender to hold as part of the Collateral and shall, if received by the
Borrower, be received in trust for the benefit of the Lender, be segregated
from the other property or funds of the Borrower, and be forthwith delivered to
the Lender as Collateral in the same form as so received (with any necessary
indorsement); and
(c) The Lender shall execute and deliver (or cause to be
executed and delivered) to the Borrower all such proxies and other instruments
as the Borrower may reasonably request for the purpose of enabling the Borrower
to exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (a) above, and to receive the dividends which he is
authorized to receive and retain pursuant to paragraph (b) above.
11. Defaults.
---------
(a) An Event of Default shall occur if:
(i) The Borrower shall fail to pay on or before the date
five business days after the date due, whether at maturity, by acceleration or
otherwise, of any principal of or interest on the Note; or
-6-
<PAGE>
(ii) The Borrower shall fail to observe or perform any of
his covenants contained herein, and such failure shall continue for a period of
thirty (30) days after written notice from the Lender to the Borrower; or
(iii) Any representation, warranty, certification or
statement made by the Borrower in this Agreement, or in any certificate,
financial statement or other document delivered to the Lender pursuant to or in
connection with this Agreement or the making of the Loan shall prove to have
been incorrect in any material respect when made; or
(iv) The Borrower shall commence a voluntary case or other
proceeding seeking reorganization or other relief with respect to his debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, custodian or other similar
official of himself or any substantial part of his property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against him, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay his debts as they become due, or shall take any action to
authorize any of the foregoing; or
(v) an involuntary case or other proceeding shall be
commenced against the Borrower seeking reorganization or other relief with
respect to his debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, custodian or
other similar official of himself or any substantial part of his property, and
such involuntary case or other proceeding shall remain undismissed for a period
of 60 days.
(b) Upon the occurrence of an Event of Default under the terms
of this Agreement:
(i) All rights of the Borrower to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 10(a) and to receive the dividends which it would otherwise
be authorized to receive and retain pursuant to Section 10(b) shall cease, and
all such rights shall, upon notice by the Lender to the Borrower, become vested
in the Lender, who shall thereupon have the sole right to exercise such voting
and other consensual rights and the sole right to receive and hold as
Collateral such dividends and apply them to payment of the Debt; and
(ii) All dividends which are received by the Borrower
contrary to the provisions of paragraph (i) of this Section 11(b) shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Lender as
Collateral in the same form as so received (with any necessary indorsement).
12. Remedies Upon the Occurrence of an Event of Default.
----------------------------------------------------
-7-
<PAGE>
(a) If an Event of Default specified under Section 11(a)(i)
through Section 11(a)(iii) hereof shall occur and be continuing, the Lender may
by written notice to the Borrower, declare the unpaid principal amount of the
Note then outstanding and all interest accrued thereon, any unpaid fees and all
other obligations of the Borrower to the Lender hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Lender without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived; and
(b) If an Event of Default specified under Section 11(a)(iv)
through (v) shall occur, the Lender shall be under no further obligations to
make any Loan hereunder and the unpaid principal amount of the Note then
outstanding and all interest accrued thereon, any unpaid fees and all other
obligations of the Borrower to the Lender hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
(c) If there shall have occurred an Event of Default under the
terms of this Agreement, then the Lender shall have such rights and remedies
with respect to the Collateral or any part thereof and the proceeds thereof as
are provided by the Code and such other rights and remedies with respect
thereto which it may have at law or in equity or under this Agreement,
including without limitation, to the extent not inconsistent with the
provisions of the Code, the right to (i) transfer all or any part of the
Collateral into the Lender's name or into the name of its nominee and
thereafter receive all cash, stock and other dividends or distributions paid or
payable in respect thereof, and otherwise act with respect thereto as the
absolute owner thereof, and (ii) sell, assign, give an option or options to
purchase or otherwise dispose of all or any part of the Collateral at any sale
as provided by the Code at such place or places and at such time or times and
upon such terms, whether for cash or on credit, and in such manner as the
Lender may determine, and apply the proceeds so received (A) first to the
payment of the costs and expenses incurred by the Lender in connection with
such sale and other costs and expenses referred to in clauses (ii) and (iii) of
the definition of "Debt," (B) second to the repayment of all amounts then due
and unpaid on the Debt, whether on account of principal, interest, fees,
expenses or otherwise, and (C) then to pay the balance, if any, as required by
law. The Borrower shall be liable for any deficiency if the proceeds of any
sale, assignment, giving of an option or options to purchase or other
disposition of the Collateral is insufficient to pay all amounts to which the
Lender is entitled. Any excess proceeds from the sale, assignment, giving of
an option or options to purchase or other disposition of the Collateral after
payment of all amounts to which the Lender is entitled shall be paid to
Borrower.
13. Notice of Sale of the Collateral by the Lender.
-----------------------------------------------
If any notification of intended sale of any of the Collateral is required by
law, such notification shall be deemed reasonable if mailed at least ten (10)
days before such sale, postage prepaid, addressed to the Borrower as provided in
Section 17 hereof.
14. Private Sale of the Collateral.
-------------------------------
-8-
<PAGE>
The Borrower recognizes that the Lender may be compelled to resort to one or
more private sales of the Collateral to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Borrower acknowledges and agrees that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall not, for such reason alone, be deemed to have been made
in a commercially unreasonable manner. The Lender shall not be under any
obligation to delay a sale of any of the Collateral for the period of time
necessary to permit the registration of such securities for public sale under
the Federal Securities Act of 1933, as amended, or under applicable state
securities laws.
15. Binding Effect; Termination.
----------------------------
Upon payment in full of the Debt, this Agreement shall terminate and be of no
further force and effect, and the Lender shall thereupon promptly return to the
Borrower such of the Collateral and such other documents delivered by the
Borrower hereunder as may then be in the Lender's possession. Until such time,
however, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective successors and assigns.
16. Non-Waiver; Cumulative Remedies.
--------------------------------
No failure or delay on the part of the Lender in exercising any right, remedy,
power or privilege hereunder shall operate as a waiver thereof or of any other
right, remedy, power or privilege of the Lender hereunder; nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies of the Lender under this Agreement
are cumulative and not exclusive of any rights or remedies which it may
otherwise have.
17. Notices.
--------
All notices and other communications which are required or may be given under
this Agreement shall be in writing and may be delivered by one of the following
methods of delivery: (i) personally; (ii) by registered or certified mail,
return receipt requested, postage prepaid; (iii) by overnight courier; or (iv)
by legible facsimile transmission, in all cases addressed in accordance with
the addresses set forth below or to such other address as such party may
indicate by a notice delivered by the other parties hereto:
If to the Lender, to:
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, PA 16915
Attention: Daniel R. Milliard
If to the Borrower, to:
-9-
<PAGE>
Paul D. Fajerski
331 Alamo Drive
Upper St. Clair, PA 15241
Notice shall be deemed received the same day (when delivered personally), five
days after mailing (when sent by registered or certified mail), or the next
business day (when sent by facsimile transmission or when delivered by overnight
courier). Any party hereto may change its
-10-
<PAGE>
address to which all notices may be sent hereunder by addressing notices of such
change in the manner provided.
18. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the Lender and
its successors and assigns, and the Borrower and his successors and assigns,
except that the Borrower may not assign or transfer the Borrower's obligations
hereunder or any interest herein.
19. Governing Law.
--------------
This Agreement shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed in accordance with the laws of said Commonwealth excepting its rules
relating to conflicts of law.
20. Unenforceability; Severability.
-------------------------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, have executed and delivered
this Agreement as of the day and year first above set forth.
BORROWER:
/s/ Paul D. Fajerski
-----------------------------------(SEAL)
PAUL D. FAJERSKI
LENDER:
HYPERION TELECOMMUNICATIONS,
INC.
By /s/ Daniel R. Milliard
---------------------------------
Title: President
-----------------------------
-11-
<PAGE>
EXHIBIT A
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
___________________, 1996
FOR VALUE RECEIVED, the undersigned __________________________________, an
individual residing at _________________________________________ (the "'Maker"),
promises to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee")
on the Maturity Date, as defined in the Loan Agreement (as hereinafter defined),
the lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000),
or (ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
A-1
<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
______________________________________(SEAL)
[Name]
A-2
<PAGE>
EXHIBIT B
COLLATERAL
366,660 shares of common stock, par value $.01 per share, of Hyperion
Telecommunications, Inc.
B-1
<PAGE>
EXHIBIT 10.11
TERM LOAN AND STOCK PLEDGE AGREEMENT
------------------------------------
THIS TERM LOAN AND PLEDGE AGREEMENT (this "Agreement"), dated as of May 10,
1996, between RANDOLPH S. FOWLER (the "Borrower"), and HYPERION
TELECOMMUNICATIONS, INC. (the "Lender");
WITNESSETH THAT:
WHEREAS, the Borrower has requested the Lender to make a term loan to
the Borrower and the Lender has agreed to make such term loan;
WHEREAS, the Borrower is the legal and beneficial owner and the holder
of the Collateral (as defined in Section 1 hereof); and
WHEREAS, the obligation of the Lender to make such term loan is
subject to the condition, among others, that the Borrower secure its obligations
to the Lender hereunder and under the Note (as defined in Section 1 hereof),
including securing such obligations in the manner set forth therein and herein;
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto covenant and agree as follows:
1. Definitions.
------------
In addition to the words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof otherwise clearly requires:
(a) "Borrowing Date" shall mean the date on which the Lender
shall make the Loan to the Borrower.
(b) "Code" shall mean the Pennsylvania Uniform Commercial Code as
in effect on the date hereof and as the same may subsequently be amended from
time to time.
(c) "Collateral" shall mean and include (i) the securities listed
on Exhibit B attached hereto and made a part hereof, and all rights and
---------
privileges pertaining thereto, including, without limitation, all securities and
additional securities receivable in respect of or in exchange for such
securities, all rights to subscribe for securities incident to or arising from
ownership of such securities, all cash, interest, stock and other dividends or
distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record and
transfer books, (ii) any and all other securities hereafter pledged to the
Lender to secure the Borrower's Debt, and all rights and privileges pertaining
thereto, including, without limitation, all securities and additional securities
receivable in respect of or in exchange for such securities, all rights to
subscribe for securities incident to or arising from ownership of such
securities, all cash, interest, stock and other dividends or distributions paid
or payable on such securities, and all books and records pertaining to the
foregoing, including, without limitation, all stock record and stock transfer
books, and (iii) whatever is
<PAGE>
received when any of the foregoing is sold, exchanged or otherwise disposed of,
including any proceeds as such term is defined in the Code.
(d) "Debt" shall mean, collectively, (i) all obligations, whether
of principal, interest, fees, expenses or otherwise, of the Borrower to the
Lender incurred hereunder or under any of the Loan Documents, (ii) all costs and
expenses, including, without limitation, reasonable attorneys' fees and legal
expenses, incurred by the Lender in the collection of any of the obligations
referred to in clause (i) above or in connection with the enforcement of this
Agreement or any of the Loan Documents, and (iii) any advances made, subsequent
to an Event of Default, by the Lender for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Collateral,
including, without limitation, advances for taxes, insurance and the like and
reasonable expenses incurred to sell or otherwise realize on, or prepare for
sale or other realization on, any of the Collateral.
(e) "Event of Default" shall mean any of the events described in
Section 11(a) hereof.
(f) "Loan" shall mean the loan made by the Lender hereunder as
described in Section 2(a) hereof.
(g) "Loan Documents" shall mean this Agreement, the Note and each
other document executed and delivered pursuant thereto, as any of the same or
any one or more of them may from time to time be amended, modified or
supplemented.
(h) "Maturity Date" shall mean the date on which the first of the
following occurs (i) registration of an equity security by the Lender under
either the Federal Securities Act of 1933, as amended, or the Federal Securities
Exchange Act of 1934, as amended, which equity security is of the same class as
the equity security held by the Individual Shareholders (as defined in that
certain Amended and Restated Pre-Incorporation and Shareholder Restrictive
Agreement, of even date herewith, between Adelphia Communications Corporation,
the Borrower and the other Individual Shareholders signatory thereto (the
"Shareholder Agreement")) and the Individual Shareholders have the opportunity
to sell their Shares (as defined in the Shareholder Agreement) pursuant to a
Registration Rights Agreement to be entered into between such Shareholders and
the Lender, and (ii) October 8, 1998.
(i) "Note" shall mean the promissory note of the Borrower in
substantially the form of Exhibit A attached hereto and made a part hereof,
together with any and all extensions, renewals, refinancings or refundings
thereof in whole or in part.
2. The Loan.
---------
(a) Agreement to Make the Loan; Prepayments & Offset.
-------------------------------------------------
-2-
<PAGE>
The Lender hereby agrees to make a Loan to the Borrower, on the
Borrowing Date subject to and on the terms and conditions set forth herein, the
aggregate principal amount of which shall not exceed $1,000,000. The Loan is not
a revolving credit loan and the Borrower shall not have the right to borrow,
repay and reborrow hereunder. The obligation of the Borrower to repay the
principal amount of the Loan, together with interest thereon, shall be evidenced
by the Note duly executed and delivered by the Borrower with the blanks
appropriately completed. The entire unpaid principal balance of the Loan and
interest accrued thereon shall be due and paid in full on the Maturity Date. The
Borrower shall have the right at its option from time to time to prepay the Loan
in whole or in part. Any interest that accrues on the Loan from the date six
months after the date of the Loan shall be offset by bonus or additional
compensation payable to the Borrower by the Lender (the "Bonus Payment") which
payment shall be payable at the time the principal of and interest on the Loan
are due and payable, whether at the Maturity Date, by acceleration or otherwise.
In addition, the Lender shall make an additional payment (the "Gross-Up
Payment") to the Borrower in an amount equal to the Federal, state and local
income taxes payable by the Borrower with respect to the Bonus Payment. In
computing the Gross-Up Payment, the Bonus Payment shall be reduced by the
amount, if any, of the interest that accrued on the Loan from the date six
months after the date of the Loan that is deductible for Federal, state or local
tax purposes. After the Gross-Up Payment is so determined, the Borrower shall
also be entitled to receive additional payments in an amount such that after
payment by the Borrower of all Federal, state and local income taxes imposed
upon the Gross-Up Payment the Borrower shall retain an amount equal to the
Gross-Up Payment.
(b) Interest Rate.
--------------
The Note shall bear interest on the unpaid principal amount of the
Loan for each day (computed on the basis of the actual number of days elapsed
over a year of 365/366 days) at a rate per annum equal to the average rate at
which Lender is able to invest cash on a short-term basis from time to time.
Interest on the Loan shall be due and payable on the Maturity Date or upon
acceleration of the Note.
3. Pledge.
-------
As security for the due and punctual payment and performance of the Debt in
full, the Borrower hereby agrees that the Lender shall have, and the Borrower
hereby grants to and creates in favor of the Lender, a first priority security
interest under the Code in and to all of the Collateral.
4. Delivery of Certificates, etc.
------------------------------
Upon the execution and delivery of this Agreement, the Borrower has delivered to
and deposited with the Lender in pledge, stock certificates and any other
instruments evidencing the Collateral, together with undated stock powers signed
in blank by the Borrower as the Lender shall have required.
5. Representations and Warranties.
-------------------------------
-3-
<PAGE>
The Borrower represents and warrants to the Lender as follows:
(a) The Borrower has good and marketable title to all of the
Collateral free and clear of any pledge, lien, security interest, encumbrance,
option or rights of others, except to the extent transfer of the Collateral may
be restricted by the Federal Securities Act of 1933, as amended, and state
securities laws and other than the security interest granted to and created in
favor of the Lender hereunder.
(b) The Borrower (i) is an individual resident of Allegheny
County, Pennsylvania and has the legal capacity, power and authority to borrow
money, to execute and deliver the Note and this Agreement and to assign,
indorse, transfer and deliver, and pledge to Lender the Collateral and otherwise
perform its obligations as provided herein, and (ii) does not require the
approval of or consent to any of such acts by any regulatory agency or other
governmental authority or other third party.
(c) The execution, delivery and performance by the Borrower of
this Agreement, the Note and the other Loan Documents to which each is a party
are within the legal capacity and power of the Borrower, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not violate, contravene, or constitute a default under, any provision of any
applicable law or regulation, or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or his properties (except
to the extent that any required consent has been obtained) and will not result
in the creation or imposition of any lien on any asset of the Borrower except
for liens in favor of the Lender created hereunder.
(d) This Agreement, the Note and the other Loan Documents
constitute valid and binding agreements and instruments of the Borrower,
enforceable against the Borrower in accordance with the terms thereof, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally or general principles of equity.
(e) The Borrower is not in violation of or breach or default
under any provision of any law, rule or regulation, or any agreement, lease or
other instrument to which the Borrower is a party or by which he or his
properties are bound, which default would materially adversely affect the
Borrower's ability to repay the principal of and interest on the Loan and pledge
the Collateral hereunder.
(f) There is no action, suit or proceeding pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of the Borrower's properties before any court, arbitrator or governmental body,
agency or official which would materially adversely affect the Borrower or the
Collateral.
6. Further Assurances.
-------------------
-4-
<PAGE>
The Borrower will faithfully preserve and protect the Lender's security interest
in the Collateral as a first priority perfected security interest under the
Code, and will do all such other acts and things, and will upon request therefor
by the Lender execute and deliver all such other documents and instruments,
including, without limitation, further pledges, assignments, documents and
powers of attorney with respect to the Collateral consistent with the terms of
this Agreement, as the Lender in its sole discretion may deem necessary or
advisable from time to time in order to preserve, perfect and protect said
security interest.
7. Certain Covenants of the Borrower.
----------------------------------
The Borrower covenants and agrees that (a) he will defend the Lender's right,
title and security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all persons whomsoever; (b) he will have like
title to and right to pledge any other property at any time hereafter pledged to
the Lender pursuant to this Agreement and will likewise defend the Lender's
right thereto and security interest therein; (c) he will not assign, transfer,
pledge, or otherwise encumber any of his right, title or interest under, in or
to the Collateral other than pursuant hereto; (d) he will not take or omit to
take any action, or permit any subsidiary any shares of capital stock of which
constitute a part of the Collateral to take or omit to take any action, the
taking or the omission of which might result in an alteration or impairment of
the Collateral or of this Agreement; (e) he will not, without the prior written
consent of the Lender, waive or release any obligation of any party to the
Collateral; (f) he will execute and deliver to the Lender and record such
supplements to this Agreement and additional assignments as the Lender
reasonably may request to evidence and confirm the pledge herein contained; and
(g) he will promptly give notice in writing to the Lender of the occurrence of
any litigation or proceedings affecting the Borrower or of any dispute between
the Borrower and any governmental or quasi-governmental authority or any other
person (including, without limitation, any material changes in the federal
income tax filings of the Borrower which may be proposed on audit) if such
litigation, proceeding or dispute is one which would, if adversely determined,
have a material adverse effect on the Borrower or the Collateral.
8. Protection of the Lender's Interest in the Collateral Against
-------------------------------------------------------------
Others.
- ------
The Borrower assumes full responsibility for taking any and all necessary steps
to preserve the Lender's rights with respect to the Collateral against all
others. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Lender takes
such action for that purpose as the Borrower shall request in writing, provided
that such requested action will not, in the judgment of the Lender, impair the
security interest in the Collateral created hereby or the Lender's rights in, or
the value of, the Collateral, and provided further that such written request is
received by the Lender in sufficient time to permit the Lender to take the
requested action.
9. Continuation of Perfection of Security Interest.
------------------------------------------------
The Borrower shall at the Borrower's own cost and expense cause the security
interest in the Collateral granted to and created in favor of the Lender under
this Agreement to be perfected and continue to be perfected as long as the Debt
or any part thereof is outstanding and unpaid or not
-5-
<PAGE>
performed in full, and for such purpose the Borrower shall from time to time
deliver possession to the Lender of and execute, deliver and file or record (or
cause to be filed or recorded) such instruments, documents and notices
(including, without limitation, amendments or supplements to this Agreement,
financing statements and continuation statements) as the Lender may deem
necessary or advisable from time to time in order to confirm, perfect and
preserve such security interest. The Lender is hereby irrevocably appointed
attorney-in-fact of the Borrower to do all acts and things which the Lender, in
the exercise of its responsibilities under this Agreement, may deem necessary or
advisable to perfect and continue perfected the Lender's security interest in
the Collateral.
10. Voting Rights; Dividends; etc.
------------------------------
So long as no Event of Default shall have occurred:
(a) The Borrower shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement; provided,
--------
however, that the Borrower shall not exercise or refrain from exercising any
- -------
such right if such action or inaction would reasonably be likely to have a
material adverse effect on the value of the Collateral or any part thereof; and
provided, further, that the Borrower shall give the Lender at least five (5)
- -----------------
business days' written notice of the manner in which it intends to exercise, and
the reasons therefor, or the reasons for refraining from exercising, any such
right;
(b) Any and all instruments and other property (other than cash
dividends) received, receivable or otherwise distributed in respect of, or in
exchange for, any of the Collateral shall be forthwith delivered to the Lender
to hold as part of the Collateral and shall, if received by the Borrower, be
received in trust for the benefit of the Lender, be segregated from the other
property or funds of the Borrower, and be forthwith delivered to the Lender as
Collateral in the same form as so received (with any necessary indorsement); and
(c) The Lender shall execute and deliver (or cause to be executed
and delivered) to the Borrower all such proxies and other instruments as the
Borrower may reasonably request for the purpose of enabling the Borrower to
exercise the voting and other rights which he is entitled to exercise pursuant
to paragraph (a) above, and to receive the dividends which he is authorized to
receive and retain pursuant to paragraph (b) above.
11. Defaults.
--------
(a) An Event of Default shall occur if:
(i) The Borrower shall fail to pay on or before the date
five business days after the date due, whether at maturity, by acceleration or
otherwise, of any principal of or interest on the Note; or
-6-
<PAGE>
(ii) The Borrower shall fail to observe or perform any of
his covenants contained herein, and such failure shall continue for a period of
thirty (30) days after written notice from the Lender to the Borrower; or
(iii) Any representation, warranty, certification or
statement made by the Borrower in this Agreement, or in any certificate,
financial statement or other document delivered to the Lender pursuant to or in
connection with this Agreement or the making of the Loan shall prove to have
been incorrect in any material respect when made; or
(iv) The Borrower shall commence a voluntary case or other
proceeding seeking reorganization or other relief with respect to his debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, custodian or other similar official of
himself or any substantial part of his property, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against him, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
his debts as they become due, or shall take any action to authorize any of the
foregoing; or
(v) an involuntary case or other proceeding shall be
commenced against the Borrower seeking reorganization or other relief with
respect to his debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, custodian or
other similar official of himself or any substantial part of his property, and
such involuntary case or other proceeding shall remain undismissed for a period
of 60 days.
(b) Upon the occurrence of an Event of Default under the terms of
this Agreement:
(i) All rights of the Borrower to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 10(a) and to receive the dividends which it would otherwise
be authorized to receive and retain pursuant to Section 10(b) shall cease, and
all such rights shall, upon notice by the Lender to the Borrower, become vested
in the Lender, who shall thereupon have the sole right to exercise such voting
and other consensual rights and the sole right to receive and hold as Collateral
such dividends and apply them to payment of the Debt; and
(ii) All dividends which are received by the Borrower
contrary to the provisions of paragraph (i) of this Section 11(b) shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of the Borrower and shall be forthwith paid over to the Lender as
Collateral in the same form as so received (with any necessary indorsement).
12. Remedies Upon the Occurrence of an Event of Default.
----------------------------------------------------
-7-
<PAGE>
(a) If an Event of Default specified under Section 11(a)(i)
through Section 11(a)(iii) hereof shall occur and be continuing, the Lender may
by written notice to the Borrower, declare the unpaid principal amount of the
Note then outstanding and all interest accrued thereon, any unpaid fees and all
other obligations of the Borrower to the Lender hereunder and thereunder to be
forthwith due and payable, and the same shall thereupon become and be
immediately due and payable to the Lender without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived; and
(b) If an Event of Default specified under Section 11(a)(iv)
through (v) shall occur, the Lender shall be under no further obligations to
make any Loan hereunder and the unpaid principal amount of the Note then
outstanding and all interest accrued thereon, any unpaid fees and all other
obligations of the Borrower to the Lender hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
(c) If there shall have occurred an Event of Default under
the terms of this Agreement, then the Lender shall have such rights and remedies
with respect to the Collateral or any part thereof and the proceeds thereof as
are provided by the Code and such other rights and remedies with respect thereto
which it may have at law or in equity or under this Agreement, including without
limitation, to the extent not inconsistent with the provisions of the Code, the
right to (i) transfer all or any part of the Collateral into the Lender's name
or into the name of its nominee and thereafter receive all cash, stock and other
dividends or distributions paid or payable in respect thereof, and otherwise act
with respect thereto as the absolute owner thereof, and (ii) sell, assign, give
an option or options to purchase or otherwise dispose of all or any part of the
Collateral at any sale as provided by the Code at such place or places and at
such time or times and upon such terms, whether for cash or on credit, and in
such manner as the Lender may determine, and apply the proceeds so received (A)
first to the payment of the costs and expenses incurred by the Lender in
connection with such sale and other costs and expenses referred to in clauses
(ii) and (iii) of the definition of "Debt," (B) second to the repayment of all
amounts then due and unpaid on the Debt, whether on account of principal,
interest, fees, expenses or otherwise, and (C) then to pay the balance, if any,
as required by law. The Borrower shall be liable for any deficiency if the
proceeds of any sale, assignment, giving of an option or options to purchase or
other disposition of the Collateral is insufficient to pay all amounts to which
the Lender is entitled. Any excess proceeds from the sale, assignment, giving of
an option or options to purchase or other disposition of the Collateral after
payment of all amounts to which the Lender is entitled shall be paid to
Borrower.
13. Notice of Sale of the Collateral by the Lender.
-----------------------------------------------
If any notification of intended sale of any of the Collateral is required by
law, such notification shall be deemed reasonable if mailed at least ten (10)
days before such sale, postage prepaid, addressed to the Borrower as provided in
Section 17 hereof.
14. Private Sale of the Collateral.
-------------------------------
-8-
<PAGE>
The Borrower recognizes that the Lender may be compelled to resort to one or
more private sales of the Collateral to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the distribution or
resale thereof. The Borrower acknowledges and agrees that any such private sale
may result in prices and other terms less favorable to the seller than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall not, for such reason alone, be deemed to have been made
in a commercially unreasonable manner. The Lender shall not be under any
obligation to delay a sale of any of the Collateral for the period of time
necessary to permit the registration of such securities for public sale under
the Federal Securities Act of 1933, as amended, or under applicable state
securities laws.
15. Binding Effect; Termination.
----------------------------
Upon payment in full of the Debt, this Agreement shall terminate and be of no
further force and effect, and the Lender shall thereupon promptly return to the
Borrower such of the Collateral and such other documents delivered by the
Borrower hereunder as may then be in the Lender's possession. Until such time,
however, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective successors and assigns.
16. Non-Waiver; Cumulative Remedies.
--------------------------------
No failure or delay on the part of the Lender in exercising any right, remedy,
power or privilege hereunder shall operate as a waiver thereof or of any other
right, remedy, power or privilege of the Lender hereunder; nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies of the Lender under this Agreement
are cumulative and not exclusive of any rights or remedies which it may
otherwise have.
17. Notices.
--------
All notices and other communications which are required or may be given under
this Agreement shall be in writing and may be delivered by one of the following
methods of delivery: (i) personally; (ii) by registered or certified mail,
return receipt requested, postage prepaid; (iii) by overnight courier; or (iv)
by legible facsimile transmission, in all cases addressed in accordance with the
addresses set forth below or to such other address as such party may indicate by
a notice delivered by the other parties hereto:
If to the Lender, to:
Hyperion Telecommunications, Inc.
5 West Third Street
Coudersport, PA 16915
Attention: Daniel R. Milliard
If to the Borrower, to:
-9-
<PAGE>
Randolph S. Fowler
336 Catalina Drive
Upper St. Clair, PA 15241
Notice shall be deemed received the same day (when delivered personally), five
days after mailing (when sent by registered or certified mail), or the next
business day (when sent by facsimile transmission or when delivered by overnight
courier). Any party hereto may change its
-10-
<PAGE>
address to which all notices may be sent hereunder by addressing notices of such
change in the manner provided.
18. Successors and Assigns.
-----------------------
This Agreement shall be binding upon and inure to the benefit of the Lender and
its successors and assigns, and the Borrower and his successors and assigns,
except that the Borrower may not assign or transfer the Borrower's obligations
hereunder or any interest herein.
19. Governing Law.
--------------
This Agreement shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed in accordance with the laws of said Commonwealth excepting its rules
relating to conflicts of law.
20. Unenforceability; Severability.
-------------------------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, have executed and delivered
this Agreement as of the day and year first above set forth.
BORROWER:
/s/ Randolph S. Fowler
--------------------------- (SEAL)
RANDOLPH S. FOWLER
LENDER:
HYPERION TELECOMMUNICATIONS,
INC.
By /s/ Daniel R. Milliard
--------------------------------
Title: President
----------------------------
-11-
<PAGE>
EXHIBIT A
TERM LOAN NOTE
--------------
$1,000,000 Pittsburgh, Pennsylvania
, 1996
-------------------
FOR VALUE RECEIVED, the undersigned , an
---------------------------------
individual residing at (the "'Maker"),
------------------------------------------
promises to pay to the order of HYPERION TELECOMMUNICATIONS, INC. (the "Payee")
on the Maturity Date, as defined in the Loan Agreement (as hereinafter defined),
the lesser of (i) the principal amount of One Million U.S. Dollars ($1,000,000),
or (ii) the aggregate unpaid principal balance of the Loan made by the Payee to
Maker pursuant to Section 2(a) of the Term Loan and Stock Pledge Agreement of
even date herewith by and among Maker and the Payee (the "Loan Agreement").
Capitalized terms used and not otherwise defined herein have the meanings given
to them in the Loan Agreement.
Maker further promises to pay to the order of Payee interest on the unpaid
principal amount hereof at the rate or rates per annum determined pursuant to
Section 2(b) of, or as otherwise provided in, the Loan Agreement, payable on the
Maturity Date or as otherwise provided in, the Loan Agreement.
Maker hereby waives presentment, demand for payment, notice of dishonor,
notice of protest, and protest, and all other notices or demands in connection
with the delivery, acceptance, performance, default, indorsement or guaranty of
this instrument.
The obligation to make payments to the Payee hereunder is absolute and
unconditional and the rights of the Payee shall not be subject to any defense,
set off, counterclaim or recoupment which Maker may have by reason of any
indebtedness or liability at any time owing by the Payee to Maker; provided,
that the obligation of the Maker to pay interest that accrues on the unpaid
principal amount hereof from the date six months after the date of this Note is
subject to the Payee making the payments to the Maker pursuant to Section 2(a)
of the Loan Agreement.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan Agreement, including the representations, warranties, covenants,
conditions, security interests and liens contained or granted therein. The Loan
Agreement, among other things, contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayment, in certain circumstances, on account of principal hereof prior to
maturity upon the terms and conditions therein specified.
Maker agrees to pay all costs of collection of any amounts due hereunder
when incurred, including, without limitation, reasonable attorneys' fees and
expenses, as provided in the Loan Agreement.
A-1
<PAGE>
Amounts due under this Note shall be payable in lawful money of the United
States of America at 5 West Third Street, Coudersport, PA 16915 or at such other
place as the holder of this Note may designate in writing.
This Note shall bind Maker and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Payee and its successors and
assigns. All references herein to "Maker" and the "Payee" shall be deemed to
apply to Maker and the Payee, respectively, and their respective successors and
assigns.
This Note shall be governed by the laws of the Commonwealth of
Pennsylvania.
EXECUTED as a sealed instrument as of the date first above written.
MAKER:
------------------------------------ (SEAL)
[Name]
A-2
<PAGE>
EXHIBIT B
COLLATERAL
366,660 shares of common stock, par value $.01 per share, of Hyperion
Telecommunications, Inc.
B-1
<PAGE>
EXHIBIT 10.13
______________________________________________
WARRANT AGREEMENT
Dated as of April 15, 1996
by and among
HYPERION TELECOMMUNICATIONS, INC.
and
Bank of Montreal Trust Company
______________________________________________
===============================================================================
<PAGE>
WARRANT AGREEMENT
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Certain Definitions........................................................................................... 1
------------------
SECTION 2. Appointment of Warrant Agent.................................................................................. 3
----------------------------
SECTION 3. Issuance of Warrants; Warrant Certificates.................................................................... 3
------------------------------------------
SECTION 4. Execution of Warrant Certificates............................................................................. 3
---------------------------------
SECTION 5. Separation of Warrants........................................................................................ 3
----------------------
SECTION 6. Registration and Countersignature............................................................................. 4
---------------------------------
SECTION 7. Registration of Transfers and Exchanges....................................................................... 4
---------------------------------------
(a) Transfer and Exchange of Definitive Warrants................................................................ 4
--------------------------------------------
(b) Restrictions on Exchange or Transfer of a Definitive Warrant for a Beneficial
-----------------------------------------------------------------------------
Interest in a Global Warrant................................................................................ 5
----------------------------
(c) Transfer and Exchange of Global Warrants.................................................................... 6
----------------------------------------
(d) Exchange of a Beneficial Interest in a Global Warrant for a Definitive Warrant.............................. 6
------------------------------------------------------------------------------
(e) Restrictions on Transfer and Exchange of Global Warrants.................................................... 7
--------------------------------------------------------
(f) Countersigning of Definitive Warrants in Absence of Depositary.............................................. 7
--------------------------------------------------------------
(g) Legends..................................................................................................... 7
-------
(h) Cancellation of Global Warrant.............................................................................. 9
------------------------------
(i) Obligations with respect to Transfers and Exchanges of Warrants............................................. 9
---------------------------------------------------------------
SECTION 8. Terms of Warrants; Exercise of Warrants....................................................................... 9
---------------------------------------
SECTION 9. Payment of Taxes.............................................................................................. 11
----------------
SECTION 10. Mutilated or Missing Warrant Certificates..................................................................... 11
-----------------------------------------
SECTION 11. Reservation of Warrant Shares ................................................................................ 11
-----------------------------
SECTION 12. Obtaining Stock Exchange Listings............................................................................. 12
---------------------------------
SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares Issuable............................................ 12
------------------------------------------------------------------
(a) Stock Splits, Combinations, etc............................................................................. 12
--------------------------------
(b) Reclassification, Combinations, Mergers, etc................................................................ 12
---------------------------------------------
(c) Issuance of Options or Convertible Securities............................................................... 13
---------------------------------------------
</TABLE>
________________
* This Table of Contents does not constitute a part of this Agreement or have
any bearing upon the interpretation of any of its terms or provisions.
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(d) Dividends and Distributions................................................................................. 14
---------------------------
(e) Current Market Price........................................................................................ 14
--------------------
(f) Certain Distributions....................................................................................... 15
---------------------
(g) Consideration Received...................................................................................... 15
----------------------
(h) Deferral of Certain Adjustments ............................................................................ 15
-------------------------------
(i) Changes in Options and Convertible Securities............................................................... 15
---------------------------------------------
(j) Expiration of Options and Convertible Securities............................................................ 16
------------------------------------------------
(k) Other Adjustments........................................................................................... 16
-----------------
(l) Adjustment in Number of Shares.............................................................................. 16
------------------------------
SECTION 14. Statement on Warrants......................................................................................... 17
---------------------
SECTION 15. Fractional Interest........................................................................................... 17
-------------------
SECTION 16. Notices to Warrant Holders.................................................................................... 17
--------------------------
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent...................................................... 19
--------------------------------------------------------
SECTION 18. Warrant Agent................................................................................................. 19
-------------
SECTION 19. Resignation and Removal of Warrant Agent; Appointment of Successor............................................ 21
------------------------------------------------------------------
SECTION 20. Registration.................................................................................................. 21
------------
SECTION 21. Reports....................................................................................................... 21
-------
SECTION 22. Rule 144A..................................................................................................... 22
---------
SECTION 23. Notices to Company and Warrant Agent.......................................................................... 22
------------------------------------
SECTION 24. Supplements and Amendments.................................................................................... 23
--------------------------
SECTION 25. Successors.................................................................................................... 23
----------
SECTION 26. Termination................................................................................................... 23
-----------
SECTION 27. Governing Law................................................................................................. 23
-------------
SECTION 28. Benefits of This Agreement.................................................................................... 23
--------------------------
SECTION 29. Counterparts.................................................................................................. 24
------------
Signature.................................................................................................................. 24
Seal....................................................................................................................... 25
EXHIBIT A.................................................................................................................. 1
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
EXHIBIT B.................................................................................................................. 1
</TABLE>
<PAGE>
WARRANT AGREEMENT dated as of April 15, 1996 (the "Agreement")
between Hyperion Telecommunications, Inc., a Delaware corporation (the
"Company"), and Bank of Montreal Trust Company, as warrant agent (the "Warrant
Agent").
WHEREAS, the Company proposes to issue Common Stock Purchase
Warrants, as hereinafter described (the "Warrants"), to purchase up to an
aggregate of 613,427 shares of Common Stock (as defined below), in connection
with the offering of an aggregate of $329,000,000 principal amount at maturity
of the Company's 13% Senior Discount Notes due 2003 (the "Senior Notes") and
329,000 Warrants, each Warrant entitling the holder thereof to purchase 1.8645
shares of Common Stock. The Senior Notes and Warrants will be sold in Units
(the "Units"), each Unit consisting of $1,000 principal amount at maturity of
Senior Notes and one Warrant.
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with
the issuance of Warrant Certificates (as defined below) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following respective meanings:
"Affiliate" of any person means any person directly or indirectly
---------
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as used with respect to any person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a person shall be deemed to be control.
"Commission" means the Securities and Exchange Commission.
----------
"Common Equity Securities" means Common Stock and securities
------------------------
convertible into, or exercisable or exchangeable for, Common Stock or rights
or options to acquire Common Stock or such other securities, excluding the
Warrants.
"Common Stock" means the common stock, par value $.01 per share, of
------------
the Company, and any other capital stock of the Company into which such common
stock may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution for, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"Company" means Hyperion Telecommunications, Inc., a Delaware
-------
corporation, and its successors and assigns.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Exercisability Date" means any time on or after the earlier to
-------------------
occur of (i) May 1, 1997 and (ii) in the event a Change of Control (as defined
in the Indenture) occurs, the date the Company mails notice thereof to holders
of Senior Notes and to the Holders.
"Exercise Price" means the purchase price per share of Common Stock
--------------
to be paid upon the exercise of each Warrant in accordance with the terms
hereof, which price shall initially be $0.01 per share, subject to adjustment
from time to time pursuant to Section 13 hereof.
"Expiration Date" means April 1, 2001.
---------------
"Holder" means a person who owns Registrable Securities (as defined
------
in Section 7).
"Indenture" means the indenture, dated the date hereof, between the
---------
Company and Bank of Montreal Trust Company, as trustee.
"Initial Purchasers" means Bear, Stearns & Co. Inc., Chase
------------------
Securities Inc. and NationsBanc Capital Markets, Inc.
"person" means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Registration Rights Agreement" means the registration rights
-----------------------------
agreement, dated as of April 15, 1996, by and among the Company and the
Initial Purchasers relating to the Senior Notes.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Senior Notes" means the 13% Series A Senior Discount Notes due 2003
------------
of the Company, being sold and issued pursuant to the Purchase Agreement and
the Indenture, or any notes exchanged therefor as contemplated by the
Indenture and the Registration Rights Agreement.
"Separation Date" means the earlier of (i) 90 days after the
---------------
issuance of the Units, (ii) such date as the Initial Purchasers may, in their
discretion, deem appropriate for the Senior Notes and the Warrants that
comprise each Unit to be transferred or exchanged separately, (iii) in the
event a Change of Control (as defined in the Indenture) occurs, the date the
Company mails notice thereof to holders of Senior Notes and (iv) the date on
which the Exchange Offer (as defined in the Registration Rights Agreement) is
consummated.
"Trustee" means the trustee under the Indenture.
-------
"Warrant Agent" means Bank of Montreal Trust Company or the
-------------
successor or successors of such Warrant Agent appointed in accordance with the
terms hereof.
2
<PAGE>
"Warrant Registration Rights Agreement" means the registration
-------------------------------------
rights agreement, dated as of April 15, 1996, by and among the Company and the
Initial Purchasers relating to the Warrants and the Warrant Shares.
"Warrant Shares" means the shares of Common Stock issued or issuable
--------------
upon the exercise of the Warrants.
SECTION 2. Appointment of Warrant Agent. The Company hereby
----------------------------
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant
Agent hereby accepts such appointment.
SECTION 3. Issuance of Warrants; Warrant Certificates. The
------------------------------------------
Warrants will be issued in global form (the "Global Warrants"), substantially
in the form of Exhibit A (including footnotes 1 and 2 thereto) and in
definitive form (the "Definitive Warrants"), substantially in the form of
Exhibit A. Each Global Warrant shall represent such of the outstanding
Warrants as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and the depositary with respect to the
Global Warrants (the "Depositary") in accordance with instructions given by
the Holder thereof. The Depository Trust Company shall act as the Depositary
until a successor shall be appointed by the Company and the Warrant Agent.
Upon request, a Holder may receive from the Depositary and the Warrant Agent
separate Definitive Warrants as set forth in Section 7 below. Any
certificates (the "Warrant Certificates") evidencing the Global Warrants or
the Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto.
SECTION 4. Execution of Warrant Certificates. Warrant Certificates
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board, its
President or a Vice President and by its Secretary or Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates
may be in the form of a facsimile signature of the present or any future
Chairman of the Board, President or Secretary and may be imprinted or
otherwise reproduced on the Warrant Certificates and for that purpose the
Company may adopt and use the facsimile signature of any person who shall have
been Chairman of the Board, President or Secretary notwithstanding the fact
that at the time the Warrant Certificates shall be countersigned and delivered
or disposed of such person shall have ceased to hold such office. The seal of
the Company may be in the form of a facsimile thereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate, although at the date of the
execution of this Warrant Agreement any such person was not such officer.
3
<PAGE>
Warrant Certificates shall be dated the date of countersignature.
SECTION 5. Separation of Warrants. The Senior Notes and Warrants
----------------------
shall not be separately transferable prior to the Separation Date.
SECTION 6. Registration and Countersignature. The Warrant Agent, on
---------------------------------
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board,
the President or the Treasurer of the Company, initially countersign, issue
and deliver Warrants entitling the Holders thereof to purchase not more than
the number of Warrant Shares referred to above in the first recital hereof and
shall countersign and deliver Warrants as otherwise provided in this
Agreement.
The Company and the Warrant Agent may deem and treat the Holder(s)
of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding
any notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary. Prior to a Separation Date, the registered holder
of the Unit shall be deemed the registered Holder of such Warrants for all
purposes hereunder.
SECTION 7. Registration of Transfers and Exchanges.
---------------------------------------
(a) Transfer and Exchange of Definitive Warrants. When Definitive
--------------------------------------------
Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Warrant Agent, duly executed
by the Holder thereof or by his attorney, duly authorized in
writing; and
(y) in the case of Registrable Securities (as defined below), such
request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Registrable Security is being delivered to the Warrant
Agent by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that
effect (in substantially the form of Exhibit B hereto);
4
<PAGE>
(B) if such Registrable Security is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act or (2) pursuant to an exemption from
registration in accordance with Rule 144 under the Securities
Act (and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto);
(C) if such Registrable Security is being transferred to an
institutional "accredited investor," within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on
an opinion of counsel if the Company so requests), a
certification to that effect (in substantially the form of
Exhibit B hereto) and a certification from the applicable
transferee; or
(D) if such Registrable Security is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the
Company so requests), a certification to that effect (in
substantially the form of Exhibit B hereto).
The term "Registrable Securities" means the Warrants, Warrant Shares
and any other securities issued or issuable with respect to the Warrants
or the Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise until such date as such
security (i) is effectively registered under the Securities Act and
disposed of in accordance with a registration statement or (ii) is
distributed to the public pursuant to Rule 144 under the Securities Act.
(b) Restrictions on Exchange or Transfer of a Definitive Warrant
------------------------------------------------------------
for a Beneficial Interest in a Global Warrant. A Definitive Warrant may not
---------------------------------------------
be exchanged for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:
(A) if such Definitive Warrant is a Registrable Security,
certification from the Holder thereof (in substantially the
form of Exhibit B hereto) to the effect that such Definitive
Warrant is being transferred by such Holder either (i) to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act who wishes to take delivery thereof in the form
of a beneficial interest in a Global Warrant or (ii) to an
"accredited investor," within the meaning of Rule 501(a)(1),
(2), (3) or (7) in accordance with Rule 144A under the
Securities Act (and based on an opinion of counsel if the
Company so requests) who wishes to take delivery thereof in
the form of a beneficial interest in a Global Warrant; and
(B) whether or not such Definitive Warrant is a Registrable
Security, written instructions directing the Warrant Agent to
make, or to direct the Depositary to
5
<PAGE>
make, an endorsement on the Global Warrant to reflect an
increase in the number of Warrants and Warrant Shares
represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrants and Warrant Shares represented by the Global Warrant to be
increased accordingly. If no Global Warrants are then outstanding, the
Company shall issue and the Warrant Agent shall countersign a new Global
Warrant representing the appropriate number of Warrants and Warrant Shares.
(c) Transfer and Exchange of Global Warrants. The transfer and
----------------------------------------
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement and the
procedures of the Depositary therefor.
(d) Exchange of a Beneficial Interest in a Global Warrant for a
-----------------------------------------------------------
Definitive Warrant.
------------------
(i) Any person having a beneficial interest in a Global Warrant may
upon request exchange such beneficial interest for a Definitive
Warrant. Upon receipt by the Warrant Agent of written
instructions or such other form of instructions as is customary
for the Depositary from the Depositary or its nominee on behalf of
any person having a beneficial interest in a Global Warrant and,
in the case of a Registrable Security, the following additional
information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being delivered to the person
designated by the Depositary as being the beneficial owner, a
certification to that effect (in substantially the form of
Exhibit B hereto);
(B) if such beneficial interest is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act or (2) pursuant to an exemption from
registration in accordance with Rule 144 under the Securities
Act (and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto);
(C) if such beneficial interest is being transferred to any
institutional "accredited investor," within the meaning of
Rule 501(a)(1), (2), (3) and (7) under the Securities Act
pursuant to a private placement exemption from the
registration requirements of the Securities Act (and based on
an opinion of counsel if the Company so requests), a
certification to that effect (in substantially the form of
Exhibit B hereto) and a certification from the applicable
transferee;
(D) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the
Company so requests), a certification to that effect (in
substantially the form of Exhibit B hereto).
6
<PAGE>
then the Warrant Agent shall cause, in accordance with the
standing instructions and procedures existing between the
Depositary and Warrant Agent, the number of Warrants and Warrant
Shares represented by the Global Warrant to be reduced and,
following such reduction, the Company shall execute and the
Warrant Agent shall countersign and deliver to the transferee, as
the case may be, a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest
in a Global Warrant pursuant to this Section 7(d) shall be
registered in such names as the Depositary, pursuant to
instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent. The Warrant Agent
shall deliver such Definitive Warrants to the persons in whose
names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
--------------------------------------------------------
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 7), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersigning of Definitive Warrants in Absence of Depositary.
--------------------------------------------------------------
If at any time:
(i) the Depositary for the Global Warrants notifies the Company that
the Depositary is unwilling or unable to continue as Depositary
for the Global Warrants and a successor Depositary for the Global
Warrants is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) The Company, in its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive
Warrants under this Warrant Agreement,
then the Company shall execute, and the Warrant Agent, upon written
instructions signed by two officers of the Company, shall countersign and
deliver Definitive Warrants, in an aggregate number equal to the number of
Warrants represented by Global Warrants, in exchange for such Global Warrants.
(g) Legends.
-------
(i) Except for any Registrable Security sold or transferred (including
any Registrable Security represented by a Global Warrant) as
discussed in clause (ii) below, each Warrant Certificate
evidencing the Global Warrants and the Definitive Warrants (and
all Warrants issued in exchange therefor or substitution thereof)
and each certificate representing the Warrant Shares shall bear a
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"),
7
<PAGE>
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR"). THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (Y) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY, (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (Z) IT WILL NOTIFY ANY PURCHASER OF THE
SECURITY EVIDENCED HEREBY, PRIOR TO CLOSING OF ANY SALE, OF
THE RESALE RESTRICTIONS SET FORTH IN (Y) ABOVE."
(ii) Upon any sale or transfer of a Registrable Security (including any
Registrable Security represented by a Global Warrant) pursuant to
an effective registration statement under the Securities Act,
pursuant to Rule 144 under the Securities Act or pursuant to an
opinion of counsel reasonably satisfactory to the Company that no
legend is required:
(A) in the case of any Registrable Security that is a Definitive
Warrant, the Warrant Agent shall permit the Holder thereof to
exchange such Registrable Security for a Definitive Warrant
that does not bear the legend set forth in clause (i) above
and rescind any restriction on the transfer of such
Registrable Security; and
(B) in the case of any Registrable Security represented by a
Global Warrant, such Registrable Security shall not be
required to bear the legend set forth in clause (i) above but
shall continue to be subject to the provisions of Section 7(c)
hereof; provided that with respect to any request for an
exchange of a
8
<PAGE>
Registrable Security that is represented by a Global Warrant
for a Definitive Warrant that does not bear the legend set
forth in clause (i) above, which request is made in reliance
upon Rule 144 (and based on an opinion of counsel if the
Company so requests), the Holder thereof shall certify in
writing to the Warrant Agent that such request is being made
pursuant to Rule 144 (such certification to be substantially
in the form of Exhibit B hereto).
(h) Cancellation of Global Warrant. At such time as all beneficial
------------------------------
interests in Global Warrants have either been exchanged for Definitive
Warrants, redeemed, repurchased or cancelled, all Global Warrants shall be
returned to or retained and cancelled by the Warrant Agent.
(i) Obligations with respect to Transfers and Exchanges of
------------------------------------------------------
Warrants.
--------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Warrant Agent is hereby authorized to
countersign, in accordance with the provisions of Section 6 and
this Section 7, Definitive Warrants and Global Warrants as
required pursuant to the provisions of this Section 7.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants or
Global Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Warrant Agreement, as the
Definitive Warrants or Global Warrants surrendered upon such
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the
person in whose name any Warrant is registered as the absolute
owner of such Warrant and neither the Warrant Agent, nor the
Company shall be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any registration,
transfer or exchange.
SECTION 8. Terms of Warrants; Exercise of Warrants. Subject to
---------------------------------------
the terms of this Agreement, each Warrant Holder shall have the right, which
may be exercised commencing at the opening of business on the Exercisability
Date and until 5:00 p.m., New York City time on the Expiration Date to
receive from the Company the number of fully paid and nonassessable Warrant
Shares registered under the Securities Act which the Holder may at the time
be entitled to receive on exercise of such Warrants and payment of the
Exercise Price then in effect for such Warrant Shares; provided that no
Warrant Holder shall be entitled to exercise such Holder's Warrants at any
time, unless, at the time of exercise, (i) a registration statement under the
Securities Act relating to the Warrant Shares has been filed with, and
declared effective by, the Commission, and no stop order suspending the
effectiveness of such registration statement has been issued by the
Commission or (ii) the issuance of the Warrant Shares is permitted pursuant
to an exemption from the registration requirements of the Securities Act.
Each Warrant not exercised prior to 5:00 p.m., New York City time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
9
<PAGE>
The Company shall give notice not less than 90, and not more than
120, days prior to the Expiration Date to the Holders of all then outstanding
Warrants to the effect that the Warrants will terminate and become void as of
the 5:00 p.m., New York City time, on the Expiration Date. If the Company
fails to give such notice, the Warrants will not expire until 90 days after
the Company gives such notice, provided in no event will Holders be entitled
to any damages or other remedy for the Company's failure to give such notice
other than any such extension.
A Warrant may be exercised upon surrender to the Company at the
principal office of the Warrant Agent of the certificate or certificates
evidencing the Warrant to be exercised with the form of election to purchase
on the reverse thereof duly filled in and signed, which signature shall be
guaranteed by a bank or trust company having an office or correspondent in the
United States or a broker or dealer which is a member of a registered
securities exchange or the National Association of Securities Dealers, Inc.,
and upon payment to the Warrant Agent for the account of the Company of the
Exercise Price as adjusted as herein provided, for each of the Warrant Shares
in respect of which such Warrant is then exercised. Payment of the aggregate
Exercise Price shall be made in cash or by certified or official bank check,
payable to the order of the Company. In the alternative, each Holder may
exercise its right to receive Warrant Shares on a net basis, such that without
the exchange of any funds, the Holder receives that number of Warrant Shares
otherwise issuable upon exercise of its Warrants less that number of Warrant
Shares having a fair market value equal to the aggregate Exercise Price that
would otherwise have been paid by the Holder of the Warrant Shares. For
purposes of the foregoing sentence, "fair market value" of the Warrant Shares
shall be the current market price of the Warrant Shares on the date
immediately preceding the date of payment of the Exercise Price as determined
by the procedures set forth in Section 13(f). The exercise of Warrants by
Holders of beneficial interest in Global Warrants shall be effected in
accordance with this Agreement and the procedures of the Depositary therefor.
Subject to the provisions of Section 9 hereof, upon surrender of
Warrants and payment of the Exercise Price as provided above, the Warrant
Agent shall thereupon promptly notify the Company, and the Company shall
promptly transfer to the Holder of such Warrant Certificate a certificate or
certificates for the appropriate number of Warrant Shares or other securities
or property (including any money) to which the Holder is entitled, registered
or otherwise placed in, or payable to the order of, such name or names as may
be directed in writing by the Holder, and shall deliver such certificate or
certificates representing the Warrant Shares and any other securities or
property (including any money) to the person or persons entitled to receive
the same, together with an amount in cash in lieu of any fraction of a share
as provided in Section 15. Any such certificate or certificates representing
the Warrant Shares shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a Holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
The Warrants shall be exercisable commencing on the Exercisability
Date, at the election of the Holders thereof, either in full or from time to
time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of fewer than all of the Warrant Shares issuable on such
exercise at any time prior to the date of expiration of the Warrants, a new
certificate evidencing the remaining Warrant or Warrants will be issued, and
the Warrant Agent is hereby irrevocably authorized to countersign and to
deliver the required new Warrant Certificate or Certificates pursuant to the
provisions of this Section and of Section 4 hereof, and the Company, whenever
required by the
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<PAGE>
Warrant Agent, will supply the Warrant Agent with Warrant Certificates duly
executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall
then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received
by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
SECTION 9. Payment of Taxes. The Company will pay all documentary
----------------
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants or to any Separation; provided that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue of any Warrant Certificates or any certificates
for Warrant Shares in a name other than that of the Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
SECTION 10. Mutilated or Missing Warrant Certificates. In case any
-----------------------------------------
of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue and the Warrant Agent may countersign, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent number of Warrants, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to them. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may
prescribe.
SECTION 11. Reservation of Warrant Shares. The Company will at all
-----------------------------
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon
the exercise of all outstanding Warrants.
The transfer agent for the Common Stock (the "Transfer Agent") and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep
a copy of this Agreement on file with the Transfer Agent and with every
subsequent transfer agent for any
11
<PAGE>
shares of the Company's capital stock issuable upon the exercise of the rights
of purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer
Agent the stock certificates required to honor outstanding Warrants upon
exercise thereof in accordance with the terms of this Agreement. The Company
will supply such Transfer Agent with duly executed certificates for such
purposes and will provide or otherwise make available any cash which may be
payable as provided in Section 15. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto,
transmitted to each Holder of the Warrants pursuant to Section 16 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 13 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants in accordance with the terms of this Agreement
(including the terms of the Exercise Price) will, upon issue, be duly and
validly issued, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges and security interests with respect to the
issue thereof.
SECTION 12. Obtaining Stock Exchange Listings. The Company will
---------------------------------
from time to time take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the principal securities exchanges and markets (including, without
limitation, the Nasdaq National Market) within the United States of America,
if any, on which other shares of Common Stock are then listed. Upon the
listing of such Warrant Shares, the Company shall notify the Warrant Agent in
writing. The Company will obtain and keep all required permits and records in
connection with such listing.
SECTION 13. Adjustment of Exercise Price and Number of Warrant
--------------------------------------------------
Shares Issuable. The number and kind of shares purchasable upon the exercise
---------------
of Warrants and the Exercise Price shall be subject to adjustment from time to
time as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall
-------------------------------
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital
stock of any other class), (B) subdivide its outstanding shares of Common
Stock, (C) combine its outstanding shares of Common Stock into a smaller
number of shares or (D) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Exercise Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the number of shares
of capital stock of the Company which such Holder would have owned immediately
following such action had such Warrant been exercised immediately prior
thereto. An adjustment made pursuant to this paragraph shall become effective
immediately after the record date in the case of a dividend and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made
pursuant to this paragraph, the Holder of any Warrant thereafter exercised
shall become entitled to receive shares of two or more classes of capital
stock of the Company, the Board of Directors of the Company (whose
determination shall be conclusive) shall
12
<PAGE>
determine the allocation of the adjusted Exercise Price between or among
shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
--------------------------------------------
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in paragraph (a) above and
other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, then, as a condition of such reclassification, change,
consolidation, merger, sale or conveyance, the Company or such a successor or
purchasing corporation, as the case may be, shall forthwith make lawful and
adequate provision whereby the Holder of such Warrant then outstanding shall
have the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by a
Holder of the number of shares of Common Stock issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance and enter into a supplemental warrant agreement so
providing. Such provisions shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 13. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental warrant agreement is an affiliate
of the formed, surviving or transferee corporation, that issuer shall join in
the supplemental warrant agreement. The above provisions of this paragraph
(b) shall similarly apply to successive reclassifications and changes of
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(c) Issuance of Options or Convertible Securities. In the event the
---------------------------------------------
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any manner (including by assumption) to
all holders of the Common Stock any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock or any stock or
securities convertible into or exchangeable for Common Stock (any such rights,
warrants or options being herein called "Options" and any such convertible or
exchangeable stock or securities being herein called "Convertible Securities")
or any Convertible Securities (other than upon exercise of any Option),
whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, and the price per share at
which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or granting of such Options
or any such Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
all such Options or upon conversion or exchange of all such Convertible
Securities, plus, in the case of Options to acquire Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable upon
the conversion or exchange of all such Convertible Securities, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
all such Options or upon the conversion or exchange of all such Convertible
Securities or upon the conversion or exchange of all Convertible Securities
issuable upon the exercise of all such Options) shall be less than the current
market price per share of Common Stock on the record date for the issuance,
sale,
13
<PAGE>
distribution or granting of such Options or Convertible Securities (any such
event being herein called a "Distribution"), then, effective upon such
Distribution, (I) the Exercise Price shall be reduced to the price (calculated
to the nearest 1/1,000 of one cent) determined by multiplying the Exercise
Price in effect immediately prior to such Distribution by a fraction, the
numerator of such shall be the sum of (1) the number of shares of Common Stock
outstanding (exclusive of any treasury shares) immediately prior to such
Distribution multiplied by the current market price per share of Common Stock
on the date of such Distribution plus (2) the consideration, if any, received
by the Company upon such Distribution, and the denominator of which shall be
the product of (A) the total number of shares of Common Stock outstanding
(exclusive of any treasury shares) immediately after such Distribution
multiplied by (B) the current market price per share of Common Stock on the
record date for such Distribution and (II) the number of shares of Common
Stock purchasable upon the exercise of each Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock so
purchasable immediately prior to the record date for such Distribution by a
fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (I) of this sentence
and the denominator of which shall be the Exercise Price in effect immediately
after such adjustment (for the purposes of this clause (ii) without giving
effect to the provisions of Section 13(h)). For purposes of the foregoing,
the total maximum number of shares of Common Stock issuable upon exercise of
all such Options or upon conversion or exchange of all such Convertible
Securities or upon the conversion or exchange of the total maximum amount of
the Convertible Securities issuable upon the exercise of all such Options
shall be deemed to have been issued as of the date of such Distribution and
thereafter shall be deemed to be outstanding and the Company shall be deemed
to have received as consideration therefor such price per share, determined as
provided above. Except as provided in paragraphs (j) and (k) below, no
additional adjustment of the Exercise Price shall be made upon the actual
exercise of such Options or upon conversion or exchange of the Convertible
Securities or upon the conversion or exchange of the Convertible Securities
issuable upon the exercise of such Options.
(d) Dividends and Distributions. In the event the Company shall, at
---------------------------
any time or from time to time after the date thereof, distribute to all the
holders of Common Stock any dividend or other distribution of cash, evidences
of its indebtedness, other securities or other properties or assets (in each
case other than (i) dividends payable in Common Stock, Options or Convertible
Securities and (ii) any cash dividend that, when added to all other cash
dividends paid in the one year prior to the declaration date of such dividend
(excluding any such other dividend included in a previous adjustment of the
Exercise Price pursuant to this paragraph (d)), does not exceed 5% of the
current market price per share of Common Stock on such declaration date), or
any options, warrants or other rights to subscribe for or purchase any of the
foregoing, then (A) the Exercise Price shall be decreased to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the current market price per share of Common Stock
on the record date for such distribution less the sum of (X) the cash portion,
if any, of such distribution per share of Common Stock outstanding (exclusive
of any treasury shares) on the record date for such distribution plus (Y) the
then fair market value (as determined in good faith by the Board of Directors
of the Company) per share of Common Stock outstanding (exclusive of any
treasury shares) on the record date for such distribution of that portion, if
any, of such distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription or purchase
rights, and the denominator of which shall be such current market price per
share of Common Stock and (B) the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock so purchasable immediately
prior to the record date for such distribution by a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to the
14
<PAGE>
adjustment required by clause (A) of this sentence and the denominator of
which shall be the Exercise Price in effect immediately after such adjustment
(for the purposes of this clause (B) without giving effect to the provisions
of Section 13(h)). The adjustments required by this paragraph (d) shall be
made whenever any such distribution occurs retroactive to the record date for
the determination of stockholders entitled to receive such distribution.
(e) Current Market Price. For the purpose of any computation of
--------------------
current market price under this Section 13 and Section 15, the current market
price per share of Common Stock at any date shall be (x) for purposes of
Section 15, the closing price on the business day immediately prior to the
exercise of the applicable Warrant pursuant to Section 8 and (y) in all other
cases, the average of the daily closing prices for the shorter of (i) the 20
consecutive trading days ending on the last full trading day on the exchange
or market specified in the second succeeding sentence prior to the Time of
Determination (as defined below) and (ii) the period commencing on the date
next succeeding the first public announcement of the issuance, sale,
distribution or granting in question through such last full trading day prior
to the Time of Determination. The term "Time of Determination" as used herein
shall be the time and date of the earlier to occur of (A) the date as of which
the current market price is to be computed and (B) the last full trading day
on such exchange or market before the commencement of "ex-dividend" trading in
the Common Stock relating to the event giving rise to the adjustment required
by paragraph (a), (b), (c) or (d). The closing price for any day shall be the
last reported sale price regular way or, in case no such reported sale takes
place on such day, the average of the closing bid and asked prices regular way
for such day, in each case (1) on the principal national securities exchange
on which the shares of Common Stock are listed or to which such shares are
admitted to trading or (2) if the Common Stock is not listed or admitted to
trading on a national securities exchange, in the over-the-counter market as
reported by Nasdaq National Market or any comparable system or (3) if the
Common Stock is not listed on Nasdaq National Market or a comparable system,
as furnished by two members of the NASD selected from time to time in good
faith by the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the current market
price per share cannot be determined pursuant to the foregoing provisions of
this paragraph (e), the current market price per share shall be the fair
market value thereof as determined in good faith by the Board of Directors of
the Company.
(f) Certain Distributions. If the Company shall pay a dividend or
---------------------
make any other distribution payable in Options or Convertible Securities,
then, for purposes of paragraph (c) above, such Options or Convertible
Securities shall be deemed to have been issued or sold without consideration.
(g) Consideration Received. If any shares of Common Stock, Options
----------------------
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board
of Directors of the Company). If any Options shall be issued in connection
with the issuance and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration; provided, that if such Options have
an exercise price equal to or greater than the current market price of the
Common Stock on the date of issuance of such Options, then such Options shall
be deemed to have been issued for consideration equal to such exercise price.
15
<PAGE>
(h) Deferral of Certain Adjustments. No adjustment to the Exercise
-------------------------------
Price (including the related adjustment to the number of shares of Common
Stock purchasable upon the exercise of each Warrant) shall be required
hereunder unless such adjustment, together with other adjustments carried
forward as provided below, would result in an increase or decrease of at least
one percent of the Exercise Price; provided that any adjustments which by
reason of this paragraph (i) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. No adjustment
need be made for a change in the par value of the Common Stock. All
calculations under this Section shall be made to the nearest 1/1,000 of one
cent or to the nearest 1/1000 of a share, as the case may be.
(i) Changes in Options and Convertible Securities. If the exercise
---------------------------------------------
price provided for in any Options referred to in paragraph (c) above, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in paragraph (c) above, or the rate at
which any Convertible Securities referred to in paragraph (c) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 13), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock
so purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(j) Expiration of Options and Convertible Securities. If, at any
------------------------------------------------
time after any adjustment to the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall have been made pursuant to paragraph
(c) or (i) above or this paragraph (j), any Options or Convertible Securities
shall have expired unexercised, the number of such shares so purchasable
shall, upon such expiration, be readjusted and shall thereafter be such as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares of
Common Stock deemed to have been issued in connection with such Options or
Convertible Securities were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or Convertible Securities and
(ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or granting of all such Options or Convertible
Securities, whether or not exercised; provided that no such readjustment shall
have the effect of decreasing the number of such shares so purchasable by an
amount (calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 13 following the date of the
original adjustment referred to above) in excess of the amount of the
adjustment initially made in respect of the issuance, sale, distribution or
granting of such Options or Convertible Securities.
(k) Other Adjustments. In the event that at any time, as a result
-----------------
of an adjustment made pursuant to this Section 13, the Holders shall become
entitled to receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so receivable upon
exercise of the Warrants and the Exercise Price applicable to such exercise
shall be
16
<PAGE>
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares of
Common Stock contained in this Section 13.
(l) Adjustment in Number of Shares. Upon each adjustment of the
------------------------------
Exercise Price pursuant to this Section 13 or upon the occurrence of any event
or action which would require an adjustment of the Exercise Price pursuant to
this Section 13 but for Section 13(h), each Warrant outstanding prior to the
making of the adjustment in the Exercise Price shall thereafter evidence the
right to receive upon payment of the adjusted Exercise Price that number of
share of Common Stock obtained by dividing (i) the sum of the adjusted number
of Warrant Shares issuable upon exercise of a Warrant by payment of the
adjusted Exercise Price plus the Exercise Price prior to adjustment by (ii)
the adjusted Exercise Price (without giving effect to the provisions of
Section 13(h)).
Irrespective of any adjustments in the Exercise Price or the number
or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 14. Statement on Warrants. Irrespective of any adjustment
---------------------
in the number or kind of shares issuable upon the exercise of the Warrants or
the Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 15. Fractional Interest. The Company shall not be required
-------------------
to issue fractional shares of Common Stock on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same Holder, the number of full shares of Common Stock which shall be
issuable upon such exercise shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall direct the Transfer Agent to pay
an amount in cash calculated by it to equal the then current market price per
share multiplied by such fraction computed to the nearest whole cent. The
Holders, by their acceptance of the Warrant Certificates, expressly waive any
and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
SECTION 16. Notices to Warrant Holders. Upon any adjustment of the
--------------------------
Exercise Price pursuant to Section 13, the Company shall promptly thereafter
(i) cause to be filed with the Warrant Agent a certificate of a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered Holders of
the Warrant Certificates at his address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. The
Warrant Agent shall be entitled to rely on the above-referenced accountant's
certificate and shall be under no duty or responsibility with respect to any
such certificate, except to exhibit the same from time to time to any Holder
desiring an inspection
17
<PAGE>
thereof during reasonable business hours. The Warrant Agent shall not at any
time be under any duty or responsibility to any Holder to determine whether
any facts exist that may require any adjustment of the number of shares of
Common Stock or other stock or property issuable on exercise of the Warrants
or the Exercise Price, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment or the validity or value (or the kind or amount) of any shares of
Common Stock or other stock or property which may be issuable on exercise of
the Warrants. The Warrant Agent shall not be responsible for any failure of
the Company to make any cash payment or to issue, transfer or deliver any
shares of Common Stock or stock certificates or other common stock or property
upon the exercise of any Warrant.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock
or distributions referred to in Section 13 hereof); or
(c) of any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change
in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or a tender
offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) a Change of Control (as defined in the Indenture) occurs; or
(f) the Company proposes to take any other action that would
require an adjustment of the Exercise Price or the number of Warrant
Shares pursuant to Section 13;
then the Company shall cause to be filed with the Warrant Agent and shall
cause to be given to each of the registered Holders of the Warrant
Certificates at such Holder's address appearing on the Warrant register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such rights,
options, warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares of
Common Stock, or (iii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up or Change of
Control is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of
18
<PAGE>
Common Stock shall be entitled to exchange such shares for securities or other
property, if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up or Change
of Control. The failure to give the notice required by this Section 16 or any
defect therein shall not affect the legality or validity of any distribution,
right, option, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or Change of Control or the vote upon
any action. Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent or to receive notice as shareholders in respect of
the meetings of shareholders or the election of Directors of the Company or
any other matter, or any rights whatsoever as shareholders of the Company.
SECTION 17. Merger, Consolidation or Change of Name of Warrant
--------------------------------------------------
Agent. Any corporation into which the Warrant Agent may be merged or with
-----
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 19. Any such successor Warrant Agent shall
promptly cause notice of its succession as Warrant Agent to be mailed (by
first class mail, postage prepaid) to each Holder at such Holder's last
address as shown on the register maintained by the Warrant Agent pursuant this
Agreement. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any
of the Warrant Certificates shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full
force and effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its
changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 18. Warrant Agent. The Warrant Agent undertakes the duties
-------------
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes
no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution
of the Warrant Certificates except as herein otherwise provided.
19
<PAGE>
(b) The Warrant Agent shall not be responsible for any failure of
the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the
Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant
Agent shall incur no liability or responsibility to the Company or to any
Holder of any Warrant Certificate in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any Holder of any Warrant Certificate for any action
taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature reasonably incurred by the Warrant Agent in the execution of this
Agreement and to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, reasonable costs and counsel
fees, for anything done or omitted by the Warrant Agent in the execution
of this Agreement except as a result of its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this
provision shall not affect the power of the Warrant Agent to take such
action as it may consider proper, whether with or without any such
security or indemnity. All rights of action under this Agreement or under
any of the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrant Certificates or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit
or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent and any recovery of judgment shall be for the ratable
benefit of the Holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though
it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant
20
<PAGE>
Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder of any Warrant Certificate to make or cause
to be made any adjustment of the Exercise Price or number of the Warrant
Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require any
of such adjustments, or with respect to the nature or extent of any such
adjustments, when made, or with respect to the method employed in making
the same. The Warrant Agent shall not be accountable with respect to the
validity or value or the kind or amount of any Warrant Shares or of any
securities or property which may at any time be issued or delivered upon
the exercise of any Warrant or with respect to whether any such Warrant
Shares or other securities will when issued be validly issued and fully
paid and nonassessable, and makes no representation with respect thereto.
SECTION 19. Resignation and Removal of Warrant Agent; Appointment
-----------------------------------------------------
of Successor. No resignation or removal of the Warrant Agent and no
------------
appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent as provided herein.
The Warrant Agent may resign its duties and be discharged from all further
duties and liability hereunder (except liability arising as a result of the
Warrant Agent's own negligence of willful misconduct) after giving written
notice to the Company. The Company may remove the Warrant Agent upon written
notice, and the Warrant Agent shall thereupon in like manner be discharged
from all further duties and liabilities hereunder, except as aforesaid. The
Warrant Agent shall, at the Company's expense, cause to be mailed (by first
class mail, postage prepaid) to each Holder of a Warrant at his last address
as shown on the register of the Company maintained by the Warrant Agent a copy
of said notice of resignation or notice of removal, as the case may be. Upon
such resignation or removal, the Company shall appoint in writing a new
warrant agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the resigning Warrant
Agent or the Holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant
agent, whether appointed by the Company or by such a court, shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not
less than $50,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, provided that such reports are
published at least annually pursuant to law or to the requirements of a
federal or state supervising or examining authority. After acceptance in
writing of such appointment by the new warrant agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be necessary or
expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be
legally and validly executed and delivered by the resigning or removed Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall give notice thereof to the resigning or removed Warrant Agent. Failure
to give any notice provided for in this Section, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be.
21
<PAGE>
SECTION 20. Registration. The Company and the Warrant Agent
------------
acknowledge that Holders shall have the registration rights set forth in the
Warrant Registration Rights Agreement.
SECTION 21. Reports.
-------
(a) So long as any of the Warrants remain outstanding, and to the
extent the Company is required to send such documents to the holders of its
outstanding Common Stock, whether or not required by the rules and regulations
of the Securities and Exchange Commission (the "Commission"), the Company
shall furnish to the Holders of the Warrants (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants; (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports;
and (iii) on a quarterly basis, certain financial information and operating
data with respect to each Subsidiary (as defined in the Indenture) and Joint
Venture (as defined in the Indenture) engaged in a Telecommunications Business
(as defined in the Indenture), in the form specified by Schedule __ of the
Indenture. In addition, whether or not required by the rules and regulations
of the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission
will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all SEC Reports that the Warrant Agent may be required to
deliver to the Holders of the Warrants under this Section 21.
SECTION 22. Rule 144A. The Company hereby agrees with each Holder,
---------
for so long as any Registrable Securities remain outstanding, to make
available, upon request of any Holder of Registrable Securities, to any Holder
or beneficial owner of Registrable Securities in connection with any sale
thereof and any prospective purchaser of such Registrable Securities
designated by such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Securities pursuant to Rule 144A.
SECTION 23. Notices to Company and Warrant Agent. Any notice or
------------------------------------
demand authorized by this Agreement to be given or made by the Warrant Agent
or by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
Hyperion Telecommunications, Inc
5 West Third Street
Coudersport, Pennsylvania 016915
Telecopy: (814) 274-8631
Attention: Daniel R. Milliard
22
<PAGE>
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or
by the Holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as
follows:
Bank or Montreal Trust Company
77 Water Street
New York, New York 10005
Telecopy: (212) 701-7684
Attention:
SECTION 24. Supplements and Amendments. The Company and the
--------------------------
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the Holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a
material adverse effect on the interests of Holders shall require the written
consent of Holders representing a majority of the then outstanding Warrants.
The consent of each Holder of a Warrant affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased. The Warrant Agent shall be entitled to receive and, subject to
Section 18, shall be fully protected in relying upon, an officers' certificate
and opinion of counsel as conclusive evidence that any such amendment or
supplement is authorized or permitted hereunder, that it is not inconsistent
herewith, and that it will be valid and binding upon the Company in accordance
with its terms.
SECTION 25. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 26. Termination. This Agreement (other than the Company's
-----------
obligations with respect to Warrants previously exercised and with respect to
indemnification under Section 18) shall terminate at 5:00 p.m., New York City
time on the Expiration Date.
SECTION 27. Governing Law. THIS AGREEMENT AND EACH WARRANT
-------------
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 28. Benefits of This Agreement.
--------------------------
23
<PAGE>
(a) Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
Holders of the Warrant Certificates any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent and the Holders of the
Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a Warrant
Certificate, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any preemptive
right, to receive any notice of meetings of stockholders for the election of
directors of the Company or any other matter or to receive any notice of any
proceedings of the Company, except as may be specifically provided for herein.
The Holders of the Warrants are not entitled to share in the assets of the
Company in the event of the liquidation, dissolution or winding up of the
Company's affairs.
(c) All rights of action in respect of this Agreement are vested in
the Holders of the Warrants, and any Holder of any Warrant, without the
consent of the Warrant Agent or the Holder of any other Warrant, may, on such
Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's rights
hereunder, including the right to exercise, exchange or surrender for purchase
such Holder's Warrants in the manner provided in this Agreement.
SECTION 29. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
HYPERION TELECOMMUNICATIONS, INC.
/s/ Daniel R. Milliard
By: ________________________________
Name: Daniel R. Milliard
Title: President
[Seal]
Attest: ______________________
Secretary
/s/ Therese Gaballah
By: ________________________________
Name: Therese Gaballah
Title: Vice President
[Seal]
Attest: _______________________
Secretary
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE (AS DEFINED HEREIN).
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY
FROM THE SENIOR NOTES ORIGINALLY SOLD AS A UNIT WITH SUCH WARRANTS UNTIL THE
EARLIER TO OCCUR OF (i) 90 DAYS FROM THE DATE OF ISSUANCE, (ii) SUCH DATE AS
THE BEAR, STEARNS & CO. INC., CHASE SECURITIES INC. AND NATIONSBANC CAPITAL
MARKETS, INC. MAY, IN THEIR DISCRETION, DEEM APPROPRIATE, (iii) IN THE EVENT A
CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE) OCCURS, THE DATE THE COMPANY
MAILS NOTICE THEREOF TO HOLDERS OF THE SENIOR NOTES AND (iv) THE DATE ON WHICH
THE EXCHANGE OFFER (AS DEFINED IN THE INDENTURE) IS CONSUMMATED.
No.
CUSIP No. _______
_______ Warrants
Warrant Certificate
HYPERION TELECOMMUNICATIONS, INC.
This Warrant Certificate certifies that Bank of Montreal Trust
Company or its registered assigns, is the registered holder of Warrants
expiring April 1, 2001 (the "Warrants") to purchase Common Stock, par value
$.01 (the "Common Stock"), of Hyperion Telecommunications, Inc., a Delaware
corporation (the "Company"). Each Warrant entitles the registered holder upon
exercise at any time from 9:00 a.m. on the Separation Date referred to below
or any time on or after the earlier to occur of (i) May 1, 1997 and (ii) in
the event a Change of Control (as defined in the Indenture) occurs, the date
the Company mails the notice thereof to holders of Senior Notes and holders of
Warrants (the "Exercisability Date") until 5:00 p.m. New York City Time on
_____________ to receive from the Company 1.8645 fully paid and nonassessable
shares of Common Stock (the "Warrant Shares") at the initial exercise price
(the "Exercise Price") of $0.01 per share payable in lawful money of the
United States of America upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office or agency of the Warrant Agent,
but only subject to the conditions set forth herein and in the Warrant
Agreement referred to on the reverse hereof. The Exercise Price and number of
Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
No Warrant may be exercised before the Exercisability Date. No
Warrant may be exercised after 5:00 p.m., New York City Time on April 1, 2001,
and to the extent not exercised by such time such Warrants shall become void.
26
<PAGE>
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, Hyperion Telecommunications, Inc. has caused
this Warrant Certificate to be signed by its President and by its Assistant
Secretary, each by a signature or a facsimile thereof, and has caused a
facsimile of its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
HYPERION TELECOMMUNICATIONS, INC.
By:________________________________________
Name: Daniel R. Milliard
Title: President and Secretary
By:________________________________________
Name: Randolph S. Fowler
Title: Vice President and Assistant
Secretary
Countersigned:
as Warrant Agent
By:___________________
Authorized Signature
27
<PAGE>
[Form of Warrant Certificate]
[Reverse]
[Unless and until it is exchanged in whole or in part for Warrants in
definitive form, this Warrant may not be transferred except as a whole by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or by the depositary or
any such nominee to a successor depositary or a nominee of such successor
depositary. The Depository Trust Company ("DTC"), (55 Water Street, New York,
New York) shall act as the depositary until a successor shall be appointed by
the Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration
of transfer, exchange or payment, and any certificate issued is registered in
the name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]*
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR"). THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (Y) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), IN A TRANSACTION MEETING THE
_______________
* This paragraph is to be included only if the Warrant is in global
form.
28
<PAGE>
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY, (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (Z) IT WILL NOTIFY ANY PURCHASER
OF THE SECURITY EVIDENCED HEREBY, PRIOR TO CLOSING OF ANY SALE, OF
THE RESALE RESTRICTIONS SET FORTH IN (Y) ABOVE.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring April 1, 2001 entitling the holder on
exercise to receive shares of Common Stock, par value $.0l, of the Company
(the "Common Stock"), and are issued or to be issued pursuant to a Warrant
Agreement dated as of April 15, 1996 (the "Warrant Agreement"), duly executed
and delivered by the Company to Bank of Montreal Trust Company, as warrant
agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants. A copy of the Warrant Agreement may be obtained by
the holder hereof upon written request to the Company. Capitalized terms used
herein without definition shall have the meanings ascribed to them in the
Warrant Agreement.
Warrants may be exercised at any time from 9:00 a.m. on or after the
Exercisability Date and until 5:00 p.m., New York City Time on April 1, 2001.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with
payment of the Exercise Price in lawful money of the United States of America
at the office of the Warrant Agent. In the event that upon any exercise of
Warrants evidenced hereby the number of Warrants exercised shall be less than
the total number of Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate evidencing the number
of Warrants not exercised. No adjustment shall be made for any dividends on
any Common Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price set forth on the face hereof and/or the number of shares of
Common Stock issuable upon the exercise of each Warrant shall, subject to
certain conditions, be adjusted. No fractions of a share of Common Stock will
be issued upon the exercise of any Warrant, but the Company will pay the cash
value thereof determined as provided in the Warrant Agreement.
29
<PAGE>
The Warrant Agreement provides that the Company shall be bound by certain
registration obligations with respect to the Common Stock issuable upon
exercise of the Warrants.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
30
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to receive ________ shares of Common Stock and
herewith tenders payment for such shares to the order of HYPERION
TELECOMMUNICATIONS, INC., in the amount of $_________ in accordance with the
terms hereof. The undersigned requests that a certificate for such shares be
registered in the name of _______________________, whose address is
______________________, and that such shares be delivered to
_________________, whose address is ____________________________. If said
number of shares is less than all of the shares of Common Stock purchasable
hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
_____________________________, whose address is ________________________, and
that such Warrant Certificate be delivered to _____________________________,
whose address is ____________________________.
Signature
Date:
Signature Guaranteed
31
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS/1/
-----------------------------------------------
The following exchanges of a part of this Global Warrant for definitive
Warrants have been made:
<TABLE>
<CAPTION>
Number of
Amount of decrease Amount of increase Warrants in this
in Number of in Number of Global Warrant Signature of
Warrants in this Warrants in this following such authorized officer of
Date of Exchange Global Warrant Global Warrant decrease or increase Warrant Agent
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
______________
/1/ This is to be included only if the Warrant is in global form.
32
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: _____ Warrants to Purchase Common Stock (the "Warrants") of HYPERION
TELECOMMUNICATIONS, INC.
This Certificate relates to _____ Warrants held in * _______ book-entry or *
_______ definitive form by __________ (the "Transferor").
The Transferor*:
[_] has requested the Warrant Agent by written order to deliver in exchange for
its beneficial interest in the Global Warrants held by the depositary a
Warrant or Warrants in definitive, registered form equal to its beneficial
interest in such Global Warrant (or the portion thereof indicated above); or
[_] has requested the Warrant Agent by written order to exchange or register the
transfer of a Warrant or Warrants
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and that the
transfer of this Warrant does not require registration under the Securities
Act of 1933, as amended (the "Securities Act") because:
[_] Such Warrant is being acquired for the Transferor's own account without
transfer (in satisfaction of Section 7 of the Warrant Agreement).
Such Warrant is being transferred (i) to a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[_] Such Warrant is being transferred (i) in accordance with Rule 144 under the
Securities Act (and based on an opinion of counsel if the Company so requests)
or (ii) pursuant to an effective registration statement under the Securities
Act.
[_] Such Warrant is being transferred to an institutional accredited investor
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the registration requirements
of the Securities Act (together with a certification).
*Check applicable box.
1
<PAGE>
[_] Such Warrant is being transferred in reliance on and in compliance with
another exemption from the registration requirements of the Securities
Act (and based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
2
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: _____ Warrants to Purchase Common Stock (the "Warrants") of HYPERION
TELECOMMUNICATIONS, INC.
This Certificate relates to _____ Warrants held in * _______ book-entry or *
_______ definitive form by __________ (the "Transferor").
The Transferor*:
[_] has requested the Warrant Agent by written order to deliver in exchange for
its beneficial interest in the Global Warrants held by the depositary a
Warrant or Warrants in definitive, registered form equal to its beneficial
interest in such Global Warrant (or the portion thereof indicated above); or
[_] has requested the Warrant Agent by written order to exchange or register the
transfer of a Warrant or Warrants
In connection with such request and in respect of each such Warrant, the
Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and that the
transfer of this Warrant does not require registration under the Securities
Act of 1933, as amended (the "Securities Act") because:
[_] Such Warrant is being acquired for the Transferor's own account without
transfer (in satisfaction of Section 7 of the Warrant Agreement).
[_] Such Warrant is being transferred (i) to a qualified institutional buyer (as
defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[_] Such Warrant is being transferred (i) in accordance with Rule 144 under the
Securities Act (and based on an opinion of counsel if the Company so requests)
or (ii) pursuant to an effective registration statement under the Securities
Act.
[_] Such Warrant is being transferred to an institutional accredited investor
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
pursuant to a private placement exemption from the registration requirements
of the Securities Act (together with a certification).
*Check applicable box.
1
<PAGE>
[_] Such Warrant is being transferred in reliance on and in compliance with
another exemption from the registration requirements of the Securities Act (and
based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By:
Date:
*Check applicable box.
2
<PAGE>
EXHIBIT 10.14
______________________________________________
WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of April 15, 1996
by and among
HYPERION TELECOMMUNICATIONS, INC.
and
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
NATIONSBANC CAPITAL MARKETS, INC.
______________________________________________
================================================================================
<PAGE>
This Warrant Registration Rights Agreement (the "Agreement") is made and
---------
entered into as of April 15, 1996, by and among Hyperion Telecommunications,
Inc., a Delaware corporation (the "Company"), and Bear, Stearns & Co. Inc.,
-------
Chase Securities Inc. and NationsBanc Capital Markets, Inc. (each an "Initial
-------
Purchaser" and together, the "Initial Purchasers"), each of whom have agreed to
- --------- ------------------
purchase an aggregate of 329,000 Units consisting of an aggregate of
$329,000,000 in aggregate principal amount at maturity of the Company's 13%
Series A Senior Discount Notes due 2003 and warrants (the "Warrants") to
--------
purchase an aggregate of 613,427 shares of the Company's Common Stock, $.01 par
value, pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement (the "Purchase
--------
Agreement"), dated as of April 10, 1996, by and among the Company and the
- ---------
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Units, the Company has agree to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchasers set forth in Section 8 of the Purchase
Agreement. All defined terms used but not defined herein shall have the
meanings ascribed to them in the Indenture (as defined below).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Common Stock: The common stock, $.01 par value, of the Company.
------------
Exchange Act: The Securities Exchange Act of 1934, as amended from time to
------------
time.
Exchange Offer: As defined in the Registration Rights Agreement, dated the
--------------
Closing Date, among the Company and the Initial Purchasers.
Holders: As defined in Section 2 hereof.
-------
Indenture: The Indenture, dated the Closing Date, between the Company Bank
---------
of Montreal Trust Company, as trustee (the "Trustee"), pursuant to which the
-------
Units are to be issued, as such Indenture is amended or supplemented from time
to time in accordance with the terms thereof.
NASD: National Association of Securities Dealers, Inc.
----
<PAGE>
Person: An individual, partnership, corporation, trust, unincorporated
------
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Registrable Securities: The Warrants, Warrant Shares and any other
----------------------
securities issued or issuable with respect to the Warrants or the Warrant Shares
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization;
provided that a security ceases to be a Registrable Security when it is no
- --------
longer a Transfer Restricted Security.
Registration Expenses: See Section 6 hereof.
---------------------
Registration Statement: Any registration statement of the Company which
----------------------
covers Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such Registration Statement.
Senior Notes: The 13% Series A Senior Discount Notes due 2003 of the
------------
Company, being sold and issued pursuant to the Purchase Agreement and the
Indenture, or any notes exchanged therefor as contemplated by the Indenture.
Transfer Restricted Securities: A Warrant or Warrant Share, until such
------------------------------
Warrant or Warrant Share (i) has been effectively registered under the Act and
disposed of in accordance with the Registration Statement covering it, (ii) is
distributed to the public pursuant to Rule 144 or (iii) may be sold or
transferred pursuant to Rule 144(k) (or any similar provisions then in force)
under the Act or otherwise.
Warrants: The warrants of the Company issued and sold pursuant to the
--------
Purchase Agreement and the Warrant Agreement, together with any warrants issued
in substitution or replacement therefor.
Warrant Agreement: The Warrant Agreement dated the Closing Date by and
-----------------
among the Company and Bank of Montreal Trust Company, as Warrant Agent.
Warrant Shares: The Common Stock or other securities which any Holder may
--------------
acquire upon exercise of a Warrant, together with any other securities which
such Holder may acquire on account of any such securities, including, without
limitation, as the result of any dividend or other distribution on Common Stock
or any split-up of such Common Stock as provided for in the Warrant Agreement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Registrable Securities. The securities entitled to the benefits of
----------------------
this Agreement are the Registrable Securities.
2
<PAGE>
(b) Holders of Registrable Securities. A Person is deemed to be a Holder
---------------------------------
of Registrable Securities whenever such Person owns Registrable Securities or
has the right to acquire such Registrable Securities, whether or not such
acquisition has actually been effected and disregarding any legal restrictions
upon the exercise of such right.
SECTION 3. SHELF REGISTRATION
(a) The Company shall file a "shelf" registration with respect to all
Registrable Securities on any appropriate form pursuant to Rule 415 (or similar
rule that may be adopted by the Commission) under the Act (the "Shelf
-----
Registration") (i) covering resales by the Holders of the Warrants, on or prior
- ------------
to October 1, 1996 and (ii) covering the issuance of the Warrant Shares by the
Company upon exercise, or if such issuance is not then permitted to be
registered by applicable rule or policy of the Commission, covering resales of
the Warrant Shares, on or prior to January 1, 1997, and shall use its best
efforts to have such Shelf Registration declared effective by the Commission on
or prior to 90 days after the dates specified for such filings. Notwithstanding
the foregoing, the Company shall not be required to file such Shelf Registration
on or prior to the consummation of the Exchange Offer; provided that, in the
event the Exchange Offer is consummated later than the filing time required by
the preceding sentence for each Shelf Registration, the Company shall file such
Shelf Registration(s) within 30 days after the date of the consummation of the
Exchange Offer.
(b) If the Holders of a majority in aggregate principal amount of the
Registrable Securities to be registered in the Shelf Registration so elect, an
offering of Registrable Securities pursuant to the Shelf Registration may be
effected in the form of an underwritten offering. In such event, and if the
managing underwriters advise the Company and the Holders of such Registrable
Securities in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such offering exceeds the amount of Registrable
Securities which can be sold in such offering, there shall be included in such
underwritten offering the amount of such Registrable Securities which in the
opinion of such underwriters can be sold, and such amount shall be allocated pro
rata among the Holders of such Registrable Securities on the basis of the
principal amount of Registrable Securities requested to be included by such
Holders. The Holders of the Registrable Securities to be registered shall pay
all underwriting discounts and commissions of such underwriters.
(c) If any of the Registrable Securities covered by the Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate principal amount of such
Registrable Securities included in such offering; provided that such investment
--------
bank or manager shall be reasonably satisfactory to the Company.
(d) The Company shall use its best efforts to keep the Shelf Registration
continuously effective until October 1, 1999 for the Warrants and until January
1, 2000 for the Warrant Shares or such shorter period that will terminate when
all the Registrable Securities covered by the Shelf Registration have been sold
pursuant to the terms of the Shelf Registration.
The Company further agrees to use its best efforts to prevent the happening
of any event that would cause the Registration Statement pursuant to Section 3
hereof to contain a material misstatement
3
<PAGE>
or omission or to be not effective and usable for resale of the Registrable
Securities during the period that such Registration Statement is required to be
effective and usable.
(e) Each Holder of Registrable Securities whose Registrable Securities are
covered by a Registration Statement filed pursuant to this Section 3 agrees, if
requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of securities of the Company of the same
class as any Securities included in such Registration Statement, including a
sale pursuant to Rule 144 under the Act (except as part of such underwritten
registration), during the 10-day period prior to, and during the 90-day period
beginning on, the closing date of each underwritten offering made pursuant to
such Registration Statement, to the extent timely notified in writing by the
Company or the managing underwriters; provided that each Holder of Registrable
Securities shall be subject to the hold-back restrictions of this Section 3(e)
only once during the term of this Agreement.
The foregoing provisions shall not apply to any Holder of Registrable
Securities if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided that any such Holder shall undertake,
in its request to participate in any such underwritten offering, not to effect
any public sale or distribution of any applicable class of Registrable
Securities commencing on the date of sale of such applicable class of
Registrable Securities unless it has provided 45 days prior written notice of
such sale or distribution to the underwriter or underwriters.
SECTION 4. LIQUIDATED DAMAGES
If the Registration Statement: (i) is not filed with the Commission on or
prior to the date specified for such filing in Section 3(a) hereof; (ii) has not
been declared effective by the Commission pursuant to Section 3(a) hereof; or
(iii) following the date such Registration Statement is declared effective by
the Commission, shall cease to be effective without being restored to
effectiveness by amendment or otherwise within 30 business days, (each such
event referred to in clauses (i) through (iii), a "Shelf Registration Default")
--------------------------
to the extent permitted by applicable law, the Company shall pay as liquidated
damages and not as a penalty to each Holder during the first 90-day period
immediately following the occurrence, and during the continuance of such Shelf
Registration Default, an amount equal to $.0025 per week per Warrant (or per
such number of Warrant Shares then issuable upon exercise of or in respect of a
Warrant) held by such Holder for each week or pro rata for a portion of each
week thereof that the Shelf Registration Default continues. To the extent
permitted by applicable law, the amount of the liquidated damages will increase
by an additional $.0025 per week per Warrant (or per such number of Warrant
Shares then issuable upon exercise of or in respect of a Warrant) with respect
to each subsequent 90-day period until all Shelf Registration Defaults have been
cured, up to a maximum amount of liquidated damages of $.0125 per week per
Warrant (or per such number of Warrant Shares then issuable upon exercise of or
in respect of a Warrant).
All accrued liquidated damages shall be paid to record Holders by the
Company by wire transfer of immediately available funds, or by mailing a federal
funds check, on each Interest Payment Date (as defined in the Indenture). All
obligations of the Company set forth in the preceding paragraph that are
outstanding with respect to any Registrable Security at the time such security
has been effectively registered under the Act shall survive until such time as
all such obligations with respect to such security have been satisfied in full.
4
<PAGE>
SECTION 5. REGISTRATION PROCEDURES
(a) General Provisions. In connection with the Company's registration
-------------------
obligations pursuant to Section 3 hereof, the Company will use its best efforts
to effect such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(1) use its best efforts to keep such Registration Statement
continuously effective and provide or incorporate by reference all
requisite financial statements for the period specified in Section 3 of
this Agreement. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Registrable Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement or file appropriate documents that will be so
incorporated by reference, (1) in the case of clause (A), correcting any
such misstatement or omission, and (2) in the case of either clause (A) or
(B), use its best efforts to cause such amendment to be declared effective
and such Registration Statement and the related Prospectus to become usable
for their intended purpose(s) as soon as practicable thereafter;
(2) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the period set forth in
Section 3(d) hereof; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Act; and comply in all material respects with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus; the Company shall not be deemed to have used its best
efforts to keep a Registration Statement effective during the applicable
period if it voluntarily takes any action that would result in selling
Holders of the Registrable Securities covered thereby not being able to
sell such Registrable Securities during that period unless such action is
required under applicable law, provided that the foregoing shall not apply
--------
to actions taken by the Company in good faith and for valid business
reasons, including without limitation the acquisition or divestiture of
assets, so long as the Company promptly thereafter complies with the
requirements of clause (14) below, if applicable;
(3) advise the underwriter(s), if any, and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (A) when
the Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any Registration Statement or any post-
effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Registrable Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference
5
<PAGE>
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Registrable Securities under state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(4) make available to each selling Holder named in any Registration
Statement or Prospectus and each of the underwriter(s) in connection with
such sale, if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus and the
Company will not file or will correct any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which the selling Holders of the Registrable Securities
covered by such Registration Statement or the underwriter(s) in connection
with such sale, if any, shall reasonably object within five Business Days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission or fails to
comply with the applicable requirements of the Act;
(5) promptly upon the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, make
available copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(6) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement or any post-
effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness; provided that any person to whom information is provided
under this clause (6) agrees in writing to maintain the confidentiality of
such information to the extent such information is not in the public
domain;
(7) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, information with respect to
the principal amount of Registrable Securities being sold to such
6
<PAGE>
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Registrable Securities to be sold in such offering;
and make all required filings of such Prospectus supplement or post-
effective amendment as soon as practicable after the Company is notified of
the matters to be included in such Prospectus supplement or post-effective
amendment;
(8) furnish to each selling Holder and each of the underwriter(s) in
connection with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, and make available all documents incorporated by
reference therein and all exhibits (including exhibits incorporated therein
by reference);
(9) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection with
the offering and the sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(10) enter into such agreements (including, unless not required
pursuant to Section 3 hereof, an underwriting agreement) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Registrable Securities pursuant to any Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder
of Registrable Securities or underwriter in connection with any sale or
resale pursuant to any Registration Statement contemplated by this
Agreement, and in such connection, whether or not an underwriting agreement
is entered into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) furnish to each selling Holder and each underwriter, if any,
upon the effectiveness of the Registration Statement:
(1) a certificate, dated the date of effectiveness of the
Registration Statement, signed by (x) the President and (y) any
Vice President, the Secretary or an Assistant Secretary of the
Company, confirming, as of the date thereof, the matters set
forth in paragraphs (a), (b), (c) and (d) of Section 8 of the
Purchase Agreement and such other matters as the Holders and/or
underwriter(s) may reasonably request;
(2) an opinion, dated the date of effectiveness of the
Registration Statement, of counsel for the Company, covering (i)
due authorization and enforceability of the Warrants, (ii) a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company and representatives of the independent public accountants
for the Company and have considered the matters required to be
stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided to such
counsel by officers and other representatives
7
<PAGE>
of the Company and without independent check or verification), no
facts came to such counsel's attention that caused such counsel
to believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective amendment
thereto became effective, and contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration
Statement as of its date and, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading and
(iii) such other matters of the type customarily covered in
opinions of counsel for an issuer in connection with similar
securities offerings, as may reasonably be requested by such
parties. Without limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility for, and has
not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and
other financial, statistical and accounting data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Registration Statement, from the Company's
independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings,
and affirming the matters set forth in the comfort letters
delivered pursuant to Section 8(i) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Registration Statement the indemnification provisions
and procedures of Section 7 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (10), if any.
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of the Company contemplated in
(A)(1) above cease to be true and correct, the Company shall so advise the
underwriter(s), if any, and selling Holders promptly and if requested by
such Persons, shall confirm such advice in writing;
(11) prior to any public offering of Registrable Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s), if any, may request
and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities covered
by the applicable Registration Statement; provided that the Company
8
<PAGE>
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(12) in connection with any sale of Registrable Securities that will
result in such securities no longer being Transfer Restricted Securities,
cooperate with the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends;
and to register such Registrable Securities in such denominations and such
names as the Holders or the underwriter(s), if any, may request at least
two Business Days prior to such sale of Registrable Securities;
(13) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Registrable Securities, subject to the proviso
contained in clause (11) above;
(14) if any fact or event contemplated by clause (2) above shall
exist or have occurred, prepare a supplement or post-effective amendment to
the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Registrable Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(15) provide a CUSIP number for all Registrable Securities not later
than the effective date of a Registration Statement covering such
Registrable Securities and provide the Trustee under the Indenture with
printed certificates for the Registrable Securities which are in a form
eligible for deposit with the Depository Trust Company;
(16) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Holders selling Registrable Securities to
consummate the disposition of such Registrable Securities;
(17) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a twelve-
month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
9
<PAGE>
(18) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed if requested by the
Holders of a majority in aggregate principal amount of Registrable
Securities or the managing underwriter(s), if any;
(19) provide promptly to each Holder upon written request each
document filed with the Commission pursuant to the requirements of Section
13 or Section 15(d) of the Exchange Act; and
(20) if the registration is a registration in which securities of the
Company are sold to an underwriter for reoffering to the public, obtain a
customary comfort letter, dated as of the date of effectiveness of each
Registration Statement, addressed to the Board of Directors of the Company
from the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort letters to
boards of directors in underwritten offerings.
(b) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Registrable Security that, upon receipt of any notice from the Company of the
existence of any fact of the kind described in Section 5(a)(3)(D) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the applicable Registration Statement until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
5(a)(14) hereof, or until it is advised in writing (the "Advice") by the Company
------
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, each Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 hereof, as
applicable, shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to Section 5(a)(3)(D)
hereof to and including the date when each selling Holder covered by such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by Section 5(a)(14) hereof or shall have
received the Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter") and its counsel, as may be required by the rules and
regulations of the NASD); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including, without limitation, expenses of printing or engraving certificates
for the Registrable Securities in a form eligible for deposit with the
Depositary Trust Company and printing of Prospectuses), messenger and delivery
services and telephone; (iv) all fees and disbursements of counsel for the
Company and the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing the Registrable Securities on a
national exchange or automated quotation system
10
<PAGE>
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with each Registration Statement required hereunder, the
Company will reimburse the Holders of Registrable Securities being registered
pursuant to such Registration Statement for the fees and disbursements of not
more than one counsel chosen by the Holders of a majority of the principal
amount of such Registrable Securities, or more than one, if, in the reasonable
judgment of counsel for the Holders and counsel for the Company, a conflict
exists among such Holders. Notwithstanding the provisions of this Section 6,
each Holder of Registrable Securities shall pay all registration expenses to the
extent required by applicable law.
SECTION 7. INDEMNIFICATION
(a) The Company and its Subsidiaries, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls a Holder within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person to
the fullest extent lawful, from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or in
any supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, that the
Company will not be liable in any such case to the extent, but only to the
extent, that (i) any such loss, liability, claim, damage or expense arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use therein and (ii) the foregoing indemnity with respect to any
untrue statement contained in or omitted from a Registration Statement or the
Prospectus shall not inure to the benefit of any Holder (or any person
controlling such Holder), from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Warrants which are the
subject thereof if it is finally judicially determined that such loss,
liability, claim, damage or expense resulted solely from the fact that the
Holder sold Warrants to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Registration
Statement and the Prospectus, as amended or supplemented, and (x) the Company
shall have previously and timely furnished sufficient copies of the Registration
Statement or Prospectus, as so amended or supplemented, to such Holder in
accordance with this Agreement and (y)
11
<PAGE>
the Registration Statement or Prospectus, as so amended or supplemented, would
have corrected such untrue statement or omission of a material fact. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have, including, under this Agreement.
(b) Each Holder, severally and not jointly, agrees to indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such Holder
expressly for use therein. This indemnity will be in addition to any liability
which a Holder may otherwise have, including under this Agreement. In no event,
however, shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon its
sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 7 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties. The indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified
12
<PAGE>
parties in each jurisdiction in which any claim or action is brought; provided
that the indemnifying party shall be liable for separate counsel for any
indemnified party in a jurisdiction, if counsel to the indemnified parties shall
have reasonably concluded that there may be defenses available to such
indemnified party that are different from or additional to those available to
those available to one or more of the other indemnified parties and that
separate counsel for such indemnified party is prudent under the circumstances.
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its prior written consent; provided, that such consent was not
unreasonably withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 7 is for any reason held to be
unavailable from the Company or is insufficient to hold harmless a party
indemnified thereunder, the Company and each Holder shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any investigation,
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company, any contribution received by the Company from persons,
other than the Holders, who may also be liable for contribution, including
persons who control the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act) to which the Company and any Holder may be
subject, in such proportion as is appropriate to reflect the relative benefits
received by the Company from the offering of Registrable Securities and any such
Holder from its sale of Registrable Securities or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in this Section 7,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Holders in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and any
Holder shall be deemed to be in the same proportion as (x) the total proceeds
from the offering of the Registrable Securities (net of discounts but before
deducting expenses) received by the Company and (y) the total proceeds received
by such Holder upon its sale of Registrable Securities which would otherwise
give rise to the indemnification obligation, respectively. The relative fault
of the Company and of the Holders shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Holders and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and each Holder agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding
the provisions of this Section 7, (i) no Holder shall be required to contribute,
in the aggregate, any amount in excess of the amount by which the total received
by such Holder with respect to the sale of its Registrable Securities exceeds
the sum of (A) the amount paid by such Holder for such Registrable Security plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, (A) each person, if any, who controls a Holder within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B)
the respective officers, directors, partners, employees, representatives and
agents of a Holder or any controlling person shall have the same rights to
contribution as such Holder, and each person, if any, who
13
<PAGE>
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 7(d). Any
party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7, notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this Section 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any Registrable
Securities remain outstanding, to make available, upon request of any Holder of
Registrable Securities, to any Holder or beneficial owner of Registrable
Securities in connection with any sale thereof and any prospective purchaser of
such Registrable Securities designated by such Holder or beneficial owner, the
information required by Rule 144A(d)(4) under the Act in order to permit resales
of such Registrable Securities pursuant to Rule 144A.
SECTION 9. MISCELLANEOUS
(a) Remedies. Each Holder of Registrable Securities, in addition to being
---------
entitled to exercise all rights provided herein, and as provided in the Purchase
Agreement and the Warrant Agreement and granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the date
---------------------------
of this Agreement enter into any agreement with respect to its securities that
conflicts with the rights granted to the Holders of Registrable Securities in
this Agreement or otherwise conflicts with the provisions hereof. The Company
has not previously entered into any agreement granting any registration rights
of its securities to any Person except as set forth in Schedule I hereto. The
rights granted to the Holders of Registrable Securities hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any other agreement in effect on the
date hereof, except where a waiver with respect thereto has been obtained prior
to the date of effectiveness of any Registration Statement required under this
Agreement.
(c) Adjustments Affecting the Registrable Securities. The Company will not
-------------------------------------------------
take any action, or permit any change to occur, with respect to the Registrable
Securities which would (i) adversely affect the ability of any of the Holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or (ii) materially adversely affect the
marketability of the Registrable Securities in any such registration.
14
<PAGE>
(d) Amendments and Waivers. The provisions of this Agreement, including
-----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of a
majority of the outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders of Registrable
Securities may be given by the Holders of at least a majority of the Registrable
Securities being sold.
(e) Notices. All notices and other communications provided for or
--------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Hyperion Telecommunications, Inc.
5 West Third Street
Suite 720
Coudersport, Pennsylvania
Telecopier No.: (814) 274-8631
Attention: Daniel R. Milliard
With a copy to:
Buchanan Ingersoll
301 Grant Street
Oxford Centre
Pittsburgh, Pennsylvania
Telecopier No.: (412) 272-1041
Attention: Carl Rothenberger, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
-----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
15
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
-------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
---------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
-------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Documents (as
-----------------
defined in the Purchase Agreement) is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[Signature Page Follows]
16
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HYPERION TELECOMMUNICATIONS, INC.
By: /s/ Daniel R. Milliard
______________________________________
Name: Daniel R. Milliard
Title: President and Secretary
BEAR, STEARNS & CO. INC.
By: /s/ Donald R. Mullen Jr.
_____________________________________________
Name: Donald R. Mullen Jr.
Title: Senior Managing Director
CHASE SECURITIES INC.
By: /s/ S. Culsky
_____________________________________________
Name: S. Culsky
Title: Managing Director
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Tom Mooney
_____________________________________________
Name: Tom Mooney
Title: Senior Vice President
<PAGE>
SCHEDULE I
Existing
--------
Registration Rights
-------------------
Shareholder Agreement amont the Company, Adelphia Communications
Corporation, Charles R. Drenning, Paul D. Fajerski and Randolph S. Fowler, dated
October 7, 1991, as amended.
18
<PAGE>
EXHIBIT 12.1
HYPERION TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------- ------------------
1992 1993 1994 1995 1994 1995
----- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Loss before Income Taxes,
Extraordinary Loss and
Cumulative Effect of
Change in Accounting
Principle............... $(213) $(1,075) $(4,822) $(7,721) $ (5,715) $ (9,921)
Add:
Fixed Charges, Excluding
Capitalized Interest.... -- -- 2,164 3,321 2,298 4,152
----- ------- ------- ------- -------- --------
Net Earnings (Loss)
Available for Fixed
Charges................. $(213) $(1,075) $(2,658) $(4,400) $ (3,417) $ (5,769)
Fixed Charges
Interest Expense........ $ -- $ -- $ 2,164 $ 3,321 $ 2,298 $ 4,152
----- ------- ------- ------- -------- --------
Total Fixed Charges...... $ -- $ -- $ 2,164 $ 3,321 $ 2,298 $ 4,152
----- ------- ------- ------- -------- --------
Ratio of Earnings to
Fixed Charges........... -- -- -- -- -- --
Deficiency in Earnings
Required to Cover Fixed
Charges................. $(213) $(1,075) $(4,822) $(7,721) $ (5,715) $ (9,921)
===== ======= ======= ======= ======== ========
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
Hyperion Enhanced Networks of Virginia, Inc. (Delaware corporation)
Hyperion Telecommunications of Florida, Inc. (Florida corporation)
Continental Fiber Technologies, Inc. (20% owned) (Florida corporation)
Hyperion Telecommunications of New York, Inc. (Delaware corporation)
NHT Partnership (40% owned) (New York general Partnership)
NewChannels Hyperion Telecommunications (50% owned) (New York general
partnership)
Hyperion Telecommunications of Kansas, Inc. (Delaware corporation)
Multimedia Hyperion Telecommunications (49.9% owned) (Kansas general
partnership)
Hyperion Telecommunications of Kentucky, Inc. (Delaware corporation)
Louisville Lightwave (50% owned) (New Jersey partnership)
Hyperion Telecommunications of Massachusetts, Inc. (Delaware corporation)
Hyperion Telecommunications of New Jersey, Inc. (Delaware corporation)
New Jersey Fiber Technologies (19.7% owned) (New Jersey general partnership)
Hyperion Telecommunications of Pennsylvania, Inc. (Delaware corporation)
PECO Hyperion Telecommunications (50% owned) (Pennsylvania general
partnership)
Hyperion Telecommunications of Harrisburg (50% owned) (Pennsylvania general
partnership)
Hyperion Telecommunications of Tennessee, Inc. (Delaware corporation)
AVR of Tennessee, L.P. d/b/a Hyperion of Tennessee, L.P. (25% owned)
(California limited partnership)
Hyperion Telecommunications of Vermont, Inc. (Delaware corporation)
Hyperion Telecommunications of Virginia, Inc. (Virginia corporation)
Alternet of Virginia (37% owned) (Virginia general partnership)
<PAGE>
EXHIBIT NO. 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Hyperion
Telecommunications, Inc. on Form S-4 of our report dated February 16, 1996
(March 19, 1996 as to Note 5; May 16, 1996 as to Notes 3 and 4), appearing
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
June 27, 1996
<PAGE>
================================================================================
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-494109
(Jurisdiction of incorporation or organization (I.R.S. employer
if not a US national bank) identification no.)
77 Water Street
New York, New York 10005
(Address of principal executive offices) (Zip code)
Mark F. McLaughlin
Bank of Montreal Trust Company
77 Water Street, New York, NY 10005
(212) 701-7602
(Name, address and telephone number of agent for service)
----------------------------------
HYPERION TELECOMMUNICATIONS, INC.
(Exact name of obligor as specified in its charter)
Delaware 25 -1669404
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Five West Third Street -- P.O. Box 472
Coudersport, PA 16915
(Address of principal executive offices)
----------------------------------
13% Senior Discount Notes Due 2003
(Title of the indenture securities)
================================================================================
<PAGE>
- 2 -
Item 1. General Information.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York NY 10045
State of New York Banking Department
2 Rector Street, New York, NY 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with the Obligor.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
Item 16. List of Exhibits.
-----------------
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust Company
to transact business and exercise corporate trust powers;
incorporated herein by reference as Exhibit "A" filed with Form T-1
Statement, Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939
the Trustee, Bank of Montreal Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 3rd day of June, 1996.
BANK OF MONTREAL TRUST COMPANY
By /s/ Therese Gaballah
---------------------
Therese Gaballah
Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Due From Banks $ 1,570,159
-----------
Investment Securities:
State & Municipal 17,025,354
Other 100
-----------
Total Securities 17,025,454
-----------
Loans and Advances
Federal Funds Sold 12,000,000
Overdrafts (336,057)
-----------
Total Loans and Advances 11,663,943
-----------
Investment in Harris Trust, NY 6,656,129
Premises and Equipment 509,422
Other Assets 2,494,863
-----------
TOTAL ASSETS $39,919,970
===========
LIABILITIES
Trust Deposits $ 9,859,384
Other Liabilities 9,239,409
-----------
TOTAL LIABILITIES 19,098,793
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 15,510,844
Equity - Municipal Gain/Loss 88,145
-----------
TOTAL CAPITAL ACCOUNTS 20,821,177
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $39,919,970
===========
</TABLE>
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
December 31, 1995
<PAGE>
We, the undersigned directors, attest to the correctness of this statement
of resources and liabilities. We declared that it has been examined by us, and
to the best of our knowledge and belief has been prepared in conformance with
the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Hyperion Telecommunications, Inc. for the 9 months
ended December 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 433
<PP&E> 12,601
<DEPRECIATION> (1,342)
<TOTAL-ASSETS> 30,948
<CURRENT-LIABILITIES> 4,568
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> (23,666)
<TOTAL-LIABILITY-AND-EQUITY> 30,666
<SALES> 0
<TOTAL-REVENUES> 2,496
<CGS> 0
<TOTAL-COSTS> 5,114
<OTHER-EXPENSES> (3,151)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,152
<INCOME-PRETAX> (9,921)
<INCOME-TAX> (58)
<INCOME-CONTINUING> (9,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,863)
<EPS-PRIMARY> (0.99)
<EPS-DILUTED> (0.99)
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
for
13% Senior Discount Notes Due 2003
of
Hyperion Telecommunications, Inc.
Pursuant to the Exchange Offer in Respect of
All of their Outstanding 13% Senior Discount Notes due 2003
for
13% Senior Discount Notes due 2003, Series B
Pursuant to the Prospectus Dated 1996
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1996, OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE
EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE WITHDRAWN PRIOR TO
THE EXPIRATION DATE.
To: Bank of Montreal Trust Company, Exchange Agent
By Registered or Certified Mail, By Facsimile
Hand or Overnight Courier Attention: Corporate Trust Department:
Bank of Montreal Trust Company (212) 701-7684
77 Water Street
New York, NY 10005 Confirm by Telephone:
Attention: Corporate Trust Department (212) 701-7653
Delivery of this Letter of Transmittal to an address, or transmission via
telegram, telex or facsimile, other than as set forth above will not constitute
a valid delivery. The instructions contained herein should be read carefully
before this Letter of Transmittal is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES
PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD
NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
By execution hereof, the undersigned acknowledges receipt of the Prospectus
(the "Prospectus"), dated , 1996, of Hyperion
Telecommunications, Inc. (the "Issuer"), which, together with this Letter of
Transmittal and the Instructions hereto (the "Letter of Transmittal"),
constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 13% Series B Senior Discount Notes due 2003 (the "New
Notes") that have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which the
Prospectus constitutes a part, for each $1,000 principal amount of its
outstanding 13% Senior Discount Notes due 2003 (the "Old Notes"), upon the terms
and subject to the conditions set forth in the Prospectus.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer, is
acquiring the New Notes in its ordinary course of business and has no
arrangement or understanding with any person to participate in the distribution
of the New Notes to be received in the Exchange Offer.
This Letter of Transmittal is to be used by Holders if : (i) certificates
representing Old Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Old Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the procedures set forth in the Prospectus under "The Exchange
Offer-Procedures for Tendering" by any financial
<PAGE>
institution that is a participant in DTC and whose name appears on a security
position listing as the owner of Old Notes (such participants, acting on behalf
of Holders (as defined below), are referred to herein, together with such
Holders, as "Acting Holders"); or (iii) tender of Old Notes is to be made
according to the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer-Guaranteed Delivery Procedures." Delivery of documents
to DTC does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Old Notes are registered on the books of the Issuer or any other
person who has obtained a properly completed bond power from the registered
Holder or (ii) whose Old Notes are held of record by DTC and who desires to
deliver such Old Notes by book entry transfer at DTC.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 8 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD NOTES
MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately executed schedule and affix the schedule to
this Letter of Transmittal. Tenders of Old Notes will be accepted only in
principal amounts equal to $1,000 or integral multiples thereof.
-2-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Certificate Aggregate
Number(s)* (Attach Principal
Name(s) and Address(es) of Holder(s) signed list if Amount Tendered (if
(Please fill in, if blank) necessary) less than all)**
- ------------------------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
- ------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL AMOUNT OF OLD NOTES TENDERED
- ------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer
** Need not be completed by Holders who wish to tender with respect
to all Old Notes listed. See Instruction 2.
- ------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
DTC Book-Entry Account No.:
------------------------------------------------
Transaction Code No.:
------------------------------------------------------
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Old Notes or other required documents to reach
the Exchange Agent prior to the Expiration Date or (iii) the procedures for
book-entry transfer cannot be completed prior to the Expiration Date, such
Holders may effect a tender of such Old Notes in accordance with the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange Offer-
Guaranteed Delivery Procedures."
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s) of Old Notes:
-----------------------------------------
Window Ticket No. (if any):
------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Eligible Institution that Guaranteed Delivery:
---------------------
DTC Book-Entry Account No.:
------------------------------------------------
If Delivered by Book-Entry Transfer,
Name of Tendering Institution:
---------------------------------------------
Transaction Code No.:
------------------------------------------------------
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
----------------------------------------------------------------------
Address:
-------------------------------------------------------------------
---------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms of the Exchange Offer, the undersigned hereby tenders
to the Issuer the principal amount of Old Notes indicated above. Subject to and
effective upon the acceptance
-4-
<PAGE>
for exchange of the principal amount of Old Notes tendered in accordance with
this Letter of Transmittal, the undersigned sells, assigns and transfers to, or
upon the order of, the Issuer all right, title and interest in and to the Old
Notes tendered hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent and its agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as the agent of the Issuer and as
Trustee under the Indenture for the Old Notes and the New Notes) with respect to
the tendered Old Notes with full power of substitution to (i) deliver
certificates for such Old Notes to the Issuer, or transfer ownership of such Old
Notes on the account books maintained by DTC, together, in either such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Issuer and (ii) present such Old Notes for transfer on the books
of the Issuer and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are acquired by the Issuer. The
undersigned also acknowledges that this Exchange Offer is being made in reliance
upon an interpretation by the staff of the Securities and Exchange Commission
that the New Notes issued in exchange for the Old Notes pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by the holders
thereof (other than any such holder that is an "affiliate" of the Issuer within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
the distribution of such New Notes. The undersigned acknowledges that if he or
she is participating in the Exchange Offer for the purpose of distributing the
New Notes, the undersigned must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes and the
undersigned represents that such Old Notes were acquired as a result of market-
making activities or other trading activities and acknowledges that it will
deliver a prospectus in connection with any resale of such New Notes, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned represents that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such Holder's
business, (ii) such Holder has no arrangements with any person to participate in
the distribution of such New Notes and (iii) such Holder is not an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Issuer or, if such
Holder is an affiliate, that such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
-5-
<PAGE>
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment and transfer of the Old Notes tendered
hereby.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuer has given oral or
written notice thereof to the Exchange Agent. If any tendered Old Notes are not
accepted for exchange pursuant to the Exchange Offer for any reason,
certificates for any such unaccepted Old Notes will be terminated (except as
noted below with respect to tenders through DTC), without expense, to the
undersigned at the address shown below or at a different address shown below or
at a different address as may be indicated under "Special Issuance Instructions"
as soon as practicable following the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, successors and
assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer-Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Issuer upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in such event in the case of
Old Notes tendered by DTC, by credit to the account at DTC). Similarly, unless
otherwise indicated under "Special Delivery Instructions," please send the
certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and any certificates for Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signatures, unless, in either event,
tender is being made through DTC. In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Issuer has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Issuer
does not accept for exchange any of the Old Notes so tendered.
-6-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES REGARDLESS
OF WHETHER OLD NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Old Notes, or by person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or other person
acting in a fiduciary or representative capacity, such person must set forth his
or her full title below under "Capacity" and submit evidence satisfactory to the
Issuer of such person's authority to so act. See Instruction 3 herein.
If the signature appearing below is not of the registered Holder(s) of the
Old Notes, then the registered Holder(s) must sign a valid proxy.
X Date:
---------------------------------- -----------------------------------
X Date:
---------------------------------- -----------------------------------
Signature(s) of
Holder(s) or
Authorized Signatory
Name(s): Address
--------------------------- ---------------------------------
--------------------------- ---------------------------------
(Please Print) (Including Zip Code)
Capacity: Area Code and Telephone No.:
-------------------------- ------------
Social Security No.:
---------------
SIGNATURE GUARANTEE (See Instruction 3 herein)
Certain Signatures Must Be Guaranteed by an Eligible Institution
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signatures)
- --------------------------------------------------------------------------------
(Address (Including zip code) and Telephone Number
(including area code) of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- ------------------------------------------------------------------------------
(Printed Name)
- ------------------------------------------------------------------------------
(Title)
Date:
--------------------
-7-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instuctions 3 and 4 herein) (See instructions 3 and 4 herein)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered are principal amount not tendered or
to be issued in the name of, or the not accepted for purchase or the
New Notes issued pursuant to the New Notes issued pursuant to the
Exchange Offer are to be issued to Exchange Offer are to be sent to
the order of, someone other than someone other than the person or
the person or persons whose persons whose signature(s)
signature(s) appear(s) within this appear(s) within this Letter of
Letter of Transmittal or issued to Transmittal or to an address
an address different from that different from that shown in the
shown in the box entitled box entitled "Description of Old
"Description of Old Notes" within Notes" within this Letter of
this Letter of Transmittal, of if Transmittal.
Old Notes tendered by book-entry
transfer that are not accepted for
purchase are to be credited to an
account maintained at DTC.
Name:.............................. Name:..............................
(Please Print) (Please Print)
Address:........................... Address:...........................
(Please Print) (Please Print)
................................... ...................................
Zip Code Zip Code
................................... ...................................
Taxpayer Identification or Taxpayer Identification or
Social Security Number Social Security Number
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Old Notes. The certificates
for the tendered Old Notes (or a confirmation of a book-entry into the Exchange
Agent's account at DTC of all Old Notes delivered electronically), as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile hereof and any other documents required by this Letter of Transmittal
must be received by the Exchange Agent at its address set forth herein prior to
5:00 p.m., New York City time, on the Expiration Date. The method of delivery
of the tendered Old Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent is at the election and risk of the Holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that the Holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assume timely delivery. No Letter
of Transmittal or Old Notes should be sent to the Issuer.
Holders who wish to tender their Old notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date must tender their Old Notes and follow the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder of the Old Notes, the certificate number or numbers of
such Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five business days
after the Expiration Date, this Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a confirmation
of electronic delivery of book-entry delivery into the Exchange Agent's account
at DTC) and any of the required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of electronic mail delivery of book-entry delivery into the
Exchange Agent's account at DTC), must be received by the Exchange Agent within
five business days after the Expiration Date, all as provided in the Prospectus
under the caption "Guaranteed Delivery Procedures." Any Holder of Old Notes who
wishes to tender his Old Notes pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration
Date.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right
-9-
<PAGE>
to reject any and all Old Notes not properly tendered or any Old Notes the
Issuer's acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Issuer's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuer shall determine. Neither the
Issuer, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering Holders of Old Notes, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
2. Partial Tenders. Tenders of Old Notes will be accepted in all
denominations of $1,000 and integral multiples in excess thereof. If less than
the entire principal amount of any Old Notes is tendered, the tendering Holders
should fill in the principal amount tendered in the third column of the chart
entitled "Description of Old Notes." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, Old Notes for the principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, Old Notes for
the principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange of any Old Notes accepted will be sent
to the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal or unless tender
is made through DTC, promptly after the Old Notes are accepted for exchange.
3. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof) is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of Old Notes tendered and the certificate(s) for New Notes
issued in exchange thereof is to be issued (or any untendered principal amount
of Old Notes is to be reissued) to the registered Holder, such Holder need not
and should not endorse any tendered Old Note, nor provide a separate bond power.
In any other case, such Holder must either properly endorse the Old Notes
tendered or transmit a properly completed separate bond power with this Letter
of Transmittal, with the signatures on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of
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<PAGE>
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuer,
evidence satisfactory to the Issuer of their authority so to act must be
submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 3 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal (or facsimile hereof) must be
guaranteed by an Eligible Institution unless the Old Notes tendered pursuant
thereto are tendered (i) by a registered Holder (including any participant in
DTC whose name appears on a security position listing as the owner of Old Notes)
who has not completed the box set forth herein entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" or (ii) for
the account of an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering Holders should
indicate, in the applicable spaces, the name and address to which New Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of the
person signing this Letter of Transmittal (or in the case of tender of the Old
Notes through DTC, if different from DTC). In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
5. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other person) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering Holder
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
6. Waiver of Conditions. The Issuer reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Old Notes tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instruction.
8. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may
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<PAGE>
be directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Certificate Surrendered Old Notes Tendered Old Notes Accepted
- -----------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Delivery Prepared by __________ Check by __________ Date __________
- -----------------------------------------------------------------------
</TABLE>
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<PAGE>
Notice of Guaranteed Delivery
for Tender of
13% Senior Discount Notes due 2003
(the "Old Notes")
of
HYPERION TELECOMMUNICATIONS, INC.
This form, or one substantially equivalent hereto, must be used to tender
Old Notes pursuant to the Exchange Offer described in the Prospectus dated
___________, 1996 (the "Prospectus") of Hyperion Telecommunications, Inc., a
Delaware corporation (the "Company"), if a holder of Old Notes cannot deliver a
Letter of Transmittal to the Exchange Agent listed below (the "Exchange Agent")
or cannot either deliver the Old Notes to be tendered or complete the procedure
for book-entry transfer prior to 5:00 P.M., New York City time, on _______, 1996
or such later date and time to which the Exchange Offer may be extended (the
"Expiration Date"). This form, or one substantially equivalent hereto, must be
delivered by hand or sent by facsimile transmission or mail to the Exchange
Agent, and must be received by the Exchange Agent on or prior to the Expiration
Date. See "The Exchange Offer - Procedures for Tendering" in the Prospectus.
Capitalized terms used herein and not defined herein shall have the meanings
ascribed thereto in the Prospectus.
To: Bank of Montreal Trust Company, Exchange Agent
By Mail, by Hand or Overnight Delivery:
Bank of Montreal Trust Company
77 Water Street
New York, NY 10005
Attn: Corporate Trust Department
By Facsimile:
(212) 701-7684
Confirm by Telephone:
(212) 701-7653
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via facsimile other than as set forth above does
not constitute a valid delivery.
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<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of the Old
Notes indicated below and that the Letter of Transmittal cannot be delivered to
the Exchange Agent and/or either the certificates representing such Old Notes
cannot be delivered to the Exchange Agent or the procedure for book-entry
transfer cannot be completed prior to the Expiration Date. The undersigned
hereby tenders the Old Notes indicated below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and the Letter of Transmittal, receipt of
which is hereby acknowledged.
Name(s) of Tender Holder(s):
----------------------------------------------------
- --------------------------------------------------------------------------------
Please Print or Type
- --------------------------------------------------------------------------------
Signature
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number(s):
------------------------------------------------------------
Name(s) in which Old Notes are registered:
--------------------------------------
- --------------------------------------------------------------------------------
Certificate No(s). Principal Amount
(if applicable)* Transferred
-------------------- ----------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
- ---------------------------------- ----------------------------------
_______________
*Need not be completed by book-entry holders.
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<PAGE>
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or a correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees that the
undersigned will deliver to the Exchange Agent the certificates representing the
Old Notes being tendered hereby in proper form for transfer (or a confirmation
of book-entry transfer of such Old Notes, into the Exchange Agent's account at
the book-entry transfer facility) with delivery of a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, all within five business
days after the Expiration Date.
Name of Firm
----------------------- -----------------------------------
Authorized Signature
Address Name
---------------------------- -------------------------------
Please Print or Type
Title
- ----------------------------------- ------------------------------
Zip Code
Telephone No. Dated:
---------------------- -----------------------------
The institution that completes this form must communicate the guarantee to
the Exchange Agent and must deliver the certificates representing any Old Notes
(or a confirmation of book-entry transfer of such Old Notes into the Exchange
Agent's account at the book-entry transfer facility) and the Letter of
Transmittal to the Exchange Agent within the time period shown herein. Failure
to do so could result in a financial loss to such institution.
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