<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________
CENTENNIAL COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4812 84-1324155
(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer Identification Number)
incorporation or organization) Code Number)
</TABLE>
___________
1600 WYNKOOP STREET
SUITE 300
DENVER, CO 80202
(303) 405-0475
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
___________
BERNARD G. DVORAK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CENTENNIAL COMMUNICATIONS CORP.
1600 WYNKOOP STREET
SUITE 300
DENVER, COLORADO 80202
(303) 405-0475
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
___________
Copies to:
MICHAEL S. QUINN, ESQ.
MARK D. EBEL, ESQ.
HOLLAND & HART LLP
555 17TH STREET, SUITE 3200
DENVER, COLORADO 80202
(303) 295-8000
___________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.
___________
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, check the following box.
___________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF REGISTRATION FEE
SECURITIES REGISTERED AGGREGATE PRICE AGGREGATE OFFERING
TO BE REGISTERED PER NOTE PRICE (1)
<S> <C> <C> <C> <C>
14% Senior Discount $40,000,000 100% $40,000,000 $11,800
Notes due 2005
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(f) under the Securities Act of
1933.
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 THAT 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>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1998
CENTENNIAL COMMUNICATIONS CORP.
OFFER TO EXCHANGE
14% SENIOR DISCOUNT NOTES DUE 2005 ("EXCHANGE NOTES")
FOR ANY AND ALL OUTSTANDING
14% SENIOR DISCOUNT NOTES DUE 2005 ("PRIVATE NOTES")
________________
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON ___________, 1998 UNLESS EXTENDED (THE "EXPIRATION DATE").
Centennial Communications Corp., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and in the accompanying Letter of Transmittal (the
"Letter of Transmittal," which together with the Prospectus constitute the
"Exchange Offer"), to exchange its 14% Senior Discount Notes due 2005 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a registration statement of which
this Prospectus is a part (together with all amendments and exhibits thereto,
the "Registration Statement"), for an equal principal amount of its outstanding
14% Senior Discount Notes due 2005 (the "Private Notes"), of which $40 million
aggregate principal amount is outstanding on the date hereof. The Exchange
Notes and the Private Notes are sometimes collectively referred to herein as the
"Notes." The terms of the Exchange Notes are identical in all material respects
to those of the Private Notes, except (i) for certain transfer restrictions and
registration rights relating to the Private Notes; and (ii) that if the Exchange
Offer is not consummated in a timely manner, or if the Company fails to comply
with certain other registration obligations with respect to the Private Notes,
the Company is required to pay certain Liquidated Damages (as defined) to the
Holders (as defined) of the Private Notes. See "Description of Notes." The
Exchange Notes will be issued pursuant to, and be entitled to the benefits of,
an Indenture dated as of January 15, 1998 (the "Indenture").
The Notes mature on January 1, 2005. Interest on the Notes will not accrue
prior to January 1, 2003. Thereafter, interest on the Notes will be payable in
cash at a rate of 14% per annum, payable semi-annually in arrears on January 1
and July 1 of each year commencing July 1, 2003. The Company will not be
required to make any mandatory redemption or sinking fund payment with respect
to the Notes prior to maturity. The Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or after January 1, 2003 at the
redemption prices set forth herein, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption. In addition, at any time
prior to January 1, 2001, the Company may, on one or more occasions, redeem up
to a maximum of 25% in aggregate principal amount at maturity of the Notes, at a
redemption price of 114% of the Accreted Value (as defined) thereof, plus
accrued and unpaid Liquidated Damages, if any, to the date of the redemption
with the net cash proceeds of certain sales of capital stock of the Company;
provided that at least 75% in aggregate principal amount at maturity of the
Notes remain outstanding immediately after the occurrence of each such
redemption. In the event of a Change of Control (as defined), the Holders of
the Notes will have the right to require the Company to purchase their Notes, in
whole or in part, at a price equal to 101% of the Accreted Value thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase or, in the case of any such purchase on or after January 1, 2003, at
101% of the aggregate principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of purchase. See "Description of
Notes."
(Continued on next page)
________________
SEE "RISK FACTORS" COMMENCING ON PAGE 20 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE EXCHANGE NOTES.
________________
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 REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________
THE DATE OF THIS PROSPECTUS IS _________, 1998.
<PAGE>
The Notes rank pari passu in right of payment with all existing and future
unsubordinated indebtedness of the Company and will rank senior in right of
payment to all subordinated indebtedness of the Company. The Notes are secured
by a pledge of (i) 100% of the Capital Stock (as defined) of SMR Direct USA,
Inc. (this entity has no operations and its financial position consists only of
a nominal capitalization) and all future domestic direct Restricted Subsidiaries
(as defined) of the Company and (ii) 100% of the Capital Stock (other than
Excluded Stock (as defined)) of each of SMR Direct Cayman Corp. (this entity is
solely a nominee shareholder in certain of the Company's Subsidiaries (as
defined) located in Latin America) and Centennial Cayman Corp. (together with
SMR Direct Cayman Corp., the "Cayman Entities") and 100% of the Capital Stock
(other than Excluded Stock) of all future foreign direct Restricted Subsidiaries
of the Company. Pursuant to the definition of Excluded Stock, the Company has
pledged approximately 66% of the total outstanding Capital Stock of each of the
Cayman Entities. The Notes are effectively subordinated to additional secured
indebtedness of the Company and the Notes are structurally subordinated to
indebtedness and other liabilities (including trade payables) of the Company's
Subsidiaries. As of June 30, 1998, the Notes were effectively subordinated to
approximately $4.9 million of secured indebtedness of the Company and to
approximately $1.1 million of indebtedness and other liabilities of the
Company's Subsidiaries (excluding intercompany payables to the Company).
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on ____________,
1998, unless the Exchange Offer is extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. The Exchange Offer is not conditioned
upon any minimum principal amount of Private Notes being tendered for exchange,
but is subject to certain customary conditions. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Private
Notes, the Company will promptly return all previously tendered Private Notes to
the Holders thereof. See "The Exchange Offer."
The Private Notes were issued and sold on January 15, 1998 (the "Initial
Offering") to Salomon Brothers Inc and Prudential Securities Incorporated
(collectively, the "Initial Purchasers") pursuant to a Purchase Agreement dated
January 12, 1998 among the Company and the Initial Purchasers (the "Initial
Purchase Agreement"). The Initial Purchase Agreement provided for the sale by
the Company of 40,000 units (the "Units"), each consisting of a Private Note
having a principal amount at maturity of $1,000 and a warrant (an "Initial
Warrant") to purchase 64 shares of the Company's Common Stock. The Initial
Purchasers subsequently resold the Private Notes and the Initial Warrants in
reliance on Rule 144A under the Securities Act.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Notes Registration Rights Agreement dated
as of January 15, 1998, among the Company and the Initial Purchasers (the "Notes
Registration Rights Agreement"). Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission") set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Private Notes may be
offered for resale, resold and otherwise transferred by a Holder thereof (other
than (i) a broker-dealer who purchased such Private Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an affiliate within the meaning of
Rule 405 under the Securities Act (an "Affiliate") of the Company), without
compliance with the registration and prospectus delivery requirements of the
Securities Act; provided that the Holder is acquiring the Exchange Notes in the
ordinary course of its business and is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private Notes
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Private Notes, where such Private 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 meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. The Company has
agreed that, for a period of 180 days from the date the Registration Statement
is declared effective (the "Effective Date") it will make this Prospectus
available to any broker-dealer for use in connection with any such resales. See
"Plan of Distribution." The Company believes that none of the registered Holders
of the Private Notes is an Affiliate of the Company.
The Private Notes have been designated eligible for trading by qualified
institutional investors in the Private Initial Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market of the National Association of
Securities Dealers (the "NASD"). The Company does not intend to apply for
listing of the Exchange Notes on any
2
<PAGE>
securities exchange or to seek approval through any automated quotation system.
There can be no assurance regarding the future development of a market for the
Exchange Notes, or the ability of Holders of the Exchange Notes to sell their
Exchange Notes or the price at which such Holders may be able to sell their
Exchange Notes. If such a market were to develop, the Exchange Notes could trade
at prices that may be higher or lower than their Accreted Value (or principal
amount) depending on many factors, including prevailing interest rates, the
Company's operating results and the market for similar securities. See "Risk
Factors - Lack of a Public Market for the Notes."
Holders of Private Notes whose Private Notes are not tendered and accepted in
the Exchange Offer will continue to hold such Private Notes and will be entitled
to all the rights and preferences and will be subject to the existing
restrictions upon transfer thereof. Except in certain circumstances, the Company
will not have any further obligation to such Holders to provide for the
registration under the Securities Act of the Private Notes held by them.
The Company will not receive any proceeds from, and has agreed to bear all
registration expenses of, the Exchange Offer. No underwriter is being used in
connection with the Exchange Offer. See "The Exchange Offer - Resale of the
Exchange Notes."
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained in this
Prospectus or any accompanying Prospectus supplement and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company, or any underwriter, agent or dealer. Neither the delivery of
this Prospectus or any such Prospectus supplement nor any resale made thereunder
shall, under any circumstance, create an implication that there has been no
change in the affairs of the Company since the date hereof or thereof. This
Prospectus and any such related Prospectus supplement do not constitute an offer
to sell or a solicitation or an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction.
________________
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION
RELATING TO THE COMPANY THAT ARE BASED ON THE BELIEFS OF MANAGEMENT AS WELL AS
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT. SUCH
FORWARD-LOOKING STATEMENTS ARE PRINCIPALLY CONTAINED IN THE SECTIONS "SUMMARY,"
"RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS" AND INCLUDE WITHOUT LIMITATION THE
COMPANY'S EXPECTATION AND ESTIMATES AS TO ITS BUSINESS FOLLOWING THE EXCHANGE
OFFER. IN ADDITION, IN THOSE AND OTHER PORTIONS OF THIS PROSPECTUS THE WORDS
"ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS," "PLANS," "INTENDS" AND
SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE
INTENDED TO SPECIFICALLY IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
REFLECT THE CURRENT VIEWS OF THE COMPANY WITH RESPECT TO FUTURE EVENTS AND ARE
SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE RISK
FACTORS DESCRIBED IN THIS PROSPECTUS. IN ADDITION TO FACTORS THAT MAY BE
DESCRIBED ELSEWHERE IN THIS PROSPECTUS, THE COMPANY SPECIFICALLY WISHES TO
ADVISE READERS THAT THE FACTORS LISTED UNDER THE CAPTION "RISK FACTORS" COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-
LOOKING STATEMENT. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD ANY UNDERLYING ASSUMPTIONS PROVE INCORRECT (INCLUDING THE
ASSUMPTIONS USED IN CONNECTION WITH THE PREPARATION OF THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA), ACTUAL RESULTS MAY VARY MATERIALLY FROM
THOSE DESCRIBED HEREIN AS ANTICIPATED, BELIEVED, ESTIMATED OR EXPECTED. THE
COMPANY DOES NOT INTEND TO UPDATE THESE FORWARD-LOOKING STATEMENTS.
________________
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
3
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes a part of an Exchange Offer Registration
Statement on Form S-4 filed by the Company with the Commission under the
Securities Act with respect to the Exchange Notes. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the Exchange Notes. Any statement contained herein concerning the
provisions of certain documents are not necessarily complete, and in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement for a more complete description of the matter
involved. Each such statement is qualified in its entirety by such reference.
As a result of the filing of the Registration Statement with the
Commission, the Company will be subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith will be required to file with or furnish to the Commission
certain reports and other information. The Registration Statement, the exhibits
and schedules thereto, reports and other information filed with or furnished to
the Commission by the Company may be inspected at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, or at its regional offices located at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Additionally, the Commission maintains a Web site on the Internet
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that submit electronic filings to the
Commission, including the Company.
Pursuant to the Indenture, the Company has agreed, whether or not required
by the rules and regulations of the Commission, to furnish to the Holders of the
Notes reports and other information as it would be required to file with the
Commission if the Company were subject to the reporting requirements of the
Exchange Act. In addition, commencing after the consummation of the Exchange
Offer, whether or not required by the rules and regulations of the Commission,
the Company has agreed to file a copy of such reports and other information with
the Commission and make such information available to securities analysts and
prospective investors upon request.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements
and related notes appearing elsewhere in this Prospectus. As used herein, the
term "Company" refers to Centennial Communications Corp. and its Subsidiaries
unless the context indicates otherwise. The Company operates under the names
(i) "Radio Trunking del Peru," "SMR Direct Peru, S.R.L.," "Telecom Supply
S.R.L.," "Pompano, S.R.L.," "C-Comunica S.R.L.," "Transnet del Peru, S.A." and
"Peru Tel S.A." in Peru, (ii) "Radio Trunking del Ecuador," "Brunacci Compania
Ltda.," and "Comovec S.A." in Ecuador, (iii) "Telecomunicaciones y Servicios
S.A.," "Centennial Radio Trunking del Chile" and "Centennial Cayman Corp. Chile
Ltd." in Chile and (iv) "Radio Trunking del El Salvador, S.R.L., C.V." in El
Salvador. All references herein to the number of channels held by the Company in
Ecuador include 10 channels for which the Company has a concession but has not
as yet acquired a frequency contract. All references herein to "Latin America"
refer to Central America, the Caribbean, South America and Mexico. Unless
otherwise indicated, all discussions herein assume that the Company's U.S.
Operations (as defined) have been fully divested. See also "Glossary of Terms"
for definitions of certain terms used herein. Except as otherwise indicated, all
dollar amounts are expressed in United States dollars and references to
"dollars" and "$" are to United States dollars. All consolidated historical
financial statements contained in this Prospectus are prepared in accordance
with United States generally accepted accounting principles ("U.S. GAAP") and
are presented in dollars.
THE COMPANY
The Company is a provider of analog specialized mobile radio ("SMR")
services focusing on providing such service in Latin America. The Company
currently operates in Latin American markets that have approximately 29.1
million people ("POPs") and, as of June 30, 1998, the Company had 14,437
subscribers. The Company also provided SMR service in the United States but is
in the process of divesting its U.S. Operations. See "Unaudited Pro Forma
Condensed Consolidated Financial Data" and "Business - Divestiture of the United
States Operations."
The Company was founded in October 1995 and, as of June 30, 1998, is (i)
the largest SMR operator in Peru, in terms of the number of subscribers and
channels, with over 9,200 subscribers and 321 channels in a market of
approximately 11.1 million POPs, and (ii) the largest SMR operator in Ecuador,
in terms of the number of subscribers and channels, with over 4,700 subscribers
and 365 channels, in a market of approximately 3.5 million POPs. The Company
acquired an operating company in Chile (a market of approximately 6.5 million
POPs) in January 1998 and, as of June 30, 1998, had 412 subscribers and 325
channels in Chile. In August 1998, the Company completed the buildout of 10
additional channels in Santiago, Chile and launched a full scale sales and
marketing program. The Company also holds concessions for 50 channels in El
Salvador (a market of approximately 5.9 million POPs) and has an application for
channels pending in Venezuela. The Company's strategy is focused on
consolidating its channel positions in the markets in which it operates. The
Company is also exploring the opportunity to provide wireless communications
services which utilize digital technology. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." The Company believes that significant market opportunities
exist to develop a leading position as a provider of SMR service in Latin
America.
INDUSTRY AND MARKET OPPORTUNITY
SMR, also referred to as "trunked radio" or wireless dispatch
communications, is primarily a business communications tool which provides cost-
effective, "one-to-many" voice communications. The Company believes that the
SMR industry offers attractive economic characteristics as compared to other
wireless communications services, such as cellular. The low fixed cost operating
structure of SMR permits operators, such as the Company, to achieve positive
operating cash flow with a limited subscriber base and to generate incremental
operating cash flow as additional subscribers are added to the networks. SMR
networks are significantly less expensive to build-out than cellular systems,
requiring only one to four sites per geographic coverage area as compared to 20
to 90 sites for cellular. In addition, the modular nature of SMR infrastructure
allows for incremental network build-out as demand for service increases, which
limits initial capital requirements.
5
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The Company believes that demand for SMR service in Latin America is
significant due to the following economic and demographic characteristics: (i)
low teledensity and low wireless communications penetration; (ii) high
population densities found in many urban markets; (iii) unreliable
telecommunications infrastructure; (iv) limited and relatively expensive
communications alternatives; and (v) economic growth fueled by developing market
economies. Traditional landline telephone service in Latin America remains poor
due to, among other reasons, underinvestment in landline infrastructure and long
waiting periods for the installation of telephone lines and service. In many
Latin American markets, wireless communications have become an important
alternative to the relatively antiquated, overburdened and unreliable landline
telephone system. The economic growth in many Latin American countries, fueled
in part by the move toward more open market economies, is generating an
increasing demand for mobile work groups to communicate more frequently and
effectively. The accompanying emphasis on productivity means that Latin
American businesses are increasingly focused on securing competitive advantages
over their business rivals and reducing their operating cost structures.
ACCOMPLISHMENTS
Many of the Company's senior management and directors have experience in
successfully building communications companies in the United States and
international markets. The Company's co-founder and board member, Stephen
Schovee, and board member Robert McKenzie, were founders of, and senior
executives with, OneComm Corporation ("OneComm"), a start-up enterprise that
became a leading, publicly-traded United States SMR operator and was eventually
acquired by Nextel Communications, Inc. ("Nextel"). In addition, William Elsner
and Bernard Dvorak, the Chairman of the Board and the President and Chief
Executive Officer of the Company, respectively, were founders of and senior
executives with, United International Holdings, Inc. ("UIH"), a publicly-traded
global provider of multi-channel television and communications services.
Since its formation, the Company's management has achieved significant
milestones in the execution of its business plan, including:
. Acquisition of Spectrum at Attractive Prices. The Company has acquired an
aggregate of 1,021 channels in the 800 MHz frequency band and 40 channels
in the 900 MHz frequency band in Peru, Ecuador, Chile and El Salvador
covering approximately 29.1 million POPs, for approximately $14.8 million.
. Construction and Deployment of Networks. In Peru, the Company operates 192
channels, 135 of which it constructed and 57 of which were previously
constructed. In Ecuador, the Company has constructed 90 of the 365 channels
for which it holds licenses. In Chile, the Company operates 20 channels, 10
of which it constructed and 10 of which were previously constructed. In El
Salvador, the Company operates 5 previously constructed channels out of the
50 channels for which it holds licenses.
. Successful Service Launch. The Company has successfully launched service
and is implementing its growth strategy in each of its markets. In May
1996, the Company commenced service in Peru and is currently the largest
SMR operator in the country in terms of the number of subscribers and
channels, with 9,253 subscribers and 321 channels as of June 30, 1998. The
Company commenced service in Ecuador in March 1997 and is the largest SMR
operator in the country in terms of subscribers and channels, with 4,772
subscribers and 365 channels as of June 30, 1998. The Company acquired an
operating company in Chile in January 1998 and, as of June 30, 1998,
provided service to 412 subscribers. In August 1998, the Company completed
the buildout of 10 additional channels in Santiago, Chile and launched a
full scale sales and marketing program.
. Raising of Equity and Debt Capital. The Company has raised approximately
$44 million in equity capital in four private transactions and has used
such proceeds to finance its operations to date. The Company's largest
group of shareholders, the Centennial Funds and certain related entities,
have participated in each of these transactions, investing an aggregate of
approximately $20 million. In addition, the Company raised approximately
$30 million in debt capital in a January 1998 offering.
6
<PAGE>
. Channel Holdings and Operations. The Company's current channel holdings and
existing operations are summarized below:
<TABLE>
<CAPTION>
POPs (mm)(1) CHANNEL HOLDINGS(2) SUBSCRIBERS AS OF SERVICE LAUNCH DATE
COUNTRY JUNE 30, 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peru 11.1 321 9,253 May 1996
Ecuador 3.5 365 4,772 March 1997
Chile 8.6 325 412 August 1998(3)
El Salvador 5.9 50 - August 1998
------------------------------------------------------------------------
TOTAL(4) 29.1 1,061 14,437
========================================================================
</TABLE>
(1) Represents the approximate number of POPs in the markets in which the
Company has channels.
(2) Channels are voice paths on which mobile communications are transmitted.
Channels are licensed per geographic area and, using analog technology,
each channel can generally serve up to 125 subscribers in a given area.
(3) The Company completed the buildout of 10 additional channels and launched a
full scale sales and marketing program in August of 1998 with respect to an
operating company it acquired in January 1998.
(4) As of June 30, 1998 the Company also had channels and subscribers in the
United States. The Company is in the process of divesting its U.S.
Operations. See "Unaudited Pro Forma Condensed Consolidated Financial Data"
and "Business - Divestiture of the United States Operations."
GROWTH STRATEGY
The Company's growth strategy is to (i) rapidly expand its analog SMR
operations and subscriber base in Latin America; (ii) improve cash flow and
profitability by actively managing and controlling operating expenses; (iii)
pursue additional SMR opportunities; and (iv) explore the implementation of
digital wireless communications technologies. Key elements of the Company's
strategy include:
. Implementation of Innovative Pricing Strategy. The Company's pricing
strategy focuses on subscriber growth and recurring revenues rather than on
up-front equipment margins, and is a departure from that historically
offered by SMR operators. The Company has implemented a pricing strategy
which provides a flexible subscriber unit purchase program designed to
enable subscribers to purchase a subscriber unit at a lower price than that
currently offered by the Company's competitors. This strategy has resulted
in the expansion of the Company's potential subscriber base in Latin
America beyond the traditional commercial user to "white collar" and "grey
collar" organizations.
. Acquisition of Additional Spectrum in Existing Markets. In order to
increase channel capacity and to allow for further subscriber growth in its
existing markets, the Company will continue to seek acquisitions of license
holding and operating companies and to pursue opportunities to acquire
additional spectrum at attractive prices. The Company's goal is to
accumulate a minimum of 150 channels in each market in which it operates.
The Company will also focus on consolidating its channel positions in the
markets in which it operates.
. Expansion into Additional Markets. The Company intends to pursue additional
SMR opportunities in Latin American markets where it can achieve
significant channel holdings. At present, the Company plans to focus on
providing SMR service in markets that exhibit the following
characteristics: (i) large, unsatisfied demand for telecommunications
services; (ii) long-term economic growth prospects; (iii) high population
densities; and (iv) favorable competitive environments. The Company intends
to enter new markets to establish operating networks and does not intend to
engage in "spectrum speculation."
. Development of Experienced Local Management Team. The Company intends to
supplement the experience of its senior management by hiring managers
familiar with the local SMR markets and the communications industry in
general. Country general managers oversee local operations on a day-to-day
basis and consult with senior management on Company-wide decisions such as
pricing and marketing strategies.
7
<PAGE>
The Company is also exploring the opportunity to provide wireless
communications services which utilize digital technology. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
RECENT DEVELOPMENTS
Recently Completed Acquisitions
On January 2, 1998, the Company purchased 100% of the outstanding capital
stock of a Chilean operating company, Telecomunicaciones y Servicios S.A.
("TyS"), which holds 10 800 MHz channels in the city of Santiago, Chile, for a
purchase price of approximately $800,000. On June 29, 1998, the Chilean
government approved the transfer of 315 additional channels (40 of which are in
Santiago) to TyS. The Company paid $2.4 million for such additional channels.
On April 14, 1998, the Company executed a purchase agreement to acquire
certain license holding companies in Peru and Ecuador and a concession in
Chile for an aggregate purchase price of approximately $3.5 million. On May 13,
1998, the Company completed the acquisition of 100% of the outstanding capital
stock of one of such license holding companies, Comovec S.A., in Ecuador.
Comovec S.A. holds licenses to operate SMR networks and has 60 channels in each
of Quito and Guayaquil and 40 channels in Cuenca. On May 22, 1998, the Company
completed the acquisition of 100% of the outstanding capital stock of the other
license holding company, Peru Tel S.A., in Peru. Peru Tel S.A. holds licenses to
operate SMR networks and has 32 channels in Lima/Callao and an aggregate of 100
channels in eight other cities. The Company has not closed the final part of the
acquisition for the concession in Chile which is subject to the approval by the
Chilean government of the transfer of the concession.
On August 26, 1998, the Company completed an acquisition including a
concession for 10 nationwide channels in El Salvador. The acquisition also
included certain infrastructure and approximately 140 subscribers. The Company
paid approximately $300,000 for such assets.
Potential Acquisitions
In furtherance of the Company's growth strategy, it has executed either a
purchase agreement or letters of intent or engaged in active discussions, to
acquire controlling interests in SMR operating companies and other wireless
communications license holding companies in Chile, Bolivia, Honduras, El
Salvador, Ecuador and Peru, as described below.
. On February 5, 1998, the Company entered into a letter of intent for the
acquisition of a Chilean license holding company which holds licenses for
20 800 MHz channels in Santiago, Chile and 215 800 MHz channels in outlying
cities. Consummation of this transaction will be conditioned on the
approval by the Chilean government of the transfer of the concession and
the amendment of certain build-out requirements.
. On June 29, 1998, the Company entered into a letter of intent to purchase
51% of a Bolivian operating company in which the Company would have
management control. It is anticipated that the joint venture would hold 120
nationwide 800 MHz channels and an additional 120 nationwide 400 MHz
channels.
. On July 7, 1998, the Company signed a letter of intent to acquire a 51%
interest in a Honduran license holding company which holds a concession for
80 nationwide 800 MHz channels.
. On July 10, 1998, the Company signed a letter of intent to acquire a
concession for 30 800 MHz channels and approximately 600 subscribers in El
Salvador.
. On August 26, 1998, the Company entered into a Purchase Agreement pursuant
to which the Company would acquire (i) an Ecuador license holding company
that holds 120 800 MHz channels in each of Quito
8
<PAGE>
and Guayaquil; and (ii) two Chilean license holding companies, each holding
20 800 MHz channels in Santiago.
. On August 13, 1998, the Company signed a letter of intent for the
acquisition of certain Chilean assets, including a license for 20 800 MHz
channels in Santiago, certain infrastructure and subscribers. Consummation
of this transaction will be conditioned on the approval by the Chilean
government of the transfer of the concession.
. The Company is in discussions for the acquisition of 10 800 MHz channels in
Lima, Peru.
Each of the transactions described above is subject to (i) the completion
of the Company's financial, legal and regulatory due diligence; and (ii)
certain other conditions to closing, including the execution of definitive
documentation and the receipt of necessary governmental and regulatory
approvals. In addition, each transaction is subject to the approval of the
Company's board of directors (the "Board of Directors"). The Company cannot
predict the results of such due diligence, whether the Company will proceed with
all or any of such transactions following completion of its due diligence or
whether the Board of Directors will authorize the Company to consummate such
transactions. There can be no assurance that all or any of these transactions
will be consummated or that they will be consummated on the terms set forth in
this Prospectus.
Auctions
The Company has submitted a proposal to build out 40 nationwide 800 MHz
channels in the Chilean SMR concurso which was held in July 1997 (the "Chile
Concurso"). On October 29, 1997, the Company received written notice from the
Chilean Ministry of Transportation and Telecommunications (the "Chilean
Ministry") that its proposal had been accepted and awarded, although such award
is subject to appeal by the other participants in the Chile Concurso. The
Company has been informed that an appeal has been filed objecting to the
acceptance of the Company's proposal. There can be no assurance that the Company
will be successful in obtaining any channels as a result of such proposal.
On June 9, 1998, the Company was awarded a concession for 40 nationwide 800
MHz channels in El Salvador. The Company paid $600,000 for such channels, which
have a 20-year term. On August 27, 1998, the Company was awarded an additional
65 nationwide 800 MHz channels in El Salvador, which award is subject to the
satisfaction of certain conditions.
In addition, the Company may participate in other Latin American auctions,
none of which have been officially scheduled. If the Company participates in
such auctions, there can be no assurance that the Company will be successful in
obtaining any channels.
The Company was incorporated in Delaware on October 25, 1995. Its
principal executive offices are located at 1600 Wynkoop Street, Suite 300,
Denver, CO 80202, and its telephone number is (303) 405-0475.
9
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... The Company is hereby offering to exchange up
to $40 million aggregate principal amount of
the Exchange Notes for an equal principal
amount of Private Notes that are properly
tendered and accepted. As of the date hereof,
there is $40 million aggregate principal
amount of Private Notes outstanding. See "The
Exchange Offer."
Based on interpretations by the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Private
Notes may be offered for resale, resold and
otherwise transferred by a Holder thereof
(other than (i) a broker dealer who purchased
such Private Notes directly from the Company
to resell pursuant to Rule 144A or any other
available exemption under the Securities Act,
or (ii) a person that is an Affiliate of the
Company), without compliance with the
registration and prospectus delivery
requirements of the Securities Act; provided
that the Holder is acquiring Exchange Notes
in the ordinary course of its business and is
not participating, does not intend to
participate, and has no arrangement or
understanding with any person to participate,
in the distribution of the Exchange Notes.
Holders of Private Notes wishing to accept
the Exchange Offer must represent to the
Company that such conditions have been met.
Each broker-dealer that receives Exchange
Notes for its own account in exchange for
Private Notes, where such Private 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 meeting the requirements
of the Securities Act in connection with any
resale of such Exchange 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 Exchange Notes received in exchange for
Private Notes acquired by such broker-dealer
as a result of market-making activities or
other trading activities. The Letter of
Transmittal that accompanies this Prospectus
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. Any Holder of Private Notes
who tenders in the Exchange Offer with the
intention to participate in a distribution of
the Exchange Notes could not rely on the
above-referenced position of the staff of the
Commission and, in the absence of an
exception under the Securities Act, would
have to comply with the registration and
prospectus delivery requirements contained
therein in connection with any resale
transaction. Failure to comply with such
requirements in such instance could result in
such Holder incurring liability under the
Securities Act for which the Holder is not
indemnified by the Company. See "The Exchange
Offer-Resale of the Exchange Notes."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ________, 1998, unless
the Exchange Offer is extended by the Company
in its sole discretion, in which case the
term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is
extended. "The Exchange Offer -Expiration
Date; Extensions; Amendments."
10
<PAGE>
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
customary conditions that may be waived by
the Company. The Exchange Offer is not
conditioned upon any minimum aggregate
principal amount of Private Notes being
tendered for exchange. See "The Exchange
Offer - Conditions."
Procedures to Tendering
Private Notes............... Each Holder of Private Notes wishing to
accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Private Notes and any other required
documentation to State Street Bank and Trust
Company, as exchange agent (the "Exchange
Agent"), at the address set forth herein. See
"The Exchange Offer - Procedures for
Tendering."
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Private
Notes in the Exchange Offer should contact
such 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 beneficial
owner's behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering such owner's
Private Notes, either make appropriate
arrangements to register ownership of the
Private 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 and may
not be able to be completed prior to the
Expiration Date. See "The Exchange Offer -
Procedures for Tendering."
Guaranteed Delivery
Procedures.................. Holders of Private Notes who wish to tender
their Private Notes and whose Private Notes
are not immediately available or who cannot
deliver their Private Notes, the Letter of
Transmittal or any other documentation
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
must tender their Private Notes according to
the guaranteed delivery procedures set forth
under "The Exchange Offer - Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes.............. Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Private
Notes that are properly tendered in the
Exchange Offer prior to the Expiration Date.
The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the
earliest practical date following the
Expiration Date. See "The Exchange Offer-
Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at
any time prior to the Expiration Date. See
"The Exchange Offer - Withdrawal of Tenders."
Certain Tax Considerations.. For a discussion of certain tax
considerations relating to the Exchange
Notes, see "Certain U.S. Federal Income Tax
Considerations."
11
<PAGE>
Exchange Agent.............. State Street Bank and Trust Company is
serving as the Exchange Agent in connection
with the Exchange Offer. State Street Bank
and Trust Company also serves as trustee (the
"Trustee") under the Indenture.
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to the $40 million aggregate principal amount of
the Private Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Private Notes except (i) for
certain transfer restrictions and registration rights relating to the Private
Notes; and (ii) that if the Exchange Offer is not consummated in a timely
manner, or if the Company fails to comply with certain other registration
obligations with respect to the Private Notes, the Company is required to pay
certain Liquidated Damages to the Holders of the Private Notes. See "The
Exchange Offer - Terms of the Exchange Offer." The Exchange Notes will evidence
the same indebtedness as the Private Notes (which they replace) and will be
issued under and entitled to the benefits of the Indenture. For further
information and for definitions of certain capitalized terms, see "Description
of Notes."
Maturity Date............... January 1, 2005.
Effective Yield............. 14%.
Interest.................... Cash interest will not accrue on the Exchange
Notes prior to January 1, 2003. Thereafter,
interest on the Exchange Notes will be
payable, in cash, at a rate of 14% per annum,
payable semi-annually in arrears on January 1
and July 1 of each year, commencing July 1,
2003.
Security.................... The Exchange Notes will be secured by a
pledge of (i) 100% of the Capital Stock of
SMR Direct USA, Inc. (this entity has no
operations and its financial position
consists only of a nominal capitalization)
and all future domestic direct Restricted
Subsidiaries of the Company and (ii) 100% of
the Capital Stock (other than Excluded Stock)
of each of the Cayman Entities (one of which
is solely a nominee shareholder in certain of
the Company's Latin American Subsidiaries)
and 100% of the Capital Stock (other than
Excluded Stock) of all future foreign direct
Restricted Subsidiaries of the Company.
Pursuant to the definition of Excluded Stock,
the Company has pledged approximately 66% of
the total outstanding Capital Stock of each
of the Cayman Entities. See "Description of
Notes -Security."
Optional Redemption......... The Exchange Notes will be redeemable at the
option of the Company, in whole or in part,
at any time on or after January 1, 2003, at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
In addition, at any time prior to January 1,
2001, the Company may, on one or more
occasions, redeem up to a maximum of 25% in
aggregate principal amount at maturity of the
Exchange Notes at a redemption price of 114%
of the Accreted Value thereof, plus accrued
and unpaid interest and Liquidated Damages,
if any, to the date of redemption with the
net cash proceeds of certain sales of capital
stock of the Company; provided, that at least
75% in aggregate principal amount at maturity
of the Exchange Notes remains outstanding
following each such redemption.
Change of Control........... In the event of a Change of Control, the
Holders of the Exchange Notes will have the
right to require the Company to purchase
their Exchange Notes at a price equal to 101%
of the Accreted Value thereof, plus accrued
and unpaid Liquidated Damages, if any, to the
date of purchase or, in the case of any such
purchase on or after January 1, 2003, at 101%
of the aggregate principal amount
12
<PAGE>
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase.
Ranking..................... The Exchange Notes will rank pari passu in
right of payment with all existing and future
unsubordinated indebtedness of the Company
and will rank senior in right of payment to
all future subordinated indebtedness of the
Company. The Exchange Notes will be
effectively subordinated to additional
secured indebtedness of the Company and the
Exchange Notes will be structurally
subordinated to indebtedness (including trade
payables) of the Company's Subsidiaries. As
of June 30, 1998, the Notes were effectively
subordinated to approximately $4.9 million of
secured indebtedness of the Company and to
approximately $1.1 million of indebtedness
and other liabilities of the Company's
Subsidiaries (excluding intercompany payables
to the Company).
Covenants................... The Indenture that will govern the Exchange
Notes contains covenants that, among other
things: (i) limit the incurrence by the
Company and its Restricted Subsidiaries of
additional indebtedness; (ii) limit the
issuance by the Company of Disqualified Stock
(as defined) and the issuance by its
Restricted Subsidiaries of preferred stock;
(iii) restrict the ability of the Company and
its Restricted Subsidiaries to make dividends
and other restricted payments or investments;
(iv) limit transactions by the Company and
its Restricted Subsidiaries with Affiliates;
(v) limit the ability of the Company and its
Restricted Subsidiaries to make asset sales;
(vi) limit the ability of the Company and its
Restricted Subsidiaries to incur certain
liens; and (vii) limit the ability of the
Company to consolidate or merge with or into,
or to transfer all or substantially all of
its assets to, another person.
For additional information regarding the Exchange Notes, see "Description
of Notes."
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer.
RISK FACTORS
See "Risk Factors" as well as other information and data included in this
Prospectus for a discussion of certain factors that should be considered in
evaluating an investment in the Exchange Notes.
13
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
Inception (October (unaudited)
26, 1995) through Year Ended December 31, Six Months Ended June 30,
December 31, ------------------------- ---------------------------
------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ - $ 296 $ 4,826 $ 2,019 $ 3,442
Costs and expenses related to revenues - 513 3,556 1,397 1,308
-------------------- ----------- ---------- ------------ -----------
Gross profit - (217) 1,270 622 2,134
Operating costs and expenses 62 4,590 15,837 6,248 5,682
-------------------- ----------- ---------- ------------ -----------
Operating loss (62) (4,807) (14,567) (5,626) (3,548)
Other income (expense) 4 (79) (1,148) (77) (1,478)
-------------------- ----------- ---------- ------------ -----------
Net loss before minority interest (58) (4,886) (15,715) (5,703) (5,026)
Minority interest (1) - 111 - - -
-------------------- ----------- ---------- ------------ -----------
Net loss (58) (4,775) (15,715) (5,703) (5,026)
Accretion of mandatorily redeemable
preferred shares to redemption value - (15) (142) (69) (717)
-------------------- ----------- ---------- ------------ -----------
Net loss applicable to common
shareholders $ (58) $ (4,790) $ 15,857 $ (5,772) $ (5,743)
==================== =========== ========== ============ ===========
Net loss per share $ (0.09) $ (1.38) $ (4.53) $ (1.65) $ (1.64)
Weighted average shares outstanding 639,091 3,480,466 3,502,534 3,502,500 3,502,748
OTHER FINANCIAL DATA:
EBITDA(2) $ (61) $ (4,299) $ (12,308) $ (4,458) $ (2,651)
Depreciation and amortization 1 508 2,259 1,168 897
Capital expenditures (3) 5 7,087 10,383 8,531 3,356
Deficiency of earnings to fixed
charges (4) 53 4,538 14,828 5,399 2,867
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
----------------------------- As of June 30, 1998
BALANCE SHEET DATA: 1995 1996 1997 (unaudited)
----------------------------------------------------
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments $2,503 $14,821 $ 7,730 $ 23,809
Restricted cash - 3,890 1,350 1,677(5)
Working capital 3,203 17,573 10,892 28,335(6)
Total assets 3,265 34,916 29,872 58,569(6)
Total long-term debt - 5,207 16,157 31,478(6)
Mandatorily redeemable convertible
preferred stock - 28,829 29,252 41,262
Stockholder's equity (deficit) 3,212 (1,348) (17,169) (17,155)
</TABLE>
(1) Reflects the acquisition of the capital stock of SMR Direct Peru, S.R.L.
(formerly Mobil Line Peru, S.A.), 51% of which was acquired in February
1996 and the remaining 49% of which was acquired in July 1996.
(2) Represents operating loss before depreciation and amortization. EBITDA is
not a measurement under U.S. GAAP and may not be similar to EBITDA measures
of other companies. The Company has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as the measure of an issuer's ability to incur and service
indebtedness; however, EBITDA should not be considered a substitute for net
income as a measure of the Company's operating results or for cash flow as
a measure of the Company's liquidity.
(3) Represents cash used for purchases of property and inventory (subscriber
units).
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest on all indebtedness and amortization of debt
expense. Because the Company's fixed charges exceeded earnings for the
14
<PAGE>
period from inception through December 31, 1995, for the years ended
December 31, 1996 and 1997, and for the six months ended June 30, 1997 and
1998, the deficiency of earnings to fixed charges (rather than a ratio of
earnings to fixed charges) has been presented for such periods.
(5) The majority of this amount reflects cash pledged by the Company to secure
its obligations in connection with the Company's bid for spectrum in the
Chile Concurso. On October 29, 1997 the Company received written notice
from the Chilean Ministry of Transportation and Telecommunications that its
proposal had been accepted and awarded, subject to appeal by other
participants in the Chile Concurso. An appeal has been filed.
(6) Includes debt incurred by the Company in connection with the FCC Auction
(as defined), which has been recorded by the Company pursuant to Accounting
Principles Board Opinion No. 21, at approximately $3.6 million as of June
30, 1998. The contractual principal amount of this debt was approximately
$4.6 million as of June 30, 1998. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources." This amount also includes $1.3 million of capital leases
payable as of June 30, 1998. In connection with the Divestiture (as
defined) of the Company's U.S. Operations, the FCC Debt (as defined) and
the capital leases payable amounts have been included under the caption
"Net assets held for sale" in the Unaudited Condensed Consolidated
Financial Statements. See Note 2 of the Notes to the Company's Unaudited
Condensed Consolidated Financial Statements as of June 30, 1998 included in
this Prospectus. The Company is currently in the process of divesting its
U.S. Operations. See "Unaudited Pro Forma Condensed Consolidated Financial
Data" and "Business - Divestiture of the United States Operations."
15
<PAGE>
UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
The unaudited summary pro forma statement of operations data and other
financial data for the year ended December 31, 1997 and unaudited summary pro
forma balance sheet data as of June 30, 1998 (the "Unaudited Summary Pro Forma
Financial Data") have been prepared on the basis set forth in, are qualified by
reference to, and should be read in conjunction with, the Unaudited Pro Forma
Condensed Consolidated Financial Data and the Company's pro forma financial
information included elsewhere in this Prospectus. Unaudited Summary Pro Forma
Financial Data for the six months ended June 30, 1998 have not been presented.
Effective August 1997, the U.S. Operations were considered assets to be disposed
of, and as such, the Company ceased recording revenue and related expenses.
Thus, no pro forma adjustments are required related to the six months ended June
30, 1998. The Unaudited Summary Pro Forma Financial Data does not purport to
represent what the Company's results of operations would have been if the
Divestiture had actually occurred at such dates nor does such data purport to
represent the Company's results of operations for any future period.
<TABLE>
<CAPTION>
Pro Forma Results of Operations for the
Year Ended December 31, 1997 (1)
--------------------------------
(dollars in thousands, except share and per
share data)
(unaudited)
STATEMENT OF OPERATIONS DATA:
<S> <C>
Revenues $ 3,714
Costs and expenses related to revenues 2,284
----------
Gross profit 1,430
Operating costs and expenses 8,485
----------
Operating loss (7,055)
Other expense (694)
----------
Net loss (7,749)
Accretion of mandatorily redeemable preferred shares to redemption value (142)
----------
Net loss applicable to common shareholders $ (7,891)
==========
Net loss per share $ (2.25)
Weighted average shares outstanding 3,502,534
OTHER FINANCIAL DATA:
EBITDA(2) (5,939)
Depreciation and amortization 1,116
Capital expenditures (3) 5,703
Deficiency of earnings to fixed charges (4) 7,315
</TABLE>
<TABLE>
<CAPTION>
As of June 30, 1998(1)
Balance Sheet Data: (pro forma, as adjusted - unaudited)
------------------------------------
<S> <C>
Cash, cash equivalents and short-term investments $ 23,809
Restricted cash 1,677(5)
Working capital 28,334
Total assets 53,763
Total long term debt 26,529
Mandatorily redeemable convertible preferred stock 41,262
Stockholder's deficit (17,155)
</TABLE>
- ----------------------
(1) Gives effect to the Divestiture of the U.S. Operations on the following
basis: (i) statement of operations data is presented assuming the
Divestiture occurred on January 1, 1997, and (ii) balance sheet data
assumes that the Divestiture occurred on June 30, 1998.
16
<PAGE>
(2) Represents operating loss before depreciation and amortization. EBITDA is
not a measurement under U.S. GAAP and may not be similar to EBITDA measures
of other companies. The Company has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as the measure of an issuers ability to incur and service
indebtedness; however, EBITDA should not be considered a substitute for net
income as a measure of the Company's operating results or for cash flow as
a measure of the Company's liquidity.
(3) Represents cash used for purchases of property and equipment, and inventory
(subscriber units).
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest on all indebtedness and amortization of debt
expense. Because the Company's fixed charges exceeded earnings for the year
ended December 31, 1997, the deficiency of earnings to fixed charges
(rather than a ratio of earnings to fixed charges) has been presented for
such period.
(5) In July 1997, the Company pledged $1.3 million to secure its obligations in
connection with the Company's bid for spectrum in the Chile Concurso. None
of this cash will be released until such time as a final determination is
made with respect to the proposal submitted by the Company. On October 29,
1997, the Company received written notice from the Chilean Ministry of
Transportation and Telecommunications that its proposal had been accepted
and awarded, subject to appeal by other participants in the Chile Concurso.
An appeal has been filed.
17
<PAGE>
GLOSSARY OF TERMS
Set forth below are certain technical terms defined as they are used in this
Prospectus:
800 MHz SMR: A two-way radio service (normally dispatch with limited mobile-
telephone usage) provided within a designated portion of the 800
MHz frequency band.
900 MHz SMR: A two-way radio service (normally dispatch with limited mobile-
telephone usage) provided within a designated portion of the 900
MHz frequency band.
Analog: A transmission method employing a continuous (rather than pulsed
or digital) electrical signal that varies in amplitude or
frequency in response to changes in sound impressed on a
transducer in the sending device.
Channel: A wireless pathway for the transmission of information between a
sending point and a receiving point (often "channel" refers to a
paired set of send and receive pathways). Channels are often
measured in terms of the amount of spectrum they occupy
(bandwidth), measured in Hertz.
Churn Rate: The rate at which subscribers terminate service, which is
calculated by dividing the number of subscribers disconnected by
the average number of subscribers on the network expressed as a
percentage and calculated for a given measurement period.
Digital: A transmission method employing a sequence of discrete, distinct
pulses to indicate specific information.
Dispatch: A service provided to clients who want to transmit and receive
short messages to and from a group of users operating within
range of the system's transmission site. Dispatch is normally
structured in a one-to-many format between a fixed base station
and mobile units, but can also be structured in a one-to-one
format.
ESMR: Enhanced Specialized Mobile Radio. Radio communications systems
that employ digital technology with a multi-site configuration
that permits frequency reuse.
FCC: United States Federal Communications Commission.
Hertz/Hz: Industry convention for measuring frequency. One Hertz
(abbreviate Hz) equals one cycle per second; kHz (kiloHertz)
stands for thousands of Hertz; MHz (megaHertz) stands for
millions of Hertz.
iDEN(TM): Integrated digital enhanced network. A digital wireless
technology developed by Motorola Inc. for the provision of ESMR
service. A trademark of Motorola Inc.
Interconnect: With respect to SMR, interconnect refers to the service provided
to a subscriber which allows such subscriber to have the
capability to connect to the public switched telephone network
and thereby communicate with a party that can be reached over the
local public telephone network.
POPs: The approximate number of persons in a market potentially served
by telecommunications services, including SMR.
Repeater: A stationary transmitter device which retransmits received
signals on an outbound circuit in amplified form.
Site: The location of a transmission station. In a multi-site
configuration with call hand-off between stations, stations are
located so that the coverage areas of the individual stations
overlap in order to facilitate coverage over a wide coverage
area. The geographic coverage area of a transmission site
typically has a radius of 15 to 30 miles depending on the height
of the antenna and the topography of the market.
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SMR: Specialized Mobile Radio. SMR refers to third-party, two-way
radio communications networks which operate on a repeater which
"repeats" an incoming transmission on one channel onto an
appropriate outgoing designated or available channel. In this
manner, a message can be sent by one user in a group to all the
other users in the same group at the same time ("one-to-many"
communications). This communications format is well-suited to the
dispatch market.
Spectrum: A term generally applied to radio frequencies.
Subscriber: An individual utilizing a subscriber unit on an SMR network.
Subscriber
Unit (Radio): An SMR portable, vehicle-mounted or base station radio
receiver/transmitter.
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RISK FACTORS
An investment in the Exchange Notes represents a high degree of risk.
There are a number of factors, including those specified below, which may
adversely affect the Company's ability to make payments on the Exchange Notes.
Holders of the Exchange Notes could therefore lose a substantial portion or all
of their investment in the Exchange Notes. Consequently, an investment in the
Exchange Notes should only be considered by persons who can assume such risk.
The risk factors described below are not necessarily exclusive and each
potential investor is encouraged to perform its own investigation with respect
to the Company.
HISTORICAL AND ANTICIPATED OPERATING LOSSES; NEGATIVE CASH FLOW FROM OPERATIONS
Since inception, the Company has been primarily engaged in start-up
activities requiring substantial expenditures. Consequently, the Company has
reported operating losses before interest of approximately $14.6 million and
$3.5 million for the fiscal year ended December 31, 1997 and the six months
ended June 30, 1998, respectively, and net cash outflow from operating and
investing activities of approximately $17.4 million and $13.0 million for the
year ended December 31, 1997 and the six months ended June 30, 1998,
respectively. From its inception, the Company has never reported operating
income or positive cash flows from operations. Further development of the
Company's business and the expansion of its SMR networks, service offerings and
subscriber base will require significant additional expenditures, and the
Company expects that it will have significant operating losses and will record
significant net cash outflow in the foreseeable future. There can be no
assurance that the Company's future operations will be profitable. As a result,
there can be no assurance that the Company will have sufficient resources to
make principal and interest payments with respect to the Notes. In addition, if
the Company does not achieve and sustain profitability, the value of the Notes
will be adversely affected. See " - Substantial Leverage; Ability to Service
Indebtedness;" " - Holding Company Structure; Inability to Access Cash Flow;" "-
Need for Additional Financing;" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Liquidity and Capital
Resources."
In connection with the sale of the Company's U.S. Operations, the Company's
management determined that a write-down of the assets comprising such operations
was necessary as of August 1997. The amount of the write-down recorded by
management was approximately $1.9 million, which represented management's best
estimate of the write-down necessary to state such assets and liabilities at
their fair value. This estimate was based upon the provisions contained in
certain Purchase Agreements (as defined) relating to the assets comprising the
U.S. Operations, as well as management's best estimate of the fair market value
of the remaining assets not then under contract. Additionally, the Company
recorded an approximate $1.3 million charge for termination and other
contractually committed costs in connection with the Divestiture of the U.S.
Operations in the third quarter of 1997. The final outcome of the Divestiture
of the U.S. Operations and the proceeds to be received therefrom is not
currently known and a risk exists that the ultimate outcome of such sale,
including the amount of the ultimate write-down necessary to state such assets
and liabilities at their fair market value, will be materially different from
management's estimates, and that the ultimate outcome could result in an
additional write-down of such assets.
LIMITED OPERATING HISTORY
The Company was formed in October 1995 and began providing analog SMR
service in Peru in May 1996, in the United States in September 1996 and in
Ecuador in March 1997. The Company acquired an operating company in Chile in
January 1998 and in August 1998, completed the buildout of 10 additional
channels in Santiago and launched a full scale sales and marketing program in
that country. In June 1998, the Company was awarded a concession in El Salvador
and in August 1998, the Company acquired an operating company in El Salvador.
The Company has not commenced operations in any other country and, to date, has
not provided any wireless communications services other than analog SMR. The
Company's viability, profitability and growth depend upon the successful
implementation of its business plan. The implementation of the Company's
business plan is subject to numerous risks, any of which could require
substantial changes to proposed plans or otherwise alter the time frames or
budgets currently contemplated. Such risks include (i) securing the necessary
licenses and adhering to regulatory requirements relating thereto; (ii) locating
suitable sites for the Company's towers and antenna, obtaining any required
zoning variances or other governmental or local regulatory approvals and
negotiating acceptable purchase, lease, joint venture or other agreements; (iii)
obtaining additional spectrum at attractive prices; and (iv) risks typically
associated with any business venture
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such as the ability to effectively implement its business strategy and
unanticipated cost increases. There can be no assurance that the implementation
of the Company's business plan will be successful.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. As of June 30, 1998, the Company had
approximately $26.5 million of indebtedness outstanding, mandatorily redeemable
preferred stock of approximately $41.3 million outstanding and a stockholders
deficit of approximately $17.2 million. The Company recorded a deficiency of
earnings to fixed charges for the year ended December 31, 1997 and the six
months ended June 30, 1998. See "Selected Consolidated Historical Financial
Data." The Indenture permits the Company and its Subsidiaries to incur
substantial additional indebtedness. Commencing on January 1, 2003, semi-annual
cash interest payments of approximately $2.8 million will be due on the Notes.
The ability of the Company to make scheduled payments with respect to its
indebtedness, including the Notes, will depend upon, among other things, its
ability to implement its business plan, to expand its operations and to
successfully develop its subscriber base in its target markets, by the ability
of the Company's Subsidiaries to remit cash to the Company in a timely manner
and the future operating performance of the Company and its Subsidiaries. Each
of these factors is, to a large extent, subject to economic, financial,
competitive, political, regulatory and other factors, many of which are beyond
the Company's control. The Company expects that it will continue to generate
cash losses for the foreseeable future. No assurance can be given that the
Company will be successful in developing and maintaining a level of cash flow
from operations sufficient to permit it to pay the principal of, and interest
on, its indebtedness, including the Notes. If the Company is unable to generate
sufficient cash flow from operations to service its indebtedness, including the
Notes, it may have to modify its growth plans, restructure or refinance its
indebtedness or seek additional capital. There can be no assurance that (i) any
of these strategies could be effected on satisfactory terms, if at all, in light
of the Company's high leverage or (ii) any such strategy would yield sufficient
proceeds to service the Company's indebtedness, including the Notes. Any
failure by the Company to satisfy its obligations with respect to the Notes at
maturity or prior thereto would constitute a default under the Indenture and
could cause a default under agreements governing other indebtedness of the
Company. See " - Historical and Anticipated Operating Losses; Negative Cash
Flow from Operations;" " - Holding Company Structure; Inability to Access Cash
Flow;" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences for Holders of the Notes, including (i) making it more difficult
for the Company to satisfy its obligations with respect to the Notes; (ii)
increasing the Company's vulnerability to general adverse economic and industry
conditions; (iii) limiting the Company's ability to obtain additional financing
to fund future working capital, capital expenditures or other general corporate
purpose requirements; (iv) requiring the dedication of a substantial portion of
the Company's cash flow from operations to the payment of principal of, and
interest on, its indebtedness, thereby reducing the availability of such cash
flow to fund working capital, capital expenditures or other general corporate
purposes; (v) limiting the Company's flexibility in planning for, or reacting
to, changes in its business and the wireless communications industry; and (vi)
placing the Company at a competitive disadvantage relative to less leveraged
competitors. In addition, the Company's operating and financial flexibility
will be limited by covenants contained in agreements governing the indebtedness
of the Company, including the Indenture. Among other things, these covenants
limit or may limit the ability of the Company and its Subsidiaries to incur
additional indebtedness, issue preferred stock, pay dividends or make
distributions to its stockholders or to make certain other restricted payments,
create certain liens upon assets, apply the proceeds from the disposition of
certain assets or enter into certain transactions with Affiliates. There can be
no assurance that such covenants will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other business
activities which may be in the interests of the Company. See "Description of
Notes - Certain Covenants."
NEED FOR ADDITIONAL FINANCING
From inception until June 30, 1998, the Company invested approximately
$57.7 million (in excess of revenues) in the development of its business,
including acquiring spectrum, building and operating its analog SMR
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networks, conducting sales and marketing activities and establishing its
management team. The Company expects to continue to make significant capital
outlays for the foreseeable future in order to continue required development
activities and to fund operations until such time as the Company begins to
generate positive cash flow from operations. Based upon the Company's current
business plan, the Company currently believes that its cash reserves are
sufficient to satisfy the Company's liquidity needs through March 1999; however,
the Company continuously evaluates new opportunities which could impact that
evaluation. If the Company's plans or assumptions change, if its assumptions
prove to be inaccurate, if it consummates investments or acquisitions in
addition to those currently contemplated, or if it experiences unanticipated
costs or competitive pressures, the Company will be required to seek additional
capital sooner than currently anticipated. In addition, there can be no
assurance that the Company's current projection of cash flow (and losses) from
operations (which will depend upon numerous future factors and conditions, many
of which are outside of the Company's control) will be accurate or that actual
results will not vary materially from such projections. Because the Company's
cost of expanding its SMR networks and operating its business, as well as the
Company's cash flow from operations, will depend on a variety of factors
(including the ability of the Company to meet its expansion schedules, the
number of subscribers and the service for which they subscribe, the nature and
penetration of new services that may be offered by the Company, regulatory
changes and changes in technology), it is likely actual costs and revenues will
vary from expected amounts, possibly to a material degree, and such variations
are likely to affect the Company's future capital requirements. The Company
intends to seek additional debt and/or equity financing necessary to fund the
Company's future liquidity needs. There can be no assurance that the Company
will be able to raise additional capital on satisfactory terms, if at all. If
the Company decides to raise additional funds through the incurrence of debt, it
may become subject to additional or more restrictive financial covenants and its
interest obligations will increase. In the event that the Company is unable to
obtain such additional capital or to obtain it on acceptable terms or in
sufficient amounts, the Company will be required to delay the expansion of its
business or take other actions that could materially adversely affect the
Company's business, operating results and financial condition and its ability to
achieve sufficient cash flow to service its indebtedness, including the Notes.
RISKS RELATED TO POTENTIAL FUTURE ACQUISITIONS
The Company intends in the future to pursue acquisitions of complementary
services, technologies or businesses, although the Company has no present
understandings, commitments or agreements with respect to any such acquisitions
except as described in this Prospectus. Future acquisitions by the Company
could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and an increase in amortization
expenses related to goodwill and other intangible assets, which could have a
material adverse effect upon the Company's business, financial condition and
results of operations. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations, technologies, services and
products of the acquired companies and the diversion of management's attention
from other business concerns.
HOLDING COMPANY STRUCTURE; INABILITY TO ACCESS CASH FLOW
The Company is a holding company with substantially all of its operations
conducted through its Subsidiaries. Accordingly, the Company's cash flow and,
consequently, its ability to service its indebtedness, including the Notes, is
dependent upon the cash flow of its Subsidiaries and the payment of funds by
those Subsidiaries to the Company in the form of dividends, distributions or
otherwise. The Company's Subsidiaries are separate and distinct legal entities
and have no obligation, contingent or otherwise, to pay any amounts due pursuant
to the Notes or to make any funds available therefor, whether in the form of
loans, dividends, distributions or otherwise.
The Company's Subsidiaries may become parties to financing arrangements,
including vendor financing and other debt financing, in connection with the
construction of the Company's SMR networks and the implementation of the
Company's business plan. Such arrangements may impose significant limitations
on the ability of such Subsidiaries to pay dividends or to make loans or
advances to the Company. In certain circumstances, these limitations will be
permitted under the Indenture.
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The ability of the Company's Subsidiaries to pay dividends or make loans or
advances to the Company is subject to regulation within their respective
jurisdictions of organization and operation. While the existing laws and
regulations of these jurisdictions generally do not prohibit the Company's
Subsidiaries from paying dividends or making loans or advances to the Company,
there can be no assurance that such laws will continue to permit or will not
restrict such payments to be made.
The Company may develop additional operations in the future through joint
ventures. In addition to the restrictions described above, the ability of any
such joint venture to pay dividends or make distributions to the Company will be
subject to the terms of the documents governing such joint venture. Moreover,
to the extent that the Company is party to any joint venture in which the
Company owns, directly or indirectly, less than 50% of the equity interests, the
Company may lack the requisite control to cause such joint venture to pay
dividends or to make distributions to the equity holders or partners of such
joint venture, including the Company.
The Notes will not be guaranteed by any of the Company's Subsidiaries and,
consequently, the Notes will be structurally subordinated to all existing and
future indebtedness and other liabilities (including trade payables) of the
Company's Subsidiaries. Accordingly, any right of the Company to receive assets
of any of its Subsidiaries upon the latter's liquidation or reorganization (and
the consequent right of the Holders of the Notes to participate in those assets)
will be subordinated to the claims of that Subsidiary's creditors. As of June
30, 1998, the Notes would have been structurally subordinated to approximately
$1.1 million of indebtedness and other liabilities of the Company's Subsidiaries
(excluding intercompany payables to the Company). The Indenture will limit, but
not prohibit, the ability of the Company and its Subsidiaries to incur
additional indebtedness. See "Description of Notes - Certain Covenants."
In the event that the Company is unable to generate sufficient cash flow or
is otherwise unable to obtain funds necessary to meet required payments of
principal of, and interest on, its indebtedness, including the Notes, the
Company would be in default under the terms of the agreements governing such
indebtedness, including the Indenture. In the event of such default, the
holders of such indebtedness could elect to declare all of the funds borrowed
thereunder to be due and payable together with accrued and unpaid interest. If
such an acceleration were effected and the Company did not have sufficient funds
to pay the accelerated indebtedness, the holders could initiate foreclosure or
other enforcement action against the Company. Any such circumstances would
materially adversely affect the Company's ability to pay principal of, and
interest on, the Notes and the market value of the Notes.
RANKING; LIMITED SECURITY; ABILITY TO REALIZE ON COLLATERAL
The Notes are secured by a pledge of (i) 100% of the Capital Stock of the
Company's direct wholly-owned Subsidiary, SMR Direct USA, Inc. (this entity has
no operations and its financial position consists only of a nominal
capitalization) and all future domestic direct Restricted Subsidiaries of the
Company, and (ii) 100% of the Capital Stock (other than Excluded Stock) of each
of the Cayman Entities (one of which is solely a nominee shareholder in certain
of the Company's Latin American Subsidiaries) and 100% of the Capital Stock
(other than Excluded Stock) of all future foreign direct Restricted Subsidiaries
of the Company.
Upon the occurrence and continuation of an Event of Default (as defined),
the Pledge Agreement provides that the Collateral Agent (as defined) may sell
the Pledged Collateral or any part thereof. The Collateral Agent's ability to
realize on the pledged collateral may require government, regulatory or
licensing agency approval. For example, in the United States, the approval of
the FCC would be required in connection with the sale of the Capital Stock of
SMR Direct USA, Inc. In addition, to the extent that the Collateral Agent
attempted to foreclose on or sell the Capital Stock of the Cayman Entities,
necessary approvals may need to be obtained from the appropriate entities in
each country in which the Cayman Entities have a Subsidiary. The approval
process could take several months and, accordingly, the ability of the
Collateral Agent to foreclose on or sell the collateral could be substantially
delayed or impaired. No assurance can be given that the Collateral Agent will
obtain the necessary government approvals to consummate the foreclosure on or
sale of all or any portion of the collateral. In addition to complying with
applicable licensing laws, the Collateral Agent will have to comply with all
applicable federal, state and foreign judicial or non-judicial foreclosure and
sale laws. Such laws may include cure provisions,
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<PAGE>
mandatory sale notice provisions, manner of sale provisions and redemption
period provisions. Such provisions may significantly increase the time
associated with taking possession of any collateral or the sale of any
collateral. Failure to comply with any applicable provision could void the
foreclosure on or sale of such collateral.
The Indenture permits certain additional indebtedness of the Company to be
secured. The holders of any secured indebtedness of the Company or any
Restricted Subsidiary will have claims that are prior to the claims of the
Holders of the Notes to the extent of the assets securing such other
indebtedness. As of June 30, 1998, the Notes were effectively subordinated to
approximately $4.9 million of secured indebtedness of the Company and to
approximately $1.1 million of indebtedness and other liabilities of the
Company's Subsidiaries (excluding intercompany payables to the Company).
ENFORCEABILITY OF CIVIL LIABILITIES
The Notes are secured by a pledge of 100% of the Capital Stock (other than
Excluded Stock) of each of the Cayman Entities and 100% of the Capital Stock
(other than Excluded Stock) of all future foreign direct Restricted Subsidiaries
of the Company. The Collateral Agent and/or the Holders of the Notes may be
unable to enforce a judgment by a United States court arising out of or in
relation to the obligations of the Company under the Pledge Agreement in the
Cayman Islands or any other foreign jurisdiction where the Capital Stock of a
direct foreign Restricted Subsidiary of the Company organized within such
jurisdiction is pledged pursuant to the Pledge Agreement. In addition, the
Pledge Agreement is governed by New York law. There can be no assurance that a
court in the Cayman Islands will apply New York law (as opposed to the law of
the Cayman Islands) to the extent an action under the Pledge Agreement with
respect to the Capital Stock of the Cayman Entities is commenced in the Cayman
Islands. The jurisdiction of organization of future foreign direct Restricted
Subsidiaries of the Company whose stock is pledged pursuant to the Pledge
Agreement may likewise refuse to apply New York law with respect to actions
under the Pledge Agreement.
UNCERTAINTY OF MARKET ACCEPTANCE; POTENTIAL LACK OF SUBSCRIBER DEMAND
The Company's success is subject to a number of business, economic,
regulatory and competitive factors, many of which are beyond the Company's
control, including the extent to which prospective subscribers will use the
Company's services. The Company's ability to service its indebtedness,
including the Notes, is subject to the successful implementation of its growth
strategy which, in turn, is premised, among other things, on the Company's
expectation that demand for its current service will increase significantly in
its existing markets and that there will be strong demand for services
introduced by the Company in the future. The Company has only recently begun
providing SMR service in Peru, Ecuador, Chile and El Salvador. The subscriber
demand for the Company's service in the markets in which it currently operates
and in those in which it expects to operate is uncertain. See " - Competition"
and " - Risks Associated with Rapidly Changing Industry." Failure to gain
market acceptance for, or subscriber demand of, current or planned services
would have a material adverse effect on the Company. In addition, the Company
has incurred and will continue to incur significant operating expenses and has
made, and will continue to make, significant capital investments. Accordingly,
any material miscalculation by the Company with respect to its strategy or
business plan is likely to have a material adverse effect on the Company. See "
- - Need for Additional Financing" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
The Company faces significant competition in its Latin American markets.
The Company's SMR operations compete primarily with other SMR operators. Many
of the Company's competitors have substantially greater financial, marketing and
other resources than the Company and hold, or may be able to obtain, significant
channel positions. In addition, the Company also competes with regional and
small SMR operators in its markets.
The Company's use of analog technology for its SMR networks will compete
with the recently developed digital technology offered by certain of its
competitors, such as Nextel. The Company believes that the demand in Latin
America for high quality telecommunications services will be able to accommodate
both low cost analog
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SMR service as well as the more expensive digital technology being offered by
certain of the Company's competitors. There can be no assurance that a
significant number of potential subscribers in Latin America will elect to use
the Company's services. See " - Uncertainty of Market Acceptance; Potential Lack
of Subscriber Demand" and "Risks Associated with Rapidly Changing Industry."
The Company's SMR operations also compete with other providers of wireless
communications services, including cellular and paging. While the Company
believes that its SMR services are differentiated from cellular and paging
services because they provide a cost-effective, one-to-many communications tool
for businesses, there can be no assurance that prices for cellular service will
not decline, that the functionality of cellular and paging services will not be
expanded or that the Company's SMR service will compete effectively with
cellular and paging services. In addition, if the Company expands into other
wireless communications services, it will face competition from
established companies who are likely to have greater market recognition and an
existing subscriber base.
The Company faces significant competition for additional spectrum in Latin
America. In seeking to obtain spectrum in each of the Company's targeted
markets, the Company competes with other SMR operators and potential SMR
operators, including large multinational telecommunications companies. A number
of the Company's competitors have significantly greater financial and operating
resources and international presence than the Company and, as a result, there is
no assurance that the Company will be able to compete effectively with such
companies. The successful implementation of the Company's growth strategy is
dependent in part upon the successful acquisition of additional licenses. There
can be no assurance that the Company will be able to acquire such licenses on
favorable terms, if at all. See "Business - Growth Strategy." In addition,
many existing telecommunications enterprises in the markets in which the Company
operates have successfully attracted significant investments from multinational
communications companies. These multinational communications companies, which
have invested in local landline and wireless communications entities, have
substantially greater financial resources than the Company and are attempting to
accelerate the modernization of the telecommunications sector in the regions in
which they operate by utilizing their operating and financial resources. See
"Industry Overview."
The Company continuously reviews opportunities to acquire additional
licenses, license holding and operating companies in its existing markets and in
other Latin American markets. In addition, the Company may in the future pursue
opportunities in other markets, such as Europe. In each new market, the Company
expects to face competition for such licenses, license holding and operating
companies from major international telecommunications entities, as well as from
local competitors. In addition, in each new market which the Company enters,
the Company believes that it will face competitive pressures similar to those
described above.
In the future, the Company also expects to experience competition from new
technologies, such as satellite technology, and from advances in existing
technologies such as cellular, paging and mobil data transmission. For
additional information regarding the competitive environment in each of the
markets in which the Company operates, see "Business - Country-by-Country
Operations."
RISKS ASSOCIATED WITH ANTICIPATED GROWTH AND EXPANSION
The Company has a limited operating history and rapid growth by the Company
could place a strain on its management, operating and financial resources. In
addition, while the Company is currently an operator of SMR networks in Peru,
Ecuador, Chile and El Salvador, the Company will, on an on-going basis, explore
opportunities to provide additional wireless communications services in
Latin America. The Company's ability to manage growth and expansion effectively
will require continued implementation of, and improvements to, its operating and
financial systems and will require the Company to expand, train and manage its
employee base. Although the Company believes that it has made adequate
allowances for the costs and risks associated with future growth and expansion,
there can be no assurance that the Company's systems, procedures or controls or
financial resources will be adequate to support the Company's operations or that
management will be able to keep pace with such growth and/or expansion. If the
Company is unable to manage growth and/or expansion effectively, the Company's
business, operating results and financial condition and its ability to generate
sufficient cash flow to
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service its indebtedness, including the Notes, will be materially adversely
affected. See "Business - Growth Strategy" and "Management."
In addition, the Indenture and the Convertible Notes (as defined) will
limit the Company's ability to engage in investment opportunities outside of
Latin America until such time as (i) the Company has consummated a Qualified
Public Offering (as defined) of its Qualified Capital Stock (as defined) and
(ii) the Notes have traded for 10 days, after the occurrence of such Qualified
Public Offering, at a price equal to 101% of their Accreted Value as
demonstrated by a bid in writing from a broker for at least $2 million in
aggregate principal amount of the Notes. While the Indenture does permit the
Company to use any Designated Equity Proceeds (as defined) raised by the Company
to pursue investment opportunities in Eastern Europe, the Company's ability to
reduce risk by diversifying its geographic operations may be impaired by such
restrictions.
RISKS ASSOCIATED WITH DIVESTITURE OF UNITED STATES OPERATIONS
The Company and its U.S. Subsidiary, SMR Direct USA, Inc., have entered
into the Purchase Agreements providing for the sale of substantially all of the
U.S. Operations. Two of the transactions contemplated by the Purchase Agreements
have already closed. The remaining Purchase Agreements are subject to the
receipt of necessary regulatory approvals. Among other things, the Company's SMR
licenses and related FCC Debt cannot be transferred or assumed until the FCC has
consented to such transfer. FCC approval of such transfer has been received on
all Purchase Agreements except two, and while the Company does not anticipate
any problems in obtaining FCC approval of the remaining Purchase Agreements,
there can be no assurance that such approval will be obtained in a timely
manner, if at all.
Prior to the closing of the remaining Purchase Agreements, the U.S.
Operations will be managed by the purchasers thereof pursuant to certain
Management Agreements (the "Management Agreements"). While the Company's U.S.
Operations are managed pursuant to the Management Agreements, the Company is
subject to the risk that any one of the purchasers of the U.S. Operations
will be unable to successfully operate and manage the portion of the U.S.
Operations that it is entitled to manage under the terms of the Management
Agreements.
Certain of the purchasers of the U.S. Operations may pay a portion of the
purchase price with respect to the U.S. Operations so purchased in the form of a
promissory note. While the Company believes that each of these purchasers will
be able to fulfill their obligations pursuant to such promissory notes, there
can be no assurance that circumstances will not change or that such purchasers
will not default on such promissory notes. The Indenture limits the amount of
such promissory notes that the Company may receive in connection with the sale
of the U.S. Operations. See "Description of Notes."
Any failure to consummate the transactions (in whole or in part)
contemplated in the Purchase Agreements could have a material adverse effect on
the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business - Divestiture of the United States
Operations."
DEPENDENCE UPON KEY PERSONNEL
The Company's performance is substantially dependent upon the performance
of its officers and key employees, most of whom have worked together for only a
short period of time. The Company is dependent upon its ability to retain and
motivate high quality personnel, especially its management. The Company does
not have "key person" life insurance policies on any of its employees. There
can be no assurance that key personnel will continue to be employed by the
Company or that the Company will be able to attract and retain qualified
personnel in the future. The Company's future success also depends upon its
continuing ability to identify, hire, train and retain other highly qualified
technical, sales, marketing and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to attract and retain its officers and key employees and the necessary
technical, sales, marketing and managerial personnel and, failure to do so,
could have a material adverse effect upon the Company's business, operating
results and financial condition and its ability to generate sufficient cash flow
to service its indebtedness, including the Notes. See "Business - Employees"
and "Management."
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RISKS ASSOCIATED WITH RAPIDLY CHANGING INDUSTRY
The telecommunications industry is subject to rapid and significant changes
in technology, which could lead to new products and services that compete with
those offered by the Company or lower the cost of current competing products and
services to the point where the Company's products and services could be
noncompetitive. While the Company is unaware of any proposed changes that will
materially affect the attractiveness of its product and service offerings, the
effect of technological changes on the Company's business cannot be predicted.
The Company currently offers analog SMR service because of its proven
quality and the lower cost of analog technology as compared to digital
technology being offered by certain of the Company's competitors. Digital
technology is a relatively new application to the SMR industry and, to date, is
a more expensive technology for potential subscribers to use. As the cost of
digital technology becomes more affordable, the Company's existing and
prospective subscribers may wish to migrate to services offering digital
technology which could adversely affect the Company's ability to maintain and
expand its subscriber base. In the future, the Company will experience
competition from new technologies such as satellite technology, as well as from
advances with respect to existing technologies such as cellular, paging and
mobile data transmission. See " - Uncertainty of Market Acceptance; Potential
Lack of Subscriber Demand" and " - Competition."
RISKS ASSOCIATED WITH SUBSCRIBER UNIT LOSS
The Company has implemented a sales and marketing strategy pursuant to
which the Company does not sell all subscriber units to its subscribers.
Instead, the Company retains ownership of such subscriber units and provides
them to its subscribers in exchange for the subscriber's agreement to use the
Company's service for a minimum period of time (typically, one year). Upon the
discontinuance of the Company's service, the subscriber is required to return
such units to the Company. Failure by subscribers to return such units could
have a material adverse effect on the Company. See "Business - Growth
Strategy."
GOVERNMENT REGULATION; CHANGING REGULATORY LANDSCAPE
The licensing, construction, ownership and operation of SMR and other
wireless communications networks, and the grant, maintenance and renewal of
applicable licenses and radio frequency allocations, are regulated by
governmental entities in the markets in which the Company operates. In
addition, such matters and certain other aspects of the operation of such
systems, including rates charged to customers and the resale of such services,
may also be subject to regulation in the jurisdiction in which service is
provided. Changes in the current regulatory environments in countries in which
the Company operates or future judicial intervention, including with respect to
requirements for increased capital investments or regulations affecting prices
the Company is able to charge for its services, could have a material adverse
effect on the Company.
Licenses and spectrum allocations are subject to ongoing review and, in
some cases, to modification or early termination for failure to comply with
applicable regulations and the terms of the license grant. All of the Company's
licenses have fixed terms and certain of such licenses are not automatically
renewable. In cases where license terms are fixed, there can be no assurance
that license renewal will be effected or, if effected, that renewal will be on
acceptable economic terms. In addition, certain of the countries in which the
Company currently operates require the holders of licenses to pay on-going
license fees. There is no assurance that these or other fees imposed by the
regulatory authorities in the countries where the Company operates will not have
a material adverse effect on the Company's operating results. Moreover, certain
of the Company's SMR licenses are subject to network construction requirements
and minimum subscriber requirements which, if not complied with by the Company
within the enumerated time periods, could result in the imposition of fines or
forfeiture by the Company of the applicable license. Changes in the regulation
of the Company's activities including, without limitation, requirements for
increased capital investments or regulations affecting prices or license fees,
could also have a material adverse effect upon the Company's operating results.
In addition, there are various rule making proceedings pending before the
FCC which generally affect the wireless or SMR industries, and, thus, may impact
the Company's U.S. Operations which are in the process of
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being divested. See "- Risks Associated with Divestiture of United States
Operations." Except for the proceeding which implements the Communications
Assistance for Law Enforcement Act ("CALEA"), the Company does not believe that
the outcome of such proceedings will have a material adverse affect on its SMR
operations. CALEA was enacted in October 1994 to enable law enforcement agencies
to expand electronic surveillance activities to new wireless technologies. The
United States SMR industry has advised the FCC that SMR technology, particularly
dispatch analog systems, cannot comply with the proposed CALEA requirements. The
FCC has proposed to exclude non-common carrier systems, such as those operated
by the Company, from compliance with CALEA. Failure to exclude the Company's
systems from compliance may require the Company to reconfigure its systems in
such a manner that will either be economically or technically infeasible.
Due to the fact that regulation of the telecommunications industry in Latin
America and the other emerging markets in which the Company may operate in the
future, is still developing, certain of the applicable governmental authorities
in such markets have previously discouraged consolidation of ownership of
licenses. In those countries where the regulatory climate is currently opposed
to such consolidation activity, the Company is still pursuing acquisition of
licenses because it believes that, as was the case in the United States, the
regulatory climate will improve as regulators recognize the benefits of
consolidation. While the Company believes it has complied with the legal
requirements regarding consolidation in each country in which it operates, there
is, nevertheless, no assurance that the applicable governmental authorities will
change their regulatory approach or will not find the Company to be in violation
of existing rules and regulations. The Company has filed an application for the
consolidation of its operations in Peru.
Compliance with the terms of SMR and other wireless communications licenses
and certain regulatory requirements, such as construction deadlines and minimum
subscriber requirements, can be difficult to meet. In addition, there can be no
assurance that in the future all regulatory requirements will be met or that the
Company will not lose any applicable licenses as a result of its failure to meet
such requirements. The Company currently is not in compliance with certain
minimum subscriber loading requirements with respect to a portion of its
channels in Peru. Requests for amendment of such loading requirements have been
filed by the Company with the Peruvian Ministry of Transportation,
Communications, Housing and Construction (the "Peruvian Ministry"); however, to
date, no responses have been received. Based upon information currently
available, the Company is optimistic that these amendments will be approved;
however, there can be no assurance that the amendments received by the Company
will be the same as those applied for. If such approvals are not granted, the
licenses relating to such channels could be subject to punitive measures which
could have an adverse effect upon the Company. In the past, Brunacci Compania
Ltda., one of the Company's Ecuadorian operating Subsidiaries, was not in full
compliance with certain construction requirements relating to its licenses. The
Company believes that it is now in compliance in all material respects with
applicable Ecuadorian regulations in respect of such licenses. Because many of
the regulatory frameworks are relatively new and still developing in the
countries in which the Company operates and the enforcement of such regulations
is often uncertain, it is difficult to determine how regulators will interpret
the rules or judge compliance, and what degree of flexibility will be available.
For a more detailed description of the regulatory environment in each of the
markets in which the Company operates, see "Business - Country-by-Country
Operations."
CHANNEL CAPACITY
There exists a maximum number of subscribers that may be loaded on each of
the Company's SMR channels in Peru, Ecuador, Chile and El Salvador. Loading in
excess of such maximum number may have a negative impact on the quality of
service provided by the Company and, in certain instances, may violate
applicable rules and regulations. Once the Company's SMR channels are fully
loaded with subscribers, the Company will need to secure additional channels in
the markets in which it operates in order to provide quality service and to
expand its subscriber base. There can be no assurance that additional channels
will be available to the Company at attractive prices or at all.
COUNTRY RISKS
General. The Company has invested significant resources in Latin America
and intends to continue to make such investments in Latin America in the future.
Accordingly, the Company may be subject to economic,
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political or social instability or other developments not typical of investments
made in the United States. Such events could adversely affect the financial
condition and results of operations of the Company, the ability of the Company
to repay the Notes and the market value and liquidity of the Notes. During the
past several years, countries in Latin America in which the Company operates or
plans to operate have been characterized by varying degrees of inflation, uneven
growth rates and political uncertainty. The Company currently does not have
political risk insurance in the countries in which it conducts business. While
the Company carefully considers these risks when evaluating investment
opportunities and seeks to mitigate these and other risks by diversifying its
operations in a number of Latin American countries, there is no assurance that
the Company will not be materially adversely affected as a result of such risks.
Currency Risks and Exchange Controls. Although the Company's Subsidiaries
have attempted, and will continue to attempt, to match costs and revenues and
borrowings and repayments in terms of their respective local currencies, payment
for a majority of purchased equipment has been, and may continue to be, required
to be made in currencies, including dollars, other than local currencies. In
addition, the value of the Company's investment in a Subsidiary is partially a
function of the currency exchange rate between the dollar and the applicable
local currency. In general, the Company does not execute hedge transactions to
reduce its exposure to foreign currency exchange rate risks. Accordingly, the
Company may experience economic loss and a negative impact on earnings with
respect to its holdings solely as a result of foreign currency exchange rate
fluctuations, which include foreign currency devaluations against the dollar.
The countries in which the Company's Subsidiaries now conduct business generally
do not restrict the removal or conversion of local or foreign currency; however,
there can be no assurance that this situation will continue.
Dependence on Local Economies; Inflation. The Company's operations depend
upon the economies of the markets in which it operates. These markets include
countries with economies in various stages of development or structural reform,
some of which are subject to rapid fluctuations in terms of consumer prices,
employment levels, gross domestic product and interest and foreign exchange
rates. The Company may be subject to such fluctuations in the local economies
in which it operates. To the extent such fluctuations have an effect on the
ability of subscribers to pay for the Company's service, the growth of the
Company's services in such markets could be impacted negatively. Many of the
countries in which the Company operates or expects to operate, do not have
established credit bureaus, thereby making it more difficult for the Company to
ascertain the creditworthiness of potential subscribers. Accordingly, the
Company may experience a higher level of bad debt expense than otherwise would
be the case.
Certain of the Company's targeted markets are in countries in which the
rate of inflation is significantly higher than that of the United States. The
Company intends to price its products and services in dollars to mitigate any
effects of inflation; however, there can be no assurance that any significant
increase in the rate of inflation in such countries could be offset, in whole or
in part, by corresponding price increases by the Company, even over the long-
term.
Import Duties on Equipment. The Company's Latin American operations are
highly dependent upon the successful and cost-efficient importation of
infrastructure equipment and subscriber units from the United States. In the
Latin American markets where the Company operates, infrastructure equipment and
subscriber units are subject to significant import duties and other taxes that
are currently as high as 42%. Although the Company believes there is a trend
away from increased import duties, any significant increase in the future could
have a material adverse effect on the Company's results of operations.
Tax Risks Associated with Foreign Operations. Distributions of earnings
and other payments, including interest, received from the Company's Subsidiaries
and Affiliates may be subject to withholding taxes imposed by the jurisdictions
in which such entities are formed or operating, which will reduce the amount of
after-tax cash the Company can receive from such entities. In general, a United
States corporation may claim a foreign tax credit against its federal income tax
expense for such foreign withholding taxes and for foreign income taxes paid
directly by foreign corporate entities in which the Company owns 10% or more of
the voting stock. The ability to claim such foreign tax credits and to utilize
net foreign losses is, however, subject to numerous limitations, and the
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Company may incur incremental tax costs as a result of these limitations or
because the Company is not in a tax-paying position in the United States.
The Company may also be required to include in its income for United States
federal income tax purposes its proportionate share of certain earnings of those
foreign corporate Subsidiaries that are classified as "controlled foreign
corporations" without regard to whether distributions have been actually
received from such Subsidiaries.
Enforcement of Agreements. A number of the agreements the Company enters
into with its non-United States Subsidiaries, dealers, subscribers and agents
are governed by the laws of, and are subject to dispute resolution in the courts
of, or through arbitration proceedings in, the country or region in which the
operation is located. The Company cannot accurately predict whether such forum
will provide it with an effective and efficient means of resolving disputes that
may arise in the future. Even if the Company is able to obtain a satisfactory
decision through arbitration or a court proceeding, it could have difficulty
enforcing any award or judgment on a timely basis. The Company's ability to
obtain or enforce relief in the United States is uncertain.
Foreign Corrupt Practices Act. As a United States corporation, the Company
is subject to the regulations imposed by the Foreign Corrupt Practices Act (the
"FCPA"), which generally prohibits United States companies and their
intermediaries from making improper payments to foreign officials for the
purpose of obtaining or keeping business. Although the Company has instituted
an employee compliance program to comply with the FCPA, there can be no
assurance that the institution of such a program and the other related
precautions that the Company anticipates instituting will protect the Company
against liability under the FCPA, particularly as a result of actions which may
in the past have been taken or which may be taken in the future by agents and
other intermediaries for whom the Company may have exposure under the FCPA. In
particular, the Company may be held responsible for actions taken by any future
local partners even though the Company has no ability to control them. Any
determination that the Company has violated the FCPA could have a material
adverse effect on the Company.
Changes in Country Policy; Change in Regulatory Agencies and Political
Structures. The Company has obtained and is seeking to acquire licenses in
countries throughout Latin America and, accordingly, is subject to government
regulation in each market. The Company has confronted, and is likely to
continue to confront, changes in government policy or circumstances that can
affect the Company's business and results of operations. There can be no
assurance that such changes in the future will not have a material adverse
effect on the Company's results of operations. See "Business - Country-by-
Country Operations."
The governments of the countries in Latin America vary widely with respect
to structure, constitution and stability. While Latin American governments have
historically exercised extensive influence over their economies, the role of
government has declined as countries have liberalized their political structures
and economies. However, there can be no assurance that future developments in
the government administration of local economies would not materially and
adversely impair the Company's business and financial condition, the value of
the Notes or the Company's ability to pay principal of, or interest on, the
Notes.
Labor Issues. In most Latin American countries labor unions are considered
to be strong and influential. Accordingly, while none of the Company's
operations are currently unionized, no assurance can be given that the Company
will not encounter strikes or other types of conflicts with labor unions or the
Company's personnel in the Company's targeted markets or that such labor
disputes will not have an adverse effect on the Company. In addition, in
response to pressure by labor unions, many Latin American governments in which
the Company targets operations have, at times, actively regulated cross-border
transactions, including placing limitations on imported goods. Such regulations
may result in delays and increased costs.
CONTROL BY EXISTING STOCKHOLDERS
The Company's executive officers and directors, together with entities
affiliated with such individuals, and other holders of 5% or more of the
Company's outstanding capital stock beneficially own over 95% of the
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Common Stock (assuming the exercise and conversion of all Warrants (as defined)
and the conversion of all outstanding Preferred Stock (as defined) and assuming
full exercise of all options granted pursuant to the Option Plan (as defined)).
Accordingly, these stockholders will be able to elect a majority of the
Company's directors, will retain the voting power to approve all matters
requiring stockholder approval and will continue to have significant influence
over the affairs of the Company. This concentration of ownership could have the
effect of delaying or preventing a change in control of the Company. See
"Management" and "Principal Stockholders."
RISK OF INABILITY TO SATISFY CHANGE OF CONTROL OFFER
In the event of a Change of Control, each Holder of Notes will have the
right to require the Company to purchase all or any part of such Holder's Notes
at a price in cash equal to 101% of the Accreted Value thereof, plus accrued and
unpaid Liquidated Damages, if any, to the date of purchase, or in the case of
any such purchase on or after January 1, 2003, at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase. There can be no assurance that, in
the event of a Change of Control, the Company would have sufficient funds to
purchase all Notes tendered or that such purchase would be permitted by the
terms of any other outstanding indebtedness of the Company. In the event a
Change of Control occurs at a time when the Company is unable to purchase the
Notes, the Company could seek to refinance the Notes. If the Company is
unsuccessful in refinancing the Notes, the Company's failure to purchase
tendered Notes would constitute an Event of Default under the Indenture. See
"Description of Notes - Repurchase at the Option of Holders - Change of
Control."
RADIO FREQUENCY EMISSION CONCERNS
Certain consumers have alleged that serious health risks have resulted from
the use of certain mobile communications devices. The actual or perceived
health risks of mobile communications devices could adversely affect mobile
communications services providers, including the Company, through reduced
subscriber growth, reduced network usage, the threat of product liability suits
or limitations on financing.
LACK OF A PUBLIC MARKET FOR THE NOTES
The Private Notes are designated for trading in the PORTAL Market. The
Exchange Notes constitute securities for which there is no established trading
market. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system, and no active public market for the Exchange Notes is
currently anticipated. If a market for the Exchange Notes should develop, such
Exchange Notes could trade at a discount from their principal amount. There can
be no assurance of the liquidity of any markets that may develop for the
Exchange Notes, the ability of Holders of the Exchange Notes to sell their
Exchange Notes, or the price at which Holders would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including prevailing interest rates, the Company's operating results
and the market for similar securities. To the extent that any Private Notes are
tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered Private Notes could be adversely affected.
No prediction can be made as to the effect, if any, that future sales of
Exchange Notes, or the availability of Exchange Notes for future sale, will have
on the market price of the Exchange Notes prevailing from time to time. Sales
of substantial amounts of Exchange Notes, or the perception that such sales
could occur, could adversely affect prevailing market prices for the Exchange
Notes. No assurance can be given that sales of substantial amounts of Exchange
Notes will not occur in the foreseeable future or as to the effect that any such
sales, or the perception that such sales may occur, will have on the market or
the market price of the Exchange Notes. No assurance can be given as to the
liquidity of the trading market for the Exchange Notes or that an active public
market for the Exchange Notes will develop or, if developed, will continue. If
an active public market does not develop or is not maintained, the market price
and liquidity of the Exchange Notes may be adversely affected.
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RISK RELATING TO THE YEAR 2000
As is the case with most other businesses using computers in their
operations, the Company is in the process of evaluating and addressing the Year
2000 compliance of its computer systems and applications. The Company has
established a committee to review its computer systems and applications to
identify, address and resolve the issues that could be created by the Year 2000
problem. The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year. Any of the
Company's programs that have time-sensitive software or equipment that has time-
sensitive embedded components may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar, normal business activities. The Company is currently evaluating its
computer systems and applications to determine whether they will function
properly with respect to dates in the year 2000 and thereafter. This process
involves assessing overall Year 2000 risk and modifying or replacing certain
hardware and software maintained by the Company. Management has not yet
quantified the Year 2000 compliance expense and related impact on the Company's
future earnings.
The Company also may be vulnerable to other companies' Year 2000 problems,
including suppliers of SMR radios and capital infrastructure. The Company
intends to initiate formal communications with all of its significant suppliers,
dealers, financial institutions and others with which it does business, with
respect to such persons' Year 2000 compliance programs and status. The Company
must therefore rely on the estimates of these suppliers, dealers, financial
institutions and others' of their own Year 2000 risks, issues and status of
their related compliance activities and programs in the Company's own risk
assessment process. There can be no assurance that such other companies will
achieve Year 2000 compliance or that any conversion by such companies to become
Year 2000 compliant will be compatible with the Company's computer systems. The
inability of the Company or any of its principal vendors or insurance payors to
become Year 2000 compliant in a timely manner could have a material adverse
effect on the Company's financial condition or results of operations.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company to satisfy certain
obligations of the Company under the Notes Registration Rights Agreement.
Pursuant to the Notes Registration Rights Agreement, the Company agreed, for the
benefit of the Holders of the Private Notes, at the Company's expense, to (i)
file within 300 days after the date of original issuance of the Private Notes
(such date to be the "Filing Date") the Registration Statement with the
Commission with respect to a registered offer to exchange the Private Notes for
the Exchange Notes to be issued under the Indenture in the same aggregate
principal amount as, and with terms that will be identical in all material
respects to, the Private Notes (except (a) for certain transfer restrictions and
registration rights relating to the Private Notes; and (b) that if the Exchange
Offer is not consummated in a timely manner, or if the Company fails to comply
with certain other registration obligations with respect to the Private Notes,
the Company is required to pay certain Liquidated Damages to the Holders of the
Private Notes) and (ii) use its best efforts to cause the Registration Statement
to be declared effective under the Securities Act at the earliest possible time,
but in no event later than 60 days after the Filing Date. Promptly after the
Registration Statement has been declared effective, the Company will offer the
Exchange Notes in exchange for the surrender of the Private Notes. The Company
will keep the Exchange Offer open for not less than 20 days (or longer if
required by the applicable law) after the date notice of the Exchange Offer is
mailed to the Holders of the Private Notes. For each Private Note tendered to
the Company pursuant to the Exchange Offer and not validly withdrawn by the
Holder thereof, the Holder of such Private Note will receive an Exchange Note
having a principal amount equal to the principal amount of such surrendered
Private Note.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date.
The Company will issue Exchange Notes in exchange for an equal aggregate
principal amount at maturity of outstanding Private Notes validly tendered
pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date.
The terms of the Exchange Notes will be identical in all material respects
to the terms of the Private Notes except (i) for certain transfer restrictions
and registration rights relating to the Private Notes and (ii) that if the
Exchange Offer is not consummated in a timely manner, or if the Company fails to
comply with certain other registration obligations with respect to the Private
Notes, the Company is required to pay certain Liquidated Damages to the Holders
of the Private Notes. The Exchange Notes will evidence the same indebtedness as
the Private Notes (which they replace) and will be issued under and entitled to
the benefits of the Indenture, which also authorized the issuance of the Private
Notes, such that the Notes will be treated as a single class of debt securities
under the Indenture.
The Exchange Offer is not being conditioned upon any minimum aggregate
principal amount of Private Notes being tendered for exchange. As of the date
of this Prospectus, $40 million in aggregate principal amount of the Private
Notes are outstanding. Only a registered Holder of the Private Notes (or such
Holder's legal representative or attorney-in-fact), as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer.
Solely for reasons of administration, the Company has fixed the close of
business on ___________, 1998 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially. There will be no fixed record date for
determining registered Holders of the Private Notes entitled to participate in
the Exchange Offer.
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The Company shall be deemed to have accepted validly tendered Private Notes
when, and if, the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company. The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Private Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions specified
below under " - Conditions."
Holders who tender Private 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 Private
Notes pursuant to the Exchange Offer. The Company 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
___________, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and mail to the registered
Holders of the Private Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if, in
the opinion of counsel for the Company, the consummation of the Exchange Offer
would violate any applicable law, rule or regulation or any applicable
interpretation of the staff of the Commission, to terminate or amend the
Exchange Offer by giving oral or written notice of such delay, extension
termination or amendment to the Exchange Agent. Any such delay in acceptance
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered Holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
Prospectus supplement that will be distributed to the registered Holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Company 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.
RESALE OF THE EXCHANGE NOTES
Based upon interpretations by the staff of the Commission set forth in
certain no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Private
Notes may be offered for resale, resold and otherwise transferred by a Holder
thereof (other than (i) a broker-dealer who purchased such Private Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or (ii) a person that is an Affiliate of the
Company, without compliance with the registration and prospectus delivery
requirements of the Securities Act; provided that the Holder is acquiring
Exchange Notes in the ordinary course of its business and is not participating,
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes. Holders of
Private Notes wishing to accept the Exchange Offer must represent to the Company
that such conditions have been met. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Private Notes, where such Private
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 meeting the requirements of the Securities Act in connection with any
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resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the 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 any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Pursuant to the Notes
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to any such
broker-dealer that requests copies of such Prospectus in the Letter of
Transmittal for use in connection with any such resale for a period of 180 days
from the Effective Date. See "Plan of Distribution."
CONDITIONS
The Exchange Offer shall not be subject to any conditions, other than (i)
that the Exchange Offer, or the making of any exchange by a Holder of Private
Notes, does not violate applicable law or any applicable interpretation of the
staff of the Commission; and (ii) the tendering of the Private Notes in
accordance with the Exchange Offer.
PROCEDURES FOR TENDERING
Only a registered Holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a Holder of Private Notes
must 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 to
the Exchange Agent at the address set forth below under " - Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Private Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation") of such Private Notes, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company (the "Depository")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the Holder
must comply with the guaranteed delivery procedures described below.
The tender by a Holder that is not withdrawn prior to the Expiration Date
will constitute an agreement among such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE 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, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. DO NOT SEND THE LETTER OF TRANSMITTAL OR ANY
PRIVATE NOTES TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner of the Private Notes whose Private 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
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private 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 and may not be able to be
completed prior to the Expiration Date.
35
<PAGE>
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see " - Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined) unless the Private Notes tendered
pursuant thereto are tendered (i) by a registered Holder who has not completed
the box titled "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 made 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) that is a member of
one of the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Private Notes listed therein, such Private Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered Holder exactly as such registered Holder's name appears on such
Private Notes.
If the Letter of Transmittal or any Private Notes are signed by 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 the Company,
evidence satisfactory to the Company of their authority to so act must submitted
with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Private
Notes not properly tendered or any Private Notes the Company's acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any defects, irregularities or
conditions of tender as to particular Private Notes. The Company'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, defects or irregularities in connection with tenders of
Private Notes must be cured within such time as the Company shall determine.
Although the Company intends to notify Holders of defects or irregularities with
respect to tenders of Private Notes, neither the Company, the Exchange Agent nor
any other person shall incur any liability for failure to give such
notification. Tenders of Private Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Private Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Private Notes that remain outstanding subsequent to the
Expiration Date and, to the extent permitted by applicable law, purchase Private
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 of Private Notes will represent to the Company
that, among other things, (i) the Exchange Notes to be acquired by such Holder
of Private Notes in connection with the Exchange Offer are being acquired by
such Holder in the ordinary course of business of such Holder, (ii) such Holder
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such Holder acknowledges and agrees
that any person who is participating in the Exchange Offer for the purposes of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the staff of the Commission set forth in certain no-action
letters, (iv) such Holder understands that a secondary resale transaction
described in clause (iii) above and any resales of Exchange Notes obtained by
such Holder in exchange for Private Notes acquired by such Holder directly from
the Company should be covered by an effective registration statement containing
the selling security holder information required by
36
<PAGE>
Item 507 or Item 508, as applicable, of Regulation S-K of the Commission and (v)
such Holder is not an Affiliate of the Company. If the Holder is a broker-dealer
that will receive Exchange Notes for such Holder's own account in exchange for
Private Notes that were acquired as a result of market-making activities or
other trading activities such Holder will be required to acknowledge in the
Letter of Transmittal that such Holder will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, such Holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn, such unaccepted, withdrawn or non-exchanged Private Notes will be
returned without expense to the tendering Holder thereof (or, in the case of
Private Notes tendered by book-entry transfer into the Exchange Agent's account
at the Depository pursuant to the book-entry transfer procedures described
below, such Private Notes will be credited to an account maintained with the
Depository) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes with the Depository for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depository's systems may make book-
entry delivery of Private Notes by causing the Depository to transfer such
Private Notes into the Exchange Agent's account at the Depository in accordance
with the Depository's procedures for transfer. However, although delivery of
Private Notes may be effected through book-entry transfer at the Depository, the
Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under " -
Exchange Agent" on or prior to the Expiration Date or pursuant to guaranteed
delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder and the certificate number(s) of such Private Notes, stating that the
tender is being made thereby and guaranteeing that, within five business days
after the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the Private Notes in proper form
for transfer or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof) as
well as the certificate(s) representing all tendered Private Notes in proper
form for transfer and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five business 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 Private Notes according to guaranteed
delivery procedures set forth above.
37
<PAGE>
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to the Expiration Date. To withdraw a tender of
Private Notes in the Exchange Offer, a written or facsimile transmission notice
of withdrawal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Private Notes to be
withdrawn, (ii) identify the Private Notes to be withdrawn (including
certificate number or numbers) and (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such
Private Notes were tendered including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt of
such notices) will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Private Notes
withdrawn will be deemed not to have been validly tendered for purposes of
Exchange Offer, and no Exchange Notes will be issued with respect thereto unless
the Private Notes so withdrawn are validly retendered. Properly withdrawn
Private Notes may be retendered by following one of the procedures described
above under "The Exchange Offer - Procedures for Tendering" at any time prior to
the Expiration Date.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
State Street Bank and Trust Company (617) 664-5395 State Street Bank and Trust Company
P.O. Box 778 (For Eligible Institutions Only) Two International Place
Boston, MA 02102-0078 Boston, MA 02110
Attn: Kellie Mullen Attn: Kellie Mullen
Confirm by Telephone:
(617) 664-5587
</TABLE>
State Street Bank and Trust Company also serves as Trustee under the Indenture.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, facsimile transmission, telephone or in person by
officers and regular employees of the Company and their Affiliates.
The Company 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. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it its reasonable, out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include registration fees, fees and
expenses of the Exchange Agent and the Trustee, accounting and legal fees and
printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Private 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.
38
<PAGE>
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of Private Notes
are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Private Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (ii) in an offshore transaction complying with Rule
903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) pursuant to an effective registration statement
under the Securities Act or (v) to institutional accredited investors in a
transaction exempt from the registration requirements of the Securities Act,
and, in each case, in accordance with all other applicable securities laws and
the transfer restrictions set forth in the Indenture. See "Description of
Notes."
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.
USE OF PROCEEDS OF THE EXCHANGE NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Notes Registration Rights Agreement and the Indenture. The
Company will not receive any proceeds from the issuance of the Exchange Notes
offered hereby and has agreed to pay the expenses of the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive, in exchange, the Private Notes representing an equal
aggregate principal amount. The terms of the Exchange Notes are identical in
all material respects to the terms of the Private Notes, except (i) for certain
transfer restrictions and registration rights relating to the Private Notes; and
(ii) that if the Exchange Offer is not consummated in a timely manner, or if the
Company fails to comply with certain other registration obligations with respect
to the Private Notes, the Company is required to pay certain Liquidated Damages
to the Holders of the Private Notes. The Private Notes surrendered in exchange
for Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding indebtedness of the Company.
39
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998 (i) on an historical basis; (ii) on a pro forma as adjusted basis to
give effect to the Divestiture (including the assumption by the purchasers of
the FCC Debt, a portion of which is subject to FCC approval). This table should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto and "Unaudited Pro Forma Condensed Consolidated Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of June 30, 1998
(unaudited)
-----------------------------------------------
Pro Forma
Actual As Adjusted
------ -----------
<S> <C> <C>
(dollars in thousands)
Long-term debt:
Spectrum license debt (1)(2) $ 3,615 $ -
Capital Leases payable (2) 1,333 -
14% Senior Discount Notes due 2005 16,117 16,117
9% Convertible Subordinated Notes due 2006 10,412 10,412
-------- --------
Total long-term debt 31,477 26,529
-------- --------
Mandatorily redeemable, convertible preferred stock:
Series A Preferred, $.01 par value, 352 shares authorized, issued
and outstanding 8,776 8,776
Series B Preferred, $.01 par value, 6,399,648 shares authorized,
5,735,251 shares issued and outstanding (4) 20,474 20,474
Series C Preferred, $.01 par value, 11,000,000 shares authorized,
8,284,136 issued and outstanding 12,012 12,012
Stockholders' equity (deficit):
Common stock, $.01 par value, 40,000,000 shares authorized,
3,502,750 shares issued and outstanding 35 35
Additional paid-in capital 8,574 8,574
Accumulated deficit (25,731) (25,731)
Accumulated other comprehensive loss (33) (33)
-------- --------
Total stockholders' deficit (17,155) (17,155)
-------- --------
Total capitalization $ 55,584 $ 50,636
======== ========
</TABLE>
(1) Reflects the aggregate principal amount of such debt as of June 30, 1998,
in accordance with Accounting Principles Board Opinion No. 21. The
contractual principal amount of this debt was approximately $4.6 million as
of June 30, 1998. The Company has decided to divest its U.S. Operations.
See "Unaudited Pro Forma Condensed Consolidated Financial Data" and
"Business - Divestiture of the U.S. Operations."
(2) In the accompanying financial statements, such amounts have been classified
as a component of "Net assets held for sale." See Note 2 of the Notes to
the Company's Unaudited Condensed Consolidated Financial Statements as of
June 30, 1998 included in this Prospectus.
40
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following selected consolidated historical financial data for the
Company as of December 31, 1995 and for the period from October 26, 1995
(inception) through December 31, 1995 and as of and for the years ended December
31, 1996 and 1997, with the exception of data presented under Other Financial
Data, were derived from the consolidated financial statements and the notes
thereto of the Company, which have been audited by Arthur Andersen LLP,
independent public accountants, whose report has been included herein. The
selected consolidated historical financial data of the Company for the six
months ended June 30, 1997 and as of and for the six months ended June 30, 1998,
are derived from unaudited consolidated financial statements of the Company
which, in the opinion of management, include all adjustments, consisting of
normal recurring accruals, that are necessary for a fair presentation of the
financial position and results of operations for these periods. Operating
results for the six months ended June 30, 1998 are not necessarily indicative of
results for future periods. The selected consolidated historical financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements and the related notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
Inception (October
26, 1995) through (unaudited)
December 31, Year Ended December 31, Six Months Ended June 30,
------------ ------------------------- ---------------------------
1995 1996 1997 1997 1998
-----------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: (dollars in thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 296 $ 4,826 $ 2,019 $ 3,442
Costs and expenses related to revenues - 513 3,556 1,397 1,308
-------- ---------- ---------- ---------- ----------
Gross profit - (217) 1,270 622 2,134
Operating costs and expenses 62 4,590 15,837 6,248 5,682
-------- ---------- ---------- ---------- ----------
Operating loss (62) (4,807) (14,567) (5,626) (3,548)
Other income (expense) 4 (79) (1,148) (77) (1,478)
-------- ---------- ---------- ---------- ----------
Net loss before minority interest (58) (4,886) (15,715) (5,703) (5,026)
Minority interest (1) - 111 - - -
-------- ---------- ---------- ---------- ----------
Net loss (58) (4,775) (15,715) (5,703) (5,026)
Accretion of mandatorily redeemable
preferred shares to redemption value - (15) (142) (69) (717)
-------- ---------- ---------- ---------- ----------
Net loss applicable to common shareholders $ (58) $ (4,790) $ 15,857 $ (5,772) $ (5,743)
======== ========== ========== ========== ==========
Net loss per share $ (0.09) $ (1.38) $ (4.53) $ (1.65) $ (1.64)
Weighted average shares outstanding 639,091 3,480,466 3,502,534 3,502,500 3,502,748
OTHER FINANCIAL DATA:
EBITDA(2) $ (61) $ (4,299) $ (12,308) $ (4,458) $ (2,651)
Depreciation and amortization - 508 2,259 1,168 897
Capital expenditures (3) 5 7,087 10,383 8,531 3,356
Deficiency of earnings to fixed charges (4) 53 4,538 14,828 5,399 2,867
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of June 30, 1998
----------------------------------------------------
BALANCE SHEET DATA: 1995 1996 1997 (unaudited)
------- -------- --------- -----------------------
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments $2,503 $14,821 $ 7,730 $ 23,809
Restricted cash - 3,890 1,350 1,677(5)
Working capital 3,203 17,573 10,892 28,335(6)
Total assets 3,265 34,916 29,872 58,569(6)
Total long-term debt - 5,207 16,157 31,478(6)
Mandatorily redeemable convertible preferred
stock - 28,829 29,252 41,262
Stockholder's equity (deficit) 3,212 (1,348) (17,169) (17,155)
- ---------------------------------------------
</TABLE>
(1) Reflects the acquisition of the capital stock of SMR Direct Peru, S.R.L.
(formerly Mobil Line Peru, S.A.), 51% of which was acquired in February
1996 and the remaining 49% of which was acquired in July 1996.
(2) Represents operating loss before depreciation and amortization. EBITDA is
not a measurement under U.S. GAAP and may not be similar to EBITDA measures
of other companies. The Company has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as the measure of an issuer's ability to incur and service
indebtedness; however, EBITDA should not be considered a substitute for net
income as a measure of the Company's operating results or for cash flow as
a measure of the Company's liquidity.
(3) Represents cash used for purchases of property and inventory (subscriber
units).
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of loss before income taxes plus fixed charges. Fixed
charges consist of interest on all indebtedness and amortization of debt
expense. Because the Company's fixed charges exceeded earnings for the
period from inception through December 31, 1995, for the years ended
December 31, 1996 and 1997 and for the six months ended June 30, 1997 and
1998, the deficiency of earnings to fixed charges (rather than a ratio of
earnings to fixed charges) has been presented for such periods.
(5) The majority of this amount reflects cash pledged by the Company to secure
its obligations in connection with the Company's bid for additional
spectrum in the Chile Concurso. On October 29, 1997, the Company received
written notice from the Chilean Ministry of Transportation and
Telecommunications that its proposal had been accepted and awarded, subject
to appeal by other participants in the Chile Concurso. An appeal has been
filed. See "Prospectus Summary - Recent Developments."
(6) Includes debt incurred by the Company in connection with the FCC Auction,
which has been recorded by the Company pursuant to Accounting Principles
Board Opinion No. 21, at approximately $3.6 million as of June 30, 1998.
The contractual principal amount of this debt was approximately $4.6
million as of June 30, 1998. Amount also includes $1.3 million of capital
leases payable as of June 30, 1998. In connection with the Divestiture of
the U.S. Operations, the FCC Debt and the capital leases payable amounts
have been included under the caption "Net assets held for sale" in the
Unaudited Condensed Consolidated Financial Statements. See Note 2 of the
Notes to the Company's Unaudited Condensed Consolidated Financial
Statements as of June 30, 1998 included in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." The Company is currently in
the process of divesting its U.S. Operations. See "Unaudited Pro Forma
Condensed Consolidated Financial Data," and "Business- Divestiture of the
United States Operations."
41
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1998, and unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1997 (the "Unaudited Pro Forma
Condensed Consolidated Financial Data"), adjust the historical financial
information of the Company to reflect the Divestiture. The unaudited pro forma
condensed consolidated balance sheet as of June 30, 1998 was prepared as if the
Divestiture was consummated on June 30, 1998. The unaudited pro forma condensed
consolidated statement of operations was prepared as if the Divestiture was
consummated on January 1, 1997. The Unaudited Pro Forma Condensed Consolidated
Financial Data does not purport to represent what the Company's results of
operations would actually have been if the Divestiture had in fact occurred on
the dates indicated. The pro forma adjustments are based upon currently
available information and upon certain assumptions that management believes are
reasonable under current circumstances. Unaudited Summary Pro Forma Financial
Data for the six months ended June 30, 1998 have not been presented. Effective
August 1997, the U.S. Operations were considered assets to be disposed of, and
as such, the Company ceased recording revenue and related expenses. Thus, no pro
forma adjustments are required related to the six months ended June 30, 1998.
The Unaudited Pro Forma Condensed Consolidated Financial Data should be read in
conjunction with the Company's consolidated financial statements and the related
notes thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
As of June 30, 1998
--------------------------------------------------------------------------
Actual Divestiture(1) Pro Forma
------ -------------- ---------
<S> <C> <C> <C>
(In Thousands)
(unaudited)
CONDENSED CONSOLIDATED BALANCE SHEET ASSETS
Current assets, net $ 30,984 $ 477 $ 31,461
Net assets held for sale 5,283 (5,283) -
Property and Equipment 7,270 - 7,270
SMR licenses 12,793 - 12,793
Other assets 2,239 - 2,239
-------- ------- --------
Total Assets $ 58,569 (4,806) 53,763
======== ======= ========
Liabilities and Stockholders' Deficit
Current liabilities $ 7,933 $(4,806) $ 3,127
Long term debt 26,529 - 26,529
-------- ------- --------
Total Liabilities 34,462 (4,806) 29,656
-------- ------- --------
Mandatorily redeemable, convertible
preferred stock 41,262 - 41,262
Stockholders' deficit (17,155) - (17,155)
-------- ------- --------
Total Liabilities and Stockholders'
Deficit $ 58,569 $(4,806) $ 53,763
======== ======= ========
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
------------------------------------------------------------------------
Actual Divestiture (2) Pro Forma
------ --------------- ---------
<S> <C> <C> <C>
(In Thousands, except share and per share data)
(unaudited)
CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
Revenue $ 4,826 $(1,112) $ 3,714
Costs and expenses related to revenue 3,556 (1,272) 2,284
---------- ------- ----------
Gross Profit 1,270 160 1,430
---------- ------- ----------
Operating expenses 12,630 (4,145) 8,485
Loss on Divestiture of U.S. Operations 3,207 (3,207) -
---------- ------- ----------
Operating loss (14,567) 7,512 (7,055)
---------- ------- ----------
Other income (expense) (1,148) 454 (694)
---------- ------- ----------
Net Loss (15,715) 7,966 7,749
Dividends on and accretion of mandatorily
redeemable preferred shares to redemption
value (142) - (142)
---------- ------- ----------
Net Loss Applicable to Common
Stockholders (15,857) 7,966 (7,891)
Foreign currency translation adjustment 13 - 13
---------- ------- ----------
Comprehensive Loss $ (15,844) $ 7,966 $ (7,878)
========== ======= ==========
Basic Net Loss Per Common Share $ (4.53) $ (2.25)
========== ==========
Weighted Average Number of Shares
Outstanding 3,502,534 3,502,534
========== ==========
</TABLE>
(1) Represents the Divestiture of the U.S. Operations in accordance with the
Purchase Agreements. Included in current liabilities is the "Deposits on
Assets Held for Sale" which are the proceeds received through June 30, 1998
in connection with the Divestiture.
(2) Represents the elimination of the actual results of operations for the U.S.
Operations for the year ended December 31, 1997 and the elimination of the
loss recognized related to the Divestiture.
43
<PAGE>
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 consolidated financial statements and the notes thereto appearing
elsewhere in this report. The Company is in the process of divesting its U.S.
Operations and the reader should factor this Divestiture into its reading of the
following discussion and analysis.
OVERVIEW
GENERAL
The Company currently offers analog SMR service in Peru, Ecuador, Chile and
El Salvador. In Peru, the Company commenced operations in May 1996, in Ecuador
the Company commenced operations in March 1997, in Chile, the Company acquired
an operating company in January 1998 and, in El Salvador, the Company acquired
an operating company in August 1998. The Company commenced operations in the
United States in September 1996 and is currently in the process of divesting its
U.S. Operations. See "Unaudited Pro Forma Condensed Consolidated Financial
Data" and "Business - Divestiture of United States Operations."
The Company has developed its operations in Latin America through the
acquisition of license holding companies whose primary assets were spectrum as
well as the acquisition of operating entities and through the grant of channels
from government auctions. The following table sets forth the name of each
entity acquired by the Company or the location where the channels have been
granted and the date of occurrence in each of its Latin American markets:
<TABLE>
<CAPTION>
Name Date of Acquisition
- ---- -------------------
<S> <C>
SMR Direct Peru, S.R.L. (Peru) (1)
Pompano, S.R.L. (Peru) November 22, 1996
Brunacci Compania Ltda. (Ecuador) November 22, 1996
Telecom Supply S.R.L. (Peru) December 9, 1996
C-Comunica S.R.L. (Peru) January 22, 1997
Transnet del Peru, S.A. (Peru) July 31, 1997
Telecomunicaciones y Servicios S.A. (Chile) January 2, 1998
Comovec S.A. (Ecuador) May 13, 1998
Peru Tel S.A. (Peru) May 22, 1998
El Salvador June 9, 1998; August 26, 1998
</TABLE>
(1) The Company purchased 51% of the capital stock of SMR Direct Peru, S.R.L.
(formerly Mobil Line Peru, S.A.) in February 1996 and the remaining 49% in
July 1996. These transactions were accounted for as a step acquisition
purchase.
REVENUES
The Company derives its revenues primarily from (i) fixed monthly network
access fees, which vary depending on the plan chosen by the subscriber; (ii) the
sale and rental of subscriber units to subscribers; (iii) ancillary service
revenue, consisting of fees charged for maintenance and loss and damage
insurance; and (iv) ancillary equipment revenue, consisting of the sale of base
stations, antennae, and other complementary products. The Company sets the
pricing of the different components of its service, in accordance with its
marketing plans in each of the countries in which it operates, taking into
account, among other things, competitive factors (i.e. the Company subsidizes
the cost of the radios it sells). Monthly fixed network access fees as well as
ancillary service charges are billed in advance and recognized in the period in
which service is delivered. Subscriber unit and ancillary equipment sales are
recognized at the time of sale. During the six months ended June 30, 1998, the
Company's average monthly revenue per subscriber unit (consisting of fixed
monthly network access fees and ancillary service revenues) was approximately
$32.70 in the Company's Latin American markets. This is higher than in the
United States and is due, in part, to the poor quality of landline telephone
service and to the unsatisfied demand for communications services generally
found in such Latin American markets.
44
<PAGE>
COSTS AND EXPENSES RELATED TO REVENUES
Costs and expenses related to revenues include both the cost of service and
the cost of sales. The cost of service represents the cost of maintaining the
Company's analog SMR networks, site lease costs, technical expenses and
utilities. The Company anticipates that the cost of service will increase with
the expansion of its analog SMR networks. However, as a percentage of revenue,
the Company anticipates that the cost of service will decrease over time as a
result of economies of scale in its operations. As the Company expands and
sells a higher volume of subscriber units in its Latin American markets, its
operations will experience an overall increase in the cost of sales offset, in
part, by a decrease in the cost of subscriber units. Cost of sales as a
percentage of revenue is expected to decrease over time as a result of the
expected decrease in the cost of subscriber units.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist primarily of
compensation expenses and, to a lesser extent, include expenses such as
marketing, rent, professional fees and other general corporate expenses. At the
operating companies, selling, general and administrative expenses consist
primarily of subscriber acquisition costs, marketing and advertising, salaries
and office expenses. As the Company's Subsidiaries expand their operations,
construct their analog SMR networks and add subscribers to such networks, the
Company expects a larger portion of selling, general and administrative expenses
to be incurred at the subsidiary level. The Company expects selling, general
and administrative expenses to increase over time as it continues to expand its
operations. As a percentage of revenues, however, the Company expects that
these expenses will decrease as a result of anticipated revenue growth as the
number of subscribers increases.
DEPRECIATION AND AMORTIZATION
The Company depreciates its infrastructure equipment over 10 years and its
subscriber units over five years using the straight line method. The Company
retains title to the subscriber units it rents and leases as part of the
subscriber agreement. Upon termination of service under a rental or lease
contract, the subscriber is required to return the unit to the Company and the
unit is placed into service with another subscriber. Spectrum is amortized over
the term of the licenses (including expected renewal periods), generally 40
years, using the straight-line method.
OTHER INCOME (EXPENSE)
Other income (expense) is comprised primarily of interest expense and
interest income. The Company currently incurs interest expense on the Private
Notes and the Convertible Notes, and in 1997 and 1996, it incurred interest
expense on debt provided by the United States government for the purpose of
acquiring spectrum licenses in the FCC Auction (the "FCC Debt"), a portion of
which relates to the accretion to fair market value, and vendor financing
(capital leases payable). The Company is in the process of divesting its U.S.
Operations and, in connection therewith, anticipates transferring the FCC Debt
relating to the U.S. Operations. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Business -Divestiture of United States Operations."
INCOME TAX BENEFIT
The Company is subject to income taxes in the United States and in each of
the jurisdictions in which it operates. Although the Company has not paid
income taxes because of its significant losses, it has been precluded from
recognizing an income tax benefit under Statement of Financial Accounting
Standards No. 109, because it is not currently considered more likely than not
that the Company will have significant future taxable income due to its history
of operating losses. As the Company expands its analog SMR networks and
increases its subscriber base, the Company expects to generate taxable income.
45
<PAGE>
RESULTS OF OPERATIONS
The Company commenced commercial operations in Peru in May 1996, in the
United States in September 1996, in Ecuador in March 1997, and acquired
operating companies in Chile in January 1998 and in El Salvador in August 1998.
In August 1997, the Company made the decision to sell the U.S. Operations. See
"Unaudited Pro Forma Condensed Consolidated Financial Data" and "Business -
Divestiture of United States Operations."
Three and Six Months Ended June 30, 1998 Compared to Three and Six Months Ended
June 30, 1997
Revenues. Total revenue increased approximately $0.4 million and $1.4
million during the three and six months ended June 30, 1998, respectively, as
compared to the amounts for the corresponding periods in the prior year as
follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------------------- --------------------------------------------
1998 1997 1998 1997
----------------- -------------------- ----------------- ------------------------
<S> <C> <C> <C> <C>
Latin America:
Radio service revenue $1,235,704 $ 526,877 $2,462,523 $ 760,381
Equipment sales 414,152 367,126 902,025 614,605
Activation and other 40,260 45,501 77,253 76,010
----------------- -------------------- ----------------- ------------------------
1,690,116 939,504 3,441,801 1,450,996
----------------- -------------------- ----------------- ------------------------
U.S. Operations:
Radio service revenue - 213,252 - 343,614
Equipment sales - 12,008 - 47,489
Activation and other - 112,977 - 176,566
----------------- -------------------- ----------------- ------------------------
- 338,237 - 567,669
----------------- -------------------- ----------------- ------------------------
Total $1,690,116 $1,277,741 $3,441,801 $2,018,665
================= ==================== ================= ========================
</TABLE>
The increase in revenue is due to a 117% increase in subscribers in Latin
America from 6,649 as of June 30, 1997 to 14,437 as of June 30, 1998. The
increase is due to the Company's growth of the business and, to a lesser extent,
to the acquisitions of Transnet del Peru S.A. in July 1997 and TyS in January
1998. This increase was offset by the Company's decision to sell the U.S.
Operations, which had revenue of $0.3 million and $0.6 million during the three
and six months ended June 30, 1997, respectively, and none during the three and
six months ended June 30, 1998. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Business - Divestiture of United States Operations."
Costs and Expenses Related to Revenues. Total costs and expenses related to
revenue decreased approximately $0.3 million and $0.1 million during the three
and six months ended June 30, 1998, respectively, as compared to the amounts for
the corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------ -------------------------------------------
1998 1997 1998 1997
---------------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Latin America:
Network and site expense $ 22,363 $ 21,636 $ 42,794 $ 32,495
Cost of equipment sold 488,949 227,781 1,080,296 341,399
Maintenance and other 65,804 183,438 185,091 228,127
---------------- --------------- ------------------ -------------------
577,116 432,855 1,308,181 602,021
---------------- --------------- ------------------ -------------------
U.S. Operations:
Network and site expense - 198,644 - 341,860
Cost of equipment sold - 34,705 - 62,239
Maintenance and other - 215,916 - 390,546
---------------- --------------- ------------------ -------------------
- 449,265 - 794,645
---------------- --------------- ------------------ -------------------
Total $577,116 $882,120 $1,308,181 $1,396,666
================ =============== ================== ===================
</TABLE>
46
<PAGE>
Costs and expenses related to revenues increased due to the increase in
subscribers in Latin America, as noted above, from the Company's growth of the
business and due to the acquisitions of Transnet del Peru S.A. in July 1997 and
TyS in January 1998. This increase was offset by the Company's decision to sell
the U.S. Operations which had costs and expenses related to revenues of $0.4
million and $0.8 million during the three and six months ended June 30, 1997,
respectively, and none during the three and six months ended June 30, 1998. See
"Unaudited Pro Forma Condensed Consolidated Financial Data" and "Business -
Divestiture of United States Operations."
Selling, General and Administrative Expenses. Total selling, general and
administrative expenses decreased approximately $0.5 million and $0.3 million
during the three and six months ended June 30, 1998 respectively, as compared to
the amounts for the corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------------- ------------------------------------------
1998 1997 1998 1997
------------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Latin America:
Selling, general and
administrative $1,218,353 $1,013,115 $2,352,383 $1,491,635
U.S. Operations:
Selling, general and
administrative - 1,031,798 - 2,046,387
Corporate:
General and administrative 1,276,404 931,188 2,432,682 1,541,887
------------------- ------------------- ------------------ ------------------
Total $2,494,757 $2,976,101 $4,785,065 $5,079,909
=================== =================== ================== ==================
</TABLE>
Selling, general and administrative expenses increased due to the Company's
growth of the business in Latin America and due to the acquisitions of Transnet
del Peru S.A. in July 1997 and TyS in January 1998. This increase was offset by
the Company's decision to sell the U.S. Operations which had selling, general
and administrative expenses of $1.0 million and $2.0 million during the three
and six months ended June 30, 1997, respectively, and none during the three and
six months ended June 30, 1998. See "Unaudited Pro Forma Condensed Consolidated
Financial Data" and "Business - Divestiture of United States Operations." The
corporate general and administrative expenses increased due to additional
employees as the business grows, a one time severance payment and due to the
additional development costs incurred as the Company pursues additional
opportunities.
Depreciation and Amortization. Total depreciation and amortization
decreased approximately $0.3 million and $0.3 million during the three and six
months ended June 30, 1998 respectively, as compared to the amounts for the
corresponding periods in the prior year as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------- --------------------------------------
1998 1997 1998 1997
---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Latin America:
Depreciation and amortization $366,290 $337,936 $705,284 $ 453,786
U.S. Operations: -
Depreciation and amortization - 372,618 653,115
Corporate:
Depreciation and amortization 97,726 26,333 191,383 60,709
---------------- ----------------- ----------------- -----------------
Total $464,016 $736,887 $896,667 $1,167,610
================ ================= ================= =================
</TABLE>
Depreciation and amortization expense increased due to the Company's growth
of the business resulting in an increase in infrastructure and equipment and due
to the acquisitions of Transnet del Peru S.A. in July 1997 and TyS in January
1998. The overall increase was offset by the decision to sell the U.S.
Operations which had depreciation and amortization expense of $0.4 million and
$0.7 million during the three and six months ended June 30, 1997 and none during
the three and six months ended June 30, 1998. See "Unaudited Pro Forma Condensed
Consolidated Financial Data" and "Business - Divestiture of United States
Operations."
47
<PAGE>
Interest Expense. Interest expense increased approximately $0.9 million
and $1.9 million during the three and six months ended June 30, 1998 as compared
to the amounts for the corresponding amounts in the prior year. This increase
is due to interest on the Private Notes and the Convertible Notes.
Interest Income. Interest income increased approximately $0.3 million and
$0.6 million during the three and six months ended June 30, 1998 as compared to
the amounts for the corresponding periods in the prior year. This increase is
due to the increase in the Company's cash balance from the sale of the Company's
Senior Secured Convertible Notes due 2002 (the "Senior Notes"), the Private
Notes and the Convertible Notes at the end of fiscal 1997 and in January 1998.
The Senior Notes were converted into shares of Series C Preferred on January 15,
1998.
For the Years Ended December 31, 1996, and 1997
In general, the Company reported increases in all categories of revenue and
expense during 1997 compared to 1996 due to the Company's significant expansion
of operations and increase in subscribers in 1997.
Revenues. Total revenue increased approximately $4.5 million during the
year ended December 31, 1997 as compared to the year ended December 31, 1996 as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1996 1997
----------------- ----------------
<S> <C> <C>
Latin America:
Radio service revenue $123,479 $2,272,721
Equipment sales 92,840 1,376,396
Activation and other - 65,587
U.S. Operations:
Radio service revenue 29,680 607,693
Equipment sales - 295,992
Activation and other 49,882 207,966
Total $295,881 $4,826,355
======== ==========
</TABLE>
Cost and Expenses Related to Revenues. Total costs and expenses related to
revenue increased approximately $3.0 million during the year ended December 31,
1997 as compared to the year ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Latin America:
Network and site expense $ 62,615 $ 79,492
Cost of equipment sold 40,765 2,028,366
Maintenance and other - 176,380
U.S. Operations:
Network and site expense 244,743 527,642
Cost of equipment sold - 218,877
Maintenance and other 165,302 525,653
-------------- --------------
Total $513,425 $3,556,410
======== ==========
</TABLE>
48
<PAGE>
Selling, General and Administrative Expenses. Total selling, general and
administrative expenses increased approximately $5.7 million during the year
ended December 31, 1997 as compared to the year ended December 31, 1996 as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1996 1997
---------------- ----------------
<S> <C> <C>
Latin America:
Selling, general and
administrative $ 807,149 $ 4,245,785
U.S. Operations:
Selling, general and
administrative 2,597,131 3,001,663
Corporate:
General and administrative 677,776 3,124,095
---------------- ----------------
Total $4,082,056 $10,371,543
========== ===========
</TABLE>
Depreciation and Amortization. Total depreciation and amortization
increased approximately $1.8 million during the year ended December 31, 1997 as
compared to the year ended December 31, 1996 as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1996 1997
---------------- ---------------
<S> <C> <C>
Latin America:
Depreciation and amortization $171,416 $1,014,885
U.S. Operations:
Depreciation and amortization 327,791 1,143,346
Corporate:
Depreciation and amortization 8,604 100,751
---------------- ---------------
Total $507,811 $2,258,982
======== ==========
</TABLE>
Loss on Divestiture of U.S. Operations. In August 1997, the Company made a
strategic decision to sell the U.S. Operations and began to seek purchasers for
these operations, consisting of licenses and related assets and liabilities in
20 United States MTAs (as defined). As of December 31, 1997 the Company had
entered into the Purchase Agreements with seven different purchasers to sell
substantially all of the assets related to the Company's U.S. Operations in each
of the 20 United States MTAs in which it had operations. The Purchase Agreements
generally provide that the consideration for the assets will consist of some
combination of cash, promissory notes and the assumption of the FCC Debt. See
"Business -Divestiture of United States Operations."
Accordingly, the Company's management estimated the fair value of such
assets, and determined that a write-down to fair market value was necessary as
of August 1997. The amount of the write-down recorded by management was
approximately $1.9 million. The Company's estimates were based upon the Purchase
Agreements and management's estimate of fair market value of the remaining
assets not under contract. Additionally, the Company recorded an approximate
$1.3 million charge for termination and other contractually committed costs in
connection with the Divestiture of the U.S. Operations. The final outcome of the
Divestiture and the proceeds to be received therefrom is not currently known and
a risk exists that the ultimate outcome of such sale, including the amount of
the ultimate write-down necessary to state such assets and liabilities at their
fair market value, will be materially different from management's estimates, and
that the ultimate outcome could result in an additional write-down of such
assets.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has been primarily engaged in start-up
activities requiring substantial expenditures. Consequently, the Company has
reported operating losses before interest of approximately $4.8
49
<PAGE>
million and $14.6 million for the years ended December 31, 1996 and 1997,
respectively, and $3.5 million for the six months ended June 30, 1998 and net
cash outflow from operating and investing activities of approximately $16.6
million and $17.4 million for the years ended December 31, 1996 and 1997,
respectively, and $13.0 million for the six months ended June 30, 1998. Further
development of the Company's business and the expansion of its SMR networks,
service offerings and subscriber base will require significant additional
expenditures, and the Company expects that it will have significant operating
losses and net cash outflows from operating and investing activities in the
foreseeable future. Through June 30, 1998, funds necessary to finance the
Company's operating and investing activities have been obtained by the Company
primarily through the sale of its Common Stock, Series A Preferred Stock
("Series A Preferred") Series B Preferred Stock ("Series B Preferred"), the
Senior Notes, the Private Notes and the Convertible Notes. Since inception, the
Company has raised total cash gross proceeds from the sale of such stock and of
the Senior Notes, the Notes and the Convertible Notes of approximately $74.6
million.
On October 3, 1997, the Company consummated an approximately $11.1 million
financing with an investor group led by the Company's existing stockholders and
Prudential Securities Incorporated and its affiliates. In connection therewith,
the Company issued the Senior Notes which were convertible into shares of the
Company's Series C Preferred Stock (as defined) at an initial conversion price
of $1.45 per share. On January 15, 1998, the Senior Notes and all accrued
interest thereon were converted into 7,955,691 shares of Series C Preferred
Stock ("Series C Preferred" and, together with the Series A Preferred and the
Series B Preferred, the "Series Preferred") at a conversion price of $1.45 per
share.
On January 15, 1998, the Company raised proceeds of approximately $20.4
million from the private offering of 40,000 Units each consisting of $1,000 in
principal amount at maturity of the Private Notes and one Initial Warrant to
purchase 64 shares of Common Stock of the Company at an exercise price of $0.01
per share, subject to certain adjustments (the "Exercise Price"). The Notes will
mature January 1, 2005. Interest will be payable, in cash, at a rate of 14% per
annum, payable semi-annually in arrears on January 1 and July 1 of each year
commencing July 1, 2003. For accounting purposes, the Notes will accrete at a
rate of 21.26% per annum compounding semi-annually.
In addition, on January 15, 1998 the Company issued $10.0 million in
aggregate principal amount of Convertible Notes pursuant to a purchase agreement
dated January 15, 1998. Interest will accrue at a rate of 9% per annum on the
Convertible Notes up to January 1, 2000, and thereafter, interest on the
Convertible Notes is payable in cash at a rate of 9% per annum on January 1 and
July 1 of each year, commencing on July 1, 2000. The Convertible Notes are
convertible into shares of Common Stock at a conversion price of $2.25 per
share, subject to adjustments in certain circumstances.
The ability of the Company to make scheduled payments with respect to its
indebtedness, including the Notes and the Convertible Notes, will depend upon,
among other things, its ability to implement its business plan, to expand its
operations and to successfully develop its subscriber base in its target
markets, by the ability of the Company's Subsidiaries to remit cash to the
Company in a timely manner and the future operating performance of the Company
and its Subsidiaries. Each of these factors is, to a large extent, subject to
economic, financial, competitive, regulatory, political and other factors, many
of which are beyond the Company's control. The Company expects that it will
continue to generate cash losses for the foreseeable future. No assurance can
be given that the Company will be successful in developing and maintaining a
level of cash flow from operations sufficient to permit it to pay the principal
of, and interest on, its indebtedness, including the Notes and the Convertible
Notes. If the Company is unable to generate sufficient cash flow from
operations to service its indebtedness, including the Notes and the Convertible
Notes, it may have to modify its growth plans, restructure or refinance its
indebtedness or seek additional capital. There can be no assurance that (i) any
of these strategies could be effected on satisfactory terms, if at all, in light
of the Company's high leverage or (ii) any such strategy would yield sufficient
proceeds to service the Company's indebtedness, including the Notes and the
Convertible Notes. Any failure by the Company to satisfy its obligations with
respect to the Notes and the Convertible Notes at maturity or prior thereto
would constitute a default under the Indenture governing the Notes and the
agreement governing the Convertible Notes and could cause a default under
agreements governing other indebtedness of the Company.
50
<PAGE>
Based upon the Company's current business plan, the Company believes that
its cash reserves will be sufficient to satisfy the Company's liquidity needs
through March 31, 1999; however, the Company continuously evaluates new
opportunities which could impact that evaluation. The Company intends to use its
cash primarily to fund capital expenditures (capital expenditures will include
the purchase of equipment (including subscriber units) and the cost of
constructing the Company's analog SMR networks), operating losses, acquisitions
of license holding and operating companies and licenses in the wireless
communications industry in the Company's targeted markets and for general
corporate purposes. Assuming that the Company consummates certain development
projects, the aggregate cash purchase price to be paid in respect of such
transactions will be approximately $5.3 million. In addition, the Company
anticipates funding approximately $17.1 million to build out those channels
acquired and to fund operating losses. If the Company pursues additional
acquisitions, the Company will need to raise additional funds through the sale
of debt or equity securities.
The Company currently offers analog SMR services in its Latin American
markets. The Company is in the process of investigating ESMR alternatives,
including iDEN(TM). Based on its preliminary analysis, the Company believes that
iDEN(TM) may allow it to increase subscriber capacity and to offer integrated
services including interconnect to the public telephone network, voicemail and
text messaging. The Company is in the process of completing market studies and
developing detailed operations plans as part of its iDEN(TM) investigation. If
the Company decides to move forward with iDEN(TM) technology, it will need to
build iDEN(TM) systems and launch service, which could take 12 to 18 months and
will require substantial additional capital. The source of the additional
capital may include vendor financing or the raising of public or private equity
or debt. There can be no assurance that the Company will build an iDEN(TM)
system or launch iDEN(TM) service or that it will be able to obtain the capital
necessary to do so.
In the future, the Company and its Subsidiaries will consider obtaining
financing from various sources, including vendor financing provided by equipment
suppliers, project financing from commercial banks and international agencies
such as the International Finance Corporation and the Overseas Private
Investment Corporation, bank lines of credit and the sale of equity and debt
securities. To the extent the Company or any of its Subsidiaries issues debt,
its leverage and debt service obligations will increase. There can be no
assurance that the Company will be able to raise such capital on satisfactory
terms, if at all. In addition, the Company's Indenture limits the ability of
the Company and its Subsidiaries to incur additional indebtedness and issue
preferred stock.
In June and July 1996, the Company issued 352 shares of Series A Preferred
which have an aggregate liquidation value of $8.8 million or $25,000 per share.
In November and December 1996 and January 1997, the Company issued 5,735,251
shares of Series B Preferred which have an aggregate liquidation value of $20.9
million or $3.65 per share. In October 1997, the Company issued 50,000 shares
of Series C Preferred which have an aggregate liquidation value of approximately
$72,500 or $1.45 per share. On October 3, 1997, the Company issued approximately
$11.1 million of Senior Notes. In January 1998, upon conversion of the Senior
Notes, the Company issued 7,955,691 shares of Series C Preferred which have an
aggregate liquidation value of $11.5 million or $1.45 per share. The Indenture
restricts the ability of the Company to pay cash dividends on the Series A
Preferred, the Series B Preferred or the Series C Preferred.
In April 1996, the Company acquired 430 900 MHz channels in an auction (the
"FCC Auction") for a purchase price of approximately $5.1 million. Because the
Company qualified for "very small business" status under FCC regulations, the
Company (i) needed only to make a 10% down payment; (ii) received a 15% bidding
credit against its spectrum purchase price; and (iii) received United States
government financing at 7% per annum on the balance of the purchase price to be
paid by the Company over a 10-year period. The note for the FCC Debt provides
for interest payments only in the first five years and quarterly principal and
interest payments thereafter. In accordance with Accounting Principles Board
Opinion No. 21, the Company has determined that the market rate for such debt is
12% and, accordingly, has recorded this debt and related spectrum licenses at
approximately $3.6 million as of June 30, 1998. The contractual principal amount
of this debt totals $4.6 million as of June 30, 1998 and is not payable until
August 2001. The Company anticipates that the purchasers of the U.S. Operations
will repay or assume the portion of the FCC Debt relating to the assets of the
U.S. Operations being purchased, although there can be no assurances to that
effect. See "Business - Divestiture of United States Operations."
51
<PAGE>
The Company has secured an aggregate of approximately $2.3 million of
vendor financing with E.F. Johnson. In July and October 1996, the Company
secured approximately $1.8 million in infrastructure equipment financing from
E.F. Johnson for use in constructing its United States analog SMR networks. On
June 2, 1997, E.F. Johnson assigned the Company's lease in respect of such
equipment to Boston Financial. The amounts financed are payable monthly over a
five year period and bear interest at 12% per annum. Total principal
outstanding on this vendor financing was $1.3 million as of June 30, 1998. In
addition, the Company paid 30% of the cost of the purchased equipment
(approximately $1.0 million in the aggregate) as a down payment. In conjunction
with the Divestiture of the U.S. Operations, the Company either intends to pay
off the entire amount of the E.F. Johnson and Boston Financial indebtedness
attributable to the assets being sold. There can be no assurance that any such
indebtedness will be assumed.
The Company entered into additional agreements with E.F. Johnson regarding
the purchase of infrastructure equipment and subscriber units. E.F. Johnson has
made available to the Company a $1.5 million credit line associated with the
purchase of infrastructure equipment for build-out in Chile. The amounts
financed will be payable quarterly over a one year period and no interest will
be charged. The Company is required to make a down payment in the amount of 25%
of the cost of the purchased equipment pursuant to the agreement. The Company
has also entered into a radio purchase agreement with E.F. Johnson to acquire
5,000 radios during 1998 at a discount.
The Company entered into a radio purchase agreement with Motorola to
acquire 10,000 radios during 1998 at a discount.
FOREIGN INVESTMENT RISK
The Company's foreign operating Subsidiaries are all directly affected by
their respective countries' governmental, economic, fiscal and monetary policies
and other political factors. The Company believes that its operating
Subsidiaries' financial conditions or results from operations have not
historically been materially adversely affected by these factors, however, there
can be no assurance that this will continue.
INFLATION AND FOREIGN CURRENCY EXCHANGE
The net monetary assets of certain of the Company's Subsidiaries are
subject to foreign currency exchange risks since they are maintained in local
currency. Certain of the Company's Subsidiaries operate in countries in which
the rate of inflation is significantly higher than that of the United States.
The Company will attempt to protect its earnings from inflation and possible
currency devaluation by setting prices in direct relation to the dollar and in
some cases by trying to periodically adjust prices in local currencies.
However, there can be no assurance that any significant devaluation against the
dollar could be offset, in whole or in part, by a corresponding price increase.
The countries in which the Company's Subsidiaries now conduct business
generally do not restrict the repatriation or conversion of local or foreign
currency. There can be no assurance, however, that this will be the case in
each market that the Company may enter in the future or that this situation will
continue in the Company's existing markets. The Company's Subsidiaries are all
directly affected by their respective countries' governmental, economic, fiscal
and monetary policies and other political factors.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1997, the Company had net operating loss carry forwards
("NOLs") for United States federal tax purposes of approximately $12.3 million
which expire through the year 2012. These NOLs are available to offset future
taxable income. The Company's foreign consolidated Subsidiaries in Peru,
Ecuador, Venezuela, and Chile are considered pre-operating entities for income
tax purposes, and therefore the losses are deferred for income tax purposes and
amortized against future taxable income or loss over a period of four years
commencing in 1997. The Company may be limited in its ability to use the NOLs in
any one year depending on the Company's ability to generate sufficient taxable
income.
52
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YEAR 2000
As is the case with most other businesses using computers in their
operations, the Company is in the process of evaluating and addressing the Year
2000 compliance of its computer systems and applications. The Company has
established a committee to review its computer systems and applications to
identify, address and resolve the issues that could be created by the Year 2000
problem. The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the applicable year. Any of the
Company's programs that have time-sensitive software or equipment that has time-
sensitive embedded components may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar, normal business activities. The Company is currently evaluating its
computer systems and applications to determine whether they will function
properly with respect to dates in the year 2000 and thereafter. This process
involves assessing overall Year 2000 risk and modifying or replacing certain
hardware and software maintained by the Company. Management has not yet
quantified the Year 2000 compliance expense and related impact on the Company's
future earnings.
The Company also may be vulnerable to other companies' Year 2000 problems,
including suppliers of SMR radios and capital infrastructure. The Company
intends to initiate formal communications with all of its significant suppliers,
dealers, financial institutions and others with which it does business, with
respect to such persons' Year 2000 compliance programs and status. The Company
must therefore rely on the estimates of these suppliers, dealers, financial
institutions and others' of their own Year 2000 risks, issues and status of
their related compliance activities and programs in the Company's own risk
assessment process. There can be no assurance that such other companies will
achieve Year 2000 compliance or that any conversion by such companies to become
Year 2000 compliant will be compatible with the Company's computer systems. The
inability of the Company or any of its principal vendors or insurance payors to
become Year 2000 compliant in a timely manner could have a material adverse
effect on the Company's financial condition or results of operations.
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INDUSTRY OVERVIEW
WIRELESS COMMUNICATIONS
Three types of systems dominate the market for commercial wireless
communications services: SMR, cellular and paging. SMR, also referred to as
"trunked radio" or wireless dispatch communications, is primarily a business
communications tool which provides cost-effective "one-to-many" voice
communications. SMR service provides a defined group of users, typically within
a business or "work group," with reliable, flexible and convenient
communications. Cellular, on the other hand, is used to provide mobile voice
communications on a point-to-point basis. However, due to the relatively high
costs and the inability to provide one-to-many communications, cellular is often
less appealing to businesses which require group communications. Paging, while
significantly less expensive than cellular and slightly less expensive than SMR,
does not provide the same functionality as SMR since it does not allow for two-
way, real-time voice communications.
The table below outlines some of the differences between SMR, cellular and
paging.
COMPARISON OF SMR/PLMR, CELLULAR AND PAGING
<TABLE>
<CAPTION>
SMR/PLMR Cellular Paging
-------------------------- ------------------------------ ---------------------------
<S> <C> <C> <C>
Services Offered Voice, data, instant Voice and data (one-to-one) Data only (one-
conferencing (one-to-many to-one)
and one-to-one)
Subscribers (Est.)
United States 18.8 million (1)(2) 48.0 million (3) 49.5 million (3)
Latin America.......... 292,735 (4) 6.4 million (3)(5) 935,500 (6)
Target Customer.......... Businesses Individuals and Businesses Individuals and Businesses
Typical Frequency
Range.................... 800 MHz 800 MHz Lowband and
900 MHz 931 MHz
220 MHz
512 MHz and below
- -------------------------
</TABLE>
(1) Source: The Strategis Group, The State of SMR Digital Mobile Radio: 1997.
(2) Consists of approximately 2.3 million SMR subscribers and approximately
16.5 million PLMR network subscribers.
(3) Source: The MultiMedia Telecomunications Association ("MMTA") and
Telecommunications Industry Association ("TIA"), 1998 Multimedia
Telecommunications Market Review and Forecast.
(4) Source: International Mobile Telecommunications Association ("IMTA"), The
Global Digest for Commercial Trunked Radio Systems (SMR, PAMR, TRS) 1997.
(5) Sources: Worldwide breakdown and forecast of total Cellular/PCS subscribers
1995-2002, Dataquest, Merrill Lynch estimates, IDC/LINK, Northern Business
Information, Ericsson; includes cellular and PCS subscribers.
(6) Source: U.S. Department of Commerce, Office of Telecommunications.
December 31, 1995 and Pyramid Research, a division of the Economist
Intelligence Unit. December 31, 1995.
SMR
SMR was originally developed in the United States in order to provide an
efficient mobile communications service for businesses that required internal
communications capabilities. Prior to allocating frequencies for SMR in the
United States, most intra-company dispatch communications utilized private land
mobile radio ("PLMR") networks. These PLMR networks typically use the frequency
bands below 512 MHz, and often have a variety of companies in various industries
sharing the same frequencies in the same geographic areas.
54
<PAGE>
Some of these systems have been built and operated by government agencies,
utility companies and large transportation companies with the capital and
expertise necessary to build and manage their own internal systems. In the mid-
1970s, in recognition of the communications needs of small and medium size
businesses which lacked the capital or were too small to justify the expense of
building and operating more efficient, technically advanced trunked radio
systems, the FCC authorized third-party operators to provide SMR service.
SMR service has traditionally emphasized radio dispatch service, which
involves shorter duration communications than mobile telephone service and
places less demand on system capacity. The traditional SMR market, therefore,
has been oriented primarily to business customers such as contractors, service
companies, security firms and delivery service companies that have significant
field operations and need to provide their personnel with the ability to
communicate directly with one another, either on a one-to-one or on a one-to-
many basis.
SMR networks receive transmissions from a subscriber unit and retransmit
the signal through the channel to other subscriber units. A multi-channel
trunked network automatically searches for an open channel for each
transmission. Once the system has assigned a user (or group) a channel per
transmission, no other unauthorized user (or group) can access that channel.
Channels are licensed per geographic area and, using analog technology, each
channel can generally serve up to 125 SMR subscribers in a given area.
SMR service employs a simplex or half-duplex ("push-to-talk") mode.
Dispatch entails short bursts of communication, with a new transmission
initiated with each pause in the communication. Each voice transmission occurs
on the then available channel. In contrast, cellular communications utilizes
two dedicated channels, one for each side of the conversation. Once a cellular
call is initiated the channel pair remains utilized throughout the entire
duration of the call, thereby potentially blocking channels for an extended
period of time. Cellular and SMR networks differ significantly in terms of the
complexity of network architecture, costs of network construction, subscriber
capacity and operating costs. SMR networks are similar to cellular networks in
that both utilize site locations to receive and rebroadcast transmission to and
from subscriber units. Unlike cellular, however, SMR utilizes networks of one
to four towers per geographic coverage area which broadcast a high-powered
signal, generally between 75 and 175 watts. Cellular networks use anywhere from
20 to 90 antennae towers per geographic coverage area which broadcast a low-
powered signal and are networked with expensive and complex switching equipment.
SMR network construction also differs from cellular in that the network build-
out is modular. Because SMR infrastructure is designed to allow for modular
expansion, network capacity increases are easily and economically accomplished
by adding repeaters in increments that closely match growth in subscriber
demand.
Traditionally, SMR service has employed analog technology which has proven
to be a reliable, cost-effective technology. Analog technology allows for the
actual voice of the user to be translated. In comparison, digital technology
takes the user's voice, digitizes and reconfigures it, then recodes it prior to
transmission.
Recently, digital technology, known as ESMR, has been introduced into the
SMR industry. ESMR is based upon the division of a given geographical area into
a number of cells and the simultaneous reuse of radio channels in non-contiguous
cells within the network. ESMR allows a greater number of subscribers to be
placed on a single channel and provides the capability to offer integrated
wireless communications services utilizing common cell and digital switching
infrastructure as well as multi-functional subscriber units. The Company is in
the process of integrating ESMR alternatives, including iDEN(TM). See "Risk
Factors - Risks Associated with Rapidly Changing Industry" and "Management's
Discussion and Analysis of Financial Condition and Result of Operations -
Liquidity and Capital Resources."
CELLULAR
Cellular telephone systems are capable of providing high quality, high
capacity voice and data communications to and from vehicle-mounted and hand-held
radio telephones. Cellular telephone systems are capable of handling thousands
of calls at any one time and providing service to hundreds of thousands of
subscribers in any particular area.
55
<PAGE>
Cellular telephone technology is based upon the division of a given
geographical area into a number of cells and the simultaneous re-use of radio
channels in non-contiguous cells within the system. Each cell contains a low
power transmitter-receiver at a base station that communicates by a switch that
controls the routing of calls and that, in turn, is connected to the public
switched telephone network. The switch enables cellular telephone users to move
freely from cell to cell while continuing their calls.
Cellular telephone systems generally offer subscribers the most up-to-date
landline telephone features and services. Cellular telephone systems are
interconnected with the landline telephone network which allows subscribers to
receive and originate local, long-distance and international calls from their
cellular telephones. As a result, cellular telephone system operators require
an interconnection arrangement with the local landline telephone companies and
the terms of such arrangements are material to the economic viability of the
system.
PAGING
Paging is a well-established wireless technology, and is widely available
in many countries. A paging system typically consists of a number of
transmitter sites connected to a central messaging center. The messaging center
receives incoming messages from the public telephone network and prepares
batches of messages for transmission to subscribers. There are two basic types
of paging services: (i) numeric (digital display) and (ii) alphanumeric, which
allows subscribers to receive and store messages of up to 5,000 characters
consisting of both letters and numbers. Historically, paging was a one-way
communications service; however, technological advances in wireless messaging
have made two-way communications possible. Two-way paging systems allow message
acknowledgment responses and the transmission of short data messages by the
paging subscriber.
TELECOMMUNICATIONS IN LATIN AMERICA
Traditional landline telephone service remains poor in many parts of Latin
America due to, among other reasons, underinvestment in landline infrastructure
and long waiting periods for the installation of telephone lines and service.
Landline telephone penetration is still extremely low, and where installed, the
quality of service is often lacking. As a result, while wireless communications
in the United States provide attractive supplemental services to a well
developed and reliable landline telephone system, in Latin America, wireless
communications have become an important alternative to the relatively
antiquated, overburdened and unreliable landline telephone systems.
Furthermore, in the Latin American markets where the Company operates, wireless
communications services tend to be more readily available and, in many cases,
provide higher quality service than landline telephone systems. In addition,
wireless networks can be constructed relatively quickly and are less expensive
to install than landline networks. See "Business - Industry and Market
Opportunity."
SMR in Latin America. The Company believes that demand for SMR service in
Latin America will be significant due to the following economic and demographic
characteristics: (i) low teledensity and low wireless communications
penetration; (ii) high population densities found in urban markets; (iii)
unreliable telecommunications infrastructure; (iv) limited and relatively
expensive communications alternatives; and (v) economic growth fueled by
developing market economies.
The economic growth in many Latin American countries, fueled in part by the
move toward more open market economies, is generating an increasing demand for
mobile work groups to communicate more frequently and effectively. The
accompanying emphasis on productivity means that Latin American businesses are
increasingly focused on securing competitive advantages over their business
rivals and reducing their own operating cost structures. The Company believes
that SMR is a cost-effective tool for businesses to increase their productivity
and enhance service quality and performance.
SMR is in the early stage of development in Latin America. In many
markets, the assignment of spectrum needed to operate an SMR network first began
in 1992. Frequency has generally been granted in most Latin American countries
on a fragmented basis, with many countries granting licenses in five to 20
channel increments. Competition for channels is growing as foreign and United
States companies are beginning to recognize the opportunities presented by SMR.
See "Risk Factors - Competition." In addition, similar to the United States,
56
<PAGE>
consolidation of channels has begun in certain countries in Latin America, and
the Company believes that such consolidation will continue in the foreseeable
future.
The Company believes SMR provides the most attractive group communications
solution for Latin American businesses. While cellular communications
represents the fastest growing segment in the Latin American telecommunications
industry, the high cost of cellular communications is uneconomical for many
Latin American businesses. Moreover, cellular service may not meet the
communications needs of many Latin American businesses, because cellular does
not provide inexpensive, one-to-many communications. Paging services have also
experienced growth and market penetration in Latin America in the last few
years. However, because paging services do not provide the same functionality
as SMR (as they do not allow for two-way, real-time voice or one-to-many
communications), the Company believes that they are also of limited utility to
businesses compared to SMR and are best suited to be a complementary
communications medium.
To be successful in the Latin American SMR market, the Company believes a
service provider must accumulate channels in populated areas and have the
financial resources available to build large-scale SMR networks. Further, the
SMR operator must be able to provide reliable and affordable service to its
subscriber base. The Company believes that there are few SMR providers
positioned to meet these subscriber and market demands in Latin America. In
addition, the Company believes that its pricing strategy of providing a fixed
monthly network access fee with unlimited airtime usage and a flexible
subscriber purchase program will encourage the use of SMR service by all types
of businesses. This strategy has resulted in the expansion of the Company's
potential subscriber base beyond the traditional commercial user to financial
institutions and other "white collar" service organizations.
57
<PAGE>
BUSINESS
The Company is a provider of analog SMR services focusing on providing such
service in Latin America. The Company currently operates in Latin American
markets that have approximately 29.1 million POPs and, as of June 30, 1998, the
Company had 14,437 subscribers. The Company also provided SMR service in the
United States but is in the process of divesting its U.S. Operations. See
"Unaudited Pro Forma Condensed Consolidated Financial Data" and "Business -
Divestiture of the United States Operations."
The Company was founded in October 1995 and, as of June 30, 1998, is (i)
the largest SMR operator in Peru, in terms of the number of subscribers and
channels, with over 9,200 subscribers and 321 channels in a market of
approximately 11.1 million POPs, and (ii) the largest SMR operator in Ecuador,
in terms of the number of subscribers and channels, with over 4,700 subscribers
and 365 channels, in a market of approximately 3.5 million POPs. The Company
acquired an operating company in Chile (a market of approximately 6.5 million
POPs) in January 1998 and, as of June 30, 1998, had 412 subscribers and 325
channels in Chile. In August 1998, the Company completed the buildout of 10
additional channels in Santiago, Chile and launched a full scale sales and
marketing program. The Company also holds concessions for 50 channels in El
Salvador (a market of approximately 5.9 million POPs) and has an application for
channels pending in Venezuela. The Company's strategy is focused on
consolidating its channel positions in the markets in which it operates. The
Company is also exploring the opportunity to provide wireless communications
services which utilize digital technology. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources." The Company believes that significant market opportunities
exist to develop a leading position as a provider of SMR service in Latin
America.
INDUSTRY AND MARKET OPPORTUNITY
SMR, also referred to as "trunked radio" or wireless dispatch
communications, is primarily a business communications tool which provides cost-
effective, "one-to-many" voice communications. The Company believes that the SMR
industry offers attractive economic characteristics as compared to other
wireless communications services, such as cellular. The low fixed cost operating
structure of SMR permits operators, such as the Company, to achieve positive
operating cash flow with a limited subscriber base and to generate incremental
operating cash flow as additional subscribers are added to the networks. SMR
networks are significantly less expensive to build-out than cellular systems,
requiring only one to four sites per geographic coverage area as compared to 20
to 90 sites for cellular. In addition, the modular nature of SMR infrastructure
allows for incremental network build-out as demand for service increases, which
limits initial capital requirements.
The Company believes that demand for SMR service in Latin America is
significant due to the following economic and demographic characteristics: (i)
low teledensity and low wireless communications penetration; (ii) high
population densities found in many urban markets; (iii) unreliable
telecommunications infrastructure; (iv) limited and relatively expensive
communications alternatives; and (v) economic growth fueled by developing market
economies. Traditional landline telephone service in Latin America remains poor
due to, among other reasons, underinvestment in landline infrastructure and long
waiting periods for the installation of telephone lines and service. In many
Latin American markets, wireless communications have become an important
alternative to the relatively antiquated, overburdened and unreliable landline
telephone system. The economic growth in many Latin American countries, fueled
in part by the move toward more open market economies, is generating an
increasing demand for mobile work groups to communicate more frequently and
effectively. The accompanying emphasis on productivity means that Latin
American businesses are increasingly focused on securing competitive advantages
over their business rivals and reducing their operating cost structures.
ACCOMPLISHMENTS
Many of the Company's senior management and directors have experience in
successfully building communications companies in the United States and
international markets. The Company's co-founder and board member, Stephen
Schovee, and board member Robert McKenzie, were founders of, and senior
executives with, OneComm, a start-up enterprise that became a leading, publicly-
traded United States SMR operator and was eventually acquired by Nextel. In
addition, William Elsner and Bernard Dvorak, the Chairman of the Board and
58
<PAGE>
the President and Chief Executive Officer of the Company, respectively, were
founders of and senior executives with, UIH, a publicly-traded global provider
of multi-channel television and communications services.
Since its formation, the Company's management has achieved significant
milestones in the execution of its business plan, including:
. Acquisition of Spectrum at Attractive Prices. The Company has acquired an
aggregate of 1,021 channels in the 800 MHz frequency band and 40 channels
in the 900 MHz frequency band in Peru, Ecuador, Chile and El Salvador
covering approximately 29.1 million POPs, for approximately $14.8 million.
. Construction and Deployment of Networks. In Peru, the Company operates 192
channels, 135 of which it constructed and 57 of which were previously
constructed. In Ecuador, the Company has constructed 90 of the 365 channels
for which it holds licenses. In Chile, the Company operates 20 channels, 10
of which it constructed and 10 of which were previously constructed. In El
Salvador, the Company operates 5 previously constructed channels out of the
50 channels for which it holds licenses.
. Successful Service Launch. The Company has successfully launched service
and is implementing its growth strategy in each of its markets. In May
1996, the Company commenced service in Peru and is currently the largest
SMR operator in the country in terms of the number of subscribers and
channels, with 9,253 subscribers and 321 channels as of June 30, 1998. The
Company commenced service in Ecuador in March 1997 and is the largest SMR
operator in the country in terms of subscribers and channels, with 4,772
subscribers and 365 channels as of June 30, 1998. The Company acquired an
operating company in Chile in January 1998 and, as of June 30, 1998,
provided service to 412 subscribers. In August 1998, the Company completed
the buildout of 10 additional channels in Santiago, Chile and launched a
full scale sales and marketing program.
. Raising of Equity and Debt Capital. The Company has raised approximately
$44 million in equity capital in four private transactions and has used
such proceeds to finance its operations to date. The Company's largest
group of shareholders, the Centennial Funds and certain related entities,
have participated in each of these transactions, investing an aggregate of
approximately $20 million. In addition, the Company raised approximately
$30 million in debt capital in a January 1998 offering.
GROWTH STRATEGY
The Company's growth strategy is to (i) rapidly expand its analog SMR
operations and subscriber base in Latin America; (ii) improve cash flow and
profitability by actively managing and controlling operating expenses; (iii)
pursue additional SMR opportunities; and (iv) explore the implementation of
digital wireless communications technologies. Key elements of the Company's
strategy include:
. Implementation of Innovative Pricing Strategy. The Company's pricing
strategy focuses on subscriber growth and recurring revenues rather than on
up-front equipment margins, and is a departure from that historically
offered by SMR operators. The Company has implemented a pricing strategy
which provides a flexible subscriber unit purchase program designed to
enable subscribers to purchase a subscriber unit at a lower price than that
currently offered by the Company's competitors. This strategy has resulted
in the expansion of the Company's potential subscriber base in Latin
America beyond the traditional commercial user to "white collar" and "grey
collar" organizations.
. Acquisition of Additional Spectrum in Existing Markets. In order to
increase channel capacity and to allow for further subscriber growth in its
existing markets, the Company will continue to seek acquisitions of license
holding and operating companies and to pursue opportunities to acquire
additional spectrum at attractive prices. The Company's goal is to
accumulate a minimum of 150 channels in each market in which it operates.
The Company will also focus on consolidating its channel positions in the
markets in which it operates.
. Expansion into Additional Markets. The Company intends to pursue additional
SMR opportunities in Latin American markets where it can achieve
significant channel holdings. At present, the Company
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<PAGE>
plans to focus on providing SMR service in markets that exhibit the
following characteristics: (i) large, unsatisfied demand for
telecommunications services; (ii) long-term economic growth prospects;
(iii) high population densities; and (iv) favorable competitive
environments. The Company intends to enter new markets to establish
operating networks and does not intend to engage in "spectrum speculation."
. Development of Experienced Local Management Team. The Company intends to
supplement the experience of its senior management by hiring managers
familiar with the local SMR markets and the communications industry in
general. Country general managers oversee local operations on a day-to-day
basis and consult with senior management on Company-wide decisions such as
pricing and marketing strategies.
The Company is also exploring the opportunity to provide wireless
communications services which utilize digital technology. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
RECENT DEVELOPMENTS
Recently Completed Acquisitions
On January 2, 1998, the Company purchased 100% of the outstanding capital
stock of a Chilean operating company, TyS, which holds 10 800 MHz channels in
the city of Santiago, Chile for a purchase price of approximately $800,000. On
June 29, 1998, the Chilean government approved the transfer of 315 additional
channels (40 of which are in Santiago) to TyS. The Company paid $2.4 million for
such additional channels.
On April 14, 1998, the Company executed a purchase agreement to acquire
certain license holding companies in Peru and Ecuador and a concession in Chile
for an aggregate purchase price of approximately $3.5 million. On May 13, 1998,
the Company completed the acquisition of 100% of the outstanding capital stock
of one of such license holding companies, Comovec S.A., in Ecuador. Comovec S.A.
holds licenses to operate SMR networks and has 60 channels in each of Quito and
Guayaquil and 40 channels in Cuenca. On May 22, 1998, the Company completed the
acquisition of 100% of the outstanding capital stock of the other license
holding company, Peru Tel S.A., in Peru. Peru Tel S.A. holds licenses to operate
SMR networks and has 32 channels in Lima/Callao and an aggregate of 100 channels
in eight other cities. The Company has not closed the final part of the
acquisition for the concession in Chile which is subject to the approval by the
Chilean government of the transfer of the concession.
On August 26, 1998, the Company completed an acquisition including a
concession for 10 nationwide channels in El Salvador. The acquisition also
included certain infrastructure and approximately 140 subscribers. The Company
paid approximately $300,000 for such assets.
Potential Acquisitions
In furtherance of the Company's growth strategy, it has executed either a
purchase agreement or letters of intent or engaged in active discussions, to
acquire controlling interests in SMR operating companies and other wireless
communications license holding companies in Chile, Bolivia, Honduras, El
Salvador, Ecuador and Peru, as described below.
. On February 5, 1998, the Company entered into a letter of intent for the
acquisition of a Chilean license holding company which holds licenses for
20 800 MHz channels in Santiago, Chile and 215 800 MHz channels in outlying
cities. Consummation of this transaction will be conditioned on the
approval by the Chilean government of the transfer of the concession and
the amendment of certain build-out requirements. In addition, in August
1998, the Company signed a letter of intent for the acquisition of certain
Chilean assets, including a liscense for 20 channels in Santiago, certain
infrastructure and subscribers.
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. On June 29, 1998, the Company entered into a letter of intent to
purchase 51% of a Bolivian operating company in which the Company would
have management control. It is anticipated that the joint venture would
hold 120 nationwide 800 MHz channels and an additional 120 nationwide
400 MHz channels.
. On July 7, 1998, the Company signed a letter of intent to acquire a 51%
interest in a Honduran license holding company which holds a concession
for 80 nationwide 800 MHz channels.
. On July 10, 1998, the Company signed a letter of intent to acquire a
concession for 30 800 MHz channels and approximately 600 subscribers in
El Salvador.
. On August 13, 1998, the Company signed a letter of intent for the
acquisition of certain Chilean assets, including a license for 20
800 MHz channels in Santiago, certain infrastructure and subscribers.
Consummation of this transaction will be conditioned on the
approval by the Chilean government of the transfer of the concession.
. On August 26, 1998, the Company entered into a Purchase Agreement
pursuant to which the Company would acquire (i) an Ecuador license
holding company that holds 120 800 MHz channels in each of Quito and
Guayaquil; and (ii) two Chilean license holding companies, each holding
20 800 MHz channels in Santiago.
. The Company is in discussions for the acquisition of 10 800 MHz channels
in Lima, Peru.
Each of the transactions described above is subject to (i) the completion
of the Company's financial, legal and regulatory due diligence; and (ii)
certain other conditions to closing, including the execution of definitive
documentation and the receipt of necessary governmental and regulatory
approvals. In addition, each transaction is subject to the approval of the
Board of Directors. The Company cannot predict the results of such due
diligence, whether the Company will proceed with all or any of such transactions
following completion of its due diligence or whether the Board of Directors will
authorize the Company to consummate such transactions. There can be no
assurance that all or any of these transactions will be consummated or that they
will be consummated on the terms set forth in this Prospectus.
Auctions
The Company has submitted a proposal to build out 40 nationwide 800 MHz
channels in the Chile Concurso. On October 29, 1997, the Company received
written notice from the Chilean Ministry that its proposal had been accepted and
awarded, although such award is subject to appeal by the other participants in
the Chile Concurso. The Company has been informed that an appeal has been filed
objecting to the acceptance of the Company's proposal. There can be no assurance
that the Company will be successful in obtaining any channels as a result of
such proposal.
On June 9, 1998, the Company was awarded a concession for 40 nationwide 800
MHz channels in El Salvador. The Company paid $600,000 for such channels, which
have a 20-year term. On August 27, 1998, the Company was awarded an additional
65 nationwide 800 MHz channels in El Salvador, which award is subject to the
satisfaction of certain conditions.
In addition, the Company may participate in other Latin American auctions,
none of which have been officially scheduled. If the Company participates in
such auctions, there can be no assurance that the Company will be successful in
obtaining any channels.
The Company was incorporated in Delaware on October 26, 1995. Its
principal executive offices are located at 1600 Wynkoop Street, Suite 300,
Denver, CO 80202, and its telephone number is (303) 405-0475.
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CHANNEL HOLDINGS
The Company's current channel holdings and existing operations are summarized
below.
<TABLE>
<CAPTION>
Total Channel Holdings Subscribers as of June
POPs (mm) 30, 1998
- ----------------------------------------------------------------------------------------------------------------------
PERU
<S> <C> <C> <C>
Lima/Callao 8.0 176 9,253
Other 3.1 145 -
---- ----- ------
Total 11.1 321 9,253
ECUADOR
Guayaquil 1.6 150 3,188
Quito 1.2 150 1,584
Cuenca 0.2 40 -
Other 0.5 25 -
---- ----- ------
Total 3.5 365 4,772
---- ----- ------
CHILE
Santiago 6.5 50 412
Other 2.1 275 -
---- ----- ------
8.6 325 412
---- ----- ------
EL SALVADOR
Nationwide(1) 5.9 50 -
---- ----- ------
TOTAL(2) 29.1 1,061 14,437
==== ===== ======
</TABLE>
- -----------------------
(1) On August 27, 1998, the Company was awarded another 65 nationwide channels
of 800 MHz spectrum which award is subject to the satisfaction of certain
conditions.
(2) As of June 30, 1998, the Company also had channels and subscribers in the
United States that are under management pursuant to the Management
Agreements. The Company is in the process of divesting its U.S.
Operations. See "Unaudited Pro Forma Condensed Consolidated Financial
Data;" and " - Divestiture of United States Operations.
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CORPORATE STRUCTURE
The chart below sets forth the corporate ownership structure of the Company
and its Subsidiaries and the date each such entity was formed or acquired. Each
of the Company's Subsidiaries is wholly-owned, either directly or indirectly, by
the Company. Unless otherwise noted, each entity is 100% owned by its parent.
[GRAPH OF CENTENNIAL COMMUNICATIONS CORP. CORPORATE STRUCTURE APPEARS HERE]
(1) SMR Direct Cayman Corp. is a nominee shareholder in this company holding no
more than 1% of the equity of this company.
(2) Centennial Cayman Corp. is a nominee shareholder in this company holding no
more than 1% of the equity of this company.
COUNTRY-BY-COUNTRY OPERATIONS
Overview
The Company currently has 1,061 channels in Peru, Ecuador, Chile and El
Salvador covering an aggregate of approximately 29.1 million POPs and, as of
June 30, 1998, provided service to 14,437 subscribers. The Company's Latin
American operations are coordinated through the Company's Latin American
headquarters in Miami, Florida.
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Sales and Marketing
General. The Company focuses its sales and marketing efforts on businesses
that require reliable, cost-effective group communications solutions, a high
degree of mobility or that have multiple work locations. Such customers include,
but are not limited to, trucking concerns, bus companies, construction
companies, security firms, messenger service companies, sales and distribution
operations, repair operations, and utilities. In addition, the Company has been
successful in extending the reach of its SMR services to non-traditional users
such as financial institutions and other "white collar" organizations. The
Company markets its analog SMR services as a low cost, high quality, wireless
communications solution that enables businesses to lower their operating costs
and improve productivity by providing two-way, real-time group communications.
The Company's primary sales channel is a sales force of independent
representatives dedicated solely to the sale of the Company's analog SMR
service. In addition, the Company's analog SMR service is sold through
equipment dealers who have customer contacts and knowledge of the local market.
The independent sales representatives and equipment dealers are compensated by
commissions and other performance-based incentives. Since these representatives
and dealers are not employees of the Company's Subsidiaries, the Company has
been able to reduce its overhead and thereby lower its subscriber acquisition
costs. In addition, the Company has begun to implement more broad-based
advertising and marketing strategies, including radio spots and outdoor
advertising, in order to promote continued growth and interest in its analog SMR
service.
Pricing Strategy. The Company's pricing strategy focuses on subscriber
growth and recurring revenues rather than on up-front equipment margins. The
Company's pricing strategy includes a fixed monthly network access fee and
unlimited airtime usage. The monthly network access and activation fees vary in
each Latin American market depending on the competition, economic environment
and availability of competing wireless communications solutions. In order to
satisfy local market demand, the Company also offers subscribers the option to
either (i) purchase; (ii) rent; or (iii) lease subscriber units with an option
to purchase the unit at the end of the service contract. The Company has
designed each of these programs to provide subscribers with units at a lower
price than that offered by the Company's competitors. In order to mitigate the
risk of inflation and currency devaluations, the Company's contracts specify
dollar prices payable in the local currency at the then prevailing exchange
rate.
Additional Programs and Products. The Company offers equipment maintenance
and insurance programs, which the Company self-insures, to its subscribers. The
Company also offers additional technical support services, short-term subscriber
unit rental programs and wide area coverage or multiple site linkage programs to
its subscribers. The Company offers its subscribers ancillary products such as
base stations, antennae and other complementary products.
Operations and Systems. The Company has developed a subscriber management
system which consists of four databases: (i) a sales information database,
which provides sales tools to assist customer representatives and contains
information, including pricing and other terms and conditions; (ii) a
fulfillment database, which contains information regarding all orders-in-
process; (iii) a historical database, which contains information regarding all
closed orders; and (iv) a site maintenance database, which contains information
such as network operations site inventory, maintenance providers, antenna site
operators and contact names and phone numbers. The Company expects to achieve
operating efficiencies and enhance customer service as a result of the
implementation of this system.
Churn Management. The Company recognizes that managing subscriber churn is
an important factor in maximizing revenues and cash flow. In order to minimize
subscriber churn caused by subscribers voluntarily terminating service, the
Company has implemented a number of programs and seeks to ensure that its
service is high quality and its prices are competitive. The Company has
instituted a program requiring subscribers to enter into a service contract
having a term of at least one year which provides for penalties for early
termination. To reduce Company-initiated disconnections resulting from non-
payment, the Company (i) conducts thorough credit checks; and (ii) may require
subscribers to pay in advance and/or make a significant deposit with the
Company. The Company believes that these policies reduce the likelihood that
subscribers will terminate service on their own
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initiative or incur excessive debts. The Company's monthly churn rate in Latin
America since commencement of operations has been approximately 2.9%.
Peru
Country Overview. Peru currently has a population of over 25 million and
has an annual population growth rate of approximately 2%. In 1997, 72% of
Peru's population lived in urban areas. In the early 1990s, the Peruvian
government implemented a number of programs designed to improve the economy,
including liberalizing trade and privatizing state-owned enterprises. In 1995,
due to concern over a growing account deficit, the Peruvian government tightened
the monetary base and slowed the growth of Peru's economy from 12.8% in 1994 to
its current rate of approximately 2%. This growth rate is expected to climb to
approximately 5% and 6% in 1997 and 1998, respectively. In 1996, Peru's gross
domestic product ("GDP") measured approximately $50 billion, equivalent to
approximately $2,195 per capita. Industry (including, mining, manufacturing and
construction) accounted for approximately 36.6% of Peru's GDP.
The lack of telecommunications infrastructure has left many Peruvian
businesses without any access to telephones and has created a demand for
alternative communications solutions. Demand by businesses for reliable
communications services is growing and is expected to continue to grow as the
Peruvian government continues its aggressive privatization plan and investment
in infrastructure projects. Currently, existing telephone service in Peru is
not capable of serving this demand. Peru's telephone density of 5.7 lines per
100 POPs in 1996 was one of the lowest number of lines per capita in any Latin
American country with a publicly traded telephone company.
The first licenses for SMR service were granted by the Peruvian government
in 1995 and, by early 1996, 11 companies had been awarded SMR licenses for an
aggregate of approximately 300 channels in Lima/Callao. Of the 11 companies, the
Company has acquired six. Unofficially, the Organization for Supervision of
Private Investments in Telecommunications ("OSIPTEL"), the governmental agency
charged with overseeing SMR operations, and the Peruvian Ministry are
considering auctioning approximately 200 additional channels in Lima/Callao in
1999, although there can be no assurance that such auction will occur in the
near future, if at all.
Operating Overview. The Company operates in Peru through six wholly-owned
Subsidiaries: SMR Direct Peru, S.R.L. (formerly Mobil Line Peru, S.A.);
Pompano, S.R.L.; C-Comunica S.R.L.; Telecom Supply, S.R.L. (formerly Beacon
Supply Comunicaciones S.A.); Transnet del Peru, S.A.; and Peru Tel S.A. These
companies hold an aggregate of 176 800 MHz channels in Lima/Callao and an
aggregate of 145 800 MHz channels in the cities of Piura, Chiclayo, Trujillo,
Chimbote, Arequipa, Ica, Cusco, Huancayo Iquitos, Tumbes and Tacna. C-Comunica
S.R.L. has an application pending before OSIPTEL to obtain an additional 40
channels covering Lima/Callao; however there can be no assurance that such
application will be granted. The Company has centralized the management and
operation of its Peruvian SMR networks in SMR Direct Peru, S.R.L. The Company
has filed an application with the Peruvian government seeking approval for the
merger of its operating companies into a single entity in order to consolidate
its operations and expects to receive such approval once the loading
requirements included in each of those operating companies' license agreements
have been met, although there can be no assurance that such approval will be
granted. See "Risk Factors - Government Regulation; Changing Regulatory
Landscape."
The Company is the largest SMR operator in Peru in terms of number of
channels and subscribers. As of the date of this Prospectus, the Company was
operating 192 channels in Lima/Callao (135 of which it constructed and 57 of
which were previously constructed) and, as of June 30, 1998, provided service to
9,253 subscribers in Lima/Callao through six sites. The Company is currently
adding subscribers at a rate which it believes is ahead of the industry average.
According to IMTA, in Peru an SMR operator typically adds 300 to 400 subscribers
in its first year of operation; this number is expected to increase 400% to 500%
by the end of its second year of operation, reaching 1,500 to 2,400 subscribers;
and to further increase by another 200% by the end of its third year of
operation for a total of 4,500 to 7,200 subscribers. The Company's current
monthly ARPU in Peru is approximately $34.
Competition. The Company believes that its primary SMR competitor in Peru
is Nextel International, which owns a majority share in a joint venture with
Motorola Inc. ("Motorola") and a local Peruvian company (the
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"Nextel JV"). The Company believes that the Nextel JV owns 138 channels in
Lima/Callao and has approximately 5,500 subscribers. The Company further
believes that the Nextel JV is in the process of deploying an iDEN(TM) network
in Lima/Callao for the provision of ESMR service. The Company believes that the
Nextel JV intends to launch iDEN(TM) service in late 1998 or early 1999. There
is another small analog SMR operator, CEMA Comunicaciones, in Peru that competes
with the Company. The Company's SMR service also competes with the cellular and
paging services offered to businesses by Telefonica del Peru, and TELE 2000, an
affiliate of BellSouth Corporation. The Company believes that the demand in Peru
for high quality telecommunications services will be able to accommodate both
low cost analog SMR service as well as the more expensive alternatives being
offered by certain of the Company's competitors, although there can be no
assurance in this regard. See "Risk Factors - Competition," "Industry Overview"
and " - Industry and Market Opportunity."
Regulatory and Legal Overview. In 1994, Peru established, by Ministerial
Resolution 412-94-MTC/15, a regulatory framework for the SMR industry. This
framework has been amended by Ministerial Resolution 373-97-MTC, published on
August 6, 1997. The Telecommunications Law passed by Supreme Decree No. 013-93-
TCC dated April 28, 1993 and the adjoining Regulation, approved by Supreme
Decree No. 06-94-TCC dated February 11, 1994 and modified by Supreme Decree 005-
98-MTC on March 28, 1998, are the source of Peruvian SMR regulations. Pursuant
to the Telecommunications Law, the Peruvian Ministry is responsible for general
oversight and regulation of the telecommunications industry, and the
governmental entity, OSIPTEL, is responsible for regulating the activities of
companies holding public services concessions, such as SMR concessions, as well
as supervising the quality of services provided to end users, and the fairness
of tariffs. Each SMR concession sets forth expansion, penetration and service
quality mandates, each of which is monitored by OSIPTEL. The Peruvian Ministry
has the authority to grant or revoke concessions, permits and licenses for
public telecommunication services.
Under Peruvian law, telecommunications concessions are subject to private
law and may not be modified, amended or terminated unilaterally by the Peruvian
government except as set forth in each concession. Telecommunications
concessions are granted for a maximum term of 20 years, and may be renewed
without limitation.
Seven hundred twenty channels have been reserved in each market in the 800
MHz frequency band for SMR use, including 535 channels for public service and
185 channels for private service. An applicant for a concession must indicate
the specific geographic area it expects the concession to cover.
The holders of concessions must submit a five-year Minimum Expansion Plan
(a "MEP") to the Peruvian Ministry at the time of application for a concession.
Each MEP must outline the number of repeaters and subscribers the concession
holder will have loaded on its network by the end of each of the initial five
years of operation. In January of each year, the concession holder must file a
report with the Peruvian Ministry and OSIPTEL indicating compliance with its
MEP. MEPs may be amended at the end of the first and second years of operation
by petitioning OSIPTEL and the Peruvian Ministry. Each concession holder must
post a performance bond for the first year of the concession and pay an annual
commercial exploitation fee, an annual canon for the use of the spectrum, a fee
to OSIPTEL for supervision of the SMR system and a special contribution to the
Telecommunications Investment Fund. Concession holders must also complete
construction of their networks and commence operations within 12 months of
execution of a concession contract, otherwise the concession will be canceled.
Concessions may not be transferred or assigned except after 10 years and
with the prior approval of the Peruvian Ministry; provided that the MEP for the
initial two years has been satisfied. There are currently no restrictions on
foreign ownership and investment in Peru's telecommunications sector that would
affect the Company's operations.
Under current Peruvian law, SMR operators are permitted to provide
interconnection to the public switched telephone network.
By Supreme Decree 021-98-MTC and 020-98-MTC on August 5, 1998, the Peruvian
government has accelerated the end of Telefonica del Peru S.A.'s monopoly on
public telephone service and national and international long distance service.
The market for the provision of these services will open effective August 1,
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1998. New regulations governing the process for granting new telephone and long
distance licenses have recently been enacted. At this point in time, it is
unclear what the impact of this liberalization will have on the Company's
operations in Peru.
Ecuador
Country Overview. Ecuador currently has a population of approximately 12
million people and has an annual population growth rate of approximately 2.1%.
In 1995, approximately 57% of Ecuador's population lived in urban areas.
Ecuador's economy is projected to grow at approximately 2.9% per year. In 1996,
Ecuador's GDP measured approximately $19 billion, equivalent to $1,559 per
capita. Industry (including mining, manufacturing, construction and power)
accounted for approximately 35.3% of GDP.
In 1996, Ecuador had approximately 6.5 telephone lines per 100 POPs, far
below the Latin American average and, in the last three years, budgetary
constraints have prevented EMETEL, the government-owned telephone company, from
making many service improvements. In August 1992, Ecuador opened the market for
wireless dispatch services to private investment and the government began
issuing SMR concessions in 1994.
Operating Overview. The Company operates in Ecuador through its wholly-
owned indirect Subsidiaries Brunacci Compania Ltda. and Comovec S.A., which hold
(i) concession and frequency contracts for 150 channels in each of the cities of
Quito and Guayaquil; (ii) a concession and frequency contract for 40 channels in
the City of Cuenca; (iii) a concession and frequency contract for five channels
in each of the cities of Machala, Portoviejo/Manta and Quevado; and (iv) a
concession for five channels in each of the cities of Salinas and Santo Domingo
de los Colorados. The Company has applied for (i) a concession and frequency
contract for 10 channels in the province of Manabi;(ii) a concession and
frequency contract for 30 channels in Quito; (iii) a concession and frequency
contract for 25 channels in Guayaquil; and (iv) a concession and frequency
contract for an additional five channels in Machala. The Company intends to
apply for frequency contracts for the five channels in each of Salinas and Santo
Domingo de los Colorados for which it holds a concession.
The Company commenced service in Guayaquil in March 1997 and in Quito in
July 1997. As of the date of this Prospectus, the Company has constructed and is
operating an aggregate of 90 channels in such cities and, as of June 30, 1998,
provided service to 4,772 (as of June 30, 1998) subscribers through four sites.
The Company plans to construct and operate the remaining 275 channels for which
it holds frequency contracts in Quito and Guayaquil as needed in order to meet
subscriber demand.
Competition. The Company believes that the only other companies currently
providing SMR service in Ecuador are Multicom (Grupo Isaias and Motorola) which
has 190 channels and approximately 3,500 subscribers, Grupo Granda, which
currently has approximately 70 channels and approximately 700 subscribers and
Fleetcall (Monttcashire) which currently has approximately 240 channels and
approximately 200 subscribers. The Company believes that the demand in Ecuador
for high quality telecommunications services will be able to accommodate both
low cost analog SMR service as well as the more expensive alternatives being
offered by certain of the Company's competitors, although there can be no
assurance in this regard. See "Risk Factors - Competition," "Industry Overview"
and " - Industry and Market Opportunity."
Regulatory and Legal Overview. The Superintendency of Telecommunications
(the "Superintendency"), was the governmental entity responsible for
administration of the SMR industry. In August 1995, the Ecuadorian government
created two new government entities, the Consejo Nacional de Telecomunicaciones
("CONATEL") and the Secretaria Nacional de Telecomunicaciones (the
"Secretariat") which, together with the Superintendency, administer and regulate
the country's telecommunications sector. The Superintendency continues to exist
with limited functions, including the supervision of SMR operators and
compliance with concession contracts.
SMR licenses and channels are granted in two stages. First, an applicant
is granted an SMR license, and then must apply for, and be granted, an SMR
frequency contract which enumerates the granted channels. Concessions have a
term of five years and may be renewed for similar five year periods without
limitation by submission of an application to the Secretariat. Under Ecuadorian
law, there are no minimum subscriber
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requirements. However, concession holders are required to construct their
networks within six months of the date of the grant of the concession.
The Secretariat and the Superintendency are charged with enforcing the
operating standards contained in each individual concession and frequency
contract. Concession holders must post a performance bond to guarantee
performance of their obligations under the concession and the frequency contract
and pay monthly spectrum usage fees.
Each frequency contract contains subscriber loading restrictions which
limit the number of subscribers the licensee is permitted to load onto its SMR
network. The minimum number of subscribers that the CONATEL will authorize for
loading onto a five channel system is 100 and the maximum number is generally
500. However, the Secretariat is empowered to permit the loading of a larger
number of subscribers if it is demonstrated that transmission quality and
service will not suffer.
The Secretariat may unilaterally revoke a concession which is transferred
by the original holder without CONATEL consent and failure to meet concession
requirements may result in the early termination of the concession or in the
imposition of penalties. Equity interests in the original concession holder may
be transferred upon notification to the Superintendency of Companies (the
Ecuadorian governmental agency responsible for supervising domestic corporations
and branches of foreign companies domiciled in Ecuador).
Current Ecuadorian telecommunications regulations do not permit SMR
operators to interconnect to the public switched telephone network.
Ecuadorian telecommunications regulations expressly allow for foreign
investment in the SMR industry. However, foreign investors are required to
register their investments with the Central Bank of Ecuador.
Chile.
Country Overview. Chile currently has a population of over 14 million and
has an annual population growth rate of approximately 1.4%. In 1997, 84% of
Chile's population lived in urban areas. Twenty-four years of market-led reforms
have resulted in 14 years of uninterrupted economic growth, which has averaged
6.6% per year during the last 8 years. In 1990, Chile emerged from 17 years of
military government with an overall consensus about the general parameters of
economic management and since then has experienced a rise in productivity
growth, an increase in domestic savings and a more efficient use of labor.
Industry, including (mining, manufacturing and construction) accounted for
approximately 33% of Chile's GDP.
The telecommunications sector was privatized in 1989 when the sale of all
state-owned telecommunications companies was completed, and competition was
allowed in long distance telephone services. The telephone density in Chile was
12 lines per 100 POPs in 1997. The privatization of the Chilean
telecommunications sector paved the way for private investment in
telecommunications services and allowed for the introduction of the commercial
SMR industry. Today, 400 channels have been designated for commercial SMR
systems and about 30 companies have been awarded SMR licenses. The Subtel (as
defined) is not currently planning to allocate any more frequency to SMR use.
Operating Overview. The Company operates in Chile through a wholly owned
Subsidiary, TyS, which holds 325 800 MHz channels, which were acquired for an
aggregate purchase price of approximately $3.2 million. Centennial Cayman Corp.
Chile Ltda. has submitted a proposal to build out 40 nationwide channels in the
Chile Concurso. Centennial Cayman Corp. Chile Ltda. received written notice from
the Chilean Ministry that its proposal had been accepted and awarded; however,
that award is currently the subject of an appeal and there can be no assurance
that the Company will be successful in obtaining such channels. See "Summary."
The Company is also currently waiting for governmental approval of the transfer
of 65 channels to SMR Direct Cayman Corp. Chile Ltda. and expects to receive
such approval within the next six months, although there can be no assurance
that such approval will be granted. See "Risk Factors - Government Regulation;
Changing Regulatory Landscape."
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The Company acquired TyS, an operating company in January 1998. As of June
30, 1998, the Company was operating 10 channels and provided service to 412
subscribers through one site. In August 1998, the Company completed the buildout
of 10 additional channels in Santiago and launched a full scale sales and
marketing program. The Company plans to construct and operate the remaining 305
channels as needed in order to meet subscriber demand.
Competition. The Company believes that its primary SMR competitors in Chile
are Telecomunicaciones Gallyas S.A. and CTC-Startel S.A. In June 1998 Motorola
acquired 100% of Multicom Ltda., a Chilean SMR operating company. It is
currently unclear as to what Motorola's plans are in the Chilean market. There
are other smaller analog SMR operators in Chile (such as Interexport
Telecomunicaciones S.A.) that compete with the Company. The Company's SMR
service also competes with the cellular and paging services offered to
businesses by CTC-Startel S.A. and Bellsouth. The Company believes that the
demand in Chile for high quality telecommunications services will be able to
accommodate both low cost analog SMR services as well as the more expensive
alternatives being offered by certain competitors of the Company, although there
can be no assurance in this regard.
Regulatory and Legal Overview. The regulating governmental entity for
telecommunications in Chile is the Chilean Ministry, which acts through the
Subsecretary of Telecommunications (the "Subtel")
The Chilean Ministry and Subtel are responsible for general oversight and
regulation of the telecommunications industry, regulating the activities of
companies holding public service concessions, such as SMR concessions, as well
as supervising the quality of services provided to end users, and the fairness
of tariffs.
Each SMR concession sets forth expansion, penetration and service quality
mandates, each of which is monitored by the Subtel. The Chilean Ministry has the
authority to grant or revoke concessions for public telecommunication services
and the Subtel has the authority to grant or revoke permits for limited
telecommunications services.
The holders of concessions must submit a technical proposal with each
application for a concession. Concession holders must complete construction of
their networks and commence operations within the time frames set forth in their
technical proposal. Failure to comply with the terms set forth in a technical
proposal can result in sanctions, including the cancellation of the concession.
Concessions, which may only be granted to legal entities incorporated and
domiciled in Chile, are not limited as to their number, type of service or
geographical area. Therefore, it is possible to grant two or more concessions
for the provision of the same service in the same location, except where
technical limitations exist, such as in the case of mobile telephony, in which
case only two concessions may be granted for a single service area.
Telecommunications concessions are granted for a maximum term of 30 years, and
may be renewed for identical periods if so requested by the concessionaire.
Concessions and permits cannot be assigned, transferred or leased without
the prior authorization of the Subtel, which cannot be denied without a
reasonable basis.
Chilean telecommunications law establishes the grounds upon which
concessions or permits may be terminated by a decree of the Chilean Ministry or
a resolution of the Subtel. The grounds for termination include the following:
(a) expiration of the term of the concession; (b) dissolution of the holder of
the concession, or (c) noncompliance with the terms and conditions specified in
Chilean telecommunications law, the regulations enacted thereunder or the
concession itself. The holder of a concession may appeal against a decree
effecting such a termination if it believes that such decree is illegal.
There are currently no restrictions on foreign ownership and investment in
Chile's telecommunications sector. Under current Chilean law, SMR operators are
permitted to provide interconnection to the public switched telephone network.
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Other Latin American Opportunities
The Company is aggressively seeking to acquire additional SMR spectrum in
its existing markets and in other Latin American markets.
Venezuela. In May 1997, the Company's Venezuelan Subsidiary, Centennial
Telecomunicaciones de Venezuela S.A., submitted an application for a concession
in respect of 800 MHz SMR licenses covering Caracas and certain other regions in
Venezuela, which application is still pending. See also "Prospectus Summary -
Recent Developments."
El Salvador. On June 9, 1998, the Company was awarded 40 nationwide 800
MHz channels. On August 26, 1998, the Company completed the acquisition of a
concession for 10 nationwide 800 MHz channels in El Salvador. This acquisition
included the infrastructure for five constructed channels and approximately 140
subscribers. On August 27, 1998 the Company was awarded 65 nationwide 800 MHz
channels, which award is subject to the satisfaction of certain conditions.
DIVESTITURE OF THE UNITED STATES OPERATIONS
The Company previously offered analog SMR service in the United States.
The Company commenced operations in the United States in September 1996.
In August 1997, the Company's Board of Directors reached the conclusion
that the Company's wireless communications investment opportunities in Latin
America were more attractive than its opportunities in the United States. As a
result, the Board of Directors decided to sell the Company's United States SMR
operations and related assets (the "U.S. Operations") and focus the Company's
ongoing efforts solely in Latin America (the "Divestiture"). As of June 30,
1998, the Company had executed purchase agreements (the "Purchase Agreements")
to sell substantially all of the assets related to the Company's U.S. Operations
in each of the 20 United States Major Trading Areas ("MTAs") in which it
currently has operations.
The Purchase Agreements generally provide that the consideration for the
assets will consist of some combination of (i) cash; (ii) promissory notes; and
(iii) assumption of the FCC Debt incurred in connection with the FCC Auction.
The aggregate net cash proceeds to be received by the Company in connection with
the sale of the U.S. Operations (based on the Purchase Agreements) is expected
to be $5.5 million although there can be no assurance in this regard. The
transactions contemplated in the Purchase Agreements are subject to the receipt
of necessary regulatory approval. Among other things, the Company's SMR
licenses and related FCC Debt cannot be transferred or assumed until the FCC
consents to such transfer. FCC approval of these transfers has been received on
all but two purchasers.
During the period of time between the execution of each Purchase Agreement
and the receipt of FCC approval to transfer the SMR licenses and related FCC
Debt, the Company has entered into the Management Agreements with the purchasers
whereby the purchasers, subject to the Company's control, will be responsible
for all management aspects of the U.S. Operations being purchased, will be
obligated to reimburse the Company for all required payments under the FCC Debt,
and will receive most of the economic benefits of managing the U.S. Operations.
In connection with the Divestiture, the Company has determined that it is
necessary to write-down the value of the assets comprising the U.S. Operations.
See "Risk Factors - Historical and Anticipated Operating Losses; Negative Cash
from Operations" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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SMR EQUIPMENT AND NETWORK DESIGN AND IMPLEMENTATION
SMR Equipment. SMR equipment is comprised of infrastructure equipment
(repeaters, towers and associated equipment) and subscriber units. The primary
vendors of SMR equipment are Kenwood, Motorola, Ericsson, Inc., Uniden America
Corporation and E.F. Johnson. Motorola and Ericsson provide equipment which
uses a proprietary protocol while Uniden, Kenwood and E.F. Johnson provide
equipment which conforms to the Logic Trunked Radio ("LTR") standard, the
industry's only open protocol standard. SMR networks such as the Company's that
use LTR infrastructure equipment can use subscriber equipment from diverse
suppliers while SMR networks based on a proprietary protocol, such as Motorola
or Ericsson, can only use subscriber equipment based on the same proprietary
standard. The Company currently has equipment purchase arrangements with E.F.
Johnson and Motorola and also purchases equipment from other leading
manufacturers.
SMR Network Design and Expansion. The Company has established its networks
utilizing proven analog SMR equipment. The Company believes that analog
technology permits the Company to offer high quality SMR service at a relatively
low cost. The Company's analog SMR networks consist of multiple channels in a
single site linked together to form what is known as a trunked system, employing
one or more antennae and associated equipment. The Company secures a site for a
tower (often co-locating with other providers on existing sites), generally
through leasing the site, and then installs the necessary infrastructure
equipment. The Company deploys one to five high-powered sites per geographic
coverage area in its analog SMR networks. To optimize SMR network design and
location of sites, the Company has at its disposal state-of-the-art computer-
based Radio Frequency propagation tools. As of the date of this Prospectus, the
Company had 12 sites with 307 channels in operation in Latin America. Each SMR
network is planned and constructed to meet a certain volume of subscriber
traffic demand within its geographic coverage area. When the Company initially
establishes SMR service in a given market it typically deploys a 10 channel
trunking system which represents an installed cost of approximately $150,000.
The Company currently deploys single site systems with a coverage radius
ranging from 15 to 30 miles, depending on the height of the antennae and the
topography of the market. Once a system is activated, the Company can begin
offering commercial services in the coverage area. The initial 10 channel
system can then be expanded up to 20 channels by adding additional repeaters to
the existing installation. Modular increments are usually done in blocks of
five channels. System expansions are done when system capacity is approached
and market demand is expected to exceed installed capacity.
The initial 10 channel trunked system can service, on average, 100
subscriber units per channel without any material service degradation. When the
system is expanded to 20 channels (full capacity), the system can provide
service to approximately 125 subscriber units per channel without material
service degradation. Repeater sharing efficiency is improved as more trunked
channels are added. LTR systems are expandable to a maximum of 20 channels,
each requiring its own repeater control manager. Once a system is fully
constructed, another system (of five to 20 channels) can be installed using the
same site and facilities.
Capacity Management. The Company closely monitors channel loading in order
to ensure high quality service. The primary limit on channel capacity is usage
during peak hours, which usually occurs around the middle of the business day.
Excess loading during the peak hours can result in service degradation in the
form of busy signals or interference. The Company believes that active
management of the network will result in maximizing the Company's revenue per
channel. In addition, while the Company believes, based on current customer
usage patterns, that its analog SMR channels could each service as many as 125
subscribers, it does not presently intend to add in excess of 100 subscribers
per channel in order to protect service quality.
EQUIPMENT SUPPLY RELATIONSHIPS
In connection with the construction and deployment of its analog SMR
networks in the United States and Latin America, the Company has entered into
supply arrangements with leading infrastructure and subscriber unit vendors such
as E.F. Johnson and Motorola.
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<PAGE>
E.F. Johnson. The Company has secured an aggregate of $2.3 million of
vendor financing with E.F. Johnson. In June and August 1996, the Company secured
approximately $1.8 million in infrastructure equipment financing from E.F.
Johnson for use in constructing its United States analog SMR networks. On June
2, 1997, E.F. Johnson assigned the Company's lease in respect of such equipment
to Boston Financial. In addition, in February 1997, the Company secured
approximately $500,000 in infrastructure equipment financing to construct
network facilities at additional site locations in the United States. The
amounts financed are payable monthly over a five year period and bear interest
at 12% per annum. Total principal outstanding on this vendor financing was $1.3
million as of June 30, 1998. In addition, the Company paid 30% of the cost of
the purchased equipment (approximately $1.0 million in the aggregate) as a down
payment. In connection with the Divestiture, the Company intends to pay off the
entire amount of the E.F. Johnson and Boston Financial indebtedness,
attributable to the assets being sold. There can be no assurance that any such
indebtedness will be paid off.
The Company entered into additional agreements with E.F. Johnson regarding
the purchase of infrastructure equipment and subscriber units. E.F. Johnson has
made available to the Company a $1.5 million credit line associated with the
purchase of infrastructure equipment for build-out in Chile. The amounts
financed will be payable quarterly over a one year period and no interest will
be charged. The Company is required to make a down payment in the amount of 25%
of the cost of the purchased equipment pursuant to the agreement. The Company
has also entered into a radio purchase agreement with E.F. Johnson to acquire
5,000 radios during 1998 at a discount.
The Company entered into a radio purchase agreement with Motorola to
acquire 10,000 radios during 1998 at a discount.
EMPLOYEES
As of June 30, 1998, the Company employed a total of 107 employees. In the
United States, the Company employed 21 employees: (i) 11 were located at the
Company's principal executive offices in Denver, Colorado; and (ii) 10 were
located at its Latin American headquarters in Miami, Florida. In the Company's
Latin American Subsidiaries, the Company employed 43 employees in Peru, 26
employees in Ecuador and 17 employees in Chile. The Company is not a party to
any collective bargaining agreements and the Company believes its relationship
with its employees is good.
PROPERTIES
The Company currently leases (i) 5,912 square feet for its principal
executive and administrative offices in Denver, Colorado and payments under such
lease are approximately $75,000 per year. The Company also currently leases (i)
4,800 square feet of office space in Miami, Florida for its Latin American
operations, (ii) 400 square meters in Lima for its Peruvian operations, (iii)
250 square meters in Guayaquil and 148 square meters in Quito for its Ecuadorian
operations, and (iv) 450 square meters in Santiago for its Chilean operations.
In addition, the Company has an aggregate of 40 leases for sites (32 in the
United States and four in Latin America). In connection with the Divestiture,
the Company anticipates transferring the United States site leases and is in the
process of attempting to sublease either its principal executive and
administrative offices or its U.S. operating headquarters, each, in Denver,
Colorado.
LITIGATION
There is no litigation pending, or to the knowledge of the Company,
threatened, which would have a material adverse effect on the operations of the
Company.
On March 31, 1997, Telefonica del Peru S.A. ("Telefonica"), petitioned
INDECOPI, the Peruvian trademark authority, to nullify the trademark "Radio
Trunking del Peru" previously granted to the Company's Subsidiary, SMR Direct
Peru, S.R.L. (formerly Mobil Line Peru, S.A.), by INDECOPI on the grounds that
such trademark is not distinctive. At the same time Telefonica challenged SMR
Direct Peru's application to use the
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<PAGE>
trademark "Radio Trunking" with a corresponding logo. The Company responded to
these petitions on May 15, 1997 and June 12, 1997, respectively. The Company is
considering appropriate modifications to its trademark in the event Telefonica's
petitions are successful. The Company does not believe that the outcome of these
petitions will have a material adverse effect on the Company's operations in
Peru. The Company has opposed the registration of the trademark "INSTACOM Radio
Trunking" requested by Telefonica del Peru S.A.
The Company has received a letter from Centennial Cellular Corporation
demanding written assurances that the Company will cease any use of Centennial
Communications Corp. as a trade name and threatening legal action if such
assurances are not given. The Company expects to enter into a binding agreement
which will cause the Company to cease using Centennial as a trade name in the
U.S. by January 1999.
In August 1996, the Company entered into an arrangement with Maxon America,
Inc. for the purchase of 15,000 subscriber units for approximately $3.8 million.
The Company currently has taken delivery of 6,500 subscriber units. Due to
quality control issues, the Company has refused to take delivery of the
remaining 8,500 subscriber units. Maxon America, Inc. has threatened legal
action if the Company does not agree to take delivery, but no such legal action
has yet been initiated.
The Company's subsidiary, Transnet Del Peru S.A. ("Transnet") possesses
certain rights to use the trademark "Nextel" in Peru. The trademarks office has
rejected the opposition of Nextel and granted the requested registrations to
Transnet. In connection with Transnet's right to use such trademark, the Company
received a letter from counsel to Nextel (i) contesting Transnet's rights in
respect of such trademark; (ii) requesting an assignment of such trademark
rights to Nextel; and (iii) setting forth Nextel's intent to commence
nullification proceedings with respect to such trademark rights. Nextel has, in
addition, filed a request for the nullification of the trademark registration
"Nextel." This action has not been contested by the Company.
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MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and directors of the Company are as
follows:
<TABLE>
<CAPTION>
NAME Age Positions
---- --- ---------
<S> <C> <C>
William J. Elsner (1)(2)(4) 46 Chairman of the Board
Bernard G. Dvorak(4) 38 President and Chief Executive Officer and Director
Danny E. Stroud 45 Senior Vice President Digital Operations
Barbara H. Vonderheid 43 Vice President - Business Development
Fred A. Gallart 40 Senior Vice President and General Manager - Latin America
Karl Maier 30 Vice President - Finance
Patricia J. Reichman 32 Controller
Mark G. Fetcenko 38 Director of Technology
Rafael Luces 43 Director of Operations - Andean Region
Moshe Benitah 52 Director of Operations - Conosur Region
Stephen W. Schovee (1)(3)(4) 38 Director
Robert F. McKenzie (2)(3) 54 Director
Adam Goldman (1) 37 Director
William W. Sprague (1) 40 Director
William D. Stanfill 62 Director
John Fullmer(3) 52 Director
Mark A. Leavitt (2) 39 Director
</TABLE>
- --------------------------
(1) Member of Finance Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of U.S. Sale Committee
William J. Elsner has been a Director of the Company since April 12, 1996, and
has been the Chairman of the Board since December 1, 1996. Mr. Elsner is
currently the Managing Member of the General Partner of Telecom Partners II,
L.P., a venture capital fund focused on early stage telecommunication services
companies. From 1995 to 1997, Mr. Elsner invested in and assisted start-up
companies with Telecom Partners and The Centennial Funds. From 1989 to 1995, Mr.
Elsner was the Chief Executive Officer and President, and one of the founders of
UIH. From June 1989 to August 1993, Mr. Elsner supervised the formation,
financing and management of UI Video, Inc., a Blockbuster Video franchise. Mr.
Elsner is a director of Formus Communications, Inc., V-I-A Internet, Inc. and
WLL International, Inc. Mr. Elsner received his B.S. in accounting from Regis
College in 1973, and his M.B.A. from the University of Denver in 1981.
Bernard G. Dvorak has been the President and Chief Executive Officer of the
Company since February 9, 1998 and prior to that was Chief Financial Officer of
the Company since February 3, 1997 and Secretary since February 21, 1997. From
1989 to 1996, Mr. Dvorak was Chief Financial Officer and one of the founders of
UIH. Mr. Dvorak received his B.S. in accounting from Ferris State University in
1981.
Danny E. Stroud has been a Senior Vice President of the company since May 1998.
From May 1996 to March 1998, he was Vice President of Verio, Inc. He has
previously served as the interim President of Global Enterprise Services, Inc.,
as well as Vice President of Network Deployment and Operations at OneComm from
June 1993 to May 1996. Prior to joining OneComm, Mr. Stroud was Network Director
at Bay Area Cellular Telephone Company in San Francisco and General Manager of
an independent business unit of Pacific Bell Yellow Pages. In
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<PAGE>
1975, Mr. Stroud received his B.S. from West Point and in 1986, he received his
M.B.A. from St. Mary's College of California.
Barbara H. Vonderheid has been Vice President - Business Development of the
Company since February 1996. From January 1993 through January 1996, Ms.
Vonderheid was Vice President of Acquisitions at Alert Centre, Inc., a security
alarm company. From June 1990 until January 1993, Ms. Vonderheid was Assistant
General Counsel and Acquisitions Staff Counsel at Alert Centre, Inc. Ms.
Vonderheid received her B.A. from Colorado State University in Political Science
in 1977 and her J.D. from the University of Denver in 1986.
Fred A. Gallart has been Senior Vice President and General Manager - Latin
America of the Company since October 1997 and was Vice President and General
Manager - Latin America from August 1996 to October 1997. From 1991 to 1996,
Mr. Gallart was Vice President of International Sales (January 1996 to August
1996) and International Sales Director (1991 to 1996) at E.F. Johnson. Mr.
Gallart received his Associate's Degree from Montgomery College in 1979 and his
B.S. in Business and Management from the University of Maryland in 1981. Mr.
Gallart also speaks Spanish and Portuguese.
Karl Maier has been Vice President - Finance and Secretary of the Company since
March 1998, Director of Finance from March 1997 to March 1998, and Director of
Business Planning from September 1996 to March 1997. From 1995 to 1996, Mr.
Maier was a Vice President at Freyberg Hambros GmbH, an investment banking firm
in Frankfurt, Germany. From 1993 to 1995, Mr. Maier was Chief Financial Officer
of Berlin Cosmetics, a cosmetics manufacturer in Berlin, Germany. From 1989 to
1993, Mr. Maier was an Assistant Vice President in the First National Bank of
Boston's Foreign Multinational Division. Mr. Maier received his B.A. in History
and German from Bowdoin College in 1989.
Patricia J. Reichman has been Controller of the Company since March 1998. From
August 1996 to March 1998 she was Assistant Controller of UIH and from August
1993 to August 1996 its Manager of Financial Reporting. Mrs. Reichman was a
Supervising Senior at KPMG Peat Marwick from September 1988 to July 1993. She
received her B.S. in Business Administration from Colorado State University in
1988.
Mark G. Fetcenko has been Director of Technology of the Company since January
1998 and was Director of Operations from February 1996 to January 1998. From
March 1995 to February 1996, Mr. Fetcenko was Vice President of Operations for
Radio Movil Digital Americas, Inc. ("RMD"). From 1990 to March 1995, Mr.
Fetcenko was the Manager of Network Operations for OneComm. Mr. Fetcenko
received his Associate's Degree in Electronics Technology from Kirtland
Community College in 1979 and has over 18 years experience in SMR operating
businesses.
Rafael Luces has been Director of Operations - Andean Region since July 1998 and
was Director of Sales and Marketing - Latin America from August 1996 to July
1998. From 1994 to 1996, Mr. Luces was Sales Marketing Manager for RMD. From
1990 to 1994, Mr. Luces was Special Product Division Manager for Moore Business
Forms. Mr. Luces received his Bachelor in International Commerce from
Universidad Simon Rodriguez in 1983. Mr. Luces also speaks Spanish and
Portuguese.
Moshe Benitah has been Director of Operations - Conosur Region since July 1998
and was Director of Sales - Latin America from February 1998 to July 1998.
From May 1997 to February 1998 he was International Marketing Director for
Wireless International Corporation. From 1988 to 1997 he was President of
Globaltronics, Inc. and from 1987 to 1988 he was Vice President of Mercury
Trading Corporation. He was employed by Motorola, Inc. or its affiliates, from
1968 to 1987. Mr. Benitah received a degree in Electronic Engineering from the
Air Force Academy in Israel. He also speaks Spanish, French and Hebrew.
Stephen W. Schovee is a co-founder of the Company and has been a Director of the
Company since October 1995. Mr. Schovee is a Managing Member of the General
Partner of Telecom Partners L.P., and Telecom Partners II, L.P., venture
capital funds focused on early stage telecommunication services companies. Mr.
Schovee joined The Centennial Funds, a telecommunications-oriented venture
capital firm, in 1987 and became a general partner in 1991. In 1989, Mr.
Schovee co-founded OneComm, and served as its Chief Executive Officer from 1992
to 1995. Mr. Schovee is a director of Verio, Inc., Formus Communications, Inc.,
Product Partners, Inc., InfoBeat, Inc.,
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Intergram Corporation and WLL International, Inc. Mr. Schovee received his B.S.
in engineering from Bucknell University in 1981 and his M.B.A. from The Wharton
School in 1986.
Robert F. McKenzie has been a Director of the Company since December 1995. Mr.
McKenzie was a founder and a director of OneComm and was President and Chief
Operating Officer from 1990 to 1994. Currently, Mr. McKenzie serves on the
Executive Board of the University of Colorado Interdisciplinary
Telecommunications Program and is on the board of the Castle Tower Corporation
and WLL International, Inc. Mr. McKenzie received his B.S. in Business
Administration from the University of Colorado in 1966.
Adam Goldman has been a Director of the Company since October 1995. Mr. Goldman
joined The Centennial Funds in 1992 and became a general partner in 1995. From
1989 to 1991, Mr. Goldman was an Associate with Booz, Allen & Hamilton. Mr.
Goldman is also a director of InfoBeat, Inc., Intergram Corporation,
LifeSpex, Inc., Prime Video, Inc., Centennial Telecommunications, Inc. and
Advanced Telecom Group, Inc. Mr. Goldman received his B.A. in Economics and
History from Northwestern University in 1982 and his M.B.A. from the Kellogg
Graduate School of Management at Northwestern University in 1989.
William W. Sprague has been a Director of the Company since December 1996 and is
co-founder and President of Crest International Holdings L.L.C., a private
equity fund. Prior to founding Crest International Holdings L.L.C., Mr. Sprague
was employed by Smith Barney Inc. where he was a Managing Director and the Head
of the MediaCom Group from November 1994 to February 1996 and Co-Head of the
Mergers and Acquisitions Group from April 1992 to November 1994. Mr. Sprague is
also a director of Ethan Allen, Inc., Orb Image, One-on-One Sports Radio, Inc.
and Communication Resources, Inc. Mr. Sprague received his B.A. in Political
Economy from Williams College in 1980 and his M.B.A. from The Wharton School in
1984.
William D. Stanfill has been a Director of the Company since October 1996 and is
a general partner of Trailhead Ventures, L.P., a venture capital fund. Mr.
Stanfill is also President of Larimer Venture Advisors, Inc., which manages a
$38 million fund-of-funds activity. In 1974, Mr. Stanfill co-founded the
investment advisory firm of Morrill, Stanfill and Co. Mr. Stanfill serves on
the advisory boards of several United States venture capital partnerships,
including: American Health Care Fund, Glenwood Ventures, O'Donnell and Masur,
Technology Partners West, The Woodlands Venture Fund, Utah Ventures, and Arizona
Growth Partners. Mr. Stanfill also serves on the advisory board of Euro
Venture, Geneva and on several non-profit boards including the University of
Denver's Social Science Foundation and the Colorado Outward Bound School. In
addition, Mr. Stanfill serves on the endowment committee of the University of
Denver. Mr. Stanfill received his B.A. from the University of Colorado in 1962.
John H. Fullmer has been a Director of the Company since April 1997. Mr.
Fullmer is the Executive Vice President of Corporate Marketing and Development
for Cendant Corporation and has been with Cendant Corporation since 1980. Mr.
Fullmer currently serves on the Board of Governors for the Landmark Club and
previously served on the Board of Directors of the Make a Wish Foundation.
Mark A. Leavitt has been a Director of the Company since October 1997. Since
August 1996, Mr. Leavitt has been a Managing Director and Head of the Media and
Telecommunications Investment Banking Group at Prudential Securities
Incorporated. Prior to joining Prudential Securities Incorporated, Mr. Leavitt
was at Oppenheimer & Co., Inc. for approximately ten years, where he headed the
Media and Communications Group. Mr. Leavitt received his A.B. in Economics from
Trinity College in 1980, and M.B.A. from the University of Chicago Graduate
School of Business in 1983.
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<PAGE>
EXECUTIVE COMPENSATION
The Company was formed on October 26, 1995 and the current executive
officers did not receive any compensation from the Company in any fiscal year
prior to fiscal year 1996. The following table provides a summary of
compensation for fiscal 1996 and 1997 with respect to the Chief Executive
Officer and the other most highly compensated officers of the Company whose
annual salary and bonus during the calendar year ended December 31, 1997
exceeded $100,000 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- AWARDS
NAME AND OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#) COMPENSATION
- ------------------ ---- ------ -------- -------------- --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bernard G. Dvorak (2) 1997 $160,417 $ 50,000 $ 2,082 250,000 $ 0
President and Chief
Executive Officer
and Director
Barbara H. Vonderheid 1997 $100,000 $ 50,000 $ 2,028 95,000 $ 0
Vice President - 1996 $ 70,890 $ 41,500(4) $ 1,083 30,000 $ 0
Business Development
Fred A. Gallart 1997 $144,792 $ 81,250 $ 0 212,000 $ 0
Senior Vice President - 1996 $ 46,474 $ 22,916 $ 0 38,000 $ 35,000(3)
and General Manager -
Latin America
Michael N. Simkin (5) 1997 $105,000 $ 50,000 $ 1,132 500,000(6) $ 22,223(3)
Chief Executive Officer
and Director
Jeff E. Rhodes (5) 1997 $213,333 $ 0 $ 2,072 50,000 $ 0
President 1996 $145,333 $180,000(7) $ 1,383 150,000 $ 0
- --------------------------------
</TABLE>
(1) Yearly parking fee.
(2) Mr. Dvorak was the Chief Financial Officer of the Company until February 9,
1998 at which time he became the President and Chief Executive Officer.
(3) Consists of moving expenses.
(4) Ms. Vonderheid's bonus consisted of: $20,750 in cash and $20,750 in the
Company's Series B Preferred
(5) Mr. Simkin's employment with the Company ended February 19, 1998 and Mr.
Rhodes' full-time employment with the Company ended on November 17, 1997.
(6) Mr. Simkin was granted 500,000 options during fiscal 1997, however, due to
his resignation, he currently only has 100,000.
(7) Mr. Rhodes' bonus consisted of: $72,000 in cash and $108,000 in the
Company's Series B Preferred.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options to the Named Officers during the fiscal year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
----------------------------
<TABLE>
<CAPTION> Potential realizable value
Number of % of Total at assumed annual rates of
Securities Options stock price appreciation
Underlying Granted to Exercise or for option term (1)
Options Employees in Base Price Expiration --------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
- ---- ------- ----------- --------- ---- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bernard G. Dvorak 250,000 16% $1.45(2) (2) $ 590,474 $ 940,232
Fred A. Gallart 212,000 14% $1.45(3) (3) $ 500,722 $ 797,316
Barbara H. Vonderheid 95,000 6% $1.45(4) (4) $ 224,380 $ 357,288
Michael N. Simkin (5) 500,000 33% $1.45(6) (6) $1,180,948 $1,880,463
Jeff E. Rhodes (5) 50,000 3% $3.25 2/20/07 $ 118,094 $ 188,046
- --------------------------------
</TABLE>
(1) The potential realizable value is calculated based on the term of the
option at the date of grant (10 years). It is calculated assuming that the
options are granted with exercise prices equal to fair market value and
that the fair market value of the Company's stock on the date of grant
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last
day of its term for the appreciated stock price.
(2) Mr. Dvorak received two option grants in 1997: the first, for 125,000
shares, which was initially priced at $3.25/share, was substituted with the
same number of shares at $1.45/share on 10/3/97 and expires 1/16/07; the
second, for 125,000 shares is priced at $1.45/share and expires 10/02/07.
(3) Mr. Gallart received three option grants in 1997: the first, for 12,000
shares, which was initially priced at $3.25/share, was substituted with the
same number of shares at $1.45/share on 10/3/97 and expires 2/20/07; the
second, for 20,000 shares, which was initially priced at $3.25/share, was
substituted with the same number of shares at $1.45/share on 10/3/97 and
expires 7/14/07; the third, for 180,000 shares is priced at $1.45/share and
expires 10/2/07.
(4) Ms. Vonderheid received two option grants in 1997; the first, for 15,000
shares, which was initially priced at $3.25/share, was substituted with the
same number of shares at $1.45/share on 10/3/97 and expires 2/20/07; the
second, for 80,000 shares is priced at $1.45/share and expires 10/2/97.
(5) Mr. Simkin's employment with the Company ended February 19, 1998 and Mr.
Rhodes' full-time employment with the Company ended on November 17, 1997.
(6) Mr. Simkin received two option grants in 1997: the first, for 250,000
shares, which was initially priced at $3.25/share, was substituted with the
same number of shares at $1.45 on 10/3/97 and expires October 2, 2007; the
second, for 250,000 shares is priced at $1.45/share and expires October 2,
2007. Due to Mr. Simkin's resignation, he currently has 100,000 options
which expire February 19, 2000.
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<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information as to options exercised
during the fiscal year ended December 31, 1997 and as to unexercised options
held at the end of such fiscal year by the Named Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-
Unexercised Options Money Options At Fiscal
at Fiscal Year-End Year-End (1)
------------------------------- ----------------------------
Shares
Acquired on
Name Exercise Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Bernard G. Dvorak - - 250,000 - -
Michael N. Simkin (2) - - 500,000 - -
Jeff E. Rhodes (2) - 174,000 - $45,000 -
Barbara H. Vonderheid - 6,000 119,000 - -
Fred Gallart - 7,600 242,400 - -
- ----------------------------
</TABLE>
(1) Based on the estimated fair market value of the Common Stock as of December
31, 1997, minus the per share exercise price, multiplied by the number of
shares underlying the option.
(2) Mr. Simkin's employment with the Company ended February 19, 1998 and Mr.
Rhodes' full-time employment with the Company ended on November 17, 1997.
DIRECTORS' COMPENSATION
Except for Mr. Elsner, Mr. McKenzie and Mr. Fullmer, who each receive
$1,000 in cash for each board of directors meeting attended and $500 in cash for
each telephonic board of director meeting participated in, members of the Board
of Directors do not receive cash compensation for acting as members of the Board
or Committees of the Board, other than reimbursement for reasonable out-of-
pocket expenses incurred in connection with their attendance at meetings of the
Board and its committees.
Directors' Stock Options
From time to time the Board has granted options to purchase shares of
Common Stock to various members of the Board who are not officers of the Company
in consideration for their service as directors. For the year ended December
31, 1997 the following directors were granted the options listed below in
consideration for serving on the Board.
NAME NUMBER OF OPTIONS EXERCISE PRICE EXPIRATION DATE
---- ----------------- -------------- ---------------
Robert McKenzie 30,000 $1.45 1/16/07
John Fullmer (1) 37,000 $1.45 (1)
(1) Mr. Fullmer received two option grants in 1997: the first for 25,000 shares,
which was initially priced at $3.25/share, was substituted with 25,000
shares priced at $1.45/share on 10/3/97 and expires 5/15/07; the second, for
12,000 shares is priced at $1.45/share and expires 10/2/07.
EMPLOYMENT AGREEMENTS
The Company currently has no employment agreements with any officer or
employee.
On November 17, 1997, the Company entered into an agreement (the "Rhodes
Agreement") with Jeff E. Rhodes, the former President of the Company, pursuant
to which, among other things, Mr. Rhodes resigned from his position as President
of the Company and from the Board of Directors of the Company and each of the
Company's Subsidiaries, but agreed to stay on as a part-time employee of the
Company for a period of six months for the purpose of providing assistance on
certain corporate development projects. Mr. Rhodes was paid a monthly salary of
$16,667 during this period. The Rhodes Agreement also provides for the immediate
vesting of 80% of
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<PAGE>
Mr. Rhodes' unvested options, contains non-competition, non-solicitation and
confidentiality covenants on behalf of Mr. Rhodes, contains a limited right of
first refusal giving the Company the right to pursue certain business
opportunities identified by Mr. Rhodes, and contains mutual releases by Mr.
Rhodes and the Company.
On February 19, 1998, the Company entered into an agreement (the "Simkin
Agreement") with Michael N. Simkin, the former Chief Executive Officer of the
Company, pursuant to which, among other things, Mr. Simkin resigned from his
position as Chief Executive Officer of the Company and from the Board of
Directors of the Company and each of the Company's Subsidiaries. Mr. Simkin
received (i) a payment equal to six months salary, paid in one lump sum in the
amount of $105,000 and (ii) a relocation payment in the amount of $25,000. The
Simkin Agreement also provides for the immediate vesting of 20% of Mr. Simkin's
unvested options, contains non-competition, non-solicitation and confidentiality
covenants on Mr. Simkin's behalf, contains a no-change provision with regard to
a Promissory Note under which Mr. Simkin is obligated to pay to the Company
$72,500 on or before October 3, 1999, and contains mutual releases by Mr. Simkin
and the Company.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors in January 1996. A total of 1,250,000 shares of Common Stock
were originally authorized for issuance under the Option Plan. The Option Plan
was amended in February 1997 to authorize the Company to grant up to 1,488,000
shares of common stock and on October 3, 1997, the Board of Directors increased
the shares of Common Stock authorized for issuance under the Option Plan to
2,307,972 shares. At August 31, 1998, 2,032,228 shares of Common Stock were the
subject of outstanding stock options granted under the Option Plan and 275,744
shares remained available for future grants. The Board of Directors may suspend
or terminate the Option Plan at any time. Unless sooner terminated, the Option
Plan will terminate on the 10th anniversary of its adoption by the Board of
Directors.
The Option Plan provides for the grant of (i) options intended to qualify
as incentive stock options under the Internal Revenue Code of 1986 (as amended)
(the "Code") and (ii) nonstatutory stock options. Incentive stock options may
be granted only to employees of the Company and its Affiliates. Nonstatutory
options may be granted only to employees or consultants of the Company or its
Affiliates, or members of the Board of Directors of the Company.
The Option Plan is administered by the Board of Directors or a committee
appointed by the Board (the "Committee"). Subject to the terms of the Option
Plan, the Board of Directors or the Committee determines which of the eligible
persons shall be granted options and the types of options to be granted,
including the exercise price, the number of shares subject to the option and the
exercisability thereof.
The terms of options granted under the Option Plan may not exceed 10 years.
The exercise price of options granted under the Option Plan is determined by the
Board of Directors; provided that (i) the exercise price for an incentive stock
option cannot be less than 100% of the fair market value of the Common Stock on
the date of the option grant, and (ii) the exercise price for a nonstatutory
stock option cannot be less than 85% of the fair market value of the Common
Stock on the date of the option grant. Options granted under the Option Plan
vest at the rate specified in each individual option agreement. No option may
be transferred by the optionee other than by will or the laws of descent or
distribution or, in certain limited instances, pursuant to a qualified domestic
relations order; provided that an optionee may designate a beneficiary who may
exercise the option following the optionee's death. An optionee whose
relationship with the Company or any of its Affiliates ceases for any reason,
other than by death or permanent disability, may (to the extent that such
optionee was entitled to exercise the option on the date of the termination)
exercise options during the three month period following such cessation (unless
such options expire sooner by their terms) or in such longer period as may be
provided in the option agreement. If an optionee's relationship with the
Company or any of its Affiliates ceases due to death or disability, his or her
options may be exercised during the 12 month period following such cessation due
to disability and during the 18 month period following such cessation due to
death (unless in each case, the option sooner expires by its terms).
80
<PAGE>
The Option Plan provides that no incentive stock option may be granted to
any person who, at the time of grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any of its Affiliates, unless the exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of the grant. To
the extent that the aggregate fair market value, determined at the date of grant
of the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its Affiliates), exceeds $100,000, such
options (or portion thereof) shall be treated as nonstatutory options.
Shares subject to options that expire or otherwise terminate without having
been exercised in full become available again for the grant of options under
the Option Plan.
Under the terms of the Option Plan, the Board of Directors or the Committee
has the authority to re-price options outstanding under the Option Plan and to
reduce the exercise price of such options. In addition, the Board of Directors
or the Committee may, with the consent of affected option holders, provide for
the cancellation of outstanding options and the substitution of new options
therefor. Such new options may be exercisable for the same or different number
of shares, and shall have an exercise price of not less than 50% of fair market
value of such shares in the case of nonstatutory options, or not less than 100%
of fair market value of such shares in the case of incentive stock options (or
110% of the fair market value of such shares in the case of incentive stock
options granted to a 10% stockholder).
The Option Plan provides that upon the occurrence of a dissolution,
liquidation, merger, consolidation, sale of substantially all of the assets of
the Company, or other similar corporate event as provided in the Option Plan,
the right to exercise under all outstanding options under the Option Plan will
be accelerated to permit the optionee to exercise such options in full prior to
such event.
ADJUSTMENT OF EXERCISE PRICE OF OUTSTANDING OPTIONS
On October 3, 1997, the Board of Directors authorized the reduction of the
exercise price to $1.45 of the outstanding options held by certain employees and
directors granted under the Option Plan with an exercise price greater than
$1.45 (the "Qualified Options"). Each Qualified Option was amended and replaced
with a new option with an exercise price of $1.45 (the "New Options"). Each New
Option (i) automatically vested to the extent that the Qualified Option it
amended and replaced was vested; (ii) continues to vest upon each anniversary of
the Qualified Option; and (iii) has a term of 10 years from the date of the
grant of the New Option.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June and July 1996, the Company issued a total of 352 shares of its
Series A Preferred for $25,000 per share. On November 22, 1996, the Company
issued 5,670,851 shares of its Series B Preferred for $3.65 per share.
Purchasers of these securities included Centennial Fund IV, L.P. ("Centennial
IV"), Centennial Fund V, L.P. ("Centennial V"), Crest Funding Partners, L.P.
("Crest Funding"), Crest SMR, L.L.C. ("Crest SMR"), Banc Boston Ventures
Incorporated ("Banc Boston Ventures"), Telecom Partners, L.P. ("Telecom
Partners"), and Trailhead Ventures, L.P. ("Trailhead Ventures"), each of which
is the beneficial owner of more than 5% of a class of the Company's voting
securities.
On October 3, 1997, the Company consummated an offering of its Series C
Preferred (the "Series C Offering") with an investor group led by the Company's
existing stockholders (including Centennial IV, Centennial V, Crest Funding,
Crest SMR, Bank Boston Ventures, Telecom Partners and Trailhead Ventures) and
Prudential Securities Incorporated and its affiliates (collectively, "PSI"). In
connection therewith, the Company issued an aggregate principal amount of
approximately $11.1 million of Senior Notes convertible into shares of the
Company's Common Stock or shares of the Company's Series C Preferred at an
initial conversion price of $1.45. On January 15, 1998, the Senior Notes and
accrued interest thereon were converted into 7,955,691 shares of Series C
Preferred at a conversion price of $1.45 per share.
In connection with these transactions, the Company, the purchasers of the
Series A Preferred, the Series B Preferred, the Senior Notes and the holders of
the Company's Common Stock, entered into the Second Amended and Restated
Stockholders Agreement, dated as of October 3, 1997 (as amended to the date
hereof, the "Stockholders Agreement"). Pursuant to the Stockholders Agreement,
each of Centennial IV, Centennial V, Telecom Partners and Crest Funding (in each
case, so long as such Person holds at least 5% of the Company's Common Stock on
a fully diluted basis) and PSI (so long as it holds 15% of the Company's Common
Stock on a fully diluted basis) is entitled to designate one director to the
Company's Board of Directors. The total number of directors is set at eleven,
which cannot be changed without the consent of the parties to the Stockholders
Agreement. Under the terms of the Stockholders Agreement, any holder of Series
Preferred or Common Stock issued upon conversion of Series Preferred that
desires to transfer its securities, must first offer to sell its securities to
the Company and then to the other holders of Series Preferred, subject to
exceptions for transfers to Affiliates or family members. In any private sale of
25% or more of the total holdings of Series Preferred and Common Stock (in the
aggregate) held by Centennial IV and Centennial V (and their respective
Affiliates and Subsidiaries), such holders are obligated to offer the other
holders of Series Preferred the opportunity to participate in such sale on a pro
rata basis. In addition, PSI is entitled to participate on a pro rata basis in
any private sale by holders of more than 25% of the shares of Series C Preferred
or Common Stock issued on the conversion of the Series C Preferred. The
restrictions on transfer in the Stockholders Agreement will terminate upon the
earlier of (i) any sale of Series Preferred or Common Stock issued upon the
conversion of Series Preferred pursuant to a registered offering under the
Securities Act or in a transaction pursuant to Rule 144 under the Securities
Act; (ii) the transfer of such securities pursuant to the transfer provisions in
the Stockholders Agreement; (iii) a Sale (as defined in the Stockholders
Agreement) of the Company; or (iv) closing of an underwritten public offering by
the Company, at a per share price paid by the public of at least $6 a share
(subject to adjustment for stock splits, stock dividends, reverse stock splits
and similar recapitalizations) and an aggregate price paid by the public of at
least $20 million.
The holders of the Series Preferred, the holders of the Warrants and the
holders of the Convertible Notes also have certain registration rights pursuant
to the Third Amended and Restated Registration Agreement (the "Registration
Agreement"). At any time after the earlier of October 3, 2000 or the completion
of an initial public offering by the Company, the holders of at least 20% of the
Common Stock underlying the Series Preferred or otherwise held by the Series
Preferred holders party to the Registration Agreement with the Company (subject
to adjustment for stock splits, stock dividends, reverse stock splits and
similar recapitalizations) (the "Registrable Securities") may make four demands
that the Company register their Registrable Securities on Form S-1 under the
Securities Act. Two of the demand registrations are to be paid for by the
Company and two are to be paid for by the holders requesting registration. In
addition, the holders of Registrable Securities may request an unlimited number
of registrations on Form S-2 or Form S-3, which shall be paid for by the
Company. The holders of the Series Preferred, the Warrants and the Convertible
Notes also have piggyback registration rights so that if the
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<PAGE>
Company proposes to register any of its securities under the Securities Act
under certain circumstances, either for its own account or for the account of
other security holders, the Company is required to include the Registrable
Securities, the Convertible Shares (as defined) and the Warrant Shares (as
defined) requested to be included in such registration, subject to certain cut
backs required by underwriters.
In addition to the registration rights granted to the holders of the Series
Preferred, PSI, so long as it holds at least 33% of the Registrable Securities
held by PSI on October 3, 1997, is entitled to two demand registrations which
are to be paid for by the Company (the "PSI Demand Right"). The PSI Demand
Right is exercisable at any time after 120 days following the date the Company
has completed a public offering of its equity securities.
The Company entered into the Initial Purchase Agreement dated January 12,
1998 among the Company and the Initial Purchasers, pursuant to which the Initial
Purchasers acquired the Units consisting of the Private Notes and the Initial
Warrants.
The Company entered into the Notes Registration Rights Agreement with the
Initial Purchasers on January 15, 1998. See "The Exchange Offer - Purpose of
the Exchange Offer," and "Description of Notes - Registration Rights; Liquidated
Damages."
On July 1, 1997 the Company loaned Michael N. Simkin, the former Chief
Executive Officer of the Company, $162,056 to purchase 44,521 shares of the
Company's Series B Preferred (the "Simkin Loan"). In connection with the Series
C Offering, Mr. Simkin returned the shares of Series B Preferred previously
issued to him for cancellation and was issued 50,000 shares of Series C
Preferred at an issue price of $1.45 per share. In addition, the Simkin Loan
was terminated and replaced with a new loan having the following terms: (i) a
principal amount of $72,500, and (ii) a maturity date of October 3, 1999.
Interest is payable annually on the principal amount of this loan at 6.5% per
annum and is secured by a pledge of the purchased shares of Series C Preferred.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the voting securities of the Company as of August 31, 1998 by (i)
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the Company's voting securities, (ii) each of the
Company's directors and executive officers, and (iii) all of the Company's
executive officers and directors as a group. See "Certain Relationships and
Related Transactions."
<TABLE>
<CAPTION>
Number of Aggregate
Shares of Number of Principal
Number of Series A Shares of Amount of Number of
Beneficial Owner(1) Shares of Preferred Series B Convertible Shares of Series
Common Stock (2) Preferred (3) Notes(4) C Preferred(5)
- --------------------------------- ------------ --------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Bernard G. Dvorak (7)(8) -- -- 13,700 -- 5,052
Danny E. Stroud (7) -- -- -- -- --
Fred A. Gallart (7)(9) -- -- 1,570 -- 589
Barbara H. Vonderheid (7)(10) -- -- 5,685 -- 2,130
Robert McKenzie (7)(11) 30,000 3 10,000 -- 23,776
William Elsner (7)(12) 150,000 4 20,000 -- 70,891
Adam Goldman (7)(13) -- -- -- -- --
Stephen Schovee (7)(14) -- -- -- -- --
William Sprague (7)(15) -- -- -- -- --
William Stanfill (7)(16) -- -- -- -- --
John Fulmer (7)(17)(18) -- -- -- -- --
Mark A. Leavitt (7) -- -- -- -- --
All directors and executive officers as a 180,000 7 50,955 -- 102,438
group (twelve persons)
5% SHAREHOLDERS:
Centennial Fund IV, L.P. (19)(20)(21) 1,638,000 175 274,000 -- 830,261
Centennial Fund V, L.P. (19)(21)(22) -- -- 2,391,787 -- 1,297,450
Centennial Entrepreneurs Fund V, L.P. -- -- 73,973 -- 40,131
(19)(21)(23)
Centennial Holdings, I, LLC. (19)(21)(24) 95,381 10 43,157 -- 75,716
Crest Funding Partners, L.P. (15)(25) -- -- 700,000 -- 261,970
Crest SMR, LLC (15)(25) -- -- 669,863 -- 250,693
Banc Boston Ventures Incorporated (26) -- -- 821,918 -- 205,602
Telecom Partners, L.P. (27) 1,500,000 30 68,493 -- 755,650
Trailhead Ventures, L.P. (28) -- 80 136,986 -- 317,188
Prudential Securities Incorporated (29) -- -- -- -- 3,324,492
MGVF II Ltd. (30) -- 26 205,479 -- 162,323
FG-CC (17) -- -- -- -- 36,939
Merrill Lynch Global Allocation Fund Inc. (31) -- -- -- 10,000,000 --
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fully Diluted Common
Shares Upon Conversion (6)
--------------------------
Percentage
of Voting
Beneficial Owner(1) Number Stock
- --------------------------------- ------ ----------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Bernard G. Dvorak (7)(8) 74,284 0.2%
Danny E. Stroud (7) -- --
Fred A. Gallart (7)(9) 60,393 0.2%
Barbara H. Vonderheid (7)(10) 41,110 0.1%
Robert McKenzie (7)(11) 121,191 0.4%
William Elsner (7)(12) 336,137 1.1%
Adam Goldman (7)(13) -- --
Stephen Schovee (7)(14) -- --
William Sprague (7)(15) -- --
William Stanfill (7)(16) -- --
John Fulmer (7)(17)(18) 9,250 *
Mark A. Leavitt (7) -- --
All directors and executive officers as a 642,365 2.0%
group (twelve persons)
5% SHAREHOLDERS:
Centennial Fund IV, L.P. (19)(20)(21) 4,916,594 15.5%
Centennial Fund V, L.P. (19)(21)(22) 4,655,151 14.6%
Centennial Entrepreneurs Fund V, L.P. 143,978 0.5%
(19)(21)(23)
Centennial Holdings, I, LLC. (19)(21)(24) 350,975 1.1%
Crest Funding Partners, L.P. (15)(25) 1,244,663 3.9%
Crest SMR, LLC (15)(25) 1,191,078 3.7%
Banc Boston Ventures Incorporated (26) 1,359,449 4.3%
Telecom Partners, L.P. (27) 2,705,578 8.5%
Trailhead Ventures, L.P. (28) 1,452,892 4.6%
Prudential Securities Incorporated (29) 3,324,492 10.4%
MGVF II Ltd. (30) 757,388 2.4%
FG-CC (17) 36,939 0.1%
Merrill Lynch Global Allocation Fund Inc. (31) 7,841,061 24.5%
- ----------------------------------------------
</TABLE>
* Less than 0.1%
(1) "Beneficial owner" means generally any person who, directly or
indirectly, has or shares voting power or investment power with
respect to a security, as well as the voting power of Common Stock
subject to options which were exercisable as of August 31, 1998, or
which will become exercisable within 60 days of such date, held by
each individual or entity listed.
(2) Each share of Series A Preferred is convertible into Common Stock
at any time in accordance with the following formula, subject to
adjustment for dilutive sales and corporate reorganizations:
(Number of Shares of Series A Preferred) x ($25,000)
----------------------------------------------------
$2.12
Holders of shares of Series A Preferred vote with the Series B
Preferred, the Series C Preferred, and the Common Stock on an as-
converted basis and also have certain separate voting rights in their
capacity as holders of Series A Preferred.
(3) Each share of Series B Preferred is convertible into Common Stock at
any time in accordance with the following formula, subject to
adjustment for dilutive sales and corporate reorganizations:
(Number of Shares of Series B Preferred) x ($3.65)
--------------------------------------------------
$2.60
84
<PAGE>
Holders of shares of Series B Preferred vote with the Series A Preferred,
the Series C Preferred, and the Common Stock on an as-converted basis and
also have certain separate voting rights in their capacity as holders of
Series B Preferred.
(4) The Convertible Notes plus all accrued and unpaid interest thereon are
convertible (i) at any time directly into Common Stock in accordance with
the following formula, subject to adjustment for dilutive sales and
corporate reorganizations.
(Outstanding principal of each Convertible Note plus all accrued and unpaid
---------------------------------------------------------------------------
interest thereon)
-----------------
$2.25
(5) Each share of Series C Preferred is convertible into Common Stock at any
time in accordance with the following formula, subject to adjustment for
dilutive sales and corporate reorganizations:
(Number of Shares of Series C Preferred) x ($1.45)
--------------------------------------------------
$1.45
Holders of shares of Series C Preferred vote with the Series A Preferred,
the Series B Preferred, and the Common Stock on an as-converted basis and
also have certain separate voting rights in their capacity as holders of
Series C Preferred.
(6) Assumes (a) conversion into Common Stock of all outstanding shares of
Series A Preferred, Series B Preferred, Series C Preferred and of the
Convertible Notes and (b) exercise of all options which were exercisable on
August 31, 1998 or will become exercisable within 60 days after that date.
Does not include the accrued and unpaid interest component of the
Convertible Notes.
(7) The address of all of the officers and directors of the Company is c/o
Centennial Communications Corp., 1600 Wynkoop, Suite 300, Denver, CO 80202.
(8) The fully diluted number of shares includes 50,000 shares of Common Stock
issuable upon exercise of stock options exercisable within 60 days of
August 31, 1998.
(9) The fully diluted number of shares includes 57,600 shares of Common Stock
issuable upon exercise of stock options exercisable within 60 days of
August 31, 1998.
(10) The fully diluted number of shares includes 31,000 shares of Common Stock
issuable upon exercise of stock options exercisable within 60 days of
August 31, 1998.
(11) The fully diluted number of shares includes 18,000 shares of Common Stock
issuable upon exercise of stock options exercisable within 60 days of
August 31, 1998.
(12) The fully diluted number of shares includes 40,000 shares of Common Stock
issuable upon exercise of stock option exercisable within 60 days of August
31, 1998.
(13) Excludes the shares of Common Stock, Series A Preferred, Series B Preferred
and Series C Preferred (the "Shares") owned directly by Centennial IV (as
defined), Centennial V (as defined), Entrepreneurs Fund (as defined) and
Holdings LLC (as defined). See notes 20-24 below for a description of the
relationships between such entities and Mr. Goldman. Mr. Goldman disclaims
beneficial ownership within the meaning of Rule 13d-3 under the Exchange
Act.
(14) Excludes Shares owned directly by Telecom Partners, L.P. ("Telecom
Partners"). Mr. Schovee may be deemed to have an indirect pecuniary
interest in an intermediate portion of the Shares beneficially owned by
Telecom Partners. Mr. Schovee disclaims beneficial ownership of these
Shares within the meaning of Rule 13d-3 under the Exchange Act.
(15) Excludes Shares owned directly by Crest Funding Partners, L.P. ("Crest
Funding") and Crest SMR, LLC ("Crest SMR"). Mr. Sprague may be deemed to
have an indirect pecuniary interest in an intermediate portion of the
Shares beneficially owned by Crest Funding and Crest SMR. Mr. Sprague
disclaims beneficial ownership of these Shares within the meaning of Rule
13d-3 under the Exchange Act.
(16) Excludes Shares owned directly by Trailhead Ventures, L.P. ("Trailhead
Ventures"). Mr. Stanfill may be deemed to have an indirect pecuniary
interest in an intermediate portion of the Shares beneficially owned by
Trailhead Ventures. Mr. Stanfill disclaims beneficial ownership of these
Shares within the meaning of Rule 13d-3 under the Exchange Act.
(17) FG-CC is the direct beneficial owner of the shares of Series C Preferred
set forth beside its name in the table above. FG-CC is a Florida general
partnership in which John Fullmer is a general partner. John Fullmer may be
deemed to indirectly beneficially own FG-CC's Series C Preferred shares by
virtue of his authority to make decisions regarding the voting and
disposition of the shares of Series C Preferred owned by FG-CC. The address
of FG-CC is c/o FG II, 72 Cummings Point Road, Stamford, CT 06902.
(18) The fully diluted number of shares includes 9,250 shares of Common Stock
issuable upon exercise of stock options exercisable within 60 days of
August 31, 1998.
85
<PAGE>
(19) The address of Centennial Fund IV, L.P.("Centennial IV"), Centennial
Holdings IV, L.P. ("Holdings IV"), Centennial Fund V, L.P. ("Centennial
V"), Holdings V, L.P. ("Holdings V"), Centennial Entrepreneurs Fund V,
L.P.("Entreprenuers Fund"), and Centennial Holdings I, LLC ("Holdings LLC")
is 1428 15th Street, Denver, CO 80202.
(20) Centennial IV is the direct beneficial owner of the Shares set forth beside
its name in the table above. Holdings IV, the sole General Partner of
Centennial IV, may be deemed to indirectly beneficially own Centennial IV's
Shares by virtue of its authority to make decisions regarding the voting
and disposition of Shares beneficially owned by Centennial IV. Steven C.
Halstedt, Jeffrey H. Schutz, Adam Goldman, Donald H. Parsons, Jr., and
David C. Hull, Jr. are the sole general partners of Holdings IV (the
"Individual Partners"). By virtue of the relationships described above and
their roles with Centennial IV and Holdings IV, each of the Individual
Partners may be deemed to control Centennial IV and Holdings IV and may be
deemed to beneficially own the Shares held by Centennial IV. However, none
of the Individual Partners, acting alone, has voting or investment power
with respect to the Shares directly held by Centennial IV and, as a result,
each Individual Partner disclaims beneficial ownership of the Shares held
by Centennial IV.
(21) Centennial V, Holdings V, the Individual Partners, Entrepreneurs Fund, and
Holdings LLC each disclaim beneficial ownership of the Shares held by
Centennial IV. Centennial IV, Holdings IV, the Individual Partners,
Entrepreneurs Fund, and Holdings LLC each disclaim beneficial ownership of
the Shares held by Centennial V. Centennial V, Centennial IV, Holdings IV,
the Individual Partners, and Holdings LLC each disclaim beneficial
ownership of the Shares held by Entrepreneurs Fund. Centennial V, Holdings
V, Centennial IV, Holdings IV, the Individual Partners and Entrepreneurs
Fund each disclaim beneficial ownership of the Shares held by Holdings LLC.
(22) Centennial V is the direct beneficial owner of the shares of Series B
Preferred and Series C Preferred set forth beside its name in the table
above. Holdings V is the sole general partner of Centennial V and may be
deemed to indirectly beneficially own Centennial V's Shares by virtue of
its authority to make decisions regarding the voting and disposition of
Shares beneficially owned by Centennial V. The Individual Partners are also
the sole general partners of Holdings V. By virtue of the relationships
described above and their roles with Centennial V and Holdings V, each of
the Individual Partners may be deemed to control Centennial V and Holdings
V and may be deemed to beneficially own the Shares held by Centennial V.
However, none of the Individual Partners, acting alone, has voting or
investment power with respect to the Shares directly held by Centennial V
and, as a result, each Individual Partner disclaims beneficial ownership of
the Shares held by Centennial V.
(23) Entrepreneurs Fund is the direct beneficial owner of the shares of Series B
Preferred and Series C Preferred set forth beside its name in the table
above. Holdings V is the sole general partner of Entrepreneurs Fund and may
be deemed to indirectly beneficially own Entrepreneurs Fund's Shares by
virtue of its authority to make decisions regarding the voting and
disposition of Shares beneficially owned by Entrepreneurs Fund. The
Individual Partners are also the sole general partners of Holdings V. By
virtue of the relationships described above and their roles with
Entrepreneurs Fund and Holdings V, each of the Individual Partners may be
deemed to control Entrepreneurs Fund and Holdings V and may be deemed to
beneficially own the Shares held by Entrepreneurs Fund. However, none of
the Individual Partners, acting alone, has voting or investment power with
respect to the Shares directly held by Entrepreneurs Fund, and as a result,
each Individual Partner disclaims beneficial ownership of the Shares held
by Entrepreneurs Fund.
(24) Holdings LLC is the direct beneficial owner of the Shares set forth beside
its name in the table above. Centennial Holdings, Inc. ("Holdings Inc.") is
the sole managing member, and each of the Individual Partners is a unit
holder, of Holdings LLC. Each of the Individual Partners are officers and
stockholders and two of the Individual Partners are directors of Holding
Inc. By virtue of the relationships described above and their roles with
Holdings Inc. and Holdings LLC each of the Individuals Partners may be
deemed to beneficially own the Shares held by Holdings LLC. However, none
of the Individual Partners acting alone, has voting or investment power
with respect to any of the Shares directly held by Holdings LLC, and, as a
result, each Individual Partner disclaims beneficial ownership of the
Shares held by Holdings LLC.
(25) The address of Crest Funding and Crest SMR is 320 Park Avenue, 17th Floor,
New York, NY 10022.
(26) The address of BancBoston Ventures Incorporated is 100 Federal St., 32nd
Floor, Boston, MA 02110.
(27) The address of Telecom Partners is 3200 Cherry Creek Drive South,
Suite 450, Denver, CO 80209.
(28) The address of Trailhead Ventures is 730 17th Street, Suite 690,
Denver, CO 80202.
(29) The address of Prudential Securities Incorporated is One New York Plaza,
18th Floor, New York, NY 10292.
(30) The address of MGVF II Ltd. is 910 Travis, Suite 2400, Houston, TX 77002.
(31) Included in the fully diluted number of shares is 2,560,000 shares issuable
upon exercise of the Initial Warrants issued in connection with the Private
Notes. The address of Merrill Lynch Global Allocation Fund, Inc. is 800
Scudders Mill Road, Plainsboro, New Jersey, 08536.
86
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
terms of the capital stock contained in the Company's Amended and Restated
Certificate of Incorporation.
As of the date of this Prospectus, the authorized capital stock of the
Company consists of 40,000,000 shares of common stock, par value $0.01 per share
("Common Stock") and 17,400,000 shares of preferred stock, par value $0.01 per
share ("Preferred Stock"). Of the Preferred Stock, 352 shares are designated
Series A Preferred, 6,399,648 shares are designated Series B Preferred and
11,000,000 shares are designated Series C Preferred. As of the date of this
Prospectus, the Company had outstanding 3,502,750 shares of Common Stock, 352
shares of Series A Preferred, 5,735,251 shares of Series B Preferred and
8,284,136 shares of Series C Preferred. The Common Stock and options to acquire
Common Stock held by certain members of the Company's management issued as part
of the Option Plan ("Management Stock") are subject to certain buy-back
provisions and rights of first refusal in favor of the Company. See "Management
- - 1996 Stock Option Plan." The Series Preferred and Common Stock issuable upon
conversion of the Series Preferred are subject to a right of first offer in
favor of the Company.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding Preferred Stock, the
holders of Common Stock are entitled to receive ratably the dividends, if any,
that may be declared from time to time by the Company's Board of Directors out
of funds legally available for such dividends. The Company has never declared a
dividend and does not anticipate doing so in the foreseeable future. In the
event of a liquidation, dissolution or winding up of the Company, subject to the
prior rights of the Preferred Stock, the holders of Common Stock are entitled to
share ratably in any remaining assets after payment of liabilities. Holders of
Common Stock have no cumulative voting rights and there are no conversion rights
or redemption or sinking fund provisions with respect to such stock. The Common
Stock is not subject to any future calls or assessments. All of the outstanding
shares of Common Stock are fully paid and nonassessable. The initial purchasers
of the Common Stock (Telecom Partners, Centennial IV, Holdings Inc., Jeff E.
Rhodes, William Elsner and Robert McKenzie), each have rights of first refusal
which give them an option to acquire an amount of Common Stock or rights to
acquire Common Stock being offered by the Company equal to their percentage
ownership of all outstanding Common Stock.
PREFERRED STOCK
Conversion. Each share of Series Preferred is initially convertible, at
any time at the holder's option, into a number of shares of Common Stock
determined by dividing the original issue price of such share by the conversion
price in effect at the time of conversion. The original issue price of each
share of Series A Preferred was $25,000 and the conversion price currently is
$2.12. The original issue price of the Series B Preferred was $3.65 and the
conversion price currently is $2.60. The original issue price and the current
conversion price of each share of Series C Preferred is $1.45. The conversion
price of each share of Series Preferred is subject to "institutional weighted-
average" anti-dilution adjustments upon the issuance of Common Stock and certain
Common Stock equivalents at prices less than the conversion price of the Series
Preferred then in effect. The Series Preferred also is subject to proportional
adjustment upon the occurrence of certain events, including stock dividends,
stock splits and similar transactions affecting the Common Stock. If the Company
issues any shares of Common Stock (or Common Stock equivalents) for a price less
than $1.93 per share (the "Per Share Issue Price"), the conversion price of the
Series C Preferred may be reduced to a price which is the lesser of (i) 25% of
the Per Share Issue Price (but in no event less than $1.25 per share) and (ii)
the conversion price obtained by application of the "institutional weighted
average" anti-dilution adjustments set forth in the Company's Amended and
Restated Certificate of Incorporation. This latter conversion price adjustment
is applicable only to the succeeding $7,500,000 in aggregate equity capital
raised by the Company after October 3, 1997. The Company may require the
conversion of all of the outstanding shares of Series Preferred at any time upon
or following the closing of a firm commitment underwritten public offering at a
per share price paid by the public of at least $6 per share (as adjusted for
stock splits, stock dividends, reverse stock splits and similar
recapitalizations) and an aggregate price paid by the public of at least $20
million (a "qualified public offering").
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Liquidation. Upon the liquidation, dissolution or winding up of the
Company (a "Liquidation Event"), before any distribution or payment is made upon
any other stock of the Company, each holder of Series C Preferred is entitled to
receive the greater of (i) the amount such holder would have received in such
Liquidation Event on an as-converted to Common Stock basis and (ii) $1.45 (plus
all declared, accrued and unpaid dividends) per share of Series C Preferred.
Upon the occurrence of a Liquidation Event, each holder of Series B Preferred in
priority to the holders of Series A Preferred and any other stock of the Company
other than the Series C Preferred ("Junior Securities") is entitled to receive
the greater of (i) the amount such holder would have received in such
Liquidation Event on an as-converted to Common Stock basis and (ii) $3.65 (plus
all declared, accrued and unpaid dividends) per share of Series B Preferred.
Upon the occurrence of a Liquidation Event, each holder of Series A Preferred in
priority to the holders of Junior Securities is entitled to receive the greater
of (i) the amount such holder would have received in such Liquidation Event on
an as-converted to Common Stock basis and (ii) $25,000 (plus all declared,
accrued and unpaid dividends) per share of Series A Preferred. At the option of
the holders of at least a majority of the outstanding shares of Series
Preferred, each of the following will be deemed a Liquidation Event: (i) the
sale or transfer of more than 50% of the assets of the Company (excluding the
Company's U.S. Operations); (ii) any sale or issuance of capital stock in a
single or series of related transactions by the Company or any holder thereof
which results in a change of more than 50% of the voting control of the Company;
or (iii) any merger, consolidation or other corporate reorganization which
results in a change of more than 50% of the voting control of the Company or its
successor.
Voting. The holders of Series Preferred are entitled to vote as a single
class with the holders of the Company's Common Stock on all matters to be voted
on by the stockholders of the Company. Each holder is entitled to the number of
votes equal to the number of shares of Common Stock into which its Series
Preferred may be converted at the time the vote is taken. Under the terms of the
Stockholders Agreement, each of the following stockholders has the right to
elect one director, so long as such stockholder holds at least 5% of the
Company's Common Stock on a fully diluted basis: Centennial IV, Centennial V,
Telecom Partners, Crest Funding, the holders of Series A Preferred (voting as a
single class) and the Series C Preferred (voting as a single class). PSI shall
also have the right to designate one director so long as it owns at least 15% of
the Common Stock represented by the Series C Preferred. Five additional
directors will be designated by the Company's Board of Directors.
Dividends. Dividends on each share of Series C Preferred accrue on a daily
basis at a rate per annum of 12% on the liquidation value (equal to $1.45) of
each such share from and including the date of issuance until the earlier of the
date (i) that the liquidation value of such share is paid in full or (ii) that
such share is converted into a share of Common Stock. Dividends on the Series C
Preferred are (i) cumulative; (ii) payable on April 30 and October 31 of each
year; and (iii) at the option of the Company, are payable in cash or by the
issuance of additional shares of Series C Preferred (based on an issue price of
$1.45 per share). The Indenture restricts the ability of the Company to pay cash
dividends on the Series C Preferred. If a "qualified public offering" occurs
during the Effective Period, (x) no further dividends accrue on the shares of
Series C Preferred except when and as declared by the Board of Directors; (y)
any accrued but unpaid dividends on the shares of Series C Preferred are deemed
waived; and (z) each holder of shares of Series C Preferred is required to
return all previously paid dividends in respect of such shares to the Company.
No dividends shall be payable on shares of Series A Preferred, Series B
Preferred or Junior Securities until all accrued but unpaid dividends due in
respect of the shares of Series C Preferred have been paid. The holders of
Series B Preferred are entitled, prior to the holders of Series A Preferred and
the holders of Junior Securities, to any dividends when and as declared by the
Board of Directors out of funds legally available. The holders of Series A
Preferred are entitled, prior to the holders of Junior Securities, to any
dividends when and as declared by the Board of Directors out of funds legally
available.
Preemptive Rights. In the event the Company chooses to issue equity
securities (other than certain issuances of stock to employees of the Company
and to unaffiliated entities for non-cash consideration), the Company is
obligated to offer each holder of Series B Preferred Stock or Series C Preferred
the right to purchase a pro rata portion, on an as-converted to Common Stock
basis, of 75% of such securities on the same terms offered others, and to offer
to each holder of Series A Preferred, the right to purchase a pro rata portion,
on an as-converted to Common Stock basis, of 50% of such securities on the same
terms offered to others.
Redemption. On or after January 31, 2006, at the option of the holders
holding at least 5% of the outstanding shares of Series C Preferred, the Company
is obligated to redeem shares of Series C Preferred tendered to the Company at a
redemption price currently equal to $1.45 per share plus all declared, accrued
and unpaid dividends. The Company is only required to redeem shares of Series C
Preferred on four occasions in each 12-
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month period. The Company is obligated to redeem the Series A Preferred and the
Series B Preferred annually in one-third increments beginning on March 1, 2006,
at a redemption price currently equal to $25,000 for each share of Series A
Preferred and $3.65 for each share of Series B Preferred, plus all declared,
accrued and unpaid dividends. The number of shares of any series of Series
Preferred to be redeemed from each holder shall be determined proportionally by
comparing the number of such shares then held by each holder of that series of
Series Preferred (adjusted to include shares of such series of Series Preferred
previously converted by such holder) to the total number of such shares then
being redeemed by the Company. The holders of Series Preferred shall have an
opportunity to convert any or all of the redeemable shares of Series Preferred
to Common Stock prior to each scheduled annual redemption.
Restrictions and Limitations. In addition to any vote required by law, the
consent of the holders of a majority of each of the Series A Preferred and
Series B Preferred and the consent of the holders of 75% of the Series C
Preferred then outstanding is required for the Company to take certain actions
including (i) the issuance of additional equity securities or debt containing
equity features senior to or on a parity with the Series Preferred; (ii) an
increase in the number of shares of Common Stock reserved for employees or the
issuance of Management Stock in excess of 15% of the Company's fully-diluted
Common Stock on July 31, 1996 (in the case of the approval of the Series A
Preferred), 10% of the Company's fully-diluted Common Stock on November 22, 1996
(in the case of the Series B Preferred) and 9% of the Company's fully-diluted
Common Stock on October 3, 1997 (in the case of the Series C Preferred); (iii)
the repurchase of any equity securities other than the Series Preferred or in
connection with the termination of employment; and (iv) the conduct of a
business other than wireless communications and ancillary activities. The
consent of the holders of a majority of the shares of the Series A Preferred,
the consent of at least 70% of the shares of the Series B Preferred then
outstanding and the consent of at least 75% of the shares of Series C Preferred
then outstanding is required to approve mergers, consolidations,
recapitalizations, liquidations and sales of substantial assets of the Company
and certain transactions with Affiliates. The consent of the holders of at
least 70% of the shares of the Series B Preferred then outstanding and the
consent of at least 75% of the shares of Series C Preferred then outstanding is
required to approve the commencement by the Company of a case, proceeding or
other action under any law relating to a bankruptcy, insolvency or relief of
debtors or seeking an appointment of a receiver, trustee, custodian or any other
similar Person for the Company. In addition, the Company may not take any
action which would adversely alter or change any of the rights, preferences or
privileges of any series of Series Preferred without the consent of the holders
of a majority of the Series A Preferred, the consent of at least 75% of the
Series B Preferred then outstanding and the consent of at least 75% of the
shares of Series C Preferred then outstanding, respectively.
The Company has also entered into certain affirmative covenants with the
holders of the Series Preferred, including, but not limited to, maintenance of
the Company's corporate existence and assets, compliance with laws and
agreements, payment of taxes and other obligations.
DELAWARE ANTI-TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law (the "Delaware
Statute") applies to Delaware corporations with a class of voting stock listed
on a national securities exchange, authorized for quotation on an inter-dealer
quotation system, or held of record by 2000 or more Persons, and restricts
transactions that may be entered into by such a corporation and certain of its
stockholders. The Delaware Statute provides, in essence, that a stockholder
acquiring more than 15% of the outstanding voting shares of a corporation
subject to the Delaware Statute (an "Interested Stockholder") but less than 85%
of such shares may not engage in certain "Business Combinations" with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the stockholder became an Interested Stockholder or (ii)
the Business Combination is approved by the corporation's board of directors and
authorized by a vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder. The Company has elected
not to be governed by the provisions of Section 203 of the Delaware Statute.
LIMITATION ON DIRECTORS' LIABILITY UNDER DELAWARE LAW
The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. Generally, the duty of care requires that, when acting on behalf of the
corporation, directors must exercise an
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informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware law, directors
could be accountable to corporations and their stockholders for monetary damages
for conduct that does not satisfy their duty of care. Although Delaware law does
not change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Company's
Certificate of Incorporation limits the liability of the Company's directors to
the Company and its stockholders to the fullest extent permitted by Delaware
law. The inclusion of this provision in the Certificate of Incorporation may
have the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
an action, if successful, might otherwise have benefited the Company and its
stockholders.
OTHER SECURITIES
As of August 31, 1998, the Company had issued and outstanding options
exercisable with respect to 2,032,228 shares of Common Stock issued under the
Company's Option Plan described in "Management - 1996 Stock Option Plan." As of
August 31, 1998, other than these employee stock options, the Common Stock, the
Series Preferred, the Private Notes, the Initial Warrants and the Convertible
Notes, the Company had no outstanding options, warrants or similar rights to
acquire any securities convertible into or exchangeable for, any indebtedness,
Common Stock or Preferred Stock of the Company.
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DESCRIPTION OF NOTES
GENERAL
Except as otherwise indicated below, the following summary applies to both
the Private Notes and the Exchange Notes. As used herein, the term "Notes"
means the Private Notes and the Exchange Notes, unless otherwise indicated.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Private Notes, except that the Exchange
Notes will be registered under the Securities Act, and therefore such Exchange
Notes will not be subject to certain transfer restrictions and registration
rights applicable to the Private Notes. See "The Exchange Offer."
The Notes are issued pursuant to an Indenture dated as of January 15, 1998
(the "Indenture") between the Company and State Street Bank and Trust Company,
as trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material 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. Copies of the Indenture and
Notes Registration Rights Agreement are available without charge from the
Company or the Trustee as set forth under " - Additional Information." The
definitions of certain terms used in the following summary are set forth below
under " - Certain Definitions." For purposes of this "Description of Notes,"
the term "Company" refers only to Centennial Communications Corp. and not to any
of its Subsidiaries.
RANKING
The Notes rank senior in right of payment to all subordinated Indebtedness
(as defined) of the Company incurred in the future, if any. The Notes rank pari
passu in right of payment with all unsubordinated Indebtedness of the Company
incurred in the future, if any. The Notes are secured by a pledge of (i) 100%
of the Capital Stock of SMR Direct USA, Inc. and all future domestic direct
Restricted Subsidiaries of the Company and (ii) 100% of the Capital Stock (other
than Excluded Stock) of each of the Cayman Entities and 100% of the Capital
Stock (other than Excluded Stock) of all future foreign direct Restricted
Subsidiaries of the Company. Holders of additional secured Indebtedness of the
Company will have claims that are effectively prior to the claims of the Holders
of the Notes with respect to the assets securing such Indebtedness.
The Company is a holding company with substantially all of its operations
conducted through its Subsidiaries. Accordingly, the Company's cash flow and,
consequently, its ability to service its debt (including the Notes), is
dependent on the cash flow of its Subsidiaries and the payment of funds by those
Subsidiaries in the form of dividends, distributions or otherwise. The Notes
are structurally subordinated to all Indebtedness and other liabilities and
commitments (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those assets) will be subordinated to the claims of that
Subsidiary's creditors. As of June 30, 1998, the Notes would have been
structurally subordinated to the Company's approximately $1.1 million of
Indebtedness and other liabilities of the Company's Subsidiaries (excluding
inter-company payables to the Company). In addition, under the Indenture, the
Company's Subsidiaries are permitted to incur Vendor Indebtedness and Acquired
Debt the terms of which may restrict the ability of the Company's Subsidiaries
to pay dividends to the Company. See " - Certain Covenants - Incurrence of
Indebtedness and Issuance of Preferred Stock." Thus, the ability of the Company
to meet the Obligations under the Indenture and the Notes may be restricted by
the terms of such Indebtedness. See "Risk Factors - Substantial Leverage;
Ability to Service Indebtedness."
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SECURITY
The Company entered into a pledge agreement (the "Pledge Agreement")
providing for the pledge by the Company to State Street Bank and Trust Company,
as collateral agent (in such capacity, the "Collateral Agent"), for the benefit
of the Holders of the Notes and the holders of the Convertible Notes of (i) 100%
of the Capital Stock of SMR Direct USA, Inc. and all future domestic direct
Restricted Subsidiaries of the Company and (ii) 100% of the Capital Stock (other
than Excluded Stock) of each of the Cayman Entities and 100% of the Capital
Stock (other than Excluded Stock) of all future foreign direct Restricted
Subsidiaries of the Company (the "Pledged Collateral"). Pursuant to the
definition of Excluded Stock, the Company has pledged approximately 66% of the
total outstanding Capital Stock of each of the Cayman Entities. Such pledges
secure the payment and performance when due of all of the Obligations of the
Company under the Indenture and the Notes, as well as any Obligations of the
Company under a Convertible Note Purchase Agreement (the "Convertible Note
Purchase Agreement") and the Convertible Notes as provided in the Pledge
Agreement. The rights of the holders of the Convertible Notes under the Pledge
Agreement are subordinated to the rights of the Holders of the Notes. On the
occurrence of a Triggering Event, the holders of the Convertible Notes will not
have any further rights under the Pledge Agreement.
So long as no Event of Default shall have occurred and be continuing and,
subject to certain terms and conditions in the Indenture and the Pledge
Agreement, the Company is entitled to receive all cash dividends, interest and
other payments made upon or with respect to the Pledged Collateral and to
exercise any voting and other consensual rights pertaining to the Pledged
Collateral. Upon the occurrence and during the continuance of an Event of
Default, (i) all rights of the Company to exercise such voting or other
consensual rights shall cease, and all such rights shall become vested in the
Collateral Agent, which, to the extent permitted by law, shall have the right to
exercise such voting and other consensual rights at the written direction of the
Majority Noteholders, (ii) all rights of the Company to receive all cash
dividends, interest and other payments made upon or with respect to the pledged
collateral will cease and such cash dividends, interest and other payments will
be paid to the Collateral Agent and (iii) the Collateral Agent may, at the
written direction of the Majority Noteholders, sell the pledged collateral or
any part thereof in accordance with the terms of the Pledge Agreement. All funds
distributed under the Pledge Agreement and received by the Collateral Agent for
the benefit of the Holders of the Notes and the holders of the Convertible Notes
will be distributed by the Collateral Agent in accordance with the provisions of
the Pledge Agreement.
Under the terms of the Pledge Agreement, the Collateral Agent will
determine the circumstances and manner in which the Pledged Collateral shall be
disposed of, including, but not limited to, the determination of whether to
release all or any portion of the Pledged Collateral from the Liens created by
the Pledge Agreement and whether to foreclose on the Pledged Collateral
following the occurrence and continuance of an Event of Default. Moreover, upon
the full and final payment and performance of all obligations of the Company
under the Indenture, the Notes, the Convertible Note Purchase Agreement and the
Convertible Notes, the Pledge Agreement shall terminate and the Pledged
Collateral shall be released. In addition, in the event that the Capital Stock
of any Subsidiary of the Company is sold and the Net Proceeds are applied in
accordance with the terms of the covenant entitled "Asset Sales," the Collateral
Agent shall release the Liens in favor of the Collateral Agent in the assets
sold; provided, that the Collateral Agent shall have received from the Company
an Officers' Certificate that such Net Proceeds have been or will be so applied.
PRINCIPAL MATURITY AND INTEREST
The Notes consist of $40 million in aggregate principal amount at maturity
($20.4 million of initial Accreted Value as of January 15, 1998 that will fully
accrete to the face amount on December 31, 2002). The Notes will mature on
January 1, 2005. No interest will accrue on the Notes until January 1, 2003 (the
"Full Accretion Date"), but the Accreted Value will accrete (representing the
amortization of original issue discount) between the date of original issuance
and such date, 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 Notes on the
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Full Accretion Date. The initial Accreted Value per $1,000 principal amount of
Notes was $511.03 (representing the original purchase price). Beginning on
January 1, 2003, interest on the Notes will accrue at the rate of 14% per annum
and will be payable in cash semi-annually on January 1 and July 1, commencing on
July 1, 2003 to holders of record on the immediately preceding December 15 and
May 15. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Full Accretion
Date. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. The Notes will be payable both as to principal and
interest 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 Notes at their
respective addresses set forth in the register of Holders of Notes; provided
that all payments with respect to 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, its office or agency in New York will
be the office of the Trustee maintained for such purpose. The Notes have been
and will be issued only in registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to January
1, 2003. Thereafter, the Notes will be subject to redemption at any time 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 and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on January 1 of the years indicated below:
YEAR Percentage
2003........................................... 114.00%
2004........................................... 107.00%
The Notes are redeemable at 100% of the principal amount on January 1,
2005. Notwithstanding the foregoing, at any time on or before January 1, 2001,
the Company may, on any one or more occasions, redeem up to a maximum of 25% in
aggregate principal amount at maturity of Notes at a redemption price equal to
114% of the Accreted Value thereof (determined at the redemption date), plus
accrued and unpaid Liquidated Damages, if any, to the date of redemption, with
the net cash proceeds received by the Company after the date of the Indenture
from the issuance and sale of its Qualified Capital Stock in a public or private
offering to the extent that such net cash proceeds have been, and continue to
be, designated as Designated Equity Proceeds to be used for such purpose as
provided in the definition thereof; provided that at least 75% aggregate
principal amount at maturity of the Notes remain outstanding immediately after
the occurrence of each such redemption; provided, further, that with respect to
any private offering of Qualified Capital Stock of the Company to an Affiliate
of the Company (or to any Person who would be an Affiliate of the Company upon
consummation of any such offering), such Qualified Capital Stock shall be issued
and sold at a price no lower than (i) the price at which the Qualified Capital
Stock is being sold to Persons that are not Affiliates of the Company in such
offering if such Persons are purchasing a majority of the Qualified Capital
Stock being sold in such offering or (ii) in all other cases, the fair market
value thereof, as evidenced by an independent investment banking firm of
national standing delivered to the Trustee and provided, further, that such
redemption shall occur within 60 days of the date of the closing of any such
public or private offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
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
Notes are listed, or, if the 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,
however, that no Notes of $1,000 in principal amount at maturity 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 Notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
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cancellation of the original Note. Notes called for redemption become due on
the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption (or, if such
redemption date is prior to the Full Accretion Date, the Notes, or any portion
of them called for redemption, cease to accrete).
MANDATORY REDEMPTION
Except as set forth below under " - Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash (the
"Change of Control Payment") equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of repurchase (or if such Change of Control Offer is
consummated prior to the Full Accretion Date, 101% of the Accreted Value thereof
on the date of repurchase plus accrued and unpaid Liquidated Damages, if any).
Within 20 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 Notes on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
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 Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all 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 Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount (or, if prior to the Full Accretion Date, the
Accreted Value) of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount at maturity of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
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 Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
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 assets of the Company and its Restricted Subsidiaries taken as a whole.
The sale, lease, transfer, conveyance or other disposition (that is not for
security purposes) of any of the assets of the Company's U.S. Operations or the
sale of all of the Capital Stock of the Company's wholly-owned Subsidiary, SMR
Direct USA, Inc. in conjunction with the sale of the Company's U.S. Operations,
will not constitute a Change of Control. 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 Notes to require the Company to repurchase such Notes as
a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Company and its Restricted Subsidiaries taken as a
whole to another Person or group may be uncertain.
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Future Vendor Indebtedness and Acquired Debt may restrict the Company's
current and future Subsidiaries from paying any dividends or making any other
distribution to the Company. Thus, in the event a Change of Control occurs, the
Company could seek the consent of its Subsidiaries' lenders under such Vendor
Indebtedness or Acquired Debt, as applicable, to the purchase of the Notes or
could attempt to refinance the borrowings that contain such restrictions. If
the Company did not obtain such a consent or repay such borrowings, the Company
would likely not have the financial resources to purchase Notes and the
Subsidiaries would be restricted in paying dividends to the Company for the
purpose of such purchase. In addition, any future Credit Facility may prohibit
the Company from purchasing any Notes prior to its maturity, and may also
provide that certain change of control events with respect to the Company would
constitute a default thereunder. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company did not
obtain such consent or repay such borrowings, the Company would remain
prohibited from purchasing Notes. In such event, the Company would be required
to seek to refinance the Notes or such other borrowings, and there can be no
assurance that the Company would be able to consummate any such refinancing.
See "Risk Factors - Substantial Leverage; Ability to Service Indebtedness." The
failure of the Company to make a Change of Control Offer and purchase all Notes
validly tendered and not withdrawn would constitute an Event of Default.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash and/or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are, within 30 days, converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision. The
Company shall not be required to comply with the foregoing sentence to the
extent an Asset Sale consists solely of the sale or other disposition of
obsolete or damaged equipment; provided that any cash received by the Company in
connection with any such sale or disposition shall be applied in accordance with
the second paragraph of this covenant.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under a Credit Facility (and to correspondingly reduce commitments
with respect thereto in the case of revolving borrowings) or (b) to the
acquisition of a controlling interest in another Permitted Business or the
making of a capital expenditure or the acquisition of other long-term assets, in
each case, in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5 million, the Company will be required to make an offer to
all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the Accreted Value thereof, plus
accrued and unpaid Liquidated Damages, if any, thereon, to the date of purchase
(if such offer is prior to the Full Accretion Date) or 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase (if such offer is on or after the Full
Accretion Date), in accordance with the procedures set forth in the Indenture.
To the extent that the Accreted Value or the
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aggregate principal amount, as the case may be, of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the Accreted Value
or the aggregate principal amount, as the case may be, of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or such Restricted Subsidiary or dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes, except a payment of interest or principal, or
premium, if any, at Stated Maturity; or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) 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 Debt)
pursuant to the Debt to Cash Flow Ratio test set forth in the first paragraph of
the covenant described below under the caption "-Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of Indenture (other
than Restricted Payments permitted by clauses (ii), (iii) or (iv) of the
following paragraph) shall not exceed, at the date of determination, the sum of
(i) 50% to the Company's Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture to the end of the Company's most recently ended
full fiscal quarter for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, minus 100% of such deficit), plus (ii) an amount equal to
the net cash proceeds received by the Company after the date of the Indenture
from the issuance and sale of its Qualified Capital Stock to the extent such net
cash proceeds have been, and continue to be, designated as Designated Equity
Proceeds to be added to the cumulative amount calculated pursuant to this clause
(c) as provided in the definition thereof, plus (iii) an amount equal to the net
cash proceeds received by the Company from the sale of Disqualified Stock or
debt securities of the Company that have been converted into Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company and other than Disqualified
Stock or convertible debt securities that have been converted into Disqualified
Stock), plus (iv) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (1) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (2) the
initial amount of such Restricted Investment, plus (v) 50% of any dividends
received by the Company or any Wholly Owned Restricted Subsidiary of the Company
after the date of the Indenture from an Unrestricted Subsidiary of the Company,
to the extent that such dividends were not otherwise included in Consolidated
Net Income of the Company for such period; provided that no cash proceeds
received by the Company from the issuance or sale of any Equity Interests issued
by the Company will be counted in determining the amount available for
Restricted Payments under this clause (c) to the extent such proceeds were
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used to redeem, repurchase, retire or acquire any Equity Interests of the
Company pursuant to clause (ii) of the next succeeding paragraph.
The foregoing provisions will not prohibit the following Restricted
Payments: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture; (ii) the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated Indebtedness or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
(other than any such net cash proceeds that constitute Designated Equity
Proceeds) of the substantially concurrent sale (other than to a Subsidiary of
the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the payment of cash (in lieu of the issuance
of fractional shares of Common Stock) to holders of Warrants at the time of
exercise of such Warrants as required by the terms of the Warrant Agreement (as
defined); provided that the aggregate amount of such payments shall not exceed
$100,000; (vi) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by (A) any member of the Company's (or any of its Restricted
Subsidiaries') management or Board of Directors or (B) any consultant to the
Company (or any of its Restricted Subsidiaries), in each case, pursuant to any
management equity subscription agreement, stock option agreement or other
similar agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after such transaction; and (vii)
the payment of amounts in respect of Equity Interests by any Restricted
Subsidiary organized as a partnership, limited liability company or comparable
entity necessary for the holders of such Equity Interests to pay taxes in
respect of the Net Income of such Restricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5 million. 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, together with a copy of any fairness opinion or
appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary (other than
any Subsidiary of the Company that owns all or a material portion of the assets
owned by the Company or any Subsidiary of the Company on the date of the
Indenture) to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) and issue
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shares of Disqualified Stock if (a) the Company's Debt to Cash Flow Ratio at the
time of incurrence of such Indebtedness or the issuance of such Disqualified
Stock, after giving pro forma effect to such incurrence or issuance as of such
date and to the use of proceeds therefrom as if the same had occurred at the
beginning of the most recently ended four full fiscal quarter period of the
Company for which internal financial statements are available, would have been
no greater than 4 to 1 and (b) the Company's Fixed Charge Coverage Ratio at the
time of incurrence of such Indebtedness or the issuance of such Disqualified
Stock, after giving pro forma effect to such incurrence or issuance as of such
date and to the use of proceeds therefrom as if the same had occurred at the
beginning of the most recently ended four full fiscal quarter periods of the
Company for which internal financial statements are available, would have been
at least 2.75 to 1; provided that after the occurrence of the Triggering Event
(as defined), the Convertible Notes shall not be included as Indebtedness for
purposes of calculating the Company's Debt to Cash Flow Ratio or the Company's
Fixed Charge Coverage Ratio.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under Credit Facilities;
provided that the aggregate principal amount of all Indebtedness (with
outstanding letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company thereunder) outstanding under all
Credit Facilities after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to $10 million less the aggregate amount of all Net Proceeds of
Asset Sales that have been applied since the date of the Indenture to repay
Indebtedness under Credit Facilities (or any such Permitted Refinancing
Indebtedness) pursuant to the covenant described above under the caption " -
Repurchase at the Option of Holders - Asset Sales;"
(ii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by (A)
the Notes issued as part of the Initial Offering on January 15, 1998 and (B)
additional Notes issued pursuant to the exercise of the option granted to the
Initial Purchasers in an amount not to exceed $20 million in aggregate principal
amount at maturity (which option has expired);
(iv) the incurrence by the Company or any Restricted Subsidiary of the
Company of up to $25 million in aggregate principal amount of Vendor
Indebtedness; provided that (A) to the extent such Vendor Indebtedness is
incurred for any purpose other than financing the cost of subscriber units, the
aggregate principal amount (or accreted value, as applicable) of such Vendor
Indebtedness does not exceed, as of the date of incurrence thereof, the lesser
of 75% of (1) the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officer's Certificate delivered to the Trustee) of
the assets purchased with the proceeds of such Vendor Indebtedness and (2) the
cost of such assets and (B) to the extent such Vendor Indebtedness is incurred
to finance the cost of subscriber units, the aggregate principal amount (or
accreted value, as applicable) of such Vendor Indebtedness does not exceed, as
of the date of incurrence thereof, the lesser of 100% of the fair market value
of such subscriber units (as determined in good faith by the Board of Directors
and set forth in an Officers' Certificate delivered to the Trustee) and the cost
of such subscriber units;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Restricted
Subsidiary; provided that such Indebtedness was incurred by the prior owner of
such assets or such Subsidiary prior to such acquisition by the Company and was
not incurred in connection with, or in contemplation of, such acquisition by the
Company; and provided further that the principal amount (or accreted value, as
applicable) of such Indebtedness, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (v), does not exceed the amount equal to (A) $8
million less (B) the principal amount (or accreted value, as applicable) of
Indebtedness outstanding pursuant to clause (vi) below at any time outstanding;
(vi) the incurrence by the Company of Indebtedness represented by Company
Notes incurred substantially simultaneously with, and for the purpose of
financing all or any part of the purchase price or cost of any acquisition of
assets or a new Restricted Subsidiary; provided that the principal amount (or
accreted value, as applicable) of such Indebtedness, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or
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replace any other Indebtedness incurred pursuant to this clause (vi), does not
exceed the amount equal to (A) $8 million less (B) the principal amount (or
accreted value, as applicable) of Indebtedness outstanding pursuant to clause
(v) above;
(vii) the incurrence by the Company of Indebtedness represented by the
Convertible Notes incurred simultaneously with the date of the Indenture;
(viii) Indebtedness of the Company not to exceed, at any one time
outstanding, the net cash proceeds received by the Company after the date of the
Indenture from the issuance and sale of its Qualified Capital Stock to the
extent that such net cash proceeds have been, and continue to be, designated as
Designated Equity Proceeds to be used for the purpose of incurring additional
Indebtedness pursuant to this clause (viii) as provided in the definition
thereof, not to exceed $50 million;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred;
(x) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Restricted
Subsidiaries; provided, however, that (A) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior payment
in full in cash of all Obligations with respect to the Notes and (B)(1) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary and (2) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company; and
(xii) Indebtedness of the Company or any Restricted Subsidiary of the
Company (A) in respect of statutory obligations, performance, surety or appeal
bonds or other obligations of a like nature incurred in the ordinary course of
business, (B) under Hedging Obligations; provided that such agreements (1) are
designed solely to protect the Company or its Restricted Subsidiaries against
fluctuations in foreign currency exchange rates or interest rates and (2) do not
increase the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates or
by reason of fees, indemnities and compensation payable thereunder.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of
accreted value will not be deemed to be an incurrence of Indebtedness for
purposes of this covenant.
Notwithstanding the foregoing, the Indenture also provides that the Company
will not incur any Indebtedness that is contractually subordinated to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated to the Notes on substantially identical terms; provided, however,
that no Indebtedness of the Company shall be deemed to be contractually
subordinated to any other Indebtedness of the Company solely by virtue of being
unsecured.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have incurred Indebtedness in an amount
equal to the Attributable Debt
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relating to such sale and leaseback transaction pursuant to the Debt to Cash
Flow Ratio test set forth in the first paragraph of the covenant described above
under the caption " - Incurrence of Indebtedness and Issuance of Preferred
Stock" and (ii) the Lien to secure such Indebtedness does not extend to or cover
any assets of the Company other than the assets which are the subject of the
sale and leaseback transaction, (iii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Board of Directors and set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and (iv) the transfer of assets in such sale
and leaseback transaction is permitted by, and the Company applies the proceeds
of such transaction in compliance with, the covenant described above under the
caption " - Repurchase at the Option of Holders - Asset Sales."
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries 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.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted 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 Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the terms of any
Permitted Debt permitted to be incurred by any Restricted Subsidiary of the
Company, (b) Existing Indebtedness as in effect on the date of the Indenture,
(c) the Indenture and the Notes, (d) applicable law, rules and regulations, (e)
any instrument governing Indebtedness or Capital Stock of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations or installment purchase agreements for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired or (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced.
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 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; (iv) such transaction will
not result in the loss or suspension or material impairment of any licenses or
other authorizations that are material to the future prospects of the Company
and its Restricted Subsidiaries, taken as a whole; and (v) except in the case of
a merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the
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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 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 pursuant to the Debt to Cash
Flow Ratio test set forth in the first paragraph of the covenant described above
under the caption " - Incurrence of Indebtedness and Issuance of Preferred
Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted 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 transaction,
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 Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
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 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (x) any employment, consulting or service agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (y) transactions between or among the Company
and/or its Restricted Subsidiaries and (z) Restricted Payments that are
permitted by the provisions of the Indenture described above under the caption "
- - Certain Covenants - Restricted Payments," in each case, shall not be deemed
Affiliate Transactions.
LIMITATION ON FOREIGN SUBSIDIARY STRUCTURE
Notwithstanding anything in the Indenture to the contrary, the Indenture
provides that (i) each of the Cayman Entities and each future foreign direct
Wholly Owned Restricted Subsidiary of the Company will at all times continue to
be a direct Wholly Owned Restricted Subsidiary of the Company, (ii) all foreign
Restricted Subsidiaries of the Company will also be (A) a direct or indirect
Subsidiary of either or both of the Cayman Entities, (B) a direct Wholly Owned
Restricted Subsidiary of the Company or (C) a direct or indirect Subsidiary of a
direct Wholly Owned Restricted Subsidiary of the Company, (iii) neither of the
Cayman Entities nor any future foreign direct Wholly Owned Restricted Subsidiary
of the Company will consolidate or merge with or into any other Person other
than a direct Wholly Owned Restricted Subsidiary of the Company whose stock has
been pledged pursuant to the Pledge Agreement, (iv) the Company will not, and
will not permit either of the Cayman Entities or any future foreign direct
Wholly Owned Restricted Subsidiary of the Company to, directly or indirectly,
create, incur, assume or suffer to exist any Lien (other than pursuant to the
Pledge Agreement) on any of its Capital Stock or any other assets of either of
the Cayman Entities or any foreign direct Wholly Owned Restricted Subsidiary of
the Company; (v) neither of the Cayman Entities nor any future foreign direct
Wholly Owned Restricted Subsidiary of the Company will incur any Indebtedness,
(vi) the Company will not permit either of the Cayman Entities to issue any
Equity Interest to any Person after the date of the Indenture and (vii) the
Company will not permit any future foreign direct Wholly Owned Subsidiary of the
Company to (A) issue any Equity Interests other than Capital Stock or (B) issue
any Capital Stock to any Person other than the Company or any Wholly Owned
Subsidiary of the Company. This paragraph will not prohibit the Company from
designating any foreign Restricted Subsidiary as an Unrestricted Subsidiary in
accordance with the terms of the Indenture or from selling Capital Stock of any
foreign Restricted Subsidiary in accordance with the terms of the Indenture.
LIMITATION ON DOMESTIC SUBSIDIARY STRUCTURE
Notwithstanding anything in the Indenture to the contrary, the Indenture
provides that each of (i) SMR Direct USA, Inc. and (ii) each future domestic
Restricted Subsidiary of the Company will either be a direct Wholly Owned
Restricted Subsidiary of the Company or a direct or indirect Wholly Owned
Restricted Subsidiary of SMR
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Direct USA, Inc. or the Company for so long as such Subsidiary is a Restricted
Subsidiary of the Company. The foregoing sentence will not prohibit the Company
from designating any Restricted Subsidiary to be an Unrestricted Subsidiary in
accordance with the terms of the Indenture or from selling the Capital Stock of
any domestic Restricted Subsidiary in accordance with the terms of the
Indenture.
CONTINGENT WARRANTS
The Indenture provides that the Company shall issue to Holders of the Notes
the Contingent Warrants (as defined) in the event that the Company does not
consummate a Qualified Public Offering of its Qualified Capital Stock on or
prior to January 1, 2001; provided that if the Company consummates a public or
private offering or offerings of its Qualified Capital Stock resulting in
aggregate gross proceeds of at least $25 million, the Company shall have until
June 30, 2002 to consummate a Qualified Public Offering; provided, further, that
with respect to any private offering of Qualified Capital Stock of the Company
to an Affiliate of the Company (or to any Person who would be an Affiliate of
the Company upon consummation of any such offering), such Qualified Capital
Stock shall be issued and sold at a price no lower than (a) the price at which
the Qualified Capital Stock is being sold to Persons that are not Affiliates of
the Company in such offering if such Persons are purchasing a majority of the
Qualified Capital Stock being sold in such offering or (b) in all other cases,
the fair market value thereof, as evidenced by an independent investment banking
firm of national standing delivered to the Trustee. Such Contingent Warrants
will have certain rights pursuant to the Warrant Agreement and holders thereof
will have the benefit of the Registration Agreement. The Company shall not be
obligated to issue the Contingent Warrants in the event of a Change of Control
prior to January 1, 2001.
ESCROW ARRANGEMENTS
The Indenture and the Convertible Note Purchase Agreement provided that
$28.6 million of the proceeds from the initial sale of the Units and the
Convertible Notes be placed in the Escrow Account with the Escrow Agent. The
Company shall not use any funds released from the Escrow Account or request the
release of such funds except in connection with and upon compliance with the
following conditions and any certification requirements set forth in the Escrow
Agreement:
(i) with respect to the funding of the acquisition of an Acquisition
Target (as defined in the Escrow Agreement), (a) the Company shall have
prepared, with the assistance of U.S. and local counsel, as appropriate, a
detailed and complete due diligence report with respect to the Acquisition
Target, including legal advice regarding each significant legal issue (to be
considered in the light of the circumstances, but including for example opinions
as to the effectiveness of the licenses or concessions for channels), (b) the
Company shall have prepared, with the assistance of financial advisors, a
financial analysis of the Acquisition Target (including verification of the
number of subscribers, if any, of the Acquisition Target) and reviewed an audit
of the financial statements for the most recent fiscal period practicable, and
(c) the Company's Board of Directors shall have, on the basis of the reports,
analysis and review referred to above, approved the acquisition of the
Acquisition Target. In addition, the Acquisition Target shall be a direct or
indirect Subsidiary of the Cayman Entities or the Company as required by the
provisions described under the caption " - Limitation on Foreign Subsidiary
Structure;" and
(ii) with respect to (a) the funding of Permitted Investments (except
working capital, unless permitted by clause (c) below), (b) the funds required
for the acquisition of channels, spectrum and other assets related to the
operation of a Permitted Business, or (c) the funding of buildout in connection
with the acquisition of a Permitted Business, a Permitted Investment or
channels, spectrum and other assets related to the operation of a Permitted
Business or the funding of operating losses, not to exceed $3 million in the
aggregate, in connection with the Company's current and future operations in the
Republic of Chile (each a "Permitted Transaction"), the Company's Board of
Directors shall have approved the Permitted Transaction. In addition, the
assets and/or services which comprise the Permitted Transaction shall be held in
an entity that is a direct or indirect Subsidiary of the Cayman Entities or the
Company as required by the provisions described under the caption "-Limitation
on Foreign Subsidiary Structure."
The Escrow Agreement also provides for the automatic release of the
remainder of the money held in the Escrow Account, if the Escrow Account has
been in existence for more than 12 months and the value of such account drops
below $3 million.
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Notwithstanding the foregoing, the Company may, with the consent of the
Majority Noteholders (as defined in the Pledge Agreement), request the release
of funds deposited into the Escrow Account for other valid business purposes.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of 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" that describes the financial condition and results of
operations of the Company and its Restricted Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (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, in each case, within the time periods set forth in the
Commission's rules and regulations. In addition, commencing after the
consummation of the Exchange Offer, 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) within the time periods set forth in
the Commission's rules and regulations 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 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 and
Liquidated Damages, if any, on the Notes; (ii) default in payment when due of
the principal of or premium, if any, on the Notes; (iii) failure by the Company
to comply with the provisions described under the captions " - Repurchase at the
Option of Holders - Change of Control," " - Repurchase at the Option of Holders
- - Asset Sales," " - Certain Covenants - Restricted Payments," " - Certain
Covenants - Incurrence of Indebtedness and Issuance of Preferred Stock" or " -
Certain Covenants - Merger, Consolidation or Sale of Assets;" (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) 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 million or more; (vi) failure by
the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5 million, which judgments are not paid, discharged or stayed for a
period of 90 days; (vii) certain events of bankruptcy or
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insolvency with respect to the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary; (viii) breach by the Company of any representation or warranty set
forth in the Pledge Agreement, or default by the Company in the performance of
any covenant set forth in the Pledge Agreement, or repudiation by the Company of
its obligations under the Pledge Agreement or the unenforceability of the Pledge
Agreement against the Company for any reason; and (ix) default by the Company in
the performance of any covenant set forth in the Escrow Agreement, or
repudiation by the Company of its obligations under the Escrow Agreement or the
unenforceability of the Escrow Agreement against the Company for any reason.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon such
declaration, the principal of (or, if prior to the Full Accretion Date, the
Accreted Value of), premium, if any, and accrued and unpaid interest and
Liquidated Damages, if any, on the Notes shall 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, the foregoing amount shall ipso facto
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount at
maturity of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the 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 or Liquidated Damages,
if any) 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 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 Notes. If an Event of Default occurs prior to
January 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to January 1, 2003, 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 Notes.
The Holders of a majority in aggregate principal amount at maturity of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the 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 principal of premium, if any, interest or Liquidated Damages,
if any on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture and the Pledge Agreement, 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.
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
Notes, the Indenture or the Pledge Agreement or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the 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 Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to
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the Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen 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 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 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 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 and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify whether the
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 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
outstanding 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 Significant Subsidiaries is a
party or by which the Company or any of its Significant Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an opinion of counsel in the
United States 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 Notes over the other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel in the United States, 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 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 Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Notes or the Pledge Agreement may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount at maturity of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption " -
Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest or Liquidated Damages, if any, on any Note, or
reduce the rate of accretion on the Accreted Value or alter the Full Accretion
Date, (iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest or Liquidated Damages, if any, on the Notes (except
a rescission of acceleration of the Notes by the Holders of at least a majority
in aggregate principal amount at maturity of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest or Liquidated Damages, if any, on the Notes, (vii) waive a redemption
payment with respect to any Note (other than a payment required by one of the
covenants described above under the caption " - Repurchase at the Option of
Holders"), (viii) make any change in the foregoing amendment and waiver
provisions or (ix) contractually subordinate in right of payment or, otherwise
contractually subordinate, the Notes to any indebtedness or obligation of the
Company.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of 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 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 Holders of a majority in principal amount of the then outstanding 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 Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Notes Registration Rights Agreement without charge by writing to Centennial
Communications Corp., 1600 Wynkoop Street, Suite 300, Denver, Colorado 80202,
Attention: Chief Executive Officer.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchasers entered into the Notes Registration
Rights Agreement on January 15, 1998. Pursuant to the Notes Registration Rights
Agreement, the Company agreed, for the benefit of the Holders of the Private
Notes, at the Company's expense, to (i) file within 300 days after the date of
original issuance of the Notes (such date to be the "Filing Date") with the
Commission with respect to a registered offer to exchange the Private Notes for
the Exchange Notes to be issued under the Indenture or a substantially similar
indenture in the same aggregate principal amount as and with terms that will be
identical in all respects to the Private Notes (except (a) for certain transfer
restrictions and registration rights relating to the Private Notes and (b) that
if the Exchange Offer is not consummated in a timely manner, or if the Company
fails to comply with certain other registration obligations with respect to the
Private Notes, the Company is required to pay certain Liquidated Damages to the
Holders of the Private Notes), and (ii) use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act at the
earliest possible time, but in no event later than 60 days after the Filing
Date. Promptly after the Registration Statement has been declared effective,
the Company will offer the Exchange Notes in exchange for surrender of the
Private Notes (the "Exchange Offer"). The Company will keep the Exchange Offer
open for not less than 20 days (or longer if required by applicable law) after
the date notice of the Exchange Offer is mailed to the Holders of the Private
Notes. For each Private Note tendered to the Company pursuant to the Exchange
Offer and not validly withdrawn by the Holder thereof, the Holder of such
Private Note will receive an Exchange Note having a principal amount equal to
the principal amount of such surrendered Note.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for the Private Notes
may be offered for resale, resold and otherwise transferred by the Holders
thereof (other than (i) a broker-dealer who purchased such Private Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or (ii) a Person that is an Affiliate of the
Company), without compliance with the registration and prospectus delivery
requirements of the Securities Act; provided that the Holder is acquiring
Exchange Notes in the ordinary course of its business and is not participating,
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes. Holders of
Private Notes wishing to accept the Exchange Offer must represent to the Company
that such conditions have been met. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Private Notes, where such Private
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 meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. The Commission has taken the position that
exchanging dealers may fulfill their prospectus delivery requirements with
respect to the Exchange Notes (other than a resale of an unsold allotment from
the original sale of the Notes) with the prospectus contained in the
Registration Statement. Under the Notes Registration Rights Agreement, the
Company is required to allow exchanging dealers to use the prospectus contained
in the Registration Statement in connection with the resale of such Exchange
Notes.
In the event that (i) any changes in law or applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or (ii) any Holder of the Private Notes shall notify the Company prior to
the 20th day following the consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer, (B) such Holder may not resell the Exchange Notes to the public
without delivering a prospectus, and this Prospectus is not appropriate or
available for such resales, or (C) such Holder is a broker-dealer and holds
Private Notes acquired directly from the Company or one of its Affiliates, the
Company will, at its expense, (x) as promptly as practicable, and in any event
on or prior to 30 days after the date on which the Company determines that it is
not required or permitted to file the Registration Statement, or 30 days after
the date on which the Company receives the notice described in clause (ii)
above, file with the Commission a shelf registration statement (the "Shelf
Registration Statement") covering resales of the Notes, (y) use its best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act on or prior to 90 days after the date on which the Company
becomes obligated to file such Shelf Registration Statement and (z) keep
effective the Shelf Registration Statement until two years after its effective
date (or such shorter period that will terminate when all the Notes covered
thereby have been sold pursuant thereto or in certain other circumstances). The
Company will, in the event of the filing of a Shelf Registration Statement,
provide to each Holder of the Notes covered by the Shelf Registration Statement
copies of the prospectus that is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration Statement for the Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes. A Holder of Notes that sells such Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to the purchaser, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Notes Registration Rights Agreement that are
applicable to such Holder (including certain indemnification obligations). In
addition, each Holder of the Notes will be required to deliver certain
information
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to be used in connection with the Shelf Registration Statement in order to have
its Notes included in the Shelf Registration Statement.
If (a) the Company fails to file any of the Registration Statements
required by the Notes 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 days of the Effectiveness Target Date
with respect to the exchange Offer Registration Statement or (d) the Shelf
Registration Statement or the Registration Statement is declared effective but
thereafter ceases to be effective during the periods specified in the Notes
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above, a "Registration Default"), then the Company will pay
liquidated damages ("Liquidated Damages") to each Holder of Notes, with respect
to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount at maturity of Notes held by such Holder. The amount of the Liquidated
Damages of $.50 per week per $1,000 principal amount at maturity of Notes for
all Registration Defaults. All accrued Liquidated Damages will be paid by the
Company on each interest payment date with respect to the Notes. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease
and all accrued and unpaid Liquidated Damages shall be paid promptly thereafter.
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 prior to January 1, 2003, an amount
per $1,000 principal amount at maturity of Notes that is equal to the sum of (i)
the initial offering price ($511.03 per $1,000 principal amount at maturity of
Notes) of such Notes and (ii) the portion of the excess of the principal amount
of such Notes over such initial offering price which shall have been amortized
through such date, such amount to be so amortized on a daily basis and
compounded semi-annually on each January 1 and July 1 at the rate of 14% per
annum from the date of original issue of the Notes through the date of
determination computed on the basis of a 360-day year of twelve 30-day months
and as of any date on or after January 1, 2003, the principal amount of each
Note.
"Acquired Debt" 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; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(that is not for security purposes) of any assets or rights (including, without
limitation, by way of a sale and leaseback) other than in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition 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 " - Repurchase at the Option
of Holders - Change of Control" and/or the provisions described above under the
caption " - Certain Covenants - Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, 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 million or (b) for net proceeds in excess of $1 million.
Notwithstanding the foregoing: (i) a transfer of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another
Restricted
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Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary, (iii) the granting of a Lien
that is permitted by the covenant described above under the caption " - Certain
Covenants - Liens," and (iv) a Restricted Payment that is permitted by the
covenant described above under the caption " - Certain Covenants - 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 or limited liability
company, partnership or membership 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 270
days from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits maturing not more than 270 days from the date of acquisition,
bankers' acceptances with maturities not exceeding 270 days, overnight bank
deposits and money market deposit accounts, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bankwatch, Inc. 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 not
more than 270 days from 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 Restricted Subsidiaries
(other than the sale, lease, transfer, conveyance or other disposition (that is
not for security purposes) of any of the assets of the Company's U.S. Operations
or all of the Capital Stock of the Company's wholly-owned Subsidiary, SMR Direct
USA, Inc. in conjunction with the sale of the Company's U.S. Operations), taken
as a whole, to any "Person" (as such term is defined in Section 13(d)(3) of the
Exchange Act) or "group" (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Principals and their Related
Parties, (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" (as defined above), or "group" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50.1% of the Voting Stock of
the Company (measured by voting power rather than number of shares), (iv) the
Company consolidates with, or merges with or into, another "Person" (as defined
above) or "group" (as defined above) in a transaction or series of related
transactions in which the Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any transaction
where (a) the outstanding Voting Stock of the Company is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee corporation and (b) the "beneficial owners" (as defined above) of the
outstanding Voting Stock of the Company immediately prior to such transaction
own beneficially, directly or indirectly through one or more Subsidiaries, not
less than a majority of the total outstanding Voting Stock of the surviving or
transferee corporation immediately after such transaction or (v) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
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"Company Notes" means bonds, notes, debentures or similar instruments of
the Company issued in connection with the acquisition of assets or a new
Restricted Subsidiary.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its subsidiaries for
such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (ii) Consolidated Interest Expense
of such Person and its Restricted Subsidiaries for such period to the extent
that any such expense was deducted in computing such Consolidated Net Income,
plus (iii) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, minus (iv)
non-cash items increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Restricted Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments on any
series of preferred stock of such Person or any of its Restricted Subsidiaries,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted 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 paid in
cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which 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 Restricted 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, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Subsidiaries.
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"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 (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 or (iii) became a member of the Board of Directors as a
result of being designated by a stockholder pursuant to, and in accordance with,
the terms of Section 1 of the Stockholders Agreement, as such section is in
effect on the date of the Indenture.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including, without limitation, leasing companies) providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Debt to Cash Flow Ratio" means, as of any date of determination, the ratio
of (i) the Consolidated Indebtedness of the Company as of such date to (ii) the
Consolidated Cash Flow of the Company for the four most recent full fiscal
quarters ending immediately prior to such date for which internal financial
statements are available, determined on a pro forma basis after giving effect to
all acquisitions or dispositions of assets made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of calculating
Consolidated Cash Flow for the computation referred to above, (i) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the date on which the event for which the
calculation of the Debt to Cash Flow Ratio is made (the "Calculation Date")
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded.
"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.
"Designated Equity Proceeds" means any net cash proceeds received by the
Company after the date of the Indenture from the issuance and sale of its
Qualified Capital Stock (other than Qualified Capital Stock sold to a Subsidiary
of the Company) providing the basis for (i) a redemption of Notes in a
transaction consummated in compliance with the second paragraph of the section
captioned " - Optional Redemption," (ii) an addition to the cumulative account
calculated pursuant to clause (c) of the first paragraph of the covenant
described above under the caption " - Certain Covenants - Restricted Payments,"
(iii) the incurrence of additional Indebtedness pursuant to clause (viii) of the
second paragraph of the covenant described above under the caption " - Certain
Covenants -Incurrence of Indebtedness and Issuance of Preferred Stock," (iv) an
Investment pursuant to clause (vii) of the definition of "Permitted Investments"
or (v) an Investment in a Permitted Business in Eastern Europe pursuant to the
definition of "Permitted Business." In no event shall the same net cash
proceeds be treated as Designated Equity Proceeds for more than one purpose
under the Indenture. Once designated and used for a particular purpose, such
net cash proceeds may not be redesignated or used for an alternative purpose.
Not later than the date on which any such net cash proceeds are to be used for a
particular purpose, the Company shall deliver to the Trustee an Officer's
Certificate stating the purpose for which such net cash proceeds are to be used.
The Company will not be required, by virtue of this definition, to "earmark,"
segregate or otherwise separate any such net cash proceeds received by the
Company from the issuance and sale of its Qualified Capital Stock.
"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 at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date on which the Notes mature.
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"Eastern Europe" shall mean the countries of Albania, Armenia, Azerbaijan,
Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia,
Georgia, Hungary, Latvia, Lithuania, Moldava, Poland, Romania, Russia, Slovenia,
Slovakia, Ukraine and Yugoslavia.
"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).
"Excluded Stock" means all of the outstanding shares of Capital Stock of
each foreign Subsidiary that, if pledged, would cause the undistributed earnings
of such foreign Subsidiary (if such foreign Subsidiary had any such
undistributed earnings) as determined for U.S. Federal income tax purposes to be
treated as a deemed dividend to any parent company of such foreign Subsidiary
for U.S. Federal income tax purposes; provided, however, that if any shares of
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Capital Stock of a foreign Subsidiary may subsequently be pledged without
resulting in such a deemed dividend, such shares shall no longer be Excluded
Stock and shall be pledged pursuant to the Pledge Agreement.
"Existing Indebtedness" means up to $6,700,000 in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under any Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Expansion Event" shall mean such time as (i) the Company has consummated a
Qualified Public Offering of its Qualified Capital Stock and (ii) the Notes have
traded for 10 days after the occurrence of such Qualified Public Offering at a
price equal to 101% of their Accreted Value as demonstrated by a bid in writing
from a broker for at least $2 million in aggregate principal amount of the
Notes.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations); (ii) the consolidated interest expense of such Person
and its Subsidiaries that was capitalized during such period; (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such guarantee or Lien is called upon); and
(vi) the product of (a) all dividend payments, whether or not in cash, on any
series of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person and its Subsidiaries for such period. In
the event that the Company or any of its Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and the
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income; (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded,
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but only to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the referent Person or any of its Subsidiaries
following the Calculation Date.
"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.
"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.
"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements and
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) foreign exchange swap agreements, foreign exchange option
agreements, foreign exchange futures agreements and other agreements and
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Initial Public Offering" shall mean the first underwritten public offering
(excluding any offering pursuant to Form S-8 under the Securities Act or any
other publicly registered offering pursuant to the Securities Act pertaining to
the issuance of shares of Common Stock or securities exercisable therefor under
any benefit plan, employee compensation plan, or employee or director stock
purchase plan) of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
"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 or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
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.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted 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
Person held by the Company or such Restricted Subsidiary immediately following
any such sale, disposition or issuance.
"Latin America" means the countries of South America, Central America, the
Caribbean and the Republic of Mexico.
"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,
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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).
"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 or accretion of mandatorily redeemable
preferred stock to redemption value, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
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 Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted 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), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
in connection with such Asset Sale, and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness of an Unrestricted Subsidiary (i) as
to which neither the Company nor any of its Restricted Subsidiaries (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 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 an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable 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 or any of its Restricted
Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means (i) any wireless telecommunications business in
Latin America or (ii) any business that is ancillary or related thereto in Latin
America; provided that (a) on the occurrence of an Expansion Event, "Permitted
Business" shall mean (i) any wireless telecommunications business or (ii) any
business that is ancillary or related thereto and (b) the Company may apply the
aggregate net cash proceeds received by the Company after the date of the
Indenture from the issuance and sale of its Qualified Capital Stock to an
Investment in a Permitted Business in Eastern Europe to the extent that such net
cash proceeds have been, and continue to be, designated as Designated Equity
Proceeds to be applied pursuant to this definition as provided in the definition
of "Designated Equity Proceeds" and such Investment shall be treated as a
"Permitted Investment."
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in a Permitted Business;
(ii) any Investment in Cash Equivalents; (iii) any Investment by the Company in
a Person, if as a result of such Investment (a) such Person becomes a Restricted
Subsidiary of the Company that is engaged in a Permitted Business 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 Restricted Subsidiary of the Company and that is engaged in a Permitted
Business; (iv) any Restricted Investment made as a result of the receipt of non-
cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption " - Repurchase at
the Option of Holders - Asset Sales"; (v) any acquisition of assets in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; (vi) any non-cash consideration received in connection with an Asset
Sale that complies with the covenant described above under the caption "-
Repurchase at the Option of Holders - Asset Sales;" and (vii) Investments in a
Person engaged in a Permitted Business, having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (vii) that are at the time outstanding, not to
exceed
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the sum of (a) $7 million (which sum may only be used in connection with
Permitted Businesses in the Republic of Chile ) plus (b) 100% of the aggregate
net cash proceeds received by the Company after the date of the Indenture from
the issuance and sale of its Qualified Capital Stock to the extent that such net
cash proceeds have been, and continue to be, designated as Designated Equity
Proceeds to be applied to make Investments pursuant to this clause (vi) as
provided in the definition thereof.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens on assets of the Company securing borrowings under Credit
Facilities permitted by the terms of the Indenture to be incurred and
outstanding;
(ii) Liens in favor of the Company or any of its Restricted Subsidiaries;
(iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Restricted Subsidiary of the
Company; 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 or such Restricted
Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Restricted Subsidiary of the Company, provided that such Liens
were not incurred in connection with, or in contemplation of, such acquisition
and do not extend to any assets of the Company or any of its Restricted
Subsidiaries other than the property so acquired;
(v) Liens existing on the date of the Indenture;
(vi) 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;
(vii) Liens securing Obligations (other than Indebtedness) under
governmental licenses, concessions or other authorizations;
(viii) 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;
(ix) Liens securing Permitted Debt of Restricted Subsidiaries of the
Company;
(x) Liens securing Vendor Indebtedness permitted by clause (iv) of the
covenant described above under the caption " - Certain Covenants - Incurrence of
Indebtedness and Issuance of Preferred Stock;" provided that such Liens shall
not extend to any other property or assets of the Company or of any Restricted
Subsidiary other than the property or assets so acquired;
(xi) Liens securing the Notes;
(xii) Liens securing the Convertible Notes until the earlier of such time
as the Convertible Notes (a) are no longer outstanding or (b) have been
converted pursuant to the terms thereof;
(xiii) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries;
(xiv) Liens securing Indebtedness incurred to refinance Indebtedness that
has been secured by a Lien permitted under the Indenture; provided that (a) any
such Lien shall not extend to or cover any assets or property not securing the
Indebtedness so refinanced and (b) the refinancing Indebtedness secured by such
Lien shall have been permitted to be incurred under the covenant described under
the caption " - Certain Covenants - Incurrence of Indebtedness and Issuance of
Preferred Stock;"
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(xv) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed $1 million at any one time outstanding;
(xvi) Liens to secure Attributable Debt that is permitted to be incurred
pursuant to the covenant described above, under the caption " - Certain
Covenants - Sale and Leaseback Transactions;" provided that any such Lien shall
not extend to or cover any assets of the Company other than the assets which are
the subject of the sale and leaseback transaction in which the Attributable Debt
is incurred; and
(xvii) Liens securing Indebtedness permitted by clause (vi) of the
covenant described above under the caption " - Certain Covenants - Incurrence of
Indebtedness and Issuance of Preferred Stock;" provided that such Liens shall
not extend to any other property or assets of the Company or of any Restricted
Subsidiary other than the property or assets so acquired.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries 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 or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses and reasonable prepayment premiums incurred in
connection therewith); (ii) such Permitted 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 Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
"Principals" means any of (i) William J. Elsner, Jeff E. Rhodes, Bernard G.
Dvorak, Stephen W. Schovee, William D. Stanfill, Robert F. McKenzie, Adam
Goldman, William Sprague, Michael N. Simkin, John Fullmer and Mark A. Leavitt,
(ii) Prudential Securities Incorporated and its Affiliates and (iii) Merrill
Lynch Global Allocation Fund, Inc. and its Subsidiaries (or a wholly owned
Subsidiary of the sole stockholder of any of the foregoing).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Public Offering" means the sale, in an underwritten Initial
Public Offering registered under the Securities Act, of shares of the Company's
Common Stock in which (i) the aggregate gross proceeds received by the Company
for the shares is at least $25,000,000 and (ii) the price per share paid by the
public is at least $6.00 (as adjusted for stock splits, reverse stock splits,
stock dividends and similar recapitalizations).
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
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"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 of the
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders Agreement" means the second amended and restated stockholders
agreement, dated as of October 3, 1997, by and among the Company and the Persons
identified on the signature pages thereto as in effect on the date of the
Indenture, and as amended from time to time thereafter.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Triggering Event" means the date immediately following the occurrence of
the last of the following: (i) the Company has consummated a public or private
offering or offerings of its capital stock resulting in aggregate gross proceeds
of $50 million; (ii) the Company has consummated a Qualified Public Offering
(which may be satisfied by the occurrence of a public offering described in
clause (i) above, that is a Qualified Public Offering); (iii) the Convertible
Notes are freely convertible into shares of Common Stock; and (iv) after the
occurrence of a Qualified Public Offering, the Common Stock is, for 10
consecutive days, trading at a price equal to two times the Conversion Price (as
defined in the Convertible Notes) then in effect at the time of such Qualified
Public Offering. The Convertible Notes will be deemed freely convertible into
shares of Common Stock if the sole reason they are not so convertible is that
they are subject to that certain Conversion Rights Agreement between the Company
and the holder of the Convertible Notes.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than any
Subsidiary of the Company that owns all or a material portion of the assets
owned by the Company or any Subsidiary of the Company on the date of the
Indenture) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption " - Certain Covenants - Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption " - Certain Covenants -
Incurrence of Indebtedness and Issuance of Preferred Stock," the Company shall
be in default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted
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Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption " - Certain
Covenants - Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"Vendor Indebtedness" means any Indebtedness (including, without
limitation, Indebtedness under any credit facility entered into with any vendor
or supplier or any financial institution acting on behalf of such vendor or
supplier, including, without limitation, any financing provided by the Overseas
Private Investment Corporation); provided that such Indebtedness is incurred
solely for the purpose of financing the cost (including, without limitation, the
cost of design, development, delivery, freight, insurance, import duties, value-
added taxes, improvement, construction or integration) of equipment or other
tangible assets necessary for the operation of wireless telecommunications
networks or systems.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors, managers or trustees of such Person.
"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 Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than (i) directors' qualifying shares or
(ii) shares of non-U.S. Restricted Subsidiaries sold to non-U.S. nationals as
required by the laws of the jurisdiction of incorporation of such non-U.S.
Restricted Subsidiary) shall at the time be owned by such Person or by one or
more Wholly Owned Restricted Subsidiaries of such Person.
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DESCRIPTION OF CONVERTIBLE NOTES
Concurrent with the offering of the Private Notes, the Company issued $10.0
million in aggregate principal amount of Convertible Notes (the "Convertible
Notes") pursuant to a Purchase Agreement dated January 15, 1998 between the
Company and Merrill Lynch Global Allocation Fund, Inc. (the "Convertible Note
Purchase Agreement") The Convertible Notes mature on January 1, 2006. The
Convertible Notes are subordinated in right of payment to the Notes and will be
pari passu with all Indebtedness (as defined in the Convertible Notes) of the
Company existing on the date of the issuance of the Convertible Notes and any
future Indebtedness of the Company; provided, however, that on the occurrence of
the Triggering Event (as defined) the Convertible Notes shall become
subordinated to all other Indebtedness of the Company that is permitted to be
incurred by the Company pursuant to the Indenture. Cash interest will not
accrue on the Convertible Notes prior to January 1, 2000. Thereafter, interest
on the Convertible Notes will be payable in cash at a rate of 9% per annum on
January 1 and July 1 of each year, commencing on July 1, 2000. The Convertible
Notes will be convertible into shares of Common Stock at a conversion price of
$2.25 per share, subject to adjustments in certain circumstances (the
"Conversion Price").
The Convertible Notes will be redeemable at the option of the Company, in
whole or in part, at any time after January 1, 2004, at redemption prices equal
to 102% and 101%, respectively, of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase if such redemption
occurs during the seventh and eighth years, respectively, of the term of the
Convertible Notes. The Convertible Notes will not be mandatorily convertible on
the occurrence of an initial public offering by the Company.
In addition, from January 1, 2003 to January 1, 2004, the Company may
redeem all but not less than all of the Convertible Notes, if the Closing Price
(as defined in the Convertible Notes) of the Common Stock is 150% of the
Conversion Price then in effect for 10 consecutive trading days, at a redemption
price equal to 100% of the principal amount thereof plus accrued and unpaid
interest thereon, if any.
The Convertible Notes are secured by the Pledged Collateral. Pursuant to
the Pledge Agreement, the rights of the holders of the Convertible Notes in the
Pledged Collateral are subordinated to the rights of the Holders of the Notes.
The holders of the Convertible Notes have no rights to the Pledged Collateral
under the Pledge Agreement upon the occurrence of the following events (the
"Triggering Event"): (i) the Company has consummated a public or private
offering or offerings of its capital stock resulting in aggregate gross proceeds
of $50 million; (ii) the Company has consummated a Qualified Public Offering
(which may be satisfied by the occurrence of a public offering described in
clause (i) above, that is a Qualified Public Offering); (iii) the Convertible
Notes are freely convertible into shares of Common Stock; and (iv) after the
occurrence of a Qualified Public Offering, the Company's Common Stock is, for 10
consecutive days, trading at a price equal to two times the Conversion Price (as
defined in the Convertible Notes) then in effect at the time of the consummation
of such Qualified Public Offering. The Convertible Notes will be deemed freely
convertible into shares of Common Stock if the sole reason they are not so
convertible is that they are subject to that certain Conversion Rights Agreement
between the Company and the holder of the Convertible Notes.
Pursuant to the Company's Third Amended and Restated Registration
Agreement, the Company has agreed to file with the Commission a registration
statement on the appropriate form under the Securities Act with respect to each
of the Convertible Notes and the shares of the Company's Common Stock
convertible on exercise thereof (the "Convertible Shares"). Each such
registration statement shall be filed on the earlier to occur of (i) three years
from the date of the consummation of the offering of the Convertible Notes, (ii)
60 days after an initial public offering of the Company's equity securities or
(iii) a Change in Control (as defined in the Indenture). The Company will cause
each such registration statement to remain effective and usable until such time
as the Convertible Notes or the Convertible Shares, as the case may be, are
freely tradeable under the Securities Act (and the holders thereof have received
an opinion of counsel to the Company to such effect) or until all of such
Convertible Notes or such Convertible Shares, as the case may be, available for
sale thereunder have been sold thereunder or otherwise converted.
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DESCRIPTION OF WARRANTS
In connection with the issuance of the Private Notes, the Company issued
the Initial Warrants to purchase an aggregate of 2,560,000 shares of Common
Stock. The Notes and the Initial Warrants will not be separately transferable
until the earlier to occur of (i) 360 days from the date of issuance of the
Initial Warrants; (ii) such date as Salomon Brothers Inc may, in its
discretion, deem appropriate; and (iii) in the event of a Change of Control, the
date the Company mails a notice thereof. The Initial Warrants were issued
pursuant to a Warrant Agreement (the "Warrant Agreement") between the Company
and State Street Bank and Trust Company, as Warrant Agent (the "Warrant Agent").
The following summary of certain provisions of the Warrant Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Warrant Agreement, including the definitions therein of certain terms used
below.
GENERAL
Each Initial Warrant, when exercised, entitles the holder thereof to
receive 64 fully paid and non-assessable shares of Common Stock of the Company,
par value $0.01 per share ("Initial Warrant Shares"), at the Exercise Price. In
the event that the Company does not consummate a Qualified Public Offering of
its Qualified Capital Stock by January 1, 2001, the Company will be obligated to
issue certain contingent warrants (the "Contingent Warrants," and together with
the Initial Warrants, the "Warrants") to the Holders of the Notes representing
7.5% of the Common Stock on a fully diluted basis as of the date of the issuance
of the Contingent Warrants after giving effect to such issuance; provided that
if the Company consummates a public or private offering or offerings of its
Qualified Capital Stock resulting in aggregate gross proceeds of at least $25
million, the Company shall have until June 30, 2002 to consummate a Qualified
Public Offering; provided, further, that with respect to any private offering of
Qualified Capital Stock of the Company to an Affiliate of the Company (or to any
Person who would be an Affiliate of the Company upon consummation of any such
offering), such Qualified Capital Stock shall be issued and sold at a price no
lower than (i) the price at which the Qualified Capital Stock is being sold to
Persons that are not Affiliates of the Company in such offering if such Persons
are purchasing a majority of the Qualified Capital Stock being sold in such
offering or (ii) in all other cases, the fair market value thereof, as evidenced
by an independent investment banking firm of national standing delivered to the
Trustee. The Exercise Price and the number of Warrant Shares are both subject to
adjustment in certain cases referred to below. Upon exercise, the holders of
the Initial Warrants are entitled, in the aggregate, to purchase shares of
Common Stock representing approximately 7.5% of the Company's Common Stock on a
fully diluted basis as of the date of the issuance of the Initial Warrants (the
"Warrant Percentage"). The Company shall not be obligated to issue the
Contingent Warrants in the event of a Change of Control prior to January 1,
2001.
The number of Initial Warrant Shares to be received on exercise of each
Initial Warrant shall be increased in the event that (i) there has not been a
Qualified Public Offering by October 3, 2000 and (ii) the holders of shares of
Series C Preferred are not required to return to the Company any additional
shares of Series C Preferred received as dividends on the outstanding shares of
Series C Preferred ("Dividend Shares") on or prior to October 3, 2000. Such
adjustment (the "Adjustment") shall be effected by adding to the number of
shares of Common Stock of the Company calculated on a fully diluted basis as of
January 15, 1998, the number of shares of Common Stock receivable on the
conversion of the Dividend Shares and then recalculating the Warrant Percentage.
The additional Warrant Shares resulting from the Adjustment will be allocated on
a pro rata basis among the Initial Warrants.
The Initial Warrants are exercisable at any time on or after the earlier to
occur of (i) one year from the date of issuance, (ii) in the event of a Change
of Control, the date the Company mails a notice thereof, and (iii) 180 days
after the consummation of an Initial Public Offering of the Company's Common
Stock (such date, the "Exercise Commencement Date"). Unless exercised, the
Warrants will automatically expire on January 1, 2005 (the "Warrant Expiration
Date"). The Company will give notice of expiration not less than 90 and not
more than 120 days prior to the Warrant Expiration Date to the registered
holders of the then outstanding Warrants. If the Company fails to give such
notice, the Warrants will not expire until 90 days after the Company gives such
notice. 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.
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The Warrants may be exercised by surrendering to the Company the warrant
certificates evidencing the Warrants to be exercised with the accompanying form
of election to purchase properly completed and executed, together with payment
of the Exercise Price. Payment of the Exercise Price may be made (i) in the
form of cash or by certified or official bank check payable to the order of the
Company, (ii) by tendering Notes having an aggregate principal amount, plus
accrued and unpaid interest, if any, thereon, to the date of exercise (or if
such exercise takes place prior to the Full Accretion Date, an Accreted Value on
the date of exercise) equal to the Exercise Price, (iii) by tendering Warrants
having a fair market value (as determined in good faith by the Company's Board
of Directors) equal to the Exercise Price or (iv) by tendering a combination of
cash, Notes and Warrants. Upon surrender of the warrant certificate and payment
of the Exercise Price, the Company will deliver or cause to be delivered, to or
upon the written order of such holder, stock certificates representing the
number of whole shares of Common Stock to which the holder is entitled. If less
than all of the Warrants evidenced by a warrant certificate are to be exercised,
a new warrant certificate will be issued for the remaining number of Warrants.
Pursuant to the Warrant Agreement, the Company will effect a registration of the
Warrants and the Warrant Shares to permit exercise of Warrants commencing on the
Exercise Commencement Date and continuing through the Warrant Expiration Date.
No fractional shares of Common Stock will be issued upon exercise of the
Warrants. The Company will pay to the holder of the Warrant at the time of
exercise an amount in cash equal to the current market value of any such
fractional share of Common Stock less a corresponding fraction of the Exercise
Price.
The holders of the Warrants have no right to vote on matters submitted to
the stockholders of the Company and have no right to receive dividends. The
holders of the Warrants are not entitled to share in the assets of the Company
in the event of liquidation, dissolution or the winding up of the Company. In
the event a bankruptcy or reorganization is commenced by or against the Company,
a bankruptcy court may hold that unexercised Warrants are executory contracts
which may be subject to rejection by the Company with approval of the bankruptcy
court, and the holders of the Warrants may, even if sufficient funds are
available, receive nothing or a lesser amount as a result of any such bankruptcy
case than they would be entitled to if they had exercised their Warrants prior
to the commencement of any such case.
ADJUSTMENTS
The number of shares of Common Stock purchasable upon exercise of Warrants
and the Exercise Price is subject to adjustment in certain events including: (i)
the payment by the Company of dividends and other distributions on its Common
Stock in Common Stock, (ii) subdivisions, combinations and reclassifications of
the Common Stock, (iii) the issuance to all holders of Common Stock of rights,
options or warrants entitling them to subscribe for Common Stock or securities
convertible into, or exchangeable or exercisable for, Common Stock at an
offering price (or with an initial conversion, exchange or exercise price) which
is less than the Current Market Price per share (as defined) of Common Stock,
(iv) the distribution to all holders of Common Stock of any of the Company's
assets (including cash), debt securities, preferred stock or any rights or
warrants to purchase any such securities (excluding those rights and warrants
referred to in clause (iii) above), (v) the issuance of shares of Common Stock
for a consideration per share less than the then current market price per share
of Common Stock which shall not be less than $2.25 (the "Current Market Price")
(excluding securities issued in transactions referred to in clauses (i) through
(iv) above), (vi) the issuance of securities convertible into or exchangeable
for Common Stock for a conversion or exchange price plus consideration received
upon issuance less than the then Current Market Price per share of Common Stock
(excluding securities issued in transactions referred to in clauses (i) through
(iv) above), and (vii) certain other events that could have the effect of
depriving holders of the Warrants of the benefit of all or a portion of the
purchase rights evidenced by the Warrants. The events described in clause (v)
and (vi) above are subject to certain exceptions described in the Warrant
Agreement, including, without limitation, (A) certain bona fide public
offerings, (B) Common Stock (and options exercisable therefor) issued to the
Company's employees and directors under bona fide employee benefit plans and (C)
Common Stock issued upon conversion of the Preferred Stock in accordance with
the Certificates of Designation related thereto and as in effect on the date
hereof.
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least 1% in the Exercise Price;
provided however, that any adjustment that is not made will be carried forward
and taken into account in any subsequent adjustment.
121
<PAGE>
In the case of certain consolidations or mergers of the Company, or the
sale of all or substantially all of the assets of the Company to another
corporation, each Warrant will thereafter be exercisable for the right to
receive the kind and amount of shares of stock or other securities or property
to which such holder would have been entitled as a result of such consolidation,
merger or sale had the Warrants been exercised immediately prior thereto.
RESERVATION OF SHARES
The Company has authorized and reserved for issuance, and will at all times
reserve and keep available, such number of shares of Common Stock as will be
issuable upon the exercise of all outstanding Warrants. Such shares of Common
Stock, when paid for and issued, will be duly and validly issued, fully paid and
non-assessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issuance thereof.
AMENDMENT
From time to time, the Company and the Warrant Agent, without the consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including curing defects or inconsistencies or making any
change that does not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants will require the written
consent of the holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its Affiliates). The consent of each
holder of the Warrants affected will be required for any amendment pursuant to
which the Exercise Price would be increased or the number of shares of Common
Stock purchasable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided in the Warrant Agreement).
REGISTRATION RIGHTS
The holders of the Warrants and the Warrant Shares are entitled to certain
rights with respect to the registration of the Warrants and the Warrant Shares
under the Securities Act as discussed below.
Shelf Registration Rights. The Company is required under the terms of the
Warrant Agreement to (i) file and use its best efforts to cause to become
effective prior to the Exercise Commencement Date a shelf registration statement
(the "Warrant Shelf Registration Statement") with respect to the Warrant Shares
issuable upon the exercise of the Warrants and (ii) to keep the Warrant Shelf
Registration Statement continuously effective until the earlier of such time as
all Warrants have been exercised and the Warrant Expiration Date.
Piggyback Registration Rights. If the Company proposes to register any of
its Common Stock under the Securities Act, either for its own account or for the
account of other security holders, the holders of the Warrant Shares are
entitled to notice of the registration and are entitled to include, at the
Company's sole expense (excluding underwriter discounts), all or any portion of
their Warrant Shares therein, subject to pro rata cut-back provisions in the
event that the managing underwriter in any underwritten offering determines that
the inclusion of such Warrant Shares and any other securities entitled to
piggyback registration rights would adversely affect the offering being
registered and subject to certain rights of the Company's existing stockholders.
122
<PAGE>
PROVISIONS GENERALLY APPLICABLE TO ALL SECURITIES
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth under "- Certificated Notes," the Exchange Notes will
be issued in the form of one Global Exchange Note. Ownership of beneficial
interest in a Global Exchange Note will be limited to Persons who have accounts
with DTC ("participants") or Persons who hold interests through participants.
Ownership of beneficial interests in a Global Exchange Note will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of participants) and
the records of participants (with respect to interests of Persons other than
participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the related Exchange Notes represented by
such Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owner of an interest in a Global Exchange Note will be able
to transfer that interest except in accordance with applicable procedures of
DTC, in addition to those provided for under the Indenture.
Payments of the principal of, and interest on, Exchange Notes represented
by the Global Exchange Note registered in the name of and held by the Depository
or its nominee will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any Paying Agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Exchange Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of the Global Exchange Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Exchange
Note as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Exchange Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
If a holder requires physical delivery of a certificated Note for any reason,
such holder must transfer its interest in the Global Exchange Note in accordance
with the procedures described under "Notice to Investors," as well as DTC's
applicable procedures and, if applicable, those of Euroclear and Cedel Bank.
The Company expects that DTC will take any action permitted to be taken by
a Holder of Exchange Notes (including the presentation of Exchange Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in the Global Exchange Note is credited and
only in respect of such portion of the aggregate principal amount of Exchange
Notes, as to which such participant or participants has or have given such
direction. However, if there is an Event of Default under the Exchange Notes,
DTC will exchange the applicable Global Exchange Note for certificated Exchange
Notes, which it will distribute to its participants.
The Company understands that: DTC is a limited-purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
123
<PAGE>
Although DTC, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Exchange
Note among participants of DTC, Euroclear and Cedel Bank, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Note and a successor depositary is not appointed by the
Company within 90 days, the Company will issue certificated Exchange Notes in
exchange for the Global Exchange Notes. Holders of an interest in the Global
Exchange Note may receive a certificated Exchange Note in accordance with DTC's
rules and procedures in addition to those provided for under the Indenture.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal income tax
consequences of the exchange of the Private Notes for the Exchange Notes
pursuant to the Exchange Offer. This discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
judicial authority, current administrative rulings and practice, and existing
and proposed Treasury Regulations, all as in effect and existing on the date
hereof. Legislative, judicial or administrative changes or interpretations
after the date hereof could alter or modify the validity of this discussion and
the conclusions set forth below. Any such changes or interpretations may be
retroactive and could adversely affect a Holder of the Private Notes or the
Exchange Notes.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular Holders in light of their
personal investment or tax circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of Holders subject to special
treatment under the U.S. federal income tax laws, such as certain financial
institutions, insurance companies, dealers in securities or foreign currency,
tax-exempt organizations, foreign corporations or non- resident alien
individuals, or persons holding Private Notes or Exchange Notes that are a hedge
against, or that are hedged against, currency risk or that are part of a
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. Moreover, the effect of any state, local or foreign tax laws is
not discussed.
EACH HOLDER OF A PRIVATE NOTE THAT IS PARTICIPATING IN THE EXCHANGE OFFER
IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT
OF SUCH HOLDER'S PARTICULAR TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL OR FOREIGN TAX LAWS OF THE
EXCHANGE OF THE PRIVATE NOTES FOR THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE
OFFER.
The exchange of the Private Notes by any Holder for the Exchange Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes should not be considered
to differ materially in kind or extent from the Private Notes. Rather, Exchange
Notes received by any Holder should be treated as a continuation of the Private
Notes in the hands of such Holder for tax purposes. As a result, there should be
no adverse federal income tax consequences to Holders exchanging the Private
Notes for Exchange Notes pursuant to the Exchange Offer, and the federal income
tax consequences of holding and disposing of the Exchange Notes should be the
same as the federal income tax consequences of holding and disposing of the
Private Notes. Accordingly, a Holder's adjusted tax basis in the Exchange Notes
will be the same as its adjusted tax basis in the Private Notes exchanged
therefor and its holding period for the Private Notes will be included in its
holding period for the Exchange Notes. Thus, the determination of gain on a
subsequent sale or other disposition of the Exchange Notes will be the same as
for the Private Notes.
124
<PAGE>
PLAN OF DISTRIBUTION
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 any Exchange Notes
received in exchange for Private Notes acquired by such broker-dealer as a
result of market-making or other trading activities. Each broker-dealer that
receives Exchange Notes for its own account in exchange for such Private Notes
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Company has
agreed that for a period of 180 days from the Effective Date, it will make this
Prospectus, as amended or supplemented, available to any such broker-dealer that
requests copies of this Prospectus in the Letter Transmittal for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other Persons. Exchange Notes received by broker-
dealers for their own account pursuant to the Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market,
negotiated transactions or through the writing of options on the Exchange Notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale 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 concessions from any such broker-dealer and/or
purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange
Notes that were received by it for its own account pursuant to the Exchange
Offer in exchange for Private Notes acquired by such broker-dealer as a result
of market-making or other trading activities and any broker-dealer participates
in a distribution of such Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on such resale of
Exchange Notes and any commissions or concessions received by 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 it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Notes Registration Rights Agreement and
will indemnify the Holders of Private Notes (including any broker-dealers),
certain parties related to such Holders, against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Holland & Hart LLP.
EXPERTS
The financial statements included in this registration statement to the
extent and for the periods indicated in their report have been audited by Arthur
Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
125
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT) AND SUBSIDIARIES
-----------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
AND REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
---------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
CENTENNIAL COMMUNICATIONS CORP. (dba SMR DIRECT) AND SUBSIDIARIES
Consolidated Financial Statements F-2 - F-25
Consolidated Interim Financial Statements (Unaudited) F-26 - F-37
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES:
Consolidated Financial Statements F-38 - F-53
Consolidated Interim Financial Statements (Unaudited) F-54 - F-62
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Centennial Communications Corp.:
We have audited the accompanying consolidated balance sheets of Centennial
Communications Corp. (a Delaware corporation) and subsidiaries as of December
31, 1996 and 1997, and the related consolidated statements of operations and
comprehensive loss; mandatorily redeemable, convertible preferred stock and
stockholders' equity (deficit); and cash flows for the period from inception
(October 26, 1995) to December 31, 1995 and for the years ended December 31,
1996 and 1997. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Centennial Communications Corp.
and subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from inception (October 26, 1995)
to December 31, 1995 and for the years ended December 31, 1996 and 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 30, 1998.
F-2
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1997
ASSETS ----------- ------------
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $14,820,583 $ 7,730,141
Restricted cash (Note 2) 3,890,262 1,349,536
Accounts receivable, net of allowances for doubtful
accounts of $0 and $517,986, respectively 464,052 1,283,409
Radios and accessories inventory 468,020 1,371,762
Prepaid licenses and other current assets 468,447 1,371,041
Net assets held for sale (Note 3) - 4,430,661
----------- ------------
Total current assets 20,111,364 17,536,550
PROPERTY AND EQUIPMENT, net (Note 5) 8,317,109 5,004,903
SMR LICENSES, net of accumulated amortization of $52,845
and $289,196 (Note 4) 6,013,695 5,921,315
OTHER NONCURRENT ASSETS, net 474,080 1,409,615
----------- ------------
Total assets $34,916,248 $ 29,872,383
=========== ============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 1,500,743 $ 1,019,208
Accrued liabilities 726,841 1,016,610
Deposits on assets held for sale (Note 3) - 4,609,077
Current portion of capital leases payable 310,319 -
----------- ------------
Total current liabilities 2,537,903 6,644,895
CAPITAL LEASES PAYABLE (Note 6) 1,435,192 -
SPECTRUM LICENSE DEBT (Note 6) 3,461,855 -
SENIOR SECURED NOTES (Note 6) - 11,144,703
----------- ------------
Total liabilities 7,434,950 17,789,598
----------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 3, 6 and 9)
MANDATORILY REDEEMABLE, CONVERTIBLE
PREFERRED STOCK:
Series A, $.01 par value, 352 authorized, issued
and outstanding 8,764,448 8,772,346
Series B, $.01 par value, 6,399,648 authorized,
5,670,851 and 5,735,251 issued and outstanding, respectively 20,064,668 20,407,217
Series C, $.01 par value, 11,000,000 authorized, none and 50,000
issued and outstanding, respectively - 72,500
----------- ------------
28,829,116 29,252,063
----------- ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value, 40,000,000 authorized,
3,502,500 and 3,502,650 issued and outstanding,
respectively 35,025 35,027
Additional paid-in capital 3,471,225 3,493,598
Accumulated deficit (4,847,599) (20,704,438)
Accumulated other comprehensive (loss) income (6,469) 6,535
----------- ------------
Total stockholders' equity (deficit) (1,347,818) (17,169,278)
----------- ------------
Total liabilities and stockholders' equity (deficit) $34,916,248 $ 29,872,383
=========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
F-3
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
------------------------------------------------------------
<TABLE>
<CAPTION>
Inception (October 26, 1995) Years Ended December 31,
------------------------
through December 31, 1995 1996 1997
------------------------- ---- ----
REVENUE:
<S> <C> <C> <C>
Radio service revenue $ - $ 153,159 $ 2,880,414
Equipment sales - 45,992 1,672,388
Activation and other - 96,730 273,553
-------- ----------- ------------
- 295,881 4,826,355
-------- ----------- ------------
COSTS AND EXPENSES RELATED
TO REVENUE:
Network and site expense - 272,910 612,632
Cost of equipment sold - 40,765 2,256,993
Maintenance and other - 199,750 686,785
-------- ----------- ------------
- 513,425 3,556,410
-------- ----------- ------------
GROSS PROFIT (LOSS) - (217,544) 1,269,945
-------- ----------- ------------
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 61,201 4,082,056 10,371,543
Depreciation and amortization 327 507,811 2,258,982
Loss on divestiture of U.S. operations - - 3,206,510
-------- ----------- ------------
61,528 4,589,867 15,837,035
-------- ----------- ------------
OPERATING LOSS (61,528) (4,807,411) (14,567,090)
-------- ----------- ------------
OTHER INCOME (EXPENSE):
Interest expense (5,129) (237,060) (887,324)
Interest income 8,569 156,731 349,662
Other - 1,614 (610,279)
-------- ----------- ------------
3,440 (78,715) (1,147,941)
-------- ----------- ------------
LOSS BEFORE MINORITY INTEREST (58,088) (4,886,126) (15,715,031)
-------- ----------- ------------
MINORITY INTEREST SHARE OF LOSS - 111,310 -
-------- ----------- ------------
NET LOSS (58,088) (4,774,816) (15,715,031)
ACCRETION OF MANDITORILY REDEEMABLE
PREFERRED SHARES TO REDEMPTION VALUE - (14,695) (141,808)
-------- ----------- ------------
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS (58,088) (4,789,511) (15,856,839)
OTHER COMPREHENSIVE INCOME
(LOSS):
Foreign currency translation adjustments - (6,469) 13,004
COMPREHENSIVE LOSS $(58,088) $(4,795,980) $(15,847,835)
======== =========== ============
BASIC NET LOSS PER
COMMON SHARE $(0.09) $(1.38) $(4.53)
======== =========== ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 639,091 3,480,466 3,502,534
======== =========== ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-4
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF MANDATORILY REDEEMABLE, CONVERTIBLE
--------------------------------------------------------------
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------
<TABLE>
<CAPTION>
Mandatorily Redeemable,
Convertible Preferred Stock
--------------------------------------------------------------------------------
Series A Series B Series C
--------------------- ------------------------ --------------------
Shares Amount Shares Amount Shares Amount
-------- ---------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION, October 26, 1995 - $ - - $ - - $ -
Common stock issued for
cash at $1.00 per share - - - -
Net loss - - - - - -
-------- ---------- --------- ------------ -------- --------
BALANCES, December 31, 1995 - - - - - -
Common stock issued for
cash at $1.00 per share - - - - - -
Common stock issued at $2.50
per share to settle liability - - - - - -
Preferred stock issued in
connection with private
placement (net of offering
costs of $39,502) (Note 10) 352 8,760,498 - - - -
Preferred stock issued in
connection with private
placement (net of offering
costs of $644,716) (Note 10) - - 5,670,851 20,053,923 - -
Accretion of preferred stock to
redemption value - 3,950 - 10,745 - -
Net loss - - - - - -
Cumulative translation
adjustment - - - - - -
-------- ---------- --------- ------------ -------- --------
BALANCES, December 31, 1996 352 8,764,448 5,670,851 20,064,668 - -
Exercise of stock options - - - - - -
Preferred stock issued as
bonus - - 40,421 146,890 - -
Preferred stock issued for
services - - 24,159 61,749 - -
Preferred stock issued for
note receivable (Note 10) - - - - 50,000 72,500
Accretion of preferred
stock to redemption value - 7,898 - 133,910 - -
Stock based compensation - - - - - -
Net loss - - - - - -
Cumulative translation of
adjustment - - - - - -
-------- ---------- --------- ------------ -------- --------
BALANCES, December 31, 1997 352 $8,772,346 5,735,251 $20,407,217 50,000 $ 72,500
======== ========== ========= =========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Stockholders' Equity (Deficit)
-------------------------------------------------------------------------------------------
Accumulated Other
Comprehensive
Common Stock Additional Accumu- Income (loss) Total
------------------ Paid-In lated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Equity (Deficit)
--------- ------- ---------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
INCEPTION, October 26, 1995 - $ - $ - $ - $ - $ -
Common stock issued for
cash at $1.00 per share 3,270,000 32,700 3,237,300 - - 3,270,000
Net loss - - - (58,088) - -
--------- ------- ---------- ------------ ---------------- ----------------
BALANCES, December 31, 1995 3,270,000 32,700 3,237,300 (58,088) - 3,211,912
Common stock issued for
cash at $1.00 per share 230,000 2,300 227,700 - - 230,000
Common stock issued at $2.50
per share to settle liability 2,500 25 6,225 - - 6,250
Preferred stock issued in
connection with private
placement (net of offering
costs of $39,502) (Note 10) - - - - - -
Preferred stock issued in
connection with private
placement (net of offering
costs of $644,716) (Note 10) - - - - - -
Accretion of preferred
stock to redemption value - - - (14,695) - (14,695)
Net loss - - - (4,774,816) - (4,774,816)
Cumulative translation of
adjustment - - - - (6,469) (6,469)
--------- ------- ---------- ------------ ------------------ ----------------
BALANCES, December 31, 1996 3,502,500 35,025 3,471,225 (4,847,599) (6,469) (1,347,818)
Exercise of stock options 150 2 373 - - 375
Preferred stock issued as
bonus - - - - - -
Preferred stock issued for
services - - - - - -
Preferred stock issued for
note receivable (Note 10) - - - - - -
Accretion of preferred stock
to redemption value - - - (141,808) - (141,808)
Stock based compensation - - 22,000 - - 22,000
Net loss - - - (15,715,031) - (15,715,031)
Cumulative translation of
adjustment - - - - 13,004 13,004
----------- ------- ------------ ------------ ------------------ ----------------
BALANCES, December 31, 1997 3,502,650 $35,027 $ 3,493,598 $(20,704,438) $ 6,535 $ (17,169,278)
=========== ======= ============ ============ ================== ================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Years Ended December 31,
Inception (October 26, 1995) -----------------------
through December 31, 1995 1996 1997
-------------------------------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (58,088) $ (4,774,816) $(15,715,031)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 327 507,811 2,258,982
Loss on divestiture of U.S. operations - - 3,206,510
Write-off of Argentine investment - - 615,588
Stock based compensation - - 22,000
Allowance for doubtful accounts - - 597,751
Accretion of spectrum license debt - 33,109 72,091
Changes in operating assets and liabilities-
Increase in accounts receivable (2,896) (430,225) (1,761,812)
Increase in inventory - (432,383) (833,714)
Increase in other assets - (435,080) (1,633,649)
Increase in accounts payable and other 52,604 1,236,912 331,054
Increase in accrued liabilities - 726,841 401,718
---------- ------------ ------------
Net cash used in operating activities (8,053) (3,567,831) (12,438,512)
---------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,118) (6,654,843) (6,877,907)
Acquisition of businesses, net of cash acquired - (2,552,248) (4,482,325)
Cash deposits received related to sale of U.S. operations - - 4,609,077
Decrease (increase) in restricted cash - (3,890,262) 2,540,726
(Deposit) refunds for acquisition of spectrum (750,000) 243,369 -
Funding of organizational costs (4,274) (171,188) (736,732)
---------- ------------ ------------
Net cash used in investing activities (759,392) (13,025,172) (4,947,161)
---------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3,270,000 230,000 375
Proceeds from issuance of Series A and Series B
preferred stock, net - 28,814,421 61,761
Proceeds from issuance of Senior Notes - - 11,144,703
Deferred offering costs - - (713,356)
Payments on capital leases payable - (126,921) (211,256)
---------- ------------ ------------
Net cash provided by financing activities 3,270,000 28,917,500 10,282,227
---------- ------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (6,469) 13,004
---------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,502,555 12,318,028 (7,090,442)
CASH AND CASH EQUIVALENTS, beginning of year - 2,502,555 14,820,583
---------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $2,502,555 $ 14,820,583 $ 7,730,141
========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-6
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Inception (October 26, 1995) Years Ended December 31,
----------------------
through December 31, 1995 1996 1997
-------------------------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
<S> <C> <C> <C>
Interest $ - $ 182,354 $ 561,725
Income taxes - 707 52,221
Supplemental schedule of noncash
investing and financing activities-
Stock issued for services and notes receivable - 6,250 219,390
Accretion of preferred stock to redemption value - 14,695 141,808
Acquisition of SMR licenses in exchange for debt - 3,428,746 -
Equipment acquired through capital lease - 1,872,432 716,464
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-7
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AS OF DECEMBER 31, 1996 AND 1997
--------------------------------
NOTE 1. ORGANIZATION AND OWNERSHIP
- ------- --------------------------
Centennial Communications Corp. and subsidiaries (collectively, the "Company")
is a Delaware corporation engaged in the acquisition, development and operation
of specialized mobile radio ("SMR") and other low-cost, wireless communications
networks, the sale of communications services using those networks, and the sale
and servicing of related accessories and equipment in certain countries of Latin
America and previously in the United States. The Company has acquired SMR
licenses through direct applications to governments and through acquisitions of
interest in other entities (all of which are wholly owned) that have been
granted or have applied for SMR licenses.
As more fully discussed below, the Company commenced significant operations
during 1996, and prior to that date had been a development stage enterprise.
The Company's business model is subject to significant modification to address
rapid change in telecommunications technology and newly emerging marketplaces
which the Company believes offer significant opportunity. Reflecting such
circumstances, in August 1997, the Company reached the conclusion that its
wireless communications investment opportunities in Latin America and other
emerging markets were more attractive than its opportunities in the United
States. As a result, the Company decided to sell its United States SMR
operations and related assets (the "U.S. Operations") and focus its ongoing
efforts solely in Latin America and other emerging markets (See Note 3).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------- ------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Centennial
Communications Corp. and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Minority interest share of loss results from minority ownership
interests in entities now wholly owned by the Company.
Stock Split
-----------
On October 28, 1996, the Board of Directors approved a 10,000-for-1 stock split
of the Company's common stock. All references to common stock shares, earnings
per share and stock options have been adjusted retroactively to reflect the
10,000-for-1 stock split.
Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include short-
term, highly liquid investments with original maturities of three months or less
which are readily convertible into cash and are not subject to significant risk
from fluctuations in interest rates.
F-8
<PAGE>
Restricted Cash
---------------
Restricted cash includes approximately $3.9 million and $1.3 million on deposit
with financial institutions at December 31, 1996 and 1997, respectively.
Included in the December 31, 1996 balance is $3.0 million which was restricted
by an investor for expenditure in the Company's domestic operations and for the
acquisition of additional SMR licenses in the United States; $800,000 held as
a guarantee to purchase additional SMR licenses in Ecuador; and $86,000 held as
guarantees for performance bonds for certain construction and operational
obligations related to SMR licenses held in Peru. During 1997, the cash was
used by the Company for its intended purposes. The December 31, 1997 balance is
restricted by guarantees for performance bonds for certain construction and
operational obligations related to SMR licenses in Chile.
Credit Risk and Concentration of Operations
-------------------------------------------
The Company typically does not require collateral from its customers. As noted
in Note 3, after the Company completes the divestiture of the U.S. Operations,
accounts receivable will be comprised of small balances due from numerous
customers located primarily in Peru, Ecuador and other Latin American countries.
Accessories Inventory
---------------------
Accessories inventory represents radio accessories that are sold to the
Company's subscribers. Accessories are stated at the lower of their cost or
market. Cost is determined using the first-in, first-out method.
Revenue Recognition
-------------------
Radio service fees as well as charges for maintenance and loss and damage
insurance coverage are recognized in the period service is provided. Equipment
sales are recognized when the equipment is delivered and title passes to the
subscriber. In the Company's U.S. Operations, activation fees were recorded as
revenue in the month the activation occurred. Activation fees are typically not
charged in the Company's Latin American operations.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Maintenance and repair
expenditures are charged to expense as incurred and expenditures for
improvements which increase the expected useful lives of the assets are
capitalized. Depreciation expense is computed using the straight-line method
over the useful lives of the respective assets (See Note 5).
Direct costs associated with the construction of SMR networks are capitalized
and amortized over the system's expected useful life upon placing the system in
service. Such costs include amounts incurred in securing tower sites, site
preparation, procurement and installation of infrastructure, and equipment
costs.
Also included in property and equipment are radios owned by the Company which
are leased to the Company's subscribers under operating lease agreements. The
Company retains title to these radios as part of the subscriber agreement and
depreciates the radios over five years. Upon termination of service, the
subscribers are required to return the radios to the Company. Certain
subscribers desire to own their radios; therefore, the cost or depreciated net
book value of radios sold to such subscribers is recorded as a charge to cost of
goods sold at the time of sale.
F-9
<PAGE>
SMR Licenses
------------
Direct and certain indirect costs of obtaining SMR licenses, such as
application, legal and consulting fees, as well as the fair market value of
licenses obtained in certain acquisitions, are capitalized and amortized using
the straight-line method over the period of the related license (generally 10 to
40 years) upon commencement of service (See Note 4).
Income Taxes
------------
The Company recognizes deferred income tax assets and liabilities for the
expected future income tax consequences, based on enacted tax laws, of temporary
differences between the financial reporting and tax bases of assets, liabilities
and carryovers. The Company recognizes deferred tax assets for the expected
future effects of all deductible temporary differences, loss carryovers and tax
credit carryovers. Deferred tax assets are then reduced, if deemed necessary,
by a valuation allowance for the amount of any tax benefits which, more likely
than not based on current circumstances, are not expected to be realized (See
Note 8).
Net Loss Per Common and Common Equivalent Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share." Under SFAS 128, primary earnings per share previously required under
Accounting Principles Board No. 15 is replaced with basic earnings per share.
Basic earnings per share is computed by dividing reported earnings available to
common stockholders by weighted average shares outstanding, excluding the
dilution for any potentially dilutive securities. Fully diluted earnings per
share as defined under Accounting Principles Board No. 15 is called diluted
earnings per share under SFAS 128. Diluted earnings per share reflects the
potential dilution assuming the issuance of common shares for all dilutive
potential common shares outstanding during the period. As a result of the
Company's net losses, all potentially dilutive securities would be anti-dilutive
and fully diluted earnings per share is not presented. Potentially dilutive
securities include the Senior Notes (Note 6), Mandatorily Redeemable Convertible
Preferred Stock (Note 10), and options and warrants for the Company's common
stock. Also on January 15, 1998, the Company completed a financing whereby
warrants for 2,560,000 shares of common stock were issued to the holders of the
Senior Discount Notes (as defined in Note 6) and whereby Convertible Notes (as
defined in Note 6) were issued with anti-dilution provisions.
Mandatorily Redeemable Preferred Stock
--------------------------------------
The Company's mandatorily redeemable preferred stock is recorded at its issuance
price less offering costs. The carrying value is increased to the redemption
value at June 2002 by a charge to stockholders' deficit ratably over the period
from issue date to redemption date.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
F-10
<PAGE>
Foreign Currency Translation
----------------------------
For subsidiaries whose functional currency is the local currency and do not
operate in highly inflationary economies, all net monetary and nonmonetary
assets and liabilities are translated at current exchange rates and translation
adjustments are included in stockholders' equity. Revenues and expenses are
translated at the weighted average rate for the period. During 1996 and 1997,
the Company incurred foreign currency exchange (losses)/gains of approximately
($27,221) and $2,777 respectively.
Long-lived Assets
-----------------
Long-lived assets and certain identifiable intangibles to be held and used by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its long-
lived assets based on estimated future cash flows from and the estimated
liquidation value of such long-lived assets, and provides for impairment if such
undiscounted cash flows are insufficient to recover the carrying amount of the
long-lived asset (see Note 3).
Recently Issued Accounting Standards
------------------------------------
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, gains, and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This statement is effective
for fiscal years beginning after December 15, 1997.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS No. 131, establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographical areas, and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated.
NOTE 3. SALE OF THE U.S. OPERATIONS
- ------- ---------------------------
In August 1997, the Company made a strategic decision to sell the U.S.
Operations and began to seek purchasers for these operations, consisting of
licenses and related assets and liabilities in 20 major trading areas ("MTAs").
As of December 31, 1997, the Company had executed sales contracts for these
licenses and substantially all of the related assets and liabilities in each of
the MTAs in which it had U.S. operations. The executed sales contracts
generally provide that the consideration for the assets will consist of some
combination of cash, promissory notes and the assumption of the FCC debt (See
Note 6). The proposed purchases are subject to significant contingencies,
primarily related to the approval by the FCC of such assumption of debt,
including the qualifications by the proposed purchaser as a small or very small
business, as defined by the FCC. If such purchasers do not so qualify, some or
all of the bidding credit received by the Company at the time it was awarded the
SMR licenses by the FCC, will be required to be repaid by the purchaser or the
Company to the FCC. The maximum amount the Company would be
F-11
<PAGE>
required to repay to the FCC is approximately $150,000. If FCC approval is not
obtained by a specified date, the executed U.S. Purchase Agreements allow, and
any subsequent purchase agreement will likely allow, either party the right to
terminate the purchase agreement and rescind and unwind the transaction. Until
the contingencies related to the FCC can be resolved, the Company intends to
transfer a majority of the risks and rewards of the U.S. Operations to the
purchasers by way of management agreements. Prior to transferring assets
and the related operations, which are the subject of management agreements, the
Company ceased recording revenue and related operating expenses. However, the
transaction will not be recognized as a sale until substantially all of the
risks, rewards of ownership and full control of such licenses and the related
assets and liabilities are transferred to the purchasers. As of December 31,
1997, the Company has received approximately $4,609,077 in cash proceeds related
to these sales and has recorded these amounts as deposit liabilities in the
accompanying balance sheet.
At December 31, 1996 and 1997 and for the years then ended, financial
information related to the U.S. Operations were as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
--------------------- ---------------------
<S> <C> <C>
Revenue $ 79,562 $ 1,111,651
Costs and expenses related to revenue 410,045 1,272,172
--------------------- ---------------------
Gross loss (330,483) (160,521)
Selling, general and administrative 2,597,131 3,001,663
Depreciation and amortization 327,791 1,143,346
--------------------- ---------------------
(3,255,405) (4,305,530)
Loss on Divestiture of U.S. Operations - (3,206,510)
--------------------- ---------------------
Operating Loss $(3,255,405) $(7,512,040)
===================== =====================
Current assets $ 616,059 $ 474,591
Property and equipment, net 5,455,950 6,714,290
SMR licenses, net 3,904,616 3,828,794
--------------------- ---------------------
Total Assets 9,976,625 11,017,675
Current liabilities 1,155,922 1,574,184
Capital leases 1,435,192 1,478,884
Spectrum license debt 3,461,855 3,533,946
--------------------- ---------------------
Total Liabilities 6,052,969 6,587,014
--------------------- ---------------------
Net assets of the U.S. Operations $ 3,923,656 $ 4,430,661
===================== =====================
</TABLE>
Effective August 1997, the property, equipment and SMR licenses related to the
U.S. Operations are considered to be assets to be disposed of, as that term has
been defined by Statement of Financial Accounting Standards No. 121, because
management, having the authority to do so, has committed to the sale of these
assets. Accordingly, the Company's management estimated the fair value of such
assets, and determined that a write-down to fair market value was necessary as
of August 1997. The amount of the write-down recorded by management was
approximately $1,900,000. The Company's estimates are based upon executed sales
contracts at December 31, 1997, and management's estimate of fair value of the
remaining assets not under contract. Additionally, the Company recorded an
approximate $1,300,000 charge for termination and other contractually committed
costs in connection with the divestiture of the U.S. Operations in the third
quarter of 1997. The final outcome of the divestiture of the U.S. Operations and
the proceeds to be received therefrom is not currently known and risk exists
that the ultimate outcome of such sale,
F-12
<PAGE>
including the amount of the ultimate write-down necessary to state such assets
and liabilities at their fair market value, will be materially different from
management's estimates, and the ultimate outcome could result in an additional
write-down of such assets. Further, as mentioned above, certain payments could
be due the FCC under certain circumstances.
NOTE 4. ACQUISITIONS
- ------- -------------
During the years ended December 31, 1996 and 1997, the Company completed several
acquisitions of non-operating entities whose primary assets were SMR licenses as
well as the acquisition of operating entities. Included in the accompanying
consolidated financial statements, from the date of their acquisition, are the
results of operations for these entities as follows:
<TABLE>
<CAPTION>
Name and Location of Entity Date Acquired
- ---------------------------------------------------- ----------------------------------------
<S> <C>
SMR Direct Peru S.R.L. (formerly Mobil Line S.A.); February and July 1996 (1)
Lima, Peru
Pompano S.R.L.; Lima, Peru November 1996
Brunacci S.R.L.; Guayaquil, Ecuador November 1996
Telecom Supply S.R.L.; Lima, Peru December 1996
C-Comunica S.R.L.; Lima, Peru January 1997
Transnet del Peru S.A.; Lima, Peru July 1997
</TABLE>
(1) The Company acquired 51% of Mobil Line S.A. in February 1996. The remaining
49% was acquired in July 1996.
In February 1996, the Company purchased 51% of the capital stock of Mobil Line
S.R.L. ("Mobil Line"), a Peruvian non-operating development stage company which
owned a Peruvian SMR spectrum concession, for $900,000. The Company acquired
the remaining 49% of Mobil Line in July 1996 for approximately $600,000. These
transactions were accounted for as a step acquisition purchase and, accordingly,
operating results of the Company from March 1996 include the operations of Mobil
Line from acquisition, with the minority interest reflected for the five-month
period ending in July. Of the total consideration paid, approximately $900,000
remained in Mobil Line to purchase infrastructure and approximately $600,000 was
paid to the founders of Mobil Line. As a result of these transactions
approximately $692,000 of the total consideration paid was allocated to SMR
licenses. SMR licenses are amortized over 40 years. The purchase price was
financed by the Company with available cash.
In November 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Pompano S.R.L. ("Pompano"), a Peruvian non-operating
development stage company which owned a Peruvian SMR spectrum concession. The
acquisition was accounted for as a purchase and, accordingly, operating results
of Pompano subsequent to the date of acquisition are included in the
accompanying consolidated financial statements. Total consideration paid by the
Company was approximately $419,000, of which approximately $16,000 was allocated
to tangible net assets and $403,000 was allocated to SMR licenses. SMR licenses
are amortized over 40 years. The purchase price was financed by the Company
with available cash.
In November 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Brunacci S.R.L. ("Brunacci") and of its wholly owned
subsidiary, Multisistemas
F-13
<PAGE>
Electronics M.S.E. S.A. ("Multisistemas"), both Ecuadorian non-operating
development stage companies which owned Ecuadorian SMR spectrum concessions. The
acquisition was accounted for as a purchase and, accordingly, operating results
of Brunacci and Multisistemas subsequent to the date of acquisition are included
in the accompanying consolidated financial statements. Total consideration given
and liabilities assumed for both of the acquired companies was approximately
$947,000, of which $297,000 was allocated to tangible net assets and $650,000
was allocated to SMR licenses. SMR licenses are amortized over 10 years. The
purchase price was financed by the Company with available cash.
In December 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Telecom Supply S.R.L. ("Telecom"), a Peruvian non-
operating development stage company which owned a Peruvian SMR spectrum
concession. The acquisition was accounted for as a purchase and, accordingly,
operating results of Telecom, subsequent to the date of acquisition, are
included in the accompanying consolidated financial statements. Total
consideration paid by the Company was approximately $400,000, of which
approximately $14,000 represented the fair value of tangible assets acquired and
the excess purchase price over fair value of the net tangible assets acquired
was approximately $386,000, which was allocated to SMR licenses. SMR licenses
are amortized over 40 years. The purchase price was financed by the Company
with available cash.
Because the above entities were acquired prior to commencing their operations,
the Company believes that pro-forma revenue and results of operations for 1995
and the period in 1996 prior to their acquisition by the Company are not
meaningful.
In January 1997, the Company acquired all of the common stock of C-Comunica S.A.
("C-Comunica"), a Peruvian SMR operating company. The acquisition was accounted
for as a purchase. The total consideration given and liabilities assumed for C-
Comunica was approximately $2.9 million, of which approximately $800,000
represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was approximately $2.1 million, which was allocated to
SMR licenses. SMR licenses are amortized over 40 years. The purchase price was
financed by the Company with available cash.
In July 1997, the Company acquired all of the common stock of Transnet del Peru
S.A. ("Transnet"), a Peruvian SMR operating company. The acquisition was
accounted for as a purchase. The total consideration given and liabilities
assumed for Transnet was approximately $1.5 million, of which approximately
$300,000 represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was approximately $1.2 million, which was allocated to
SMR licenses. SMR licenses are amortized over 40 years. The purchase price was
financed by the Company with available cash.
Also in July 1997, the Company pledged $1.3 million to secure its obligations in
connection with the Company's bid for additional spectrum with the Chile
Concurso. On October 29, 1997, the Company received written notice from the
Chilean Ministry of Transportation and Telecommunications that its proposal had
been accepted and awarded; although such award is subject to appeal by the other
participants in the Chile Concurso. The Company has been informed that on
November 28, 1997 CTC-VTR Comunicaciones Moviles S.A., one of the other
participants, filed an appeal objecting to the acceptance of the Company's
proposal. On March 5, 1998 the Company received notice from the Chilean Ministry
that it had denied the appeal filed. On March 25, 1998, appeals were filed by
Chile Concurso participants with the Chilean Court of Appeals in respect of the
Chilean Ministry's denial of the participants' original appeal of the award of
the channels to the Company. In connection with the Chile Concurso, the Company
entered into a joint development agreement with a group of investors who hold
SMR licenses in Chile, the
F-14
<PAGE>
Dominican Republic and Panama which provides, among other things, that the
parties would work together to submit bids in the Chile Concurso and also to
form a project entity that would ultimately be owned 50% by each party and be
the vehicle for holding any channels obtained by the parties in the Chile
Concurso. There can be no assurance that the Company will be successful in
obtaining any channels as a result of such proposal.
In September 1997, the Parent Company acquired all of the common stock of
Fastcom S.A. ("Fastcom") and Radioservicios Moviles, S.A. ("Radioservicios"),
Argentine non-operating development stage companies which owned an Argentine
paging concession. The total consideration given and liabilities assumed for
Fastcom was approximately $526,000. The Company paid $110,000 cash at closing
and signed a note to the seller for the remainder of the purchase price due
December 2, 1997. The Company pledged the shares of Fastcom and Radioservicios
to the previous owners and related parties (the "Lienholders") to secure certain
payment obligations of the Company. The Company did not satisfy these payment
obligations on December 2, 1997, and as such, the Lienholders foreclosed on the
shares of Fastcom and Radioservicios. This resulted in the Company taking an
approximately $600,000 charge in December 1997, which consists of the $110,000
initial purchase price and approximately $490,000 in capitalized costs made in
connection with the Radioservicios transaction during 1997. Detail of net
assets of acquisitions during 1997 follows:
Property and equipment $ 896,688
SMR licenses 3,326,723
Other assets 928,538
Accounts payable and accrued liabilities (669,624)
----------
Net assets acquired $4,482,325
==========
Recently Completed Acquisition
On January 2, 1998, the Company purchased 100% of the outstanding capital stock
of an operating company for approximately $800,000. The operating company holds
10 800 MHz channels in the city of Santiago, Chile.
NOTE 5. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
December 31,
-----------------------
1996 1997
--------- -----------
Furniture and fixtures $ 171,594 $ 229,174
Computer equipment and software 644,657 392,276
Network infrastructure 6,050,859 3,527,655
Leasehold improvements 10,403 44,496
Radios 1,934,678 2,017,071
---------- -----------
8,812,191 6,210,672
Accumulated depreciation (495,082) (1,205,769)
---------- -----------
Property and equipment, net $8,317,109 $ 5,004,903
========== ===========
F-15
<PAGE>
The Company leases network infrastructure equipment under capital leases. As of
December 31, 1996 the book value of such equipment was approximately $2.5
million net of accumulated depreciation of approximately $90,000. As of
December 31, 1997, all of the capital leases are part of the U.S. Operations and
are included in Net Assets Held for Sale. (See Notes 3 and 6).
The Company depreciates infrastructure over ten years, radios over five years,
computer equipment and software over three years and leasehold improvements over
the life of the lease.
Depreciation expense was $446,652 and $1,802,283 for the year ended December 31,
1996 and 1997, respectively.
In August 1997, the Company decided to sell certain property and equipment
related to the U.S. Operations (See Note 3).
NOTE 6. LONG-TERM DEBT AND CAPITAL LEASES PAYABLE
- ------- -----------------------------------------
In April 1996, the Company acquired 430 channels in MTA's in the United States
with approximately 70 million people through the Federal Communications
Commission's ("FCC") 900 MHz spectrum auction for a purchase price of
approximately $5.1 million. In connection with such auction, the Company
qualified for "small business" status under the FCC's regulations which allowed
the Company to (i) make a 10% down payment; (ii) receive a 15% bidding credit
against its spectrum purchase price; and (iii) receive United States government
financing at 7% per annum on the balance of the purchase price to be paid by the
Company over a 10-year period. The contractual principal amount on this debt
totals approximately $4.6 million as of December 31, 1996 and 1997. The note
provides for interest payments only in the first five years and quarterly
principal and interest payments thereafter. In accordance with Accounting
Principles Board Opinion No. 21, "Interest on Receivables and Payables", the
Company has determined that the market rate for such debt is 12%, and
accordingly, has recorded this debt and related spectrum at approximately $3.5
million. As discussed in Note 3, the Company has decided to sell the U.S.
Operations and it is intended that the FCC debt will be assumed by the buyers of
the U.S. Operations.
In July through October 1996, the Company secured approximately $1.8 million in
fixed equipment infrastructure financing from E.F. Johnson, a leading equipment
manufacturer, for use in constructing its U.S. network. Total principal
outstanding on this vendor financing was approximately $1.4 million at December
31, 1997. In addition, in February 1997, the Company secured an additional $0.5
million in fixed equipment infrastructure financing from E.F. Johnson to
construct network facilities at additional site locations in the U.S. The terms
of this financing required that the Company pay 30% of the cost of the equipment
at the time of purchase with the balance of the purchase price payable monthly
over a five year period and bearing interest at a rate of 12% per annum.
Purchases made under this financing arrangement were classified as capital
leases payable (See Note 3) and it is intended that the capital leases will be
assumed by the buyers of the U.S. operations.
Subsequent to year-end 1997, the Company entered into additional agreements with
E.F. Johnson regarding the purchase of infrastructure equipment and subscriber
units. E.F. Johnson has made available to the Company a $1.5 million credit
line associated with the purchase of infrastructure equipment for build-out in
Chile. The amounts financed will be payable quarterly over a one year period
and no interest will be charged. The Company is required to make a down payment
in the amount of 25% of the cost of the purchased equipment pursuant to the
agreement. The Company has also entered into a radio purchase agreement with
E.F. Johnson to acquire 5,000 radios during 1998.
F-16
<PAGE>
Subsequent to year-end 1997, the Company entered into a radio purchase agreement
with Motorola to acquire 10,000 radios during 1998.
Senior Notes Financing
----------------------
On October 3, 1997, the Company finalized an approximately $11.1 million
financing of Senior Secured Convertible Notes, due 2002 ( the "Senior Notes"),
which are convertible into shares of the Company's common stock at an initial
conversion price of $1.45 per share. The Senior Notes are secured by 66% of the
Company's shares of its holding companies for its Latin American operations, and
bear interest at 12% (payable semi-annually beginning on April 30, 1998). Due to
the Senior Discount Notes offering completed on January 15, 1998, the principal
amount of the Senior Notes and related accrued interest were automatically
converted into 7,955,691 shares of the Company's Series C Preferred stock at a
conversion price of $1.45 per share (see Note 10).
F-17
<PAGE>
Notes and capital leases payable consist of the following at December 31, 1996
and 1997:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1997
------------ -------------
<S> <C> <C>
Capital lease, payable in monthly principal and
interest payments of $40,577, for 60 months beginning on various dates from
July 1, 1996 through October 31, 1996, effective interest rate
of 12%, secured by infrastructure equipment $ 1,700,540 $ 1,436,686
Capital lease, payable in monthly principal and
interest payments of $1,226 for 48 months
beginning July 28, 1996, effective interest rate
of 10.1%, secured by a phone system 44,971 42,198
Notes payable for purchase of SMR license,
quarterly payments of $79,786 are interest-only (at the stated
rate) for first five years after which quarterly payments of $272,144
include principal and interest for remaining five years, imputed interest
rate of 12%, secured by related SMR licenses 3,461,855 3,533,946
Senior Notes (see above) - 11,144,703
------------ -------------
5,207,366 16,157,533
Less current portion (310,319) -
Less amount classified as Net Assets Held for Sale - (5,012,830)
------------ -------------
$ 4,897,047 $ 11,144,703
============ =============
</TABLE>
On January 15, 1998, the Company finalized a $40 million financing of Senior
Discount Notes (the "Discount Notes") due 2005. The financing consisted of
40,000 units, each unit consisting of $1,000 in principal at maturity and one
warrant to purchase 64 shares of common stock of the Company at an exercise
price of $.01 per share. The Discount Notes were issued at a substantial
discount from their principal amount and interest does not accrue on the
Discount Notes prior to January 1, 2003. Thereafter, interest accrues at 14%
per annum, payable semi-annually in arrears on January 1 and July 1 of each year
commencing July 1, 2003. Net proceeds to the Company were $18.9 million, after
deducting $19.6 million of debt discount and $1.5 million in offering expenses.
The Discount Notes are secured by 66% of the Company's shares of its Cayman
Island holding companies for its Latin American operations. The Discount Notes
are also secured by 100% of the Company's stock in SMR Direct USA, Inc., a
wholly-owned subsidiary of the Company. This entity has no operations and its
financial position consists only of a nominal capitalization. The effective
interest rate on the Discount Notes is 21.26%.
In addition, on January 15, 1998 the Company issued $10.0 million in aggregate
principal amount of convertible notes (the "Convertible Notes") pursuant to a
purchase agreement dated January 15, 1998. Cash interest will not accrue on
the Convertible Notes prior to January 1, 2000. Thereafter, interest on the
Convertible Notes will be payable in cash at a rate of 9% per annum on January 1
and July 1 of each year, commencing on July 1, 2000. The Convertible Notes are
convertible into shares of common stock at a conversion price of $2.25 per
share, subject to adjustments in certain circumstances.
F-18
<PAGE>
Contractual maturities of debt outstanding (after reflecting conversion of the
Senior Notes) and capital leases at December 31, 1997, are as follows:
Capital
Debt Leases
----------- --------------
1998 $ 319,144 $ 541,028
1999 319,144 541,034
2000 319,144 525,398
2001 639,741 304,297
2002 1,088,577 4,876
Thereafter 3,900,731 -
----------- ----------
6,586,481 1,916,633
Less imputed interest (2,027,282) (339,732)
Less discount (1,025,253) -
Less sales tax - (98,017)
----------- ----------
$ 3,533,946(1) $1,478,884 (1)
========= ==========
(1) Amounts are included in the Net Assets Held for Sale line on the balance
sheet.
The terms of the Company's debt with the FCC contain provisions that require the
Company to seek the FCC's permission to enter into certain transactions,
including those which would result in a change in the Company's controlling
stockholders (See Note 3).
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
- ------- -----------------------------------
Fair values of cash equivalents and other current amounts receivable and payable
approximate the carrying amount due to their short-term nature.
Debt carried on the Company's consolidated balance sheet at December 31, 1997
approximates fair value and was recorded using market prices for companies with
similar debt maturities and market risk.
Mandatorily redeemable, convertible preferred stock is carried on the Company's
consolidated balance sheet at December 31, 1997 at $29.3 million. Fair value of
the Company's mandatorily redeemable, convertible Preferred Stock is based upon
the fair value established by the October 3, 1997 sale of Series C Preferred
Stock and instruments convertible into Series C Preferred Stock at $1.45 per
share, and are as follows:
Fair Value
----------
Series A Preferred $ 6,018,868
Series B Preferred $11,674,545
Series C Preferred $ 72,500
Subsequent to year-end, the Company issued convertible securities which are
convertible into common stock of the Company at $2.25 per share.
F-19
<PAGE>
NOTE 8. INCOME TAXES
- ------- ------------
The Company is subject to federal, state and foreign income taxes but has
incurred no liability for such taxes due to losses it has incurred since
inception. At December 31, 1997, the Company had net operating loss
carryforwards for U.S. federal tax purposes of approximately $12.3 million which
expire through the year 2012. These carryforwards are available to offset
future taxable income. The Company's foreign consolidated subsidiaries in Peru,
Ecuador, Venezuela and Chile are considered pre-operating entities for income
tax purposes and therefore the losses are deferred for income tax purposes and
amortized against future taxable income or loss over a period of approximately
four years commencing in 1997.
The Company's net deferred tax assets result primarily from the future benefit
of net operating loss carryforwards and deferred pre-operating losses. Net
deferred tax assets by country as of December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
U.S. Peru Ecuador Venezuela Chile Other Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996:
Net operating losses and
deferred pre-operating
losses $ 1,581,832 $ 226,710 $ 22,323 $ 3,396 $ 2,244 $ - $ 1,836,505
Valuation allowance (1,581,832) (226,710) ( 22,323) (3,396) (2,244) - (1,836,505)
----------- --------- --------- ------- -------- ------- -----------
$ - $ - $ - $ - $ - $ - $ -
=========== ========= ========= ======= ======== =======
1997:
Net operating losses and
deferred pre-operating
losses $ 6,356,024 $ 779,561 $ 338,773 $ 5,669 $ 10,526 $ 6,861 $ 7,497,414
Valuation allowance (6,356,024) (779,561) (338,773) (5,669) (10,526) (6,861) (7,497,414)
----------- --------- --------- ------- -------- ------- -----------
$ - $ - $ - $ - $ - $ - $ -
========= ========= ======= ======== =======
</TABLE>
The reconciliation of income taxes computed at the statutory rates to the income
tax benefit is as follows:
Years Ended December 31,
--------------------------
1996 1997
----------- -----------
Income tax benefit at statutory rates $(1,814,430) $(5,660,909)
Increase in valuation allowance 1,814,430 5,660,909
----------- -----------
Tax benefit $ - $ -
=========== ===========
NOTE 9. COMMITMENTS AND CONTINGENCIES
- ------- -----------------------------
Recovery of Investments
-----------------------
Since its inception, the Company's efforts have been primarily directed towards
raising capital and acquiring, developing and operating SMR and other low-cost,
wireless communications networks. Further, the Company has made significant
investments in pre-operating entities in various Latin American countries whose
primary assets were SMR licenses. The Company's Peruvian operations and
revenue-generating activity began in May 1996 and its Ecuadorian operations and
revenue generating activity began in March 1997. The Company has also made or
committed to make investments in Chile. The ability of the Company to recover
its current investment in property, equipment and spectrum and to generate
positive cash flow and operating profits is contingent upon a number of factors,
including the Company's ability to continue to build out and develop the SMR and
other low-cost, wireless communications networks it currently owns and to
F-20
<PAGE>
attract and retain sufficient subscribers on its existing systems and those
which are under development in sufficient numbers to achieve profitable
operations.
Recoverability of Licenses
--------------------------
The terms of the Company's SMR license agreements contain provisions whereby the
Company must achieve certain levels of subscriber load and network build out.
If such commitments are not met, the Company could be subject to the revocation
of the applicable licenses.
Compliance with the terms of SMR and other wireless communications licenses and
certain regulatory requirements, such as construction deadlines and minimum
subscriber requirements, can be difficult to meet. In addition, there can be no
assurance that in the future all regulatory requirements will be met or that the
Company will not lose any applicable licenses as a result of its failure to meet
such requirements. The Company currently is not in compliance with certain
minimum subscriber loading requirements with respect to a portion of its
channels in Peru. Failure to comply with such requirements may subject the
licenses relating to such channels to punitive measures. Requests for amendment
of such loading requirements have been filed by the Company with the Peruvian
Ministry of Transportation, Communications, Housing and Construction (the
"Ministry"); however, to date no responses have been received. Based upon
information currently available, the Company is optimistic that these amendments
will be approved; however, there can be no assurance that the amendments to be
received by the Company will be the same as those applied for.
Further, the terms of the Company's debt with the FCC contain provisions which
require the Company to seek the FCC's permission to enter into certain
transactions, including those which would result in a change in the Company's
controlling stockholders (See Note 3).
Lease Commitments
-----------------
The Company leases certain office facilities and transmission sites under
operating leases. Lease terms for office facilities range from one to five
years. Lease terms for transmission sites on buildings range from one to five
years, with varying renewal terms. Future minimum rental payments for such
office facilities and antenna site leases are as follows as of December 31,
1997.
1998 $ 951,773
1999 849,195
2000 586,820
2001 544,645
2002 17,760
Thereafter 88,800
---------
$3,038,993
=========
Lease expense for the years ended December 31, 1996 and 1997 was $102,560 and
$279,972, respectively.
Litigation
----------
In the normal course of business, the Company is subject to, and may become a
party to, litigation. In management's opinion, none of the matters currently in
litigation will have a material impact on the Company's financial position or
results of operations.
F-21
<PAGE>
NOTE 10. PREFERRED STOCK
- -------- ---------------
The Company is authorized to issue 17,400,000 shares of preferred stock. Shares
of preferred stock may be issued from time to time in one or more series with
designations, rights, preferences and limitations established by the Company's
Board of Directors.
Holders of preferred stock are entitled to dividends in amounts determined by
the Board of Directors. No distributions may be made to holders of common
stock until all dividends declared, if any, on the preferred stock have been
paid. The Indenture restricts the Company's ability to pay cash dividends.
In the event of the liquidation of the Company, holders of Series C Preferred
Stock have a preference of $72,500 over all other stock. Holders of Series B
Preferred Stock have a preference of $20,933,670 plus any declared and unpaid
dividends, if any, over holders of Series A Preferred Stock and common stock.
Holders of Series A Preferred Stock have a preference of $8,800,000 plus any
declared and unpaid dividends, if any, over holders of common stock. All such
series of preferred stock are collectively referred to as "Preferred Stock."
After all such payments have been made, any remaining assets will be distributed
to holders of all preferred stock and common stock ratably based on the number
of common shares outstanding, assuming the holders of Preferred Stock had
converted their shares into common stock.
Each share of Preferred Stock is convertible, at the option of the holder, into
shares of the Company's common stock at the rate of 10,000 shares of common
stock for each share of Series A Preferred Stock, 1.123 shares of common stock
for each share of Series B Preferred Stock and 1 share of common stock for each
share of Series C Preferred Stock. This conversion rate is subject to
adjustment based on a formula to prevent dilution. Due to the financing which
closed on October 3, 1997 (see Note 6) at which the fair market value of the
Company's stock was determined to be $1.45, the above-mentioned conversion rates
were adjusted, such that each share of Series A Preferred Stock and Series B
Preferred Stock is convertible into 11,792 and 1.4 shares of common stock,
respectively. Each share of Preferred Stock is automatically convertible into
common stock immediately prior to the closing of a public offering which meets
certain conditions.
The Company is obligated to redeem the Preferred Stock in three equal annual
payments beginning on June 27, 2002. The redemption price for the Series A
Preferred Stock is $25,000 per share ($8,800,000 in total), the redemption price
for the Series B Preferred Stock is $3.65 per share ($20,933,670 in total), the
redemption price for the Series C Preferred Stock is $1.45 per share ($72,500 at
December 31, 1997 and $11,608,246 subsequent to the conversion of the Senior
Notes.) The holders of Preferred Stock have an option to convert any or all of
the redeemable shares of Preferred Stock to common stock prior to each scheduled
annual redemption. In connection with the issuance of the Discount Notes and
the Convertible Notes, this obligation has been extended beyond January 1, 2006.
On October 3, 1997, the Company issued 50,000 shares of Series C Preferred Stock
to an officer of the Company in exchange for a promissory note payable in the
amount of $72,500. The Series C Preferred Stock bears a 12% dividend per annum
and is payable semi-annually in either cash or additional shares of Series C
Preferred at the option of the Company. The indenture related to the Discount
Notes (the "Indenture") restricts the ability of the Company to pay cash
dividends on the Series C Preferred.
F-22
<PAGE>
NOTE 11. STOCKHOLDERS' EQUITY (DEFICIT)
- -------- ------------------------------
Stock Option Plan
-----------------
During 1996, the Company adopted the 1996 Stock Option Plan ("the Plan") under
which the Company is authorized to grant options for up to 1,250,000 shares of
the Company's common stock to employees and directors of the Company. The Plan
was amended in February 1997 to authorize the Company to grant up to 1,488,000
shares of the Company's common stock and again in October 1997 to grant up to
2,307,972. The Company has outstanding options on 1,896,011 shares of the
Company's common stock at December 31, 1997. Under the Plan, the option
exercise price equals the market price of the stock on date of grant. The
options vest at various terms with a maximum vesting period of five years and
expire after a maximum of 10 years. The Company accounts for the Plan under
Accounting Principles Board Opinion No. 25 ("APB Opinion No. 25") under which
$22,000 of compensation cost has been recognized.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123 ("SFAS No. 123") which defines a fair value-based method of accounting for
employee stock options and similar equity instruments. However, it also allows
an entity to continue to measure compensation cost for those plans using the
intrinsic value-based method of accounting prescribed by APB Opinion No. 25.
Entities electing to remain with the accounting prescribed in APB Opinion No. 25
must make pro forma disclosures of net income and earnings per share, as if the
fair value-based method of accounting defined in SFAS No. 123 had been applied.
The Company has elected to make the pro forma disclosures in accordance with
SFAS No. 123 set forth below.
Had compensation cost for the Plan been determined consistent with SFAS 123, the
Company's net loss and net loss per common and common equivalent share would
have been increased to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1997
------------- ------------
<S> <C> <C> <C>
Net loss: As Reported $ (4,789,511) $(15,856,839)
============ ============
Pro Forma $ (4,803,081) $(15,870,576)
============ ============
Basic loss per common and
common equivalent share: As Reported $ (1.38) $ (4.53)
============ ============
Pro Forma $ (1.38) $ (4.53)
============ ============
</TABLE>
Because the fair value method of accounting required by SFAS 123 has not been
applied to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years.
A summary of the status of the Plan at December 31, 1996 and 1997 and changes
during the year then ended is presented in the table and narrative below:
<TABLE>
<CAPTION>
1996 1997
------------------------------- -------------------------------
Weighted Avg. Weighted Avg.
Shares Exercise Price Shares Exercise Price
------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year - $ - 572,750 $ 1.89
Granted 573,500 1.88 2,438,750 1.96
Exercised - - (150) 2.50
Forfeited or canceled (750) 2.50 (1,115,339) 2.77
Expired - - - -
------- ----- ----------- --------
Outstanding at end of year 572,750 1.89 1,896,011 1.46
======= ===== =========== ========
Exercisable at end of year _ - 254,604 1.64
======= ===== =========== ========
Weighted average fair value of
options granted $ 0.22 $ 0.44
=========== =====
</TABLE>
F-23
<PAGE>
The status of total stock options outstanding and exercisable under the Stock
Option Plan as of December 31, 1997 follows:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options
Exercisable
- -------------------------------------------------------------------------- ------------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number of Contractual Exercise Number of Exercise
Prices Shares Life (Years) Price Shares Price
<S> <C> <C> <C> <C> <C>
$1.00 - $1.45 1,811,015 4.51 $1.40 175,208 $1.15
$1.46 - $2.50 59,788 2.13 $2.50 54,188 $2.50
$2.51 - $3.25 25,208 1.92 $3.25 25,208 $3.25
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black Scholes option pricing model with the following weighted average
assumptions used for grants in 1996 and 1997, respectively; risk-free interest
rate of 6.1% and 5.9%; expected dividend yield of 0%; expected lives of 4.7 and
4.4 years; and, expected volatility of 0.001%.
On October 3, 1997, the Board of Directors authorized the reduction of the
exercise price to $1.45, the fair market value on such day, for the outstanding
options held by certain employees and directors with an exercise price greater
than $1.45. The other terms of such options remained substantially the same.
During 1997, the Company modified the terms of 200,000 stock options held by an
officer of the Company. The terms were modified to allow for immediate vesting
of a portion of these options. The Company recorded related compensation
expense of $22,000.
NOTE 12. GEOGRAPHIC DATA
- -------- ---------------
The following information presents certain summarized balance sheet and
statement of operations data by geographic region as of December 31, 1997 and
1996 and for the years then ended (in 000's).
<TABLE>
<CAPTION>
United Latin America
------------------
States Peru Ecuador Corporate Eliminations Consolidated
-------- --------- -------- --------- ------------- --------------
1997
- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,112 $ 2,939 $ 775 $ - $ - $ 4,826
Operating loss (7,512) (2,698) (1,132) (3,225) - (14,567)
Total assets $11,017 $11,440 $ 3,181 $27,452 $(23,218) $ 29,872
1996
- ----
Revenues $ 80 $ 216 $ - $ - $ - $ 296
Operating loss (3,255) (767) (296) (489) - (4,807)
Total assets $ 9,977 $ 4,139 $ 1,420 $24,376 $ (4,996) $ 34,916
</TABLE>
The Company conducts a significant portion of its business in Peru and Ecuador.
Accordingly, the Company's cash flow and its ability to service its indebtedness
is significantly dependent upon the cash flow of its Peruvian and Ecuadorian
subsidiaries. The Company's ability to recover its investment in these
subsidiaries, to fund operations in other countries, and to service its
F-24
<PAGE>
indebtedness, among other things, depends to a significant degree on its ability
to transfer funds from such subsidiaries to the United States parent (the
"Parent").
The ability of the Company's subsidiaries to pay dividends or make loans or
advances to the Parent is subject to regulation within their respective
jurisdictions of organization and operations. While the existing laws and
regulations of these jurisdictions generally do not prohibit the Company's
subsidiaries from paying dividends or making loans or advances to the Parent,
there can be no assurance that such laws will continue to permit or will not
restrict such payments.
Further, the Company is exposed to credit risk related to receivables
denominated in non-United States Dollar currencies in those foreign countries.
Note 13. PRO FORMA INFORMATION (UNAUDITED)
- -------- ---------------------------------
The following pro forma information for the years ended December 31, 1996 and
1997 gives effect to the disposition of U.S. Operations and the acquisitions of
C-Comunica and Transnet, as if each had occurred on January 1, 1996. The pro
forma financial information does not purport to represent what the Company's
results of operations would actually have been if such transactions had in fact
occurred on such date. The pro forma results presented below are based upon
currently available information and upon certain assumptions that management
believes are appropriate under the circumstances.
<TABLE>
<CAPTION>
(Unaudited)
For the Years Ended
December 31,
---------------------------------------------
1996 1997
------------------- ---------------------
<S> <C> <C>
Revenues $ 887,078 $ 3,807,161
Net loss applicable to common shareholders $ (2,048,011) $ (8,703,458)
Net loss per share $ (0.59) $ (2.48)
</TABLE>
F-25
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $23,809,273 $ 7,730,141
Restricted cash 1,677,359 1,349,536
Accounts receivable, net of allowances for doubtful
accounts of $559,774 and $517,986, respectively 1,283,964 1,283,409
Radios and accessories inventory 2,010,581 1,371,762
Other current assets 2,203,043 1,371,041
Net assets held for sale (Note 2) 5,283,189 4,430,661
---------- ------------
Total current assets 36,267,409 17,536,550
PROPERTY AND EQUIPMENT, net (Note 4) 7,269,714 5,004,903
SMR LICENSES, net of accumulated amortization of $457,594
and $289,196 12,792,988 5,921,315
OTHER NONCURRENT ASSETS, net 2,239,317 1,409,615
----------- ------------
Total assets $58,569,428 $ 29,872,383
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,558,064 $ 1,019,208
Accrued liabilities 819,052 1,016,610
Payable to seller (Note 3) 750,000 -
Deposits on assets held for sale (Note 2) 4,805,577 4,609,077
------------ ------------
Total current liabilities 7,932,693 6,644,895
SENIOR DISCOUNT NOTES (Note 5) 16,116,629 -
CONVERTIBLE NOTES (Note 5) 10,412,500 -
SENIOR SECURED NOTES (Note 5) - 11,144,703
------------ ------------
Total liabilities 34,461,822 17,789,598
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 2 and 5)
MANDATORILY REDEEMABLE, CONVERTIBLE
PREFERRED STOCK:
Series A, $.01 par value, 352 authorized, issued
and outstanding 8,776,294 8,772,346
Series B, $.01 par value, 6,399,648 authorized,
5,735,251 issued and outstanding 20,474,171 20,407,217
Series C, $.01 par value, 11,000,000 authorized, 8,284,136 and 50,000
issued and outstanding, respectively 12,011,997 72,500
------------ ------------
41,262,462 29,252,063
------------ ------------
STOCKHOLDERS' DEFICIT:
Common stock, $.01 par value, 40,000,000 authorized,
3,502,750 and 3,502,650 issued and outstanding,
respectively 35,028 35,027
Additional paid-in capital 8,573,882 3,493,598
Accumulated deficit (25,730,425) (20,704,438)
Accumulated other comprehensive (loss) income (33,341) 6,535
------------ ------------
Total stockholders' deficit (17,154,856) (17,169,278)
------------ ------------
Total liabilities and stockholders' deficit $ 58,569,428 $ 29,872,383
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
F-26
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
-------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
----------------------------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------------------- --------------------------------------------
1998 1997 1998 1997
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
REVENUE:
Radio service revenue $ 1,235,704 $ 740,129 $ 2,462,523 $ 1,103,995
Equipment sales 414,152 379,134 902,025 662,094
Activation and other 40,260 158,478 77,253 252,576
---------------- ---------------- ---------------- ----------------
1,690,116 1,277,741 3,441,801 2,018,665
---------------- ---------------- ---------------- ----------------
COSTS AND EXPENSES RELATED TO
REVENUE:
Network and site expense 22,363 220,280 42,794 374,355
Cost of equipment sold 488,949 262,486 1,080,296 403,638
Maintenance and other 65,804 399,354 185,091 618,673
---------------- ---------------- ---------------- ----------------
577,116 882,120 1,308,181 1,396,666
---------------- ---------------- ---------------- ----------------
GROSS PROFIT 1,113,000 395,621 2,133,620 621,999
OPERATING COSTS AND EXPENSES:
Selling, general and
administrative 2,494,757 2,976,101 4,785,065 5,079,909
Depreciation and amortization 464,016 736,887 896,667 1,167,610
---------------- ---------------- ---------------- ----------------
2,958,773 3,712,988 5,681,732 6,247,519
---------------- ---------------- ---------------- ----------------
OPERATING LOSS (1,845,773) (3,317,367) (3,548,112) (5,625,520)
---------------- ---------------- ---------------- ----------------
OTHER INCOME (EXPENSE):
Interest expense (1,118,787) (173,413) (2,158,649) (303,519)
Interest income 415,296 103,118 834,324 282,230
Other (11,731) (26,035) (153,550) (55,859)
---------------- ---------------- ---------------- ----------------
(715,222) (96,330) (1,477,875) (77,148)
---------------- ---------------- ---------------- ----------------
NET LOSS (2,560,995) (3,413,697) (5,025,987) (5,702,668)
DIVIDENDS ON AND ACCRETION OF
MANDITORILY REDEEMABLE PREFERRED
SHARES TO REDEMPTION VALUE (403,331) (35,451) (717,423) (69,662)
---------------- ---------------- ---------------- ----------------
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS (2,964,326) (3,449,148) (5,743,410) (5,772,330)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation
adjustments (45,309) 6,469 (39,876) 71,849
---------------- ---------------- ---------------- ----------------
COMPREHENSIVE LOSS $ (3,009,635) $ (3,442,679) $ (5,783,286) $ (5,700,481)
================ ================ ================ ================
BASIC AND DILUTED NET LOSS PER
COMMON SHARE
$ (0.85) $ (0.98) $ (1.64) $ (1.65)
================ ================ ================ ================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 3,502,750 3,502,500 3,502,748 3,502,500
================ ================ ================ ================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-27
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE, CONVERTIBLE
-----------------------------------------------------------------------
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
-----------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Manditorily Redeemable,
Convertible Preferred Stock
-------------------------------------------------------------------------
Series A Series B Series C
-------------------- ------------------------ -----------------------
Shares Amount Shares Amount Shares Amount
------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1997 352 $8,772,346 5,735,251 $20,407,217 50,000 $ 72,500
Exercise of stock options - - - - - -
Conversion of Senior
Convertible Notes to Preferred
Stock Series C - - - - 7,955,687 11,535,746
Warrants issued in connection
with Discount Notes - - - - - -
Dividends payable on the Preferred
Stock Series C - - - - - -
Payment of Dividends on the Preferred
Stock Series C in additional shares - - - - - -
Accretion of preferred stock to
redemption value - 3,948 - 66,954 278,449 403,751
Stock based compensation - - - - - -
Net loss - - - - - -
Cumulative translation adjustment - - - - - -
------ ---------- --------- ----------- --------- -----------
BALANCES, June 30, 1998 352 $8,776,294 5,735,251 $20,474,171 8,284,136 $12,011,997
====== ========== ========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Stockholders' Deficit
-----------------------------------------------------------------------------------
Accumulated
Common Stock Additional Accumu- Other Total
-------------------- Paid-In lated Comprehensive Stockholders'
Shares Amount Capital Deficit Income (Loss) Deficit
--------- --------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1997 3,502,650 $ 35,027 $3,493,598 $(20,704,438) $ 6,535 $ (17,169,278)
Exercise of stock options 100 1 249 - - 250
Conversion of Senior
Convertible Notes to Preferred
Stock Series C - - - - - -
Warrants issued in connection
with Discount Notes - - 5,760,000 - - 5,760,000
Dividends payable on the Preferred
Stock Series C - - (646,521) - - (646,521)
Payment of Dividends on the Preferred
Stock Series C in additional shares - - - - - -
Accretion of preferred stock to
redemption value - - (70,902) - - (70,902)
Stock based compensation - - 37,458 - - 37,458
Net loss - - - (5,025,987) - (5,025,987)
Cumulative translation adjustment - - - - (39,876) (39,876)
--------- --------- ---------- ------------ ------------- -------------
BALANCES, June 30, 1998 3,502,750 $ 35,028 $8,573,882 $(25,730,425) $ (33,341) $ (17,154,856)
========= ========= ========== ============ ============= =============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-28
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1998 1997
------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (5,025,987) $ (5,702,668)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 896,667 1,167,610
Stock based compensation 37,458 5,500
Allowance for doubtful accounts 302,363 76,471
Accretion of interest on discount and
convertible notes 1,903,637 -
Accretion of spectrum license debt - 46,623
Changes in operating assets and liabilities-
Increase in accounts receivable (302,918) (651,186)
Increase in inventory (638,819) (2,604,837)
Increase in other assets (538,473) (238,271)
Increase in accounts payable and other 459,106 1,001,200
Decrease in accrued liabilities (76,297) (453,847)
------------ ------------
Net cash used in operating activities (2,983,263) (7,353,405)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,906,390) (5,918,641)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (4,082,303) (2,875,365)
Payment of contingent payable to seller (2,040,000) -
(Increase) decrease in restricted cash (327,823) 3,640,262
Change in net assets held for sale (656,028) -
Funding of organizational costs - (499,191)
------------ ------------
Net cash used in investing activities (10,012,544) (5,652,935)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from offering of discount notes and warrants 20,441,258 -
Proceeds from offering of convertible notes 10,000,000 -
Deferred debt offering costs (1,326,693) -
Proceeds from issuance of common stock 250 -
Proceeds from issuance of Series A and Series B
preferred stock, net - 51,127
Payments on capital leases payable - (119,129)
------------ ------------
Net cash provided by (used in) financing activities 29,114,815 (68,002)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (39,876) 71,849
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 16,079,132 (13,002,493)
CASH AND CASH EQUIVALENTS, beginning of period 7,730,141 14,820,583
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 23,809,273 $ 1,818,090
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-29
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
--------------------------
1998 1997
----------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
<S> <C> <C>
Interest $ 246,760 $242,158
Income taxes 96,804 -
Supplemental schedule of noncash
investing and financing activities-
Stock issued for services - 151,870
Accretion of preferred stock to redemption value 70,902 69,662
Dividends payable on preferred stock 646,521 -
Conversion of senior note and related accrued
interest to Series C preferred stock 11,535,746 -
Payment of dividends on Series C preferred stock
in additional shares 403,751 -
Contingent payment of acquisition of Chilean
channels 2,800,000 -
Equipment acquired through capital lease - 716,464
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-30
<PAGE>
CENTENNIAL COMMUNICATIONS CORP. AND SUBSIDIARIES
------------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
AS OF JUNE 30, 1998
-------------------
(UNAUDITED)
-----------
NOTE 1. BASIS OF PRESENTATION
- ------- ---------------------
Basis of Presentation
---------------------
The accompanying interim consolidated financial statements include the
accounts of Centennial Communications Corp. and its subsidiaries (collectively,
the "Company"), all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In management's opinion, all adjustments (which are of a normal recurring
nature) have been made which are necessary to present fairly the financial
position of the Company as of June 30, 1998 and the results of its operations
for the three and six months ended June 30, 1998 and 1997. For a more complete
understanding of the Company's financial position and results of operations, see
the consolidated financial statements of the Company included in the Company's
annual report for the year ended December 31, 1997.
Comprehensive Income
--------------------
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS No. 130"), which requires
companies to report all changes in equity during a period, except those
resulting from investment by owners and distributions to owners, in a financial
statement for the period in which they are recognized. The Company has chosen
to report Comprehensive Income, which encompasses net income and foreign
currency translation adjustments, in the Condensed Consolidated Statements of
Operations. Prior years have been restated to conform to the SFAS No. 130
requirements.
Recently Issued Accounting Standards
------------------------------------
The AICPA issued Statement of Position ("SOP") 98-5, Reporting on the Costs
of Start-Up Activities. SOP 98-5 requires costs of start-up activities,
including organization costs, to be expensed as incurred. SOP 98-5 is effective
for fiscal years beginning after December 15, 1998. The Company does not
believe that the provisions of SOP 98-5 will have a material effect on the
Company's reported results of operations.
NOTE 2. SALE OF THE U.S. OPERATIONS
- ------- ---------------------------
In August 1997, the Company made a strategic decision to sell the U.S.
Operations and began to seek purchasers for these operations, consisting of
licenses and related assets and liabilities in 20 major trading areas ("MTAs").
As of June 30, 1998, the Company had executed sales contracts for these licenses
and substantially all of the related assets and liabilities in each of the MTAs
in which
F-31
<PAGE>
it had U.S. operations. The executed sales contracts generally provide that the
consideration for the assets will consist of some combination of cash,
promissory notes and the assumption of the FCC debt (see Note 6). The proposed
purchases were subject to significant contingencies, primarily related to the
approval by the FCC of such assumption of debt, including the qualifications by
the proposed purchaser as a small or very small business, as defined by the FCC.
The Company has not been notified from the FCC regarding two remaining
purchasers. The maximum amount the Company would be required to repay currently
to the FCC is approximately $11,000 for which the purchaser has agreed to
reimburse the Company. Until the sales close without contingency, the Company
has transferred a majority of the risks and rewards of the U.S. Operations to
the purchasers by way of management agreements. However, the transaction will
not be recognized as a sale until substantially all of the risks and rewards of
ownership and full control of such licenses and the related assets and
liabilities are transferred to the purchasers (see Note 9). As of June 30,
1998, the Company has received approximately $4,805,577 in cash proceeds related
to these sales and has recorded these amounts as deposit liabilities in the
accompanying balance sheet.
At June 30, 1998 and December 31, 1997 and for the six months ended June 30,
1998 and 1997, financial information related to the U.S. Operations was as
follows:
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1998 1997
--------------------- ----------------------
<S> <C> <C>
Current assets $ 597,546 $ 474,591
Property and equipment 6,297,206 6,714,290
SMR licenses 3,828,794 3,828,794
----------- -----------
Total Operating Assets 10,723,546 11,017,675
Current liabilities 491,844 1,574,184
Capital leases 1,333,485 1,478,884
Spectrum license debt 3,615,028 3,533,946
----------- -----------
Total Liabilities 5,440,357 6,587,014
----------- -----------
Net assets of the U.S. Operations $ 5,283,189 $ 4,430,661
=========== ===========
For the Six Months
Ended June 30,
-------------------------------------------------
1998 1997
--------------------- ----------------------
Revenue $ - $ 567,669
Costs and expenses related to revenue - 794,645
------- -----------
Gross loss - (226,976)
Selling, general and administrative - 2,046,387
Depreciation and amortization - 653,115
------- -----------
Operating Loss $ - $(2,926,478)
======= ===========
</TABLE>
Effective August 1997, the property, equipment and SMR licenses related to
the U.S. Operations are considered to be assets to be disposed of, as that term
has been defined by Statement of Financial Accounting Standards No. 121, because
management, having the authority to do so, has committed to the sale of these
assets. As such, the Company ceased recording
F-32
<PAGE>
revenue and related operating expenses. Accordingly, the Company's management
estimated the fair value of such assets, and determined that a write-down to
fair market value was necessary as of August 1997. The amount of the write-down
recorded by management was approximately $1,900,000. The Company's estimates are
based upon executed sales contracts and management's estimate of fair value of
the remaining assets not under contract. Additionally, the Company recorded an
approximate $1,300,000 charge for termination and other contractually committed
costs in connection with the divestiture of the U.S. Operations in the third
quarter of 1997. The final outcome of the divestiture of the U.S. Operations and
the proceeds to be received therefrom is not currently known and risk exists
that the ultimate outcome of such sale, including the amount of the ultimate
write-down necessary to state such assets and liabilities at their fair market
value, will be materially different from management's estimates, and the
ultimate outcome could result in an additional write-down of such assets.
NOTE 3. ACQUISITIONS
- ------- -------------
On January 2, 1998, the Company purchased 100% of the outstanding capital
stock of Telecomunicaciones y Servicios S.A. ("TyS"), a Chilean operating
company. TyS holds 10 800 MHz channels in the city of Santiago, Chile. The
acquisition was accounted for as a purchase. The total consideration given and
liabilities assumed for the Chilean company was approximately $3,200,000, of
which $800,000 was paid at closing and approximately $2,040,000 was paid June
29, 1998 and $350,000 on July 8, 1998 upon the transfer of 315 additional
channels (40 of which are in Santiago) to the operating company. Approximately
$80,000 represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was approximately $3,120,000, which was allocated to
SMR licenses. SMR licenses are amortized over approximately 40 years, the
average remaining life of the licenses. The purchase price was financed by the
Company with available cash.
On April 14, 1998 the Company executed a purchase agreement with certain
non-operating subsidiaries of International Wireless Communications Holdings,
Inc. for the acquisition of certain assets in Peru, Ecuador and Chile for a
purchase price of approximately $3,500,000. On May 13, 1998 the Company
completed the first part of the acquisition and acquired a non-operating entity
in Ecuador (Comovec S.A.) for approximately $300,000. Comovec S.A. holds
licenses to operate SMR networks and has 60 channels in each of Quito and
Guayaquil and 25 channels in Cuenca. Approximately $20,000 represented the fair
value of the net tangible assets of Comovec S.A. as of the date of acquisition.
The excess purchase price over the fair value of the net tangible assets
acquired was approximately $250,000, which was allocated to SMR licenses.
Comovec S.A.'s licenses will be amortized over 40 years beginning on the date
that the channels are launched. On May 22, 1998, the Company completed the
second part of the acquisition and acquired a non-operating entity in Peru (Peru
Tel S.A.) for approximately $2,800,000. Peru Tel S.A. holds licenses to operate
SMR networks and has 32 channels in Lima/Callao and 100 channels among eight
other cities. Approximately $400,000 represented the fair value of the net
tangible assets of Peru Tel S.A. as of the date of acquisition. The excess
purchase price over the fair value of the net tangible assets acquired was
approximately $2,400,000, which was allocated to SMR licenses. Peru Tel S.A.'s
SMR licenses will be amortized over 40 years beginning on the date that the
channels are launched. The Company is currently waiting for government approval
for the transfer of the license in Chile to the Company (which it expects will
occur in the next six months) before it can
F-33
<PAGE>
close the final part of the acquisition for approximately $400,000. The Company
used its existing cash to acquire Comovec S.A. and Peru Tel S.A. Detail of net
assets of acquisitions during 1998 follows:
<TABLE>
<CAPTION>
Chile Peru Ecuador
-------------------- ----------------- ----------------
<S> <C> <C> <C>
Property and equipment $ 71,039 $ - $ -
SMR licenses 2,769,715 2,423,920 248,986
Other assets 15,105 87,041 3,259
Accounts payable and accrued liabilities (24,273) (82,489) -
-------------------- ----------------- ----------------
Acquisition, net of cash acquired 2,831,586 2,428,472 252,245
Cash acquired 18,414 386,095 16,421
Payable to seller 750,000 - -
-------------------- ----------------- ----------------
Purchase price $3,600,000 $2,814,567 $268,666
========== ========== ========
</TABLE>
In addition to acquisitions, the Company was awarded 40 nationwide
channels of 800 MHz spectrum on June 9, 1998 in El Salvador. The Company paid
$620,000 for the channels which have a 20 year term.
NOTE 4. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
June 30, December 31,
1998 1997
----------- -------------
Network infrastructure $ 4,495,884 $ 3,527,655
Radios 3,867,544 2,017,071
Computer equipment and software 458,227 392,276
Furniture and fixtures 308,354 229,174
Leasehold improvements 92,296 44,496
----------- -----------
9,222,305 6,210,672
Accumulated depreciation (1,952,591) (1,205,769)
----------- -----------
Property and equipment, net $ 7,269,714 $ 5,004,903
=========== ===========
In August 1997, the Company decided to sell certain property and equipment
related to the U.S. Operations (see Note 2).
NOTE 5. LONG-TERM DEBT AND CAPITAL LEASES PAYABLE
- ------- -----------------------------------------
Notes and capital leases payable consist of the following at June 30, 1998
and December 31, 1997:
F-34
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Capital lease, payable in monthly principal and
interest payments of $40,577, for 60 months
beginning on various dates from July 1, 1996
through October 31, 1996, effective interest rate
of 12%, secured by infrastructure equipment $ 1,299,875 $ 1,436,686
Capital lease, payable in monthly principal and
interest payments of $1,226 for 48 months
beginning July 28, 1996, effective interest rate
of 10.1%, secured by a phone system 33,610 42,198
Notes payable for purchase of SMR license,
quarterly payments of $79,786 are interest-
only (at the stated rate) for first five years
after which quarterly payments of $272,144
include principal and interest for remaining
five years, imputed interest rate of 12%,
secured by related SMR licenses 3,615,028 3,533,946
Senior Notes - 11,144,703
Discount Notes 16,116,629 -
Convertible Notes 10,412,500 -
---------- ----------
31,477,642 16,157,533
Less amount classified as Net Assets Held for Sale (4,948,513) (5,012,830)
----------- -----------
$26,529,129 $11,144,703
=========== ===========
</TABLE>
NOTE 6. PREFERRED STOCK
- ------- ---------------
In the event of a liquidation of the Company, holders of Series C Preferred
Stock have a preference of $12,011,997 over all other stock. Holders of Series
B Preferred Stock have a preference of $20,933,670 plus any declared and unpaid
dividends, if any, over holders of Series A Preferred Stock and common stock.
Holders of Series A Preferred Stock have a preference of $8,800,000 plus any
declared and unpaid dividends, if any, over holders of common stock. All such
series of preferred stock are collectively referred to as "Preferred Stock."
After all such payments have been made, any remaining assets will be distributed
to holders of all preferred stock and common stock ratably based on the number
of common shares outstanding, assuming the holders of Preferred Stock had
converted their shares into common stock.
On January 15, 1998, the Senior Notes and related accrued interest were
automatically converted into 7,955,691 shares of Series C Preferred Stock at a
conversion price of $1.45 per share. The Series C Preferred Stock bears a 12%
dividend per annum and is payable semi-annually in each April and October in
either cash or additional shares of Series C Preferred stock at the option of
the Company. The Indenture restricts the ability of the Company to pay cash
dividends on the Series C Preferred. In April 1998, the Company issued 278,449
shares of Series C Preferred Stock for the 12% dividend at $1.45 per share.
F-35
<PAGE>
NOTE 7. OPERATING SEGMENTS
- ------- ------------------
The following information presents certain summarized balance sheet and
statement of operations data by segment as of June 30, 1998 and 1997 and for the
six months then ended (in 000's):
<TABLE>
<CAPTION>
United Latin America
----------------------------
States(1) Peru Ecuador Chile Corporate Eliminations Consolidated
---------- -------- -------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998
- ---------------------
Revenues $ - $ 2,045 $1,343 $ 54 $ - $ - $ 3,442
EBITDA - 382 (161) (441) (2,431) - (2,651)
Operating loss - (15) (446) (463) (2,624) - (3,548)
Total assets $10,724 $15,732 $4,579 $5,381 $56,631 $(34,478) $58,569
June 30, 1997
- ---------------------
Revenues $ 568 $ 1,309 $ 142 $ - $ - $ - $ 2,019
EBITDA (2,273) (364) (278) - (1,543) - (4,458)
Operating loss (2,926) (722) (375) - (1,603) - (5,626)
Total assets $14,522 $10,720 $2,419 $ - $16,492 $(12,830) $31,323
</TABLE>
(1) In August 1997 the Company made the decision to sell its U.S. operations
(see Note 2).
F-36
<PAGE>
Note 8. PRO FORMA INFORMATION
- ------- ----------------------
The following pro forma information for the six months ended June 30, 1998
and 1997 gives effect to the disposition of U.S. Operations and the acquisitions
of Transnet, TyS, Peru Tel S.A. and Comovec S.A., as if each had occurred on
January 1, 1997. The pro forma financial information does not purport to
represent what the Company's results of operations would actually have been if
such transactions had in fact occurred on such date. The pro forma results
presented below are based upon currently available information and upon certain
assumptions that management believes are reasonable under current circumstances.
<TABLE>
<CAPTION>
Disposition of
Actual U.S. Operations Acquisitions Pro Forma
------------ ------------------- ---------------- -------------
For the Six Months Ended
June 30, 1998:
<S> <C> <C> <C> <C>
Revenues $ 3,441,801 $ - $ - $ 3,441,801
Net loss applicable to common
Shareholders (5,743,410) - (121,524) (5,864,934)
Net loss per share (1.64) - - (1.67)
Disposition of
Actual U.S. Operations Acquisitions Pro Forma
------------ ------------------- ---------------- -------------
For the Six Months Ended
June 30, 1997:
Revenues $ 2,018,665 $ (567,669) $ 82,109 $ 1,533,105
Net loss applicable to common
shareholders (5,772,330) 2,296,478 (471,343) (3,947,195)
Net loss per share (1.65) - - (1.13)
</TABLE>
NOTE 9. SUBSEQUENT EVENT
- ------- ----------------
On July 6, 1998, the Company closed a portion of the sale of the U.S.
Operations in connection with the U.S. sale. The Company closed the sale of its
MTA's in seven states to one purchaser. The Company anticipates closing the
sale of 12 more of its MTA's in August 1998 and the remaining MTA by year-end.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Centennial Cayman Corp.:
We have audited the accompanying consolidated balance sheets of Centennial
Cayman Corp. (a Cayman Islands corporation) and subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of operations and
comprehensive loss, stockholder's equity and cash flows for the period from
inception (February 29, 1996) to December 31, 1996 and for the year ended
December 31, 1997. 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 auditing standards generally accepted
in the United States. United States generally accepted auditing standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Centennial Cayman Corp. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from inception (February 29,
1996) to December 31, 1996 and for the year ended December 31, 1997 in
conformity with accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 30, 1998.
F-38
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1996 1997
------ ----------------------- ------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 171,073 $ 908,048
Restricted cash 86,000 44,536
Accounts receivable - trade, net of allowance for doubtful
accounts of $0 and $517,986, respectively 393,460 1,283,409
Accounts receivable affiliates 25,000 -
Inventory 176,066 1,371,762
VAT receivable - 785,787
Prepaid licenses and other current assets 185,949 337,517
----------------------- ------------------------
Total current assets 1,037,548 4,731,059
PROPERTY AND EQUIPMENT, net 1,942,989 4,474,619
SMR LICENSES, net of accumulated amortization
of $20,051 and $289,196, respectively 2,111,112 5,921,315
OTHER NONCURRENT ASSETS, net 467,190 584,918
----------------------- ------------------------
Total assets $5,558,839 $15,711,911
======================= ========================
LIABILITIES AND STOCKHOLDER'S EQUITY
-------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 309,633 $ 251,957
Accounts payable - affiliates 1,336,846 -
Accrued liabilities 68,242 308,268
----------------------- ------------------------
Total liabilities 1,714,721 560,225
COMMITMENTS AND CONTINGENCIES (Notes 1, 3 and 6)
STOCKHOLDER'S EQUITY :
Common stock, $1 par value, 50,000 authorized,
2 issued and outstanding, respectively 2 2
Additional paid-in capital 4,820,585 20,858,377
Accumulated deficit (970,000) (5,713,228)
Accumulated other comprehensive (loss) income (6,469) 6,535
----------------------- ------------------------
Total stockholder's equity 3,844,118 15,151,686
----------------------- ------------------------
Total liabilities and stockholder's equity $5,558,839 $15,711,911
======================= ========================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
F-39
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
(February 29,
1996) to Year Ended
December 31, December 31,
-------------------- -------------------------
1996 1997
-------------------- -------------------------
REVENUE:
<S> <C> <C>
Radio service revenue $ 123,479 $ 2,247,494
Equipment sales 92,840 1,376,396
Other - 65,587
-------------------- -------------------------
216,319 3,689,477
COSTS RELATED
TO REVENUE:
Network and site expense 62,615 79,492
Cost of equipment sold 40,765 2,038,116
Maintenance and other - 176,380
-------------------- -------------------------
103,380 2,293,988
-------------------- -------------------------
GROSS PROFIT 112,939 1,395,489
OPERATING COSTS AND EXPENSES:
Selling, general and administrative
(including $223,000 and
$936,011 in allocations from
Parent, respectively) 996,678 5,181,796
Depreciation and amortization 179,707 1,014,885
-------------------- -------------------------
1,176,385 6,196,681
-------------------- -------------------------
OPERATING LOSS (1,063,446) (4,801,192)
-------------------- -------------------------
OTHER INCOME (EXPENSE):
Interest expense (130) (3,894)
Interest income 8,178 22,696
Foreign currency exchange (losses)/gains (27,222) 2,777
Other 1,310 36,385
-------------------- -------------------------
(17,864) 57,964
-------------------- -------------------------
NET LOSS BEFORE MINORITY INTEREST
(1,081,310) (4,743,228)
MINORITY INTEREST SHARE OF LOSS 111,310 -
-------------------- -------------------------
NET LOSS (970,000) (4,743,228)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency transaction adjustments (6,469) 13,004
-------------------- -------------------------
COMPREHENSIVE LOSS $ (976,469) $(4,730,224)
==================== =========================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
F-40
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
Stockholder's Equity
---------------------------------------------------------------------------
Common Stock Additional Accumulated
-------------- ------------ Other Total
Paid-in Accumulated Comprehensive Stockholder's
Shares Amount Capital Deficit Income (Loss) Equity
------ ------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Inception, February 29, 1996 - $ - $ - $ - $ - $ -
Common stock issuance 2 2 498 - - 500
Equity contributions from parent - - 4,820,087 - - 4,820,087
Net loss - - - (970,000) - (970,000)
Cumulative translation
adjustment - - - - (6,469) (6,469)
------ ------ ------------ -------------- ------------ --------------
Balances, December 31, 1996 2 $ 2 $ 4,820,585 $ (970,000) $ (6,469) $ 3,844,118
Equity contributions from parent - - 16,037,792 - - 16,037,792
Net loss - - - (4,743,228) - (4,743,228)
Cumulative translation
adjustment - - - - 13,004 13,004
------ ------ ------------ -------------- ------------ --------------
Balances, December 31, 1997 2 $ 2 $ 20,858,377 $ (5,713,228) $ 6,535 $ 15,151,686
====== ====== ============ ============== ============ ==============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
F-41
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Inception
(February 29, Year
1996) to Ended
December 31, December 31,
-------------------- -----------------------
1996 1997
-------------------- -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (970,000) $(4,743,228)
Adjustments to reconcile net loss to net cash used
in operating activities-
Depreciation and amortization 179,707 1,014,885
Write-off of Argentine investment - 615,598
Allowance for doubtful accounts - 517,986
Changes in operating assets and liabilities-
Increase in accounts receivable trade (362,529) (1,331,582)
(Increase) decrease in accounts receivable
affiliates (25,000) 25,000
(Increase) decrease in inventory (140,429) 2,177,991
Increase in other assets (152,582) (1,481,850)
Increase in accounts payable and other 92,156 525,409
Increase in accrued liabilities 68,242 162,620
-------------------- -----------------------
Net cash used in operating activities (1,310,435) (2,517,171)
-------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,312,641) (975,289)
Acquisition of businesses, net of cash acquired (2,552,248) (4,482,325)
(Increase) decrease in restricted cash (86,000) 41,464
Funding of organizational costs (167,356) (701,631)
-------------------- -----------------------
Net cash used in investing activities (4,118,245) (6,117,781)
-------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 500 -
Contribution from parent 4,268,876 10,695,769
Advances (payments) from affiliates 1,336,846 (1,336,846)
-------------------- -----------------------
Net cash provided by financing activities 5,606,222 9,358,923
-------------------- -----------------------
EFFECT OF EXCHANGE RATE ON CASH (6,469) 13,004
-------------------- -----------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 171,073 736,975
CASH AND CASH EQUIVALENTS, beginning of period
- 171,073
-------------------- -----------------------
CASH AND CASH EQUIVALENTS, end of period
$ 171,073 $ 908,048
==================== =======================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
F-42
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------
Inception
(February 29, Year
1996) to Ended
December 31, December 31,
-----------------------------------
1996 1997
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
Interest $ - $ 24,562
Income taxes - 52,221
Supplemental schedule of non-cash investing
and financing activities-
Equipment contributed by parent $ 551,211 $ 5,342,023
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements
F-43
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
AS OF DECEMBER 31, 1996 AND 1997
--------------------------------
NOTE 1. ORGANIZATION AND OWNERSHIP
- ------- --------------------------
Centennial Cayman Corp. was incorporated in June 1996 as a wholly owned
subsidiary of Centennial Communications Corp. (the "Parent Company").
Centennial Cayman Corp. and subsidiaries (collectively, the "Company") is a
Cayman Islands corporation engaged in the acquisition, development and operation
of specialized mobile radio ("SMR") and other low-cost, wireless communications
networks, the sale of communications services using those networks, and the sale
and servicing of related accessory equipment in certain countries of Latin
America. The accompanying consolidated financial statements for the period from
inception (February 29, 1996) to December 31, 1996 include the operations of an
entity purchased by the Parent Company in February 1996. As this entity and the
Company are under the common control of the Parent Company, this entity was
contributed to the Company upon its formation in June 1996. The Company has
acquired SMR licenses through direct applications to governments, contributions
from the Parent Company and through acquisitions of interests in other entities
(all of which are wholly owned at December 31, 1996 and 1997) that have been
granted or have applied for SMR licenses. As more fully discussed in Note 6,
the Company is subject to various risks and uncertainties, primarily those of an
enterprise in the early stage of operations.
To date, the Company has been solely dependent on funds provided by the Parent
Company. The Company has received equity contributions as well as extensions of
credit from the Parent Company to fund its activities and anticipates that the
Parent Company will make additional equity contributions to the Company. The
Parent Company is under no obligation to provide additional advances or loans to
the Company; however, if the Company's operating cash flow is not sufficient to
meet its needs, the Parent Company has committed that it will continue to make
advances to the Company as necessary, through at least December 31, 1998.
In October 1997, the Parent Company completed a financing which resulted in
proceeds to the Parent Company of approximately $11.1 million. In addition, in
January 1998, the Parent Company completed financings which resulted in proceeds
to the Parent Company of approximately $30.4 million.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------- ------------------------------------------
Basis of Presentation
---------------------
The consolidated financial statements have been prepared in conformity with
United States generally accepted accounting principles which are substantially
the same as Cayman Islands generally accepted accounting principles.
The consolidated financial statements include the accounts of Centennial Cayman
Corp. and its subsidiaries, all of which are wholly owned. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Minority interest share of loss results from minority ownership interests in
entities now wholly owned by the Company.
The Company's Parent incurs certain direct and indirect expenses on behalf of
the Company including management, financing and other corporate overhead items.
Items directly identifiable to the Company's operations are charged to the
Company by the Parent. The Parent also allocates a portion of its corporate
overhead based on the estimated level of activity performed by the
F-44
<PAGE>
Parent on behalf of the Company. Such allocations of indirect expenses totaled
approximately $223,000 during the period from inception (February 29, 1996)
through December 31, 1996 and $936,011 for the year ended December 31, 1997.
Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents include short-
term, highly liquid investments with original maturities of three months or less
which are readily convertible into cash and are not subject to significant risk
from fluctuations in interest rates.
Restricted Cash
---------------
Restricted cash includes $86,000 and $44,536 as of December 31, 1996 and 1997,
respectively, held as guarantees for performance bonds for certain construction
and operational obligations related to SMR licenses held in Peru.
Credit Risk and Concentrations of Operations
--------------------------------------------
The Company typically does not require collateral from its customers. Accounts
receivable are comprised of small balances due from numerous customers located
primarily in Peru, Ecuador and other Latin American countries.
Accessories Inventory
---------------------
Accessories inventory represents radio accessories that are sold to the
Company's subscribers. Accessories are stated at the lower of their cost or
market. Cost is determined using the first-in, first-out method.
Revenue Recognition
-------------------
Monthly network access fees, as well as charges for maintenance and loss and
damage insurance coverage are recognized in the period service is delivered.
Equipment sales are recognized when the equipment is delivered and title passes
to the subscriber.
Property and Equipment
----------------------
Property and equipment are recorded at cost. Maintenance and repair
expenditures are charged to expense as incurred, and expenditures for
improvements that increase the expected useful lives of the assets are
capitalized. Depreciation expense is computed using the straight-line method
over the useful lives of the respective assets (see Note 4).
Direct costs associated with the construction of SMR networks are capitalized
and amortized over the system's expected useful life upon placing the system in
service. Such costs include amounts incurred in securing tower sites, site
preparation, procurement and installation of infrastructure and equipment costs.
Also included in property and equipment are radios owned by the Company, which
are leased to the Company's subscribers under operating lease agreements. The
Company retains title to these radios as part of the subscriber agreement and
depreciates the radios over five years. Upon termination of service, the
subscribers are required to return the radios to the Company and placed with
another subscriber. Certain subscribers desire to own their radios. The cost
or depreciated net book value of radios sold to such subscribers is recorded as
a charge to cost of goods sold at the time of sale.
F-45
<PAGE>
SMR Licenses
------------
Direct and certain indirect costs of obtaining SMR licenses, such as
application, legal and consulting fees, as well as the fair market value of
licenses obtained in certain acquisitions, are capitalized and amortized using
the straight-line method over the period of the related license (generally 10 to
40 years) upon commencement of service.
Income Taxes
------------
The Company is not subject to income taxes under the laws of the Cayman Islands.
The Company's foreign participant subsidiaries are subject to foreign income
taxes in their respective taxing jurisdictions.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Foreign Currency Translation
----------------------------
The Company's functional currency is the United States dollar. For subsidiaries
whose functional currency is the local currency and which do not operate in
highly inflationary economies, all net monetary and nonmonetary assets and
liabilities are translated at current exchange rates, and translation
adjustments are included in stockholder's equity. Revenues and expenses are
translated at the weighted average exchange rate for the period.
Fair Value of Financial Instruments
-----------------------------------
Fair values of cash equivalents and other current amounts receivable and payable
approximate the carrying amount due to their short-term nature.
Long-Lived Assets
-----------------
In accordance with Financial Accounting Standards Board's ("FASB") Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
long-lived assets and certain identifiable intangibles to be held and used by
the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company continuously evaluates the recoverability of its long-
lived assets based on estimated future cash flows and the estimated liquidation
value of such long-lived assets, and provides for impairment if such
undiscounted cash flows are insufficient to recover the carrying amount of the
long-lived asset.
NOTE 3. ACQUISITIONS
- ------- ------------
During 1996 and 1997, the Company completed several acquisitions of non-
operating entities whose primary assets were SMR licenses as well as the
acquisition of operating entities. The Parent Company also made an acquisition
of such an entity which was subsequently contributed
F-46
<PAGE>
to the Company. Included in the accompanying financial statements, from the date
of their acquisition, are the results of operations for these entities as
follows:
<TABLE>
<CAPTION>
Name and Location of Entity Date Acquired
- ---------------------------------------------------- ----------------------------------------
<S> <C>
SMR Direct Peru S.R.L. (formerly Mobil Line S.A.); February and July 1996 (1)
Lima, Peru
Pompano S.R.L.; Lima, Peru November 1996
Brunacci S.R.L.; Guayaquil, Ecuador November 1996
Telecom Supply S.R.L.; Lima, Peru December 1996
C-Comunica S.R.L.; Lima, Peru January 1997
Transnet del Peru S.A.; Lima, Peru July 1997
</TABLE>
(1) The Parent Company acquired 51% of Mobil Line S.A. in February 1996. This
interest was contributed to the Company by the Parent upon the formation of the
Company. The remaining 49% was acquired by the Company in July 1996.
In February 1996, the Parent Company purchased 51% of the capital stock of Mobil
Line S.R.L. ("Mobil Line"), a Peruvian non-operating development stage company
which owned a Peruvian SMR spectrum concession, for $900,000. Upon formation of
the Company in June 1996, the ownership interest in Mobil Line was transferred
to the Company at its carrying value. Operations between February 1996 and June
1996 were not significant. This transfer was treated as a reorganization of
entities under common control, and operations of this entity have been included
in the Company's accompanying consolidated financial statements for all periods
presented as if the Company had owned the investment in Mobil Line since the
date of purchase. The Company acquired the remaining 49% of Mobil Line in July
1996 for approximately $600,000. This transaction was accounted for as a step
acquisition; and accordingly, operating results of the Company from March 1996
include the operations of Mobil Line from February 1996, with the minority
interest reflected for the five-month period ending in July. Of the total
consideration paid, approximately $900,000 remained with Mobil Line to purchase
infrastructure and approximately $600,000 was paid to the founders of Mobil
Line. As a result of these transactions, approximately $692,000 of the total
consideration paid was allocated to SMR licenses. The SMR licenses are
amortized over 40 years. The purchase price was financed by the Company with
cash made available to it by a Parent Company investment.
In November 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Pompano S.R.L. ("Pompano"), a Peruvian non-operating
development stage company which owned a Peruvian SMR spectrum concession. The
acquisition was accounted for as a purchase; and accordingly, operating results
of Pompano subsequent to the date of acquisition are included in the
accompanying consolidated financial statements. Total consideration paid by the
Company was approximately $419,000, of which approximately $16,000 was allocated
to tangible net assets and $403,000 was allocated to SMR licenses. SMR licenses
are amortized over 40 years. The purchase price was financed by the Company
with cash made available to it by a Parent Company investment.
In November 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Brunacci S.R.L. ("Brunacci") and of its wholly owned
subsidiary, Multisistemas Electronics M.S.E. S.A. ("Multisistemas"), both
Ecuadorian non-operating development stage companies
F-47
<PAGE>
which owned Ecuadorian SMR spectrum concessions. The acquisition was accounted
for as a purchase; and accordingly, operating results of Brunacci and
Multisistemas subsequent to the date of acquisition are included in the
accompanying consolidated financial statements. Total consideration given and
liabilities assumed for both of the acquired companies was approximately
$947,000, of which $297,000 was allocated to tangible net assets and $650,000
was allocated to SMR licenses. SMR licenses are amortized over 10 years. The
purchase price was financed by the Company with cash made available to it by a
Parent Company investment.
In December 1996, the Company, through wholly owned subsidiaries, acquired all
of the common stock of Telecom Supply S.R.L. ("Telecom"), a Peruvian non-
operating development stage company which owned a Peruvian SMR spectrum
concession. The acquisition was accounted for as a purchase; and accordingly,
operating results of Telecom, subsequent to the date of acquisition, are
included in the accompanying consolidated financial statements. Total
consideration paid by the Company was approximately $400,000, of which
approximately $14,000 represented the fair value of tangible assets acquired and
the excess purchase price over fair value of the net tangible assets acquired
was approximately $386,000, which was allocated to SMR licenses. SMR licenses
are amortized over 40 years. The purchase price was financed by the Company with
cash made available to it by a Parent Company investment.
Because the above purchased entities were acquired prior to their operations,
the Company believes that pro-forma revenue and results of operations for the
period in 1996 prior to their acquisition by the Company are not meaningful.
In January 1997, the Company acquired the majority of the common stock of C-
Comunica S.A. ("C-Comunica"), a Peruvian SMR operating company. The acquisition
was accounted for as a purchase. The total consideration given and liabilities
assumed for C-Comunica was approximately $2.9 million, of which approximately
$800,000 represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was approximately $2.1 million, which was allocated to
SMR licenses. SMR licenses are amortized over 40 years. The purchase price was
financed by the Company with cash made available to it by a Parent Company
investment.
In July 1997, the Company acquired all of the common stock of Transnet del Peru
S.A. ("Transnet"), a Peruvian SMR operating company. The acquisition was
accounted for as a purchase. The total consideration given and liabilities
assumed for Transnet was approximately $1.5 million, of which approximately
$300,000 represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was approximately $1.2 million, which was allocated to
SMR licenses. SMR licenses are amortized over 40 years. The purchase price was
financed by the Company with available cash.
Also in July 1997, the Parent Company pledged $1.3 million to secure its
obligations in connection with the Company's bid for additional spectrum with
Chile Concurso. On October 29, 1997, the Company received written notice from
the Chilean Ministry of Transportation and Telecommunications (the "Chilean
Ministry") that its proposal had been accepted and awarded; although such award
is subject to appeal by the other participants in the Chile Concurso. The
Company has been informed that on November 28, 1997, CTC-VTR Comunicaciones
Moviles S.A., one of the other participants, filed an appeal objecting to the
acceptance of the Company's proposal. On March 5, 1998 the Company received
notice from the Chilean Ministry that it had denied the appeal filed. However,
on March 25, 1998, appeals were filed by Chile Concurso participants with the
Chilean Court of Appeals in respect of the Chilean Ministry's denial of the
participants' original appeal of the award of the channels to the Company.
There can be no assurance that the Company will be successful in obtaining any
channels as a result of such
F-48
<PAGE>
proposal. In connection with the Chile Concurso, the Company entered into a
joint development agreement with a group of investors who hold SMR licenses in
Chile.
In September 1997, the Company acquired all of the common stock of Fastcom S.A.
("Fastcom") and Radioservicios Moviles, S.A. ("Radioservicios"), Argentine non-
operating development stage companies which owned an Argentine paging
concession. The acquisition was accounted for as a purchase. The total
consideration given and liabilities assumed for Fastcom was approximately
$526,000. The Company paid $110,000 cash at closing and signed a note to the
seller for the remainder of the purchase price due December 2, 1997. The
Company has pledged the shares of Fastcom and Radioservicios to the previous
owners and related parties (the "Lienholders") to secure certain payment
obligations of the Company. The Company did not satisfy these payment
obligations on December 2, 1997; as such, the Lienholders foreclosed on the
shares of Fastcom and Radioservicios. This resulted in the Company taking an
approximately $600,000 charge in December 1997, which consists of the $110,000
initial purchase price and approximately $490,000 in capitalized costs made in
connection with the Radioservicios transaction during 1997. Detail of net
assets of acquisitions during 1997 follows:
1997
----
Property and equipment $ 896,688
SMR Licenses 3,326,723
Other assets 928,538
Accounts Payable and accrued liabilities (669,624)
----------
Net assets acquired $4,482,325
==========
Recently Completed Acquisition
On January 2, 1998, the Company purchased 100% of the outstanding capital stock
of an operating company which for approximately $800,000. The operating company
holds 10 800 MHz channels in the city of Santiago, Chile.
F-49
<PAGE>
NOTE 4. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
December 31,
------------------------
1996 1997
---------- -----------
Furniture and fixtures $ 16,138 $ 146,648
Computer equipment and software 96,829 241,928
Network infrastructure 1,747,485 3,214,106
Leasehold improvements 1,458 -
Radios 281,740 2,017,071
---------- -----------
2,143,650 5,619,753
Accumulated depreciation (200,661) (1,145,134)
---------- -----------
Property and equipment, net $1,942,989 $ 4,474,619
========== ===========
The Company depreciates infrastructure over ten years, radios over five years,
computer equipment and software over three years and leasehold improvements over
the life of the lease.
Depreciation expense was approximately $160,000 and $635,135 for the periods
ended December 31, 1996 and 1997, respectively.
NOTE 5. INCOME TAXES
- ------- ------------
The Company is not subject to income taxes under the laws of the Cayman Islands.
The Company's foreign participant subsidiaries are subject to foreign income
taxes in their respective taxing jurisdictions but have incurred no liability
for such taxes due to losses that have been incurred since inception. At
December 31, 1997, the Company's foreign participants have net operating and
deferred pre-operating loss carryforwards for income tax purposes of
approximately $4.7 million that expire starting in the year 2001. These
carryforwards are available to offset future taxable income in the respective
taxing jurisdictions in which they were incurred. The Company's foreign
participants in Peru, Ecuador, Venezuela and Chile are considered pre-operating
entities for income tax purposes, and therefore, the losses are deferred for
income tax purposes. The losses may be utilized against future taxable income
generated in the respective taxing jurisdictions over a period of approximately
four years commencing in 1997.
F-50
<PAGE>
The Company's net deferred tax assets result primarily from the future benefit
of loss carryforwards and deferred pre-operating losses. Net deferred tax
assets, by country, as of December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
Peru Ecuador Venezuela Chile Other Total
--------- --------- --------- ---------- ------------ ----------
1996:
<S> <C> <C> <C> <C> <C> <C>
Net deferred tax assets $ 226,710 $ 22,323 $ 3,396 $ 2,244 $ - $ 254,673
Valuation allowance (226,710) (22,323) (3,396) (2,244) $ - (254,673)
--------- --------- --------- ---------- ------------ ----------
$ - $ - $ - $ - $ - $ -
========= ========= ========= ========== ============ ==========
1997:
Net deferred tax assets $ 779,561 $ 338,773 $ 5,669 $ 10,526 $ 6,861 $1,141,390
Valuation allowance (779,561) (338,773) (5,669) (10,526) (6,861) (1,141,390)
--------- --------- --------- ---------- ------------ ----------
$ - $ - $ - $ - $ - $ -
========= ========= ========= ========== ============ ==========
</TABLE>
The reconciliation of income taxes computed at the statutory rates to the income
tax benefit is as follows:
Inception
Through Year Ended
December 31, 1996 December 31, 1997
----------------- -----------------
Income tax benefit at statutory rate $ (254,673) $ (886,717)
Increase in valuation allowance 254,673 886,717
---------- ----------
Tax benefit $ - $ -
========== ==========
NOTE 6. COMMITMENTS AND CONTINGENCIES
- ------- -----------------------------
Recoverability of Investments
-----------------------------
Since its inception, the Company's efforts have been primarily directed towards
acquiring, developing and operating SMR and other low-cost, wireless
communications networks. Further, the Company has made significant investments
in pre-operating entities in various Latin American countries whose primary
assets were SMR licenses. The Company's Peruvian operations and revenue-
generating activity began in May 1996 and the Ecuadorian operations in March
1997. The Company has committed to make investments in Chile. The ability of
the Company to recover its current investment in property, equipment and
spectrum and to generate positive cash flow and operating profits is contingent
upon a number of factors including the Company's ability to continue to build
out and develop the SMR and other low-cost, wireless communications networks it
currently owns and to attract and retain sufficient subscribers on its existing
systems and those which are under development in sufficient numbers to achieve
profitable operations. The Company will also be required to provide additional
operating and investment funds to its subsidiaries. The Company, to date, has
not raised any capital, and all capital has been provided by the Parent Company.
Accordingly, the ability of the Company to recover its current investment in
property and spectrum is significantly dependent upon the ability and intent of
the Parent Company to continue to provide funding. However, if the Company's
operating cash flow is not
F-51
<PAGE>
sufficient to meet its needs, the Parent Company has committed that it will
continue to make advances to the Company as necessary, through at least December
31, 1998.
Lease Commitments
-----------------
The Company leases certain office facilities and transmission sites under
operating leases. Lease terms for office facilities range from one to five
years. Lease terms for transmission sites on buildings range from one to five
years, with varying renewal terms. Future minimum rental payments for such
office facilities and antenna site leases are as follows as of December 31,
1997:
1998 $186,480
1999 109,680
2000 17,760
2001 17,760
2002 17,760
Thereafter 88,800
--------
$438,240
The Company recognized lease expense during the years ended December 31, 1996
and 1997 of $34,901 and $113,295, respectively.
Recoverability of Licenses
--------------------------
The terms of the Company's SMR license agreements contain provisions whereby the
Company must achieve certain levels of subscriber load and network build out. If
such commitments are not met, the Company could be subject to the revocation of
the applicable licenses. Compliance with the terms of SMR and other wireless
communications licenses and certain regulatory requirements, such as
construction deadlines and minimum subscriber requirements, can be difficult to
meet. In addition, there can be no assurance that in the future all regulatory
requirements will be met or that the Company will not lose any applicable
licenses as a result of its failure to meet such requirements. Currently, the
Company is not in compliance with certain minimum subscriber loading
requirements with respect to a portion of its channels in Peru. Failure to
comply with such requirements may subject the licenses relating to such channels
to punitive measures. Requests for amendment of such loading requirements have
been filed by the Company with the Peruvian Ministry of Transportation,
Communications, Housing and Construction (the "Ministry"); however, to date no
responses have been received. Based upon information currently available, the
Company is optimistic that these amendments will be approved; however, there can
be no assurance that the amendments received by the Company will be the same as
those applied for.
F-52
<PAGE>
NOTE 7. GEOGRAPHIC DATA
- ------- ---------------
The following information presents certain summarized balance sheet and
statement of operations data by geographic region as of December 31, 1997 and
1996 and for the years then ended (in 000's):
Peru Ecuador Other Consolidated
1997:
Revenues $ 2,939 $ 775 $ (25) $ 3,689
Operating Loss (2,698) (1,132) (971) (4,801)
Total Assets 11,440 3,181 1,091 15,712
1996:
Revenues $ 216 $ - $ - $ 216
Operating Loss (767) (45) (251) (1,063)
Total Assets 4,139 1,390 30 5,559
The Company conducts a significant portion of its business in Peru and Ecuador.
Accordingly, the Company's cash flow and its ability to make distributions to
the Parent Company is significantly dependent upon the cash flow of its Peruvian
and Ecuadorian subsidiaries. The Company's ability to recover its investment in
these subsidiaries, to fund operations in other countries and to make
distributions to the Parent Company, among other things, depends to a
significant degree on its ability to transfer funds from such subsidiaries to
the Parent Company.
The ability of the Company's subsidiaries to pay dividends or make loans or
advances to the Parent Company is subject to regulation within their respective
jurisdictions of organization and operation. While the existing laws and
regulations of these jurisdictions generally do not prohibit the Company's
subsidiaries from paying dividends or making loans or advances to the Parent
Company, there can be no assurance that such laws will continue to permit or
will not restrict such payments to be made.
Further, the Company is exposed to credit risk related to receivables
denominated in non-United States dollar currencies in these foreign countries.
NOTE 8. PRO FORMA INFORMATION (UNAUDITED)
- ------------------------------------------
The following pro forma information for the years ended December 31, 1996 and
1997 gives effect to the acquisitions of C-Comunica and Transnet as if each had
occurred on January 1, 1996. The pro forma financial information does not
purport to represent what the Company's results of operations would actually
have been if such transactions had in fact occurred on such date. The pro forma
results presented below are based upon currently available information and upon
certain assumptions that management believes are appropriate under the
circumstances.
(Unaudited)
For the Years Ended
December 31,
---------------------------
1996 1997
------------ ------------
Revenues $ 887,078 $ 3,781,934
Net loss applicable to common shareholders $(1,720,835) $(5,101,887)
F-53
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ----------------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 943,596 $ 908,048
Restricted cash 372,359 44,536
Accounts receivable, net of allowances for doubtful
accounts of $559,774 and $517,986, respectively 1,283,964 1,283,409
Radios and accessories inventory 1,766,875 1,371,762
VAT receivable 809,002 785,787
Other current assets 630,901 337,517
----------- -----------
Total current assets 5,806,697 4,731,059
PROPERTY AND EQUIPMENT, net (Note 3) 6,715,365 4,474,619
SMR LICENSES, net of accumulated amortization of $457,594
and $289,196 12,792,988 5,921,315
OTHER NONCURRENT ASSETS, net 249,789 584,918
----------- -----------
Total assets $25,564,839 $15,711,911
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 24,973 $ 251,957
Accounts payable - affiliates 12,099,077 -
Accrued liabilities 338,131 308,268
Payable to seller (Note 2) 750,000 -
----------- -----------
Total liabilities 13,212,181 560,225
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 2)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 50,000 authorized,
2 issued and outstanding,
respectively 2 2
Additional paid-in capital 20,858,377 20,858,377
Accumulated deficit (8,472,380) (5,713,228)
Accumulated other comprehensive (loss) income (33,341) 6,535
----------- -----------
Total stockholders' equity 12,352,658 15,151,686
----------- -----------
Total liabilities and stockholders' equity $25,564,839 $15,711,911
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated balance sheets.
F-54
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
----------------------------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------- ----------------------------------------
1998 1997 1998 1997
----------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
REVENUE:
Radio service revenue $ 1,235,704 $ 526,877 $ 2,462,523 $ 760,381
Equipment sales 414,152 367,126 902,025 614,605
Activation and other 40,260 45,501 77,253 76,010
---------------- -------------- --------------- ----------------
1,690,116 939,504 3,441,801 1,450,996
---------------- -------------- --------------- ----------------
COSTS AND EXPENSES RELATED TO REVENUE:
Network and site expense 22,363 21,636 42,794 32,495
Cost of equipment sold 488,949 227,781 1,080,296 341,399
Maintenance and other 65,804 183,438 185,091 228,127
---------------- -------------- --------------- ----------------
577,116 432,855 1,308,181 602,021
---------------- -------------- --------------- ----------------
GROSS PROFIT 1,113,000 506,649 2,133,620 848,975
OPERATING COSTS AND EXPENSES:
Selling, general and administrative 1,987,158 1,692,225 4,007,156 2,496,947
Depreciation and amortization 366,290 337,936 705,284 453,786
---------------- -------------- --------------- ----------------
2,353,448 2,030,161 4,712,440 2,950,733
---------------- -------------- --------------- ----------------
OPERATING LOSS (1,240,448) (1,523,512) (2,578,820) (2,101,758)
---------------- -------------- --------------- ----------------
OTHER INCOME (EXPENSE):
Interest expense (854) (413) (2,233) (1,000)
Interest income - 31,633 - 61,887
Other (155,622) (27,320) (178,099) (48,551)
---------------- -------------- --------------- ----------------
(156,476) 3,900 (180,332) 12,336
---------------- -------------- --------------- ----------------
NET LOSS (1,396,924) (1,519,612) (2,759,152) (2,089,422)
---------------- ------------- --------------- ----------------
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments (45,309) 6,469 (39,876) 71,849
---------------- ------------- --------------- ----------------
COMPREHENSIVE LOSS $(1,442,233) $(1,513,143) $(2,799,028) $(2,017,573)
================ ============= =============== ================
BASIC NET LOSS PER COMMON SHARE $ (698,462) $ (759,806) $(1,399,514) $(1,044,711)
================ ============= =============== ================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2 2 2 2
================ ============= =============== ================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-55
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Common Stock Accumulated
---------------- Additional Paid-In Accumulated Other Comprehensive Total Stockholders'
Shares Amount Capital Deficit Income (Loss) Equity
------ ------ ------------------ ----------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1997 2 $2 $20,858,377 $(5,713,228) $ 6,535 $15,151,686
Net Loss - - - (2,759,152) - (2,759,152)
Cumulative translation adjustment - - - - (39,876) (39,876)
---- ---- ----------- ----------- -------- -----------
BALANCES, June 30, 1998 2 $2 $10,858,377 $(8,472,380) $(33,341) $12,352,658
==== ==== =========== =========== ======== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-56
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
-------------------------------------------
1998 1997
----------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(2,759,152) $(2,089,422)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 714,795 455,286
Allowance for doubtful accounts 302,363 76,471
Changes in operating assets and liabilities-
Increase in accounts receivable (302,918) (519,629)
Increase in inventory (395,113) (2,291,117)
Increase in other assets (129,166) (453,667)
(Decrease) increase in accounts payable and other (306,734) 25,385
Increase in accrued liabilities 2,851 173,923
----------- -----------
Net cash used in operating activities (2,873,074) (4,622,770)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,700,453) (1,819,514)
Acquisition of operating and non-operating,
entities and spectrum, net of cash acquired (4,082,303) (2,875,365)
Payment of contingent payable to seller (2,040,000) -
(Increase) decrease in restricted cash (327,823) 86,000
Funding of organizational costs - (421,687)
----------- -----------
Net cash used in investing activities (9,150,579) (5,030,566)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in payable to parent 12,099,077 5,071,130
Contribution from parent - 4,519,150
----------- -----------
Net cash provided by financing activities 12,099,077 9,590,280
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (39,876) 71,849
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 35,548 8,793
CASH AND CASH EQUIVALENTS, beginning of period 908,048 171,073
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 943,596 $ 179,866
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.
F-57
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
-----------
For the Six Months Ended
June 30,
--------------------------
1998 1997
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for-
Interest $ - $ -
Income taxes $ 96,804 $ -
Supplemental schedule of noncash
investing and financing activities-
Contingent payment of acquisition of Chilean
channels $2,800,000 $ -
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
F-58
<PAGE>
CENTENNIAL CAYMAN CORP. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
AS OF JUNE 30, 1998
-------------------
(UNAUDITED)
-----------
NOTE 1. BASIS OF PRESENTATION
- ------- ---------------------
The accompanying interim consolidated financial statements include the
accounts of Centennial Cayman Corp. and its subsidiaries (collectively, the
"Company"), all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated in consolidation.
In management's opinion, all adjustments (which are of a normal recurring
nature) have been made which are necessary to present fairly the financial
position of the Company as of June 30, 1998 and the results of its operations
for the three and six months ended June 30, 1998 and 1997. For a more complete
understanding of the Company's financial position and results of operations, see
the consolidated financial statements of the Company included in the Company's
annual report for the year ended December 31, 1997.
Comprehensive Income
--------------------
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS No. 130"), which requires
companies to report all changes in equity during a period, except those
resulting from investment by owners and distributions to owners, in a financial
statement for the period in which they are recognized. The Company has chosen
to disclose Comprehensive Income, which encompasses net income and foreign
currency translation adjustments, in the Condensed Consolidated Statements of
Operations. Prior years have been restated to conform to the SFAS No. 130
requirements.
Recently Issued Accounting Standards
------------------------------------
The AICPA issued Statement of Position ("SOP") 98-5, Reporting on the Costs
of Start-Up Activities. SOP 98-5 requires costs of start-up activities,
including organization costs, to be expensed as incurred. SOP 98-5 is effective
for fiscal years beginning after December 15, 1998. The Company does not
believe that the provisions of SOP 98-5 will have a material effect on the
Company's reported results of operations.
NOTE 2. ACQUISITIONS
- ------- -------------
On January 2, 1998, the Company purchased 100% of the outstanding capital
stock of Telecomunicaciones y Servicios S.A. ("TyS"), a Chilean operating
company. TyS holds 10 800 MHz channels in the city of Santiago, Chile. The
acquisition was accounted for as a purchase. The total consideration given and
liabilities assumed for the Chilean company was approximately $3,200,000, of
which $800,000 was paid at closing and approximately $2,040,000 was paid June
29, 1998 and $350,000 on July 8, 1998 upon the transfer of 290 additional
channels (40 of which are in Santiago) to the operating company. Approximately
$80,000 represented the fair value of the net tangible assets as of the date of
acquisition and the excess purchase price over the fair value of the net
tangible assets acquired was
F-59
<PAGE>
approximately $3,120,000, which was allocated to SMR licenses. SMR licenses are
amortized over 40 years, the average remaining life of the licenses. The
purchase price was financed by the Company with fundings from its parent
company.
On April 14, 1998 the Company executed a purchase agreement with certain
non-operating subsidiaries of International Wireless Communications Holdings,
Inc. for the acquisition of certain assets in Peru, Ecuador and Chile for a
purchase price of approximately $3,500,000. On May 13, 1998 the Company
completed the first part of the acquisition and acquired a non-operating entity
in Ecuador (Comovec S.A.) for approximately $300,000. Comovec S.A. holds
licenses to operate SMR networks and has 60 channels in each of Quito and
Guayaquil and 25 channels in Cuenca. Approximately $20,000 represented the fair
value of the net tangible assets of Comovec S.A. as of the date of acquisition.
The excess purchase price over the fair value of the net tangible assets
acquired was approximately $250,000, which was allocated to SMR licenses.
Comovec S.A.'s licenses will be amortized over 40 years beginning on the date
that the channels are launched. On May 22, 1998, the Company completed the
second part of the acquisition and acquired a non-operating entity in Peru (Peru
Tel S.A.) for approximately $2,800,000. Peru Tel S.A. holds licenses to operate
SMR networks and has 32 channels in Lima/Callao and 100 channels among eight
other cities. Approximately $400,000 represented the fair value of the net
tangible assets of Peru Tel S.A. as of the date of acquisition. The excess
purchase price over the fair value of the net tangible assets acquired was
approximately $2,400,000, which was allocated to SMR licenses. Peru Tel S.A.'s
SMR licenses will be amortized over 40 years beginning on the date that the
channels are launched. The Company is currently waiting for government approval
for the transfer of the license in Chile to the Company (which it expects will
occur in the next six months) before it can close the final part of the
acquisition for approximately $400,000. The Company used cash fundings from its
parent company to acquire Comovec S.A. and Peru Tel S.A. Detail of net assets of
acquisitions during 1998 follows:
<TABLE>
<CAPTION>
Chile Peru Ecuador
-------------------- ----------------- ----------------
<S> <C> <C> <C>
Property and equipment $ 71,039 $ - $ -
SMR licenses 2,769,715 2,423,920 248,986
Other assets 15,105 87,041 3,259
Accounts payable and accrued liabilities (24,273) (82,489) -
-------------------- ----------------- ----------------
Acquisition, net of cash acquired 2,831,586 2,428,472 252,245
Cash acquired 18,414 386,095 16,421
Payable to seller 750,000 - -
-------------------- ----------------- ----------------
Purchase price $3,600,000 $2,814,567 $268,666
==================== ================= ================
</TABLE>
In addition to acquisitions, the Company was awarded 40 nationwide
channels of 800 MHz spectrum on June 9, 1998 in El Salvador. The Company paid
$620,000 for the channels which have a 20 year term.
F-60
<PAGE>
NOTE 3. PROPERTY AND EQUIPMENT
- ------- ----------------------
The composition of property and equipment follows:
June 30, December 31,
1998 1997
------------ ------------
Network infrastructure $ 4,043,286 $ 3,214,106
Radios 3,867,544 2,017,071
Computer equipment and 264,994 241,928
software
Furniture and fixtures 221,955 146,648
Leasehold improvements 27,670 -
----------- -----------
8,425,449 5,619,753
Accumulated depreciation (1,710,084) (1,145,134)
----------- -----------
Property and equipment, net $ 6,715,365 $ 4,474,619
=========== ===========
NOTE 4. OPERATING SEGMENTS
- ------- ------------------
The following information presents certain summarized balance sheet and
statement of operations data by segment as of June 30, 1998 and 1997 and for the
six months then ended (in 000's):
<TABLE>
<CAPTION>
Latin America
--------------------------------
Peru Ecuador Chile Other(1) Consolidated
-------- ----------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
June 30, 1998
- -------------
Revenues $ 2,045 $1,343 $ 54 $ - $ 3,442
EBITDA 382 (161) (441) (1,654) (1,874)
Operating loss (15) (446) (463) (1,654) (2,578)
Total assets $15,732 $4,579 $5,381 $ (127) $ 25,565
June 30, 1997
- -------------
Revenues $ 1,309 $ 142 $ - $ - $ 1,451
EBITDA (364) (278) - (1,006) (1,648)
Operating loss (722) (375) - (1,006) (2,103)
Total assets $10,720 $2,419 $ - $ 1,733 $ 14,872
</TABLE>
(1) Includes unallocated expenses from Corporate.
Note 5. PRO FORMA INFORMATION
- ------- ----------------------
The following pro forma information for the six months ended June 30, 1998
and 1997 gives effect to the acquisitions of Transnet, TyS, Peru Tel S.A. and
Comovec S.A., as if each had occurred on January 1, 1997. The pro forma
financial information does not purport to represent what the Company's results
of operations would actually have been if such transactions had in fact occurred
on such date. The pro forma results presented below are based upon currently
available information and upon certain assumptions that management believes are
reasonable under current circumstances.
F-61
<PAGE>
Actual Acquisitions Pro Forma
----------- ------------ ------------
For the Six Months Ended
June 30, 1998:
Revenues $ 3,441,801 $ - $ 3,441,801
Net loss applicable to common
Shareholders (2,759,152) (121,524) (2,880,676)
Actual Acquisitions Pro Forma
----------- ------------ ------------
For the Six Months Ended
June 30, 1997:
Revenues $ 1,450,996 $ 82,109 $ 1,533,105
Net loss applicable to common
shareholders (2,089,422) (471,343) (2,560,765)
F-62
<PAGE>
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations in connection with the offer
contained herein other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or the solicitation of any offer to buy any security other than those to which
it relates, nor does it constitute an offer to sell, or the solicitation of an
offer to buy, to any person 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 any Person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof nor that the information contained herein is correct as of any time
subsequent to the date hereof.
__________
TABLE OF CONTENTS
Prospectus Summary............................................. 5
Glossary of Terms.............................................. 18
Risk Factors................................................... 20
The Exchange Offer............................................. 33
Use of Proceeds of the Exchange Notes.......................... 39
Capitalization................................................. 40
Selected Consolidated Historical Financial Data................ 41
Unaudited Pro Forma Condensed Consolidated Financial Data...... 42
Management's Discussion and Analysis
of Financial Condition and Results of
Operations..................................................... 44
Industry Overview.............................................. 54
Business....................................................... 58
Management..................................................... 74
Executive Compensation......................................... 77
Certain Relationships and Related Transactions................. 82
Principal Stockholders......................................... 84
Description of Capital Stock................................... 87
Description of Notes........................................... 91
Description of Convertible Notes............................... 119
Description of Warrants........................................ 120
Provisions Generally Applicable to All
Securities..................................................... 123
Certain U.S. Federal Income Tax Considerations................. 124
Plan of Distribution........................................... 125
Legal Matters.................................................. 125
Experts........................................................ 125
Index to Financial Statements.................................. F-1
UNTIL ________, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN
THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
CENTENNIAL COMMUNICATIONS CORP.
Offer to Exchange 14% Senior Discount Notes Due 2005 for any and all
outstanding 14% Senior Discount Notes Due 2005
PROSPECTUS
_____________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") permits
the indemnification of the directors and officers of the Company. The Company's
Amended and Restated Certificate of Incorporation provides that it will
indemnify the officers, directors, employees and agents of the Company to the
extent permitted by the DGCL.
The Company's Amended and Restated Certificate of Incorporation and Bylaws
provide for the indemnification of directors and officers of the Company, and
persons who serve or have served at the request of the Company as a director,
officer, employee, fiduciary or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against all expense, liability and loss
(including attorneys' fees actually and reasonably incurred by such person in
connection with such proceeding) provided, however, the Company shall indemnify
any such person seeking indemnification in connection with a proceeding
initiated by such person only if such proceeding was authorized by the Company's
Board of Directors. In the event a claim for indemnification by any person has
not been paid in full by the Company within 30 days after written request has
been received by the Company, the claimant may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim and, if successful
in whole or in part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. The right to indemnification conferred in the
Company's Amended and Restated Certificate of Incorporation is a contract right
and shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition. The Company
maintains insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Company against any such expense, liability or
loss, whether or not the Company would have the power to indemnify such person
against such expense, liability or loss under state law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. Description
- ----------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company, as amended
3.2 Bylaws of the Company
4.1 Purchase Agreement dated January 12, 1998 between the Company and Salomon Brothers Inc
and Prudential Securities Incorporated
4.2 Indenture dated January 15, 1998 between the Company and State Street Bank and Trust
Company
4.3 Form of Private Note
4.4* Form of Exchange Note
4.5 Notes Registration Rights Agreement dated January 15, 1998 by and among the Company and
Salomon Brothers Inc and Prudential Securities Incorporated
4.6 Collateral Pledge Agreement dated January 15, 1998 between the Company and State Street
Bank and Trust Company
4.7 Escrow Agreement dated January 15, 1998 between the Company and Morgan Stanley, Dean
Witter and Discover & Co.
5.1* Opinion of Holland & Hart LLP
10.1 Founders Round Purchase Agreement dated as of December 8, 1995 between the Company and
the persons listed on the Schedule of Purchasers attached thereto
10.2 Founders Round Stockholders Agreement dated as of December 8, 1995 between the Company
and the Investors listed on the Schedule of Purchasers attached thereto
10.3 Series A Purchase Agreement dated as of June 27, 1996 between the Company and the
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. Description
- ----------- -----------
<C> <S>
persons listed on the Schedule of Purchasers attached thereto
10.4 Series B Purchase Agreement dated as of November 22, 1996 between the Company and the
persons listed on the Schedule of Purchasers attached thereto
10.5 Series C Purchase Agreement dated as of October 3, 1997 between the Company and the
Purchasers set forth therein
10.6 Second Amended and Restated Stockholders Agreement dated as of October 3, 1997 between
the Company and each of the Investors listed on the Schedule of Investors attached thereto
10.7 Convertible Note Purchase Agreement dated as of January 15, 1998 between the Company and
the Purchasers set forth therein
10.8 Third Amended and Restated Registration Agreement dated January 15, 1998 between the
Company and the persons listed as Investors on the schedule attached thereto
10.9 Centennial Communications Corp. 1996 Stock Option Plan including amendments and forms of
Incentive Stock Option Agreement and Non-statutory Stock Option Agreement
10.10 Warrant Agreement dated as of January 15, 1998 between Centennial Communications Corp.
and State Street Bank and Trust Company
10.11 Confidential Termination and Release Agreement dated February 19, 1998 between the
Company and Michael N. Simkin
10.12 Confidential Termination and Release Agreement dated November 17, 1997 between the
Company and Jeff E. Rhodes
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
21.1 List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Holland & Hart LLP, included in Exhibit 5.1
24.1 Power of Attorney
25.1 Statement on Form T-1 of the eligibility of the Trustee
27.1 Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
- ---------------
</TABLE>
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a)(1) 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;
(ii) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or 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. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
II-2
<PAGE>
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
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.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) 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.
(c) 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.
(d) That insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling Persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling Person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling Person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Centennial
Communications Corp. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Denver,
Colorado, on August 28, 1998.
CENTENNIAL COMMUNICATIONS CORP.
By: *
----------------------------------------------
Bernard G. Dvorak
President, Chief Executive Officer, Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on August 28, 1998.
SIGNATURES
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Patricia J. Reichman Controller (Principal Financial and Accounting August 28, 1998
- ------------------------------------------------ Officer)
Patricia J. Reichman
* Director August 28, 1998
- ------------------------------------------------
Steven W. Schovee
* Director August 28, 1998
- ------------------------------------------------
Robert F. McKenzie
* Director August 28, 1998
- ------------------------------------------------
Adam Goldman
* Director August 28, 1998
- ------------------------------------------------
William W. Sprague
* Director August 28, 1998
- ------------------------------------------------
William D. Stanfill
* Director August 28, 1998
- ------------------------------------------------
John Fullmer
* Director August 28, 1998
- ------------------------------------------------
Mark A. Leavitt
*By: /s/ Patricia J. Reichman
-------------------------------------------
Patricia J. Reichman
Pursuant to Powers of Attorney filed
herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company, as amended
3.2 Bylaws of the Company
4.1 Purchase Agreement dated January 12, 1998 between the Company and Salomon Brothers Inc
and Prudential Securities Incorporated
4.2 Indenture dated January 15, 1998 between the Company and State Street Bank and Trust
Company
4.3 Form of Private Note
4.4* Form of Exchange Note
4.5 Notes Registration Rights Agreement dated January 15, 1998 by and among the Company and
Salomon Brothers Inc and Prudential Securities Incorporated
4.6 Collateral Pledge Agreement dated January 15, 1998 between the Company and State Street
Bank and Trust Company
4.7 Escrow Agreement dated January 15, 1998 between the Company and Morgan Stanley, Dean
Witter and Discover & Co.
5.1* Opinion of Holland & Hart LLP
10.1 Founders Round Purchase Agreement dated as of December 8, 1995 between the Company and
the persons listed on the Schedule of Purchasers attached thereto
10.2 Founders Round Stockholders Agreement dated as of December 8, 1995 between the Company
and the Investors listed on the Schedule of Purchasers attached thereto
10.3 Series A Purchase Agreement dated as of June 27, 1996 between the Company and the persons
listed on the Schedule of Purchasers attached thereto
10.4 Series B Purchase Agreement dated as of November 22, 1996 between the Company and the
persons listed on the Schedule of Purchasers attached thereto
10.5 Series C Purchase Agreement dated as of October 3, 1997 between the Company and the
Purchasers set forth therein
10.6 Second Amended and Restated Stockholders Agreement dated as of October 3, 1997 between
the Company and each of the Investors listed on the Schedule of Investors attached thereto
10.7 Convertible Note Purchase Agreement dated as of January 15, 1998 between the Company and
the Purchasers set forth therein
10.8 Third Amended and Restated Registration Agreement dated January 15, 1998 between the
Company and the persons listed as Investors on the schedule attached thereto
10.9 Centennial Communications Corp. 1996 Stock Option Plan including amendments and forms of
Incentive Stock Option Agreement and Non-statutory Stock Option Agreement
10.10 Warrant Agreement dated as of January 15, 1998 between Centennial Communications Corp.
and State Street Bank and Trust Company
10.11 Confidential Termination and Release Agreement dated February 19, 1998 between the
Company and Michael N. Simkin
10.12 Confidential Termination and Release Agreement dated November 17, 1997 between the
Company and Jeff E. Rhodes
12.1 Statement re Computation of Ratio of Earnings to Fixed Charges
21.1 List of Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Holland & Hart LLP, included in Exhibit 5.1
24.1 Power of Attorney
25.1 Statement on Form T-1 of the eligibility of the Trustee
27.1 Financial Data Schedule
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
- --------------
</TABLE>
* To be filed by amendment
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENTENNIAL COMMUNICATIONS CORP.
Centennial Communications Corp., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, Does
Hereby Certify:
1. The name of the corporation is Centennial Communications Corp. The
date of filling of its original Certificate of Incorporation with the Secretary
of State was Thursday, October 26, 1995.
2. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 228, 242 and 245 of the Delaware General
Corporation Law.
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation by restating the text of the original Certificate of Incorporation,
as amended and restated, in full to read as follows:
1.
The name of the corporation is Centennial Communications Corp.
(hereinafter called the "Corporation").
2.
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware 19805. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
3.
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 Delaware.
4.
a.
i. CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is forty six million five hundred thousand (46,500,000) shares, twenty nine
million one hundred
<PAGE>
thousand (29,100,000) shall be Common Stock, each having a par value of one cent
($.01) per share. Seventeen million four hundred thousand (17,400,000) shares
shall be Preferred Stock, each having a par value of one cent ($.01) per share.
ii. DESIGNATION OF PREFERRED STOCK. Three hundred fifty-two
(352) of the authorized shares of Preferred Stock are hereby designated "Series
A Preferred Stock" (the "Series A Preferred"), six million three hundred ninety-
nine thousand six hundred forty-eight (6,399,648) of the authorized shares of
the Preferred Stock are hereby designated as "Series B Preferred Stock" (the
"Series B Preferred"), and eleven million (11,000,000) of the authorized shares
of Preferred Stock are hereby designated as "Series C Preferred Stock" (the
"Series C Preferred"). The Series A Preferred, the Series B Preferred and the
Series C Preferred are hereinafter collectively referred to as the "Series
Preferred."
b. DIVIDENDS.
i. DIVIDENDS IN RESPECT OF SERIES C PREFERRED. Except as
provided herein, dividends on each share of Series C Preferred shall accrue on a
daily basis at the rate of twelve percent (12%) per annum on the sum of the
Liquidation Value thereof from and including the date of issuance of each such
share of Series C Preferred to and including the earlier of the date on which
(i) the Liquidation Value of such share is paid in full or (ii) such share is
converted into a share of Common Stock hereunder. Such dividends shall accrue
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends. Such dividends shall be cumulative such that all accrued and unpaid
dividends shall be fully paid or declared before any dividend, distribution or
payment may be made with respect to any shares of Series A Preferred, Series B
Preferred, Common Stock or any other stock of the Corporation that is not by its
terms expressly senior in right of payment of dividends to the Series C
Preferred. The date on which the Corporation initially issues any share of
Series C Preferred shall be deemed to be its "date of issuance" regardless of
the number of times a transfer of each such share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share.
ii. PAYMENT OF DIVIDENDS ON SERIES C PREFERRED. All accrued
dividends on the Series C Preferred shall be payable on April 30 and October 31
of each year, commencing on the earlier to occur of April 30 or October 31
following the month in which such shares of Series C Preferred are issued.
Except as otherwise provided herein, if at any time the Corporation pays less
than the total amount of dividends then accrued with respect to the Series C
Preferred, such payment shall be distributed ratably among the holders of the
Series C Preferred based on the number of shares of Series C Preferred held by
each such holder.
iii. PAYMENT OF STOCK DIVIDENDS. In the sole discretion of the
Corporation, any dividends accruing on shares of Series C Preferred may be paid,
in lieu of cash dividends, by the issuance of additional shares of Series C
Preferred (including
2
<PAGE>
fractional shares) having an aggregate Liquidation Value at the time of such
payment equal to the amount of the dividends to be paid; provided that if the
Corporation pays less than the total amount of dividends then accrued on the
Series C Preferred in the form of additional shares of Series C Preferred, such
payment in shares of Series C Preferred shall be made pro rata to the holders of
Series C Preferred based on the aggregate accrued but unpaid dividends on the
shares of Series C Preferred held by each such holder.
iv. CESSATION OF DIVIDENDS; RETURN OF DIVIDENDS. If a Qualified
Public Offering occurs during the period commencing on October 3, 1997 and
ending on the third anniversary thereof, (i) no further dividends shall accrue
and be payable on the Series C Preferred except when and as declared by the
Board of Directors, but only out of funds that are legally available therefor;
(ii) any accrued but unpaid dividends on any shares of Series C Preferred shall
be deemed waived, and the holder of each share of Series C Preferred shall not
be entitled to such dividends; and (iii) each holder of shares of Series C
Preferred shall return all previously paid dividends to the Corporation in
respect of such shares of Series C Preferred including, without limitation, any
dividends paid in shares of Series C Preferred.
v. ADDITIONAL PROVISIONS. Holders of Series B Preferred, in
preference to the holders of Series A Preferred, shall be entitled to receive
dividends, when and as declared by the Board of Directors, but only out of funds
that are legally available therefor. Holders of Series A Preferred and Series B
Preferred, in preference to the holders of Common Stock and any other stock of
the Corporation that is not by its terms expressly senior in right of payment of
dividends to the Series A Preferred and the Series B Preferred, shall be
entitled to receive dividends, when and as declared by the Board of Directors,
but only out of funds that are legally available therefor. In the event that the
Corporation declares or pays any dividends upon the Common Stock (whether
payable in cash, securities or other property) other than dividends payable
solely in shares of Common Stock, the Corporation shall also declare and pay to
the holders of the Series Preferred prior to the time that it declares and pays
such dividends to the holders of the Common Stock, the dividends which would
have been declared and paid with respect to the Common Stock issuable upon
conversion of the Series Preferred had all of the outstanding Series Preferred
been converted immediately prior to the record date for such dividend, or if no
record date is fixed, the date as of which the record holders of Common Stock
entitled to such dividends are to be determined.
C. LIQUIDATION.
i. PRIORITY. Upon any liquidation, dissolution or winding up
of the Corporation, each holder of Series C Preferred shall be entitled to be
paid, before any distribution or payment is made to the holders of the
Corporation's Series A Preferred, Series B Preferred and Common Stock and any
other stock of the Corporation that is not expressly senior in right of payment
to the Series C Preferred, the greater of (i) an amount in cash equal to the
aggregate Liquidation Value (as defined below) (plus all declared, accrued and
unpaid dividends) of all shares of Series C Preferred held by
3
<PAGE>
such holder, and (ii) the consideration which would have been paid on the shares
of Conversion Stock had all outstanding shares of Series C Preferred been
converted immediately prior to the liquidation, dissolution or winding up of the
Corporation. The holders of Series C Preferred shall not be entitled to any
further payment. If upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets available for distribution to the holders
of the Series C Preferred are insufficient to permit payment to such holders of
the aggregate amount which they are entitled to be paid, then the entire assets
available for distribution to the holders of the Series C Preferred shall be
distributed ratably among such holders based upon the aggregate Liquidation
Value (plus all declared, accrued and unpaid dividends) of the Series C
Preferred held by each such holder. Prior to the liquidation, dissolution or
winding up of the Corporation, the Corporation shall declare for payment any
accrued and unpaid dividends with respect to the Series C Preferred. The
Corporation shall mail written notice of such liquidation, dissolution or
winding up, not less than 60 days prior to the payment date stated therein, to
each record holder of Series C Preferred.
ii. Upon any liquidation, dissolution or winding up of the
Corporation, each holder of the Series B Preferred shall be entitled to be paid,
before any distribution or payment is made to the holders of the Corporation's
Series A Preferred, Common Stock and any other stock of the Corporation that is
not by its terms expressly senior in right of payment to the Series B Preferred,
the greater of (i) an amount in cash equal to the aggregate Liquidation Value
(plus all declared, accrued and unpaid dividends) of all shares of Series B
Preferred held by such holder, and (ii) the consideration which would have been
paid on the shares of Conversion Stock had all outstanding shares of Series B
Preferred been converted immediately prior to the liquidation, dissolution or
winding up of the Corporation. The holders of the Series B Preferred shall not
be entitled to any further payment. If upon any such liquidation, dissolution or
winding up of the Corporation, the Corporation's assets available for
distribution to the holders of the Series B Preferred are insufficient to permit
payment to such holders of the amount which they are entitled to be paid, then
the entire assets available for distribution to the holders of the Series B
Preferred shall be distributed ratably among such holders based upon the
aggregate Liquidation Value (plus all declared, accrued and unpaid dividends) of
the Series B Preferred held by each such holder. Prior to the liquidation,
dissolution or winding up of the Corporation, the Corporation shall declare for
payment any accrued and unpaid dividends with respect to the Series B Preferred.
The Corporation shall mail written notice of such liquidation, dissolution or
winding up, not less than 60 days prior to the payment date stated therein, to
each record holder of the Series B Preferred.
iii. Upon any liquidation, dissolution or winding up of the
Corporation, each holder of the Series A Preferred shall be entitled to be paid,
before any distribution or payment is made to the holders of the Corporation's
Common Stock and any other stock of the Corporation that is not by its terms
expressly senior in right of payment to the Series A Preferred, the greater of
(i) an amount in cash equal to the aggregate Liquidation Value (plus all
declared, accrued and unpaid dividends) of all shares of Series A Preferred held
by such holder, and (ii) the consideration which would
4
<PAGE>
have been paid on the shares of Conversion Stock had all outstanding shares of
Series A Preferred been converted immediately prior to the liquidation,
dissolution or winding up of the Corporation. The holders of the Series A
Preferred shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation, the Corporation's
assets available for distribution to the holders of the Series A Preferred are
insufficient to permit payment to such holders of the amount which they are
entitled to be paid, then the entire assets available for distribution to the
holders of the Series A Preferred shall be distributed ratably among such
holders based upon the aggregate Liquidation Value (plus all declared, accrued
and unpaid dividends) of the Series A Preferred held by each such holder. Prior
to the liquidation, dissolution or winding up of the Corporation, the
Corporation shall declare for payment any accrued and unpaid dividends with
respect to the Series A Preferred. The Corporation shall mail written notice of
such liquidation, dissolution or winding up, not less than 60 days prior to the
payment date stated therein, to each record holder of the Series A Preferred.
iv. CHANGE OF OWNERSHIP; FUNDAMENTAL CHANGE. For purposes of
this Section 3, upon the election of the holders of at least a majority of the
outstanding shares of Series Preferred (voting on an as-converted to Common
Stock basis), a "Change in Ownership" or "Fundamental Change" (each, as defined
below) shall be deemed to be a liquidation, dissolution or winding up of the
Corporation, and the holders of the Series Preferred shall be entitled to
receive payment of amounts payable with respect to the respective series of
Series Preferred upon a liquidation, dissolution or winding up in cancellation
of their shares of Series Preferred upon consummation of any such transaction.
The term "Change in Ownership" means any sale or issuance or series of sales
and/or issuances of shares of the Corporation's capital stock by the Corporation
or any holders thereof which results in any Person or group of affiliated
Persons (other than the owners of capital stock as of the original issue date of
the Series C Preferred on the conversion of the Senior Notes) owning capital
stock of the Corporation possessing more than 50% of the voting power (under
ordinary circumstances) of the Corporation. The term "Fundamental Change" means
(a) a sale or transfer of more than 50% of the assets of the Corporation and its
Subsidiaries on a consolidated basis (measured by either book value in
accordance with generally accepted accounting principles consistently applied or
fair market value determined in the reasonable good faith judgment of the
Corporation's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business and other than a sale of
the Corporation's United States wireless communications business) and (b) any
merger or consolidation or other corporate reorganization to which the
Corporation is a party, except for a merger, consolidation or other corporate
reorganization in which after giving effect to such, the holders of the
Corporation's outstanding capital stock immediately prior to such event shall
own at least 50% of the Corporation's voting power (under ordinary
circumstances).
d. REDEMPTIONS.
i. OPTIONAL SERIES C PREFERRED REDEMPTIONS. Subject to the
provisions contained herein, the Corporation shall redeem, at the option of the
holders
5
<PAGE>
of shares of Series C Preferred, shares of Series C Preferred held by such
holders at any time on or after October 3, 2002 (the "Redemption Effective
Date"), at a price per share equal to the Liquidation Value thereof (plus all of
Series C Preferred declared, accrued and unpaid dividends thereon). Any
redemption requested by the holders of shares of Series C Preferred must be
received by the Corporation at least 30 days prior to the date requested for
redemption. The Corporation shall only be required to redeem shares of Series C
Preferred (i) on four occasions during each twelve month period commencing with
the Redemption Effective Date, and (ii) so long as the holders of at least 5% of
the outstanding shares of Series C Preferred request redemption at such time.
ii. SCHEDULED REDEMPTIONS. The Corporation shall redeem a
number of shares of Series A Preferred equal to 33-1/3% of the total number of
shares of Series A Preferred Stock issued under the Series A Purchase Agreement
(or such lesser number then outstanding) on each of the sixth, seventh and
eighth anniversaries of the initial closing of the sale of Series B Preferred
(the "Scheduled Redemption Dates"), at a price per share of Series A Preferred
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). The Corporation shall redeem a number of shares of Series B Preferred
equal to 33-1/3% of the total number of shares of Series B Preferred Stock
issued under the Series B Purchase Agreement (or such lesser number then
outstanding) on each of the Scheduled Redemption Dates, at a price per share of
Series B Preferred equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon).
iii. REDEMPTION PAYMENT. For each share of Series Preferred
which is to be redeemed (or for which redemption is requested), the Corporation
shall be obligated on the respective Scheduled Redemption Date or Redemption
Date to pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such share of
Series Preferred) an amount in immediately available funds equal to the
Liquidation Value of such share of Series Preferred (plus all declared, accrued
and unpaid dividends thereon). If the funds of the Corporation legally available
for redemption of shares of Series Preferred on any Scheduled Redemption Date or
Redemption Date are insufficient to redeem the total number of shares of Series
Preferred to be redeemed (or elected to be redeemed) on such date, those funds
which are legally available shall be used to redeem the maximum possible number
of shares of Series Preferred ratably among the holders of the shares of Series
Preferred to be redeemed (or elected to be redeemed) based upon the aggregate
Liquidation Value of such shares of Series Preferred (plus all declared, accrued
and unpaid dividends thereon) held by each such holder. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of shares of Series Preferred, such funds shall immediately be used
to redeem the balance of the shares of Series Preferred which the Corporation
has become obligated to redeem (or for which requests for redemption were
received by the Corporation) on any Scheduled Redemption Date or Redemption Date
but which it has not redeemed. Prior to any redemption of Series Preferred, the
Corporation shall declare for payment all accrued and unpaid dividends with
respect to the shares of Series Preferred which are to be redeemed.
6
<PAGE>
iv. NOTICE OF REDEMPTION. The Corporation shall mail written
notice of each redemption of any Series Preferred to each record holder thereof
not more than 60 nor less than 30 days prior to the date on which such scheduled
redemption is to be made. In case fewer than the total number of shares of
Series Preferred represented by any certificate are redeemed, a new certificate
representing the number of unredeemed shares of Series Preferred shall be issued
to the holder thereof without cost to such holder within three business days
after surrender of the certificate representing the redeemed shares of Series
Preferred.
V. DETERMINATION OF THE NUMBER OF EACH HOLDER'S SHARES TO BE
REDEEMED.
(a) Subject to the rights of the holders of Series A
Preferred set forth in Section 4(i) below, the number of shares of Series A
Preferred to be redeemed from each holder thereof in scheduled redemptions by
the Corporation under this Section 4 shall be the number of shares of Series A
Preferred determined by multiplying the total number of shares of Series A
Preferred to be redeemed times a fraction, the numerator of which shall be the
total number of shares of Series A Preferred and Offset Shares (as defined in
Section 6(i)(2)) then held by such holder and the denominator of which shall be
the total number of shares of Series A Preferred and Offset Shares then
outstanding. If the application of this Section 4(e)(i) has caused the number of
shares of Series A Preferred to be redeemed from any holder to exceed the number
of shares of Series A Preferred, then held by such holder, such holder shall be
deemed (solely for purposes of this paragraph) to have applied a number of
Offset Shares equal to such excess to reduce the number of shares of Series A
Preferred to be redeemed from such holder.
(b) Subject to the rights of the holders of Series B
Preferred set forth in Section 4(j) below, the number of shares of Series B
Preferred to be redeemed from each holder thereof in scheduled redemptions by
the Corporation under this Section 4 shall be the number of shares of Series B
Preferred determined by multiplying the total number of shares of Series B
Preferred to be redeemed times a fraction, the numerator of which shall be the
total number of shares of Series B Preferred and Offset Shares (as defined in
Section 6(i)(4)) then held by such holder and the denominator of which shall be
the total number of shares of Series B Preferred and Offset Shares then
outstanding. If the application of this Section 4(e)(ii) has caused the number
of shares of Series B Preferred to be redeemed from any holder to exceed the
number of shares of Series B Preferred, then held by such holder, such holder
shall be deemed (solely for purposes of this paragraph) to have applied a number
of Offset Shares equal to such excess to reduce the number of shares of Series B
Preferred to be redeemed from such holder.
vi. DIVIDENDS AFTER REDEMPTION DATE. No share of Series
Preferred is entitled to any dividends accruing after the date on which the
Liquidation Value of such share of Series Preferred (plus all declared, accrued
and unpaid dividends thereon) is paid to the holder thereof. On such date all
rights of the holder of such share
7
<PAGE>
of Series Preferred shall cease, and such share of Series Preferred shall not
be deemed to be outstanding.
vii. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any shares of Series
Preferred which are redeemed or otherwise acquired by the Corporation shall be
canceled and shall not be reissued, sold or transferred.
viii. OTHER REDEMPTIONS OR ACQUISITIONS. Neither the
Corporation nor any Subsidiary shall redeem or otherwise acquire any Series
Preferred, except as expressly authorized herein (or pursuant to a purchase
offer made pro rata to all holders of Series Preferred on the basis of the
aggregate Liquidation Value of the shares of the Series Preferred (plus all
declared, accrued and unpaid dividends thereon) owned by such holder.
ix. ACCRUED DIVIDENDS MUST BE PAID PRIOR TO ANY REDEMPTION.
The Corporation may not redeem any Series Preferred, unless all dividends
accrued on the outstanding Series Preferred to be redeemed have been paid in
full.
x. RIGHT OF OFFSET.
(1) Upon the receipt of any notice of redemption under
this Section 4, any holder of Series A Preferred shall have the right
(exercisable by notifying the Corporation prior to the date specified for
redemption in the redemption notice) to reduce the number of shares of Series A
Preferred to be redeemed from such holder at such time by a number of shares of
Series A Preferred not exceeding the number of Offset Shares held by such holder
at the time of such redemption; provided that except as otherwise provided in
the following sentence, the right of offset hereunder shall not be exercisable
in connection with the final scheduled redemption of the Series A Preferred. If
any holder of the Series A Preferred has converted shares of Series A Preferred
after receipt of any notice of redemption under this Section 4 but prior to the
Redemption Date for such redemption, such holder shall be deemed to have elected
(and shall not be required to deliver notice of such election) to reduce the
number of shares of Series A Preferred to be redeemed from such holder in such
redemption by the number of shares of Series A Preferred so converted.
(2) A holder of Series A Preferred shall be deemed to hold
one Offset Share for each share of Series A Preferred converted by such holder
pursuant to Section 6 hereof at any time prior to the scheduled Redemption Date
for such share of Series A Preferred and for each share of Series A Preferred
otherwise acquired by the Corporation from such holder other than pursuant to a
scheduled redemption of Series A Preferred, and an Offset Share shall cease to
be an Offset Share when it has been applied to reduce the number of shares of
Series A Preferred to be redeemed in any redemption. When any holder transfers
any portion of such holder's outstanding shares of Series A Preferred to any
other Person, the transferor shall be deemed to have transferred to the
transferee a pro rata portion of the transferor's Offset
8
<PAGE>
Shares, unless the parties to such transaction otherwise agree in a writing
deposited with the secretary of the Corporation in connection with such
transfer.
(3) Upon the receipt of any notice of redemption under this
Section 4, any holder of Series B Preferred shall have the right (exercisable by
notifying the Corporation prior to the date specified for redemption in the
redemption notice) to reduce the number of shares of Series B Preferred to be
redeemed from such holder at such time by a number of shares of Series B
Preferred not exceeding the number of Offset Shares held by such holder at the
time of such redemption; provided that except as otherwise provided in the
following sentence, the right of offset hereunder shall not be exercisable in
connection with the final scheduled redemption of the Series B Preferred. If any
holder of the Series B Preferred has converted shares of Series B Preferred
after receipt of any notice of redemption under this Section 4 but prior to the
Redemption Date for such redemption, such holder shall be deemed to have elected
(and shall not be required to deliver notice of such election) to reduce the
number of shares of Series B Preferred to be redeemed from such holder in such
redemption by the number of shares of Series B Preferred so converted.
(4) A holder of Series B Preferred shall be deemed to hold
one Offset Share for each share of Series B Preferred converted by such holder
pursuant to Section 6 hereof at any time prior to the scheduled Redemption Date
for such share of Series B Preferred and for each share of Series B Preferred
otherwise acquired by the Corporation from such holder other than pursuant to a
scheduled redemption of Series B Preferred, and an Offset Share shall cease to
be an Offset Share when it has been applied to reduce the number of shares of
Series B Preferred to be redeemed in any redemption. When any holder transfers
any portion of such holder's outstanding shares of Series B Preferred to any
other Person, the transferor shall be deemed to have transferred to the
transferee a pro rata portion of the transferor's Offset Shares, unless the
parties to such transaction otherwise agree in a writing deposited with the
secretary of the Corporation in connection with such transfer.
e. VOTING RIGHTS.
The holders of the Series Preferred shall be entitled to notice of all
meetings of stockholders in accordance with the Corporation's bylaws, and except
as otherwise required by law or as provided herein, the holders of the Series
Preferred shall be entitled to vote or act by written consent on all matters
submitted to the stockholders for a vote together with the holders of the Common
Stock voting together as a single class with each share of Common Stock entitled
to one vote per share and with each share of Series Preferred entitled to one
vote for each share of Common Stock issuable upon conversion of the Series
Preferred at the time the vote is taken.
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f. CONVERSION.
i. CONVERSION PROCEDURE.
(1) At any time and from time to time, any holder of Series
Preferred may convert all or any portion of the Series Preferred (including any
fraction of a share) held by such holder into a number of shares of Conversion
Stock computed by multiplying the number of shares of Series Preferred to be
converted by the Original Issue Price for such share of Series Preferred and
dividing the result by the applicable Conversion Price then in effect.
(2) Each conversion of Series Preferred shall be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Series Preferred to be converted
have been surrendered at the principal office of the Corporation. At such time
as such conversion has been effected, the rights of the holder of such Series
Preferred as such holder shall cease and the Person or Persons in whose name or
names any certificate or certificates for shares of Conversion Stock are to be
issued upon such conversion shall be deemed to have become the holder or holders
of record of the shares of Conversion Stock represented thereby.
(3) The conversion rights of any share of Series Preferred
subject to redemption hereunder shall terminate on the Redemption Date for such
share of Series Preferred unless the Corporation has failed to pay to the holder
thereof the Liquidation Value thereof (plus all declared, accrued and unpaid
dividends thereon) in which case the conversion rights shall continue with
respect to any share of Series Preferred not redeemed.
(4) Notwithstanding any other provision hereof, if a
conversion of Series Preferred is to be made in connection with a Public
Offering, the conversion of any shares of Series Preferred may, at the election
of the holder of such shares of Series Preferred, be conditioned upon the
consummation of the Public Offering in which case such conversion shall not be
deemed to be effective until the consummation of the Public Offering.
(5) As soon as possible after a conversion has been
effected, the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the converting
holder has specified;
(b) payment in an amount equal to all accrued dividends
with respect to each share of Series Preferred converted, which have not been
10
<PAGE>
paid prior thereto, plus the amount payable under subparagraph (9) below with
respect to such conversion; and
(c) a certificate representing any shares of Series
Preferred which were represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which were not converted.
(6) If for any reason the Corporation is unable to pay any
portion of the accrued dividends on any share of Series Preferred being
converted then, at the converting holder's option, (a) the Corporation shall
either pay such dividends to the converting holder as soon thereafter as funds
of the Corporation are legally available for such payment, or (b) such portion
of the unpaid dividends shall be converted into an additional number of shares
of Conversion Stock determined by dividing the amount of the unpaid dividends to
be applied for such purposes by the Conversion Price then in effect. If the
converting holder elects to have dividends paid as soon as funds are legally
available, then, at the request of the converting holder, the Corporation shall
provide the holder with written evidence of its obligation to such holder.
(7) The issuance of certificates for shares of Conversion
Stock upon conversion of Series Preferred shall be made without charge to the
holder of such Series Preferred for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion and the
related issuance of shares of Conversion Stock. Upon conversion of each share of
Series Preferred, the Corporation shall take all such actions as are necessary
in order to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable.
(8) The Corporation shall not close its books against the
transfer of Series Preferred or of Conversion Stock issued or issuable upon
conversion of Series Preferred in any manner which interferes with the timely
conversion of Series Preferred. The Corporation shall assist and cooperate with
any holder of shares of Series Preferred required to make any governmental
filings or obtain any governmental approval prior to or in connection with any
conversion of shares of Series Preferred hereunder (including, without
limitation, making any filings required to be made by the Corporation).
(9) If any fractional interest in a share of Conversion
Stock would, except for the provisions of this subparagraph, be deliverable upon
any conversion of the Series Preferred, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of conversion.
ii. CONVERSION PRICE.
(1) The Conversion Price of the Series A Preferred shall be
$2.12. The
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Conversion Price of the Series B Preferred shall be $2.60. The Conversion Price
of the Series C Preferred shall be $1.45. In order to prevent dilution of the
conversion rights granted under this subparagraph, the respective Conversion
Prices for the Series Preferred shall be subject to adjustment from time to time
pursuant to this Section 6.
(2) Subject to Section 6(e), if and whenever on or after the
original date of issuance of the Senior Notes, the Corporation issues or sells,
or in accordance with Section 6(c) is deemed to have issued or sold, any shares
of its Common Stock for a consideration per share less than the Conversion Price
for the Series C Preferred in effect immediately prior to the time of such issue
or sale, then forthwith upon such issue or sale, the Conversion Price for the
Series C Preferred shall be reduced to the Conversion Price determined by
dividing (a) the sum of (1) the product derived by multiplying the Conversion
Price of the Series C Preferred in effect immediately prior to such issue or
sale times the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (2) (i) the consideration, if any, received by
the Corporation upon such issue or sale, and (ii) the consideration, if any,
payable to the Corporation upon the exercise of any Options (as defined in
Section 6(c)(1)) or upon the conversion or exchange of any Convertible
Securities (as defined in Section 6(c)(1)) by (b) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale; provided that
there shall be no adjustment in the Conversion Price of the Series C Preferred
as a result of (i) any issuance or sale (or deemed issuance or sale) of
2,307,972 shares of Common Stock to directors, officers, employees and
consultants of the Corporation pursuant to stock option plans or stock ownership
plans so long as the issue or sale price of such Options is not less than the
Series C Conversion Price then in effect (including any change in the issue
price of any Options issued under such plans so long as the issue price is not
less than the Series C Conversion Price then in effect) (as adjusted for stock
splits, stock dividends and similar recapitalizations) or (ii) the issuance of
shares of Convertible Securities or Common Stock as dividends or interest in
respect of any shares of Series Preferred or Senior Notes, respectively.
(3) If and whenever on or after the original date of
issuance of the Senior Notes, the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock for a consideration per share less than the Conversion Price for the
Series C Preferred in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale the Conversion Price for the Series
A Preferred shall be reduced to the Conversion Price determined by dividing (a)
the sum of (1) the product derived by multiplying the Conversion Price of the
Series A Preferred in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) (i) the consideration, if any, received by the
Corporation upon such issue or sale, and (ii) the consideration, if any, payable
to the Corporation upon the exercise of any Options (as defined in Section
6(c)(1)) or upon the conversion or exchange of any Convertible Securities (as
defined in Section 6(c)(1)) by (b) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale; provided that there shall be
no adjustment in the Conversion Price of the
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<PAGE>
Series A Preferred as a result of any (i) issuance or sale (or deemed issuance
or sale) of 2,307,972 shares of Common Stock to directors, officers, employees
and consultants of the Corporation pursuant to stock option plans or stock
ownership plans so long as the issue or sale price of such Options is not less
than the Series C Conversion Price then in effect (including any change in the
issue price of any Options issued under such plans so long as the issue price is
not less than the Series C Conversion Price then in effect) (as adjusted for
stock splits, stock dividends and similar recapitalizations) or (ii) the
issuance of shares of Convertible Securities or Common Stock as dividends or
interest in respect of shares of Series Preferred or Senior Notes, respectively.
(4) If and whenever on or after the original date of
issuance of the Senior Notes, the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock for a consideration per share less than the Conversion Price for the
Series C Preferred in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale the Conversion Price for the Series
B Preferred shall be reduced to the Conversion Price determined by dividing (a)
the sum of (1) the product derived by multiplying the Conversion Price of the
Series B Preferred in effect immediately prior to such issue or sale times the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) (i) the consideration, if any, received by the
Corporation upon such issue or sale, and (ii) the consideration, if any, payable
to the Corporation upon the exercise of any Options (as defined in Section
6(c)(1)) or upon the conversion or exchange of any Convertible Securities (as
defined in Section 6(c)(1)) the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale; provided that there shall be
no adjustment in the Conversion Price of the Series B Preferred as a result of
any (i) issuance or sale (or deemed issuance or sale) of 2,307,972 shares of
Common Stock to directors, officers, employees and consultants of the
Corporation pursuant to stock option plans or stock ownership plans so long as
the issue or sale price of such Options is not less than the Series C Conversion
Price then in effect (including any change in the issue price of any Options
issued under such plans so long as the issue price is not less than the Series C
Conversion Price then in effect) (as adjusted for stock splits, stock dividends
and similar recapitalizations) or (ii) the issuance of shares of Convertible
Securities or Common Stock as dividends or interest in respect of shares of
Series Preferred or Senior Notes, respectively.
iii. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Prices for the Series Preferred under
Section 6(b), the following shall be applicable:
(1) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in
any manner grants any rights or Options to subscribe for or to purchase Common
Stock or any stock or other securities convertible into or exchangeable for
Common Stock (such rights or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such Convertible
Securities is less than the
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<PAGE>
Conversion Price for the Series C Preferred in effect immediately prior to the
time of the granting of such Options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the granting of such
Options for such price per share. For purposes of this paragraph, the "price per
share for which Common Stock is issuable" shall be determined by dividing (A)
the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon exercise of
all such Options, plus in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities issuable upon
the exercise of such Options. No further adjustment of the Conversion Price
shall be made when Convertible Securities are actually issued upon the exercise
of such Options or when Common Stock is actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible Securities.
(2) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation
in any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange of such
Convertible Securities is less than the Conversion Price for the Series C
Preferred in effect immediately prior to the time of such issue or sale, then
the maximum number of shares of Common Stock issuable upon conversion or
exchange of such Convertible Securities shall be deemed to be outstanding and to
have been issued and sold by the Corporation at the time of the issuance or sale
of such Convertible Securities for such price per share. For the purposes of
this paragraph, the "price per share for which Common Stock is issuable" shall
be determined by dividing (A) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment of the
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 6, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
(3) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the
purchase price provided for in any Option, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities, or the
rate at which any
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<PAGE>
Convertible Securities are convertible into or exchangeable for Common Stock
change at any time, the Conversion Price in effect at the time of such change
shall be readjusted to the Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold;
provided that if such adjustment would result in an increase of the Conversion
Price then in effect, such adjustment shall not be effective until 30 days after
written notice thereof has been given by the Corporation to all holders of the
Series Preferred.
(4) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder shall
be adjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such expiration or termination,
never been issued; provided that if such expiration or termination would result
in an increase in the Conversion Price then in effect, such increase shall not
be effective until 30 days after written notice thereof has been given to all
holders of the Series Preferred.
(5) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Corporation therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation shall be the Market Price thereof as of the date of
receipt. If any Common Stock, Option or Convertible Security is issued to the
owners of the non-surviving entity in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash and securities shall be determined jointly by the
Corporation and the holders of a majority of each class of the outstanding
Series Preferred. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration shall be
determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Corporation and the holders of a majority
of each class of the outstanding Series Preferred. The determination of such
appraiser shall be final and binding upon the parties, and the fees and expenses
of such appraiser shall be borne by the Corporation.
(6) INTEGRATED TRANSACTIONS. In case any Option is issued
in connection with the issue or sale of other securities of the Corporation,
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<PAGE>
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(7) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(8) RECORD DATE. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
iv. CHANGE IN CONVERSION PRICE ON SALE OF U.S. ASSETS. As more
fully described below, the respective Conversion Prices for the Series Preferred
shall also be reduced if, by March 31, 1998, the Corporation shall not have
received $3,500,000 in aggregate net cash sale proceeds (the "Threshold Amount")
from the sale or other disposition of all or a portion of the Corporation's or
its Subsidiaries' United States wireless communications businesses and assets
(the "U.S. Assets") by the application of the following formula:
CPE * (1-(Threshold Amount-NSP))
--------------------
25,000,000
where:
CPE = the applicable Conversion Price then in effect.
Threshold Amount = 3,500,000.
NSP = the aggregate net cash sale proceeds received by the Corporation and its
Subsidiaries on the sale or other disposition of the U.S. Assets less any
liabilities retained by the Corporation and its Subsidiaries related to the U.S.
Assets that were sold or disposed; provided that in the event the Corporation
and its Subsidiaries have received 80% of the Threshold Amount in cash from the
sale or other disposition of the U.S. Assets, then any amounts payable in cash
which are held back by the purchasers of such U.S. Assets solely pending
governmental approval of such sale or disposition, shall be taken into account
in the calculation of the aggregate net sale proceeds received.
If the Corporation and its Subsidiaries receive the Threshold Amount or more, no
adjustment in the respective Conversion Prices for the Series Preferred shall
occur as a
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result of the sale or other disposition of the U.S. Assets. In no event shall
the Conversion Price for the Series C Preferred obtained by application of this
Section 6(d) be reduced to less than $1.25.
v. CHANGE IN CONVERSION PRICE FOR SERIES C PREFERRED ON CERTAIN
CAPITAL RAISINGS. If, after the original date of issuance of the Senior Notes,
the Corporation issues or sells or, in accordance with Section 6(c) is deemed to
have issued or sold, any shares of Common Stock, for a consideration per share
(the "Per Share Trigger Price") less than $1.93, the Conversion Price for Series
C Preferred shall be reduced to the Conversion Price which is the lesser of (i)
25% less than the Per Share Trigger Price but in no event less than $1.25 or
(ii) the Conversion Price for Series C Preferred obtained by application of
Section 6(b)(2); provided that this Section 6(e) shall only apply to the next
$7,500,000 in aggregate capital raisings by the Corporation after October 3,
1997.
vi. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split or otherwise) one
or more classes of its outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased.
vii. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets to another
Person or other transaction which is effected in such a manner that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
each class of the Series Preferred then outstanding voting on an as-converted to
Common Stock basis) to insure that each of the holders of Series Preferred shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series Preferred,
such shares of stock, securities or assets as such holder would have received in
connection with such Organic Change if such holder had converted its Series
Preferred immediately prior to such Organic Change. In each such case, the
Corporation shall also make appropriate provisions (in form and substance
satisfactory to the holders of a majority of each class of the Series Preferred
then outstanding voting on an as-converted to Common Stock basis) to insure that
the provisions of this Section 6 and Sections 7 and 8 hereof shall thereafter be
applicable to the Series Preferred (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Corporation, an immediate adjustment of the Conversion Price
to the value for
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<PAGE>
the Common Stock reflected by the terms of such consolidation, merger or sale,
and a corresponding immediate adjustment in the number of shares of Conversion
Stock acquirable and receivable upon conversion of Series Preferred, if the
value so reflected is less than the Conversion Price for the Series C Preferred
in effect immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor corporation (if other than the
Corporation) resulting from consolidation or merger or the corporation
purchasing such assets assumes by written instrument (in form reasonably
satisfactory to the holders of a majority of each class of the Series Preferred
then outstanding voting on an as-converted to Common Stock basis) the obligation
to deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
viii. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Corporation's board of directors shall make an appropriate adjustment
in the Conversion Price so as to protect the rights of the holders of Series
Preferred; provided that no such adjustment shall increase the Conversion Price
as otherwise determined pursuant to this Section 6 or decrease the number of
shares of Conversion Stock issuable upon conversion of each share of Series
Preferred.
ix. NOTICES.
(1) Immediately upon any adjustment of any Conversion Price,
the Corporation shall give written notice thereof to all holders of Series
Preferred, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(2) The Corporation shall give written notice to all holders
of Series Preferred at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(3) The Corporation shall also give written notice to the
holders of Series Preferred at least 20 days prior to the date on which any
Organic Change, dissolution or liquidation shall take place.
x. MANDATORY CONVERSION. The Corporation may at any time
require the conversion of all of the outstanding Series Preferred if the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of such its Common Stock in which (a) the aggregate proceeds
(after taking into account underwriting discounts and commissions) received by
the Corporation for the shares shall be at least $20,000,000 and (b) the price
per share paid by the public for such
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<PAGE>
shares shall be at least $6.00 (as adjusted for stock splits, stock dividends,
reverse stock splits and similar recapitalizations) (a "Qualified Public
Offering"). Any such mandatory conversion shall only be effected at the time of
and subject to the closing of the sale of such shares pursuant to such Public
Offering and upon written notice of such mandatory conversion delivered to all
holders of Series Preferred at least seven days prior to such closing.
g. LIQUIDATING DIVIDENDS.
If the Corporation declares or pays a dividend upon the Common Stock
payable otherwise than in cash out of earnings or earned surplus (determined in
accordance with generally accepted accounting principles, consistently applied)
except for a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of Series Preferred at
the time of payment thereof the Liquidating Dividends which would have been paid
on the shares of Conversion Stock had such Series Preferred been converted
immediately prior to the date on which a record is taken for such Liquidating
Dividend, or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
h. PURCHASE RIGHTS.
If at any time the Corporation grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then each holder of Series Preferred shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Conversion Stock acquirable upon conversion of such
holder's Series Preferred immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
i. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of shares of Series Preferred. Upon the surrender of any
certificate representing shares of Series Preferred at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the shares of Series Preferred represented by such new
certificate from the date to
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which dividends have been fully paid on such Series Preferred represented by the
surrendered certificate.
j. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series Preferred, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor
its own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of Series Preferred of such class represented
by such lost, stolen, destroyed or mutilated certificate and dated the date of
such lost, stolen, destroyed or mutilated certificate, and dividends shall
accrue on the shares of Series Preferred represented by such new certificate
from the date to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
k. DEFINITIONS.
"Common Stock" means, collectively, the Corporation's Common Stock, par
------------
value $.01 per share and any capital stock of any class of the Corporation
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time, the
-------------------------------
number of shares of Common Stock actually outstanding at such time, plus (a) the
number of shares of Common Stock which would be issued upon exercise of all of
the Corporation's outstanding Options and (b) the number of shares of Common
Stock which would be issued upon conversion or exchange of all of the
Corporation's outstanding Convertible Securities (including Convertible
Securities issuable upon exercise of Options).
"Conversion Price" means the respective Conversion Price for each of
----------------
the Series A Preferred, Series B Preferred and Series C Preferred in effect from
time to time.
"Conversion Stock" means shares of the Corporation's Common Stock, par
----------------
value $.01 per share; provided that if there is a change such that the
securities issuable upon conversion of any of the Series Preferred are issued by
an entity other than the Corporation or there is a change in the class of
securities so issuable, then the term "Conversion Stock" shall mean one share of
the security issuable upon conversion of the
20
<PAGE>
affected Series Preferred if such security is issuable in shares, or shall mean
the smallest unit in which such security is issuable if such security is not
issuable in shares.
"Liquidation Value" of any share of Series Preferred shall be equal
-----------------
to the Original Issue Price of such share of Series Preferred.
"Market Price" of any security means the average of the closing
------------
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the NASDAQ System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day. If at any time such security is not
listed on any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of each
class of the Series Preferred. If such parties are unable to reach agreement
within a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of a majority of each class of the Series Preferred
(voting on an as-converted to Common Stock basis). The determination of such
appraiser shall be final and binding upon the parties, and the Corporation shall
pay the fees and expenses of such appraiser.
"Original Issue Price" of any share of Series A Preferred shall be
--------------------
equal to $25,000, the Original Issue Price of Series B Preferred shall be equal
to $3.65 and the Original Issue Price of the Series C Preferred shall be equal
to $1.45.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a limited liability company, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
---------------
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933, as then in effect, or any comparable statement under
any similar federal statute then in force; provided that for purposes of
Section 6(j) hereof, a Public Offering shall not include an offering made in
connection with a business acquisition or combination or an employee benefit
plan.
"Redemption Date" as to any share of Series Preferred means the date
---------------
specified herein for the scheduled redemption of such Series Preferred or the
date
21
<PAGE>
requested for redemption by the holders of Series C Preferred in accordance
with the terms hereof.
"Senior Notes" means the Corporation's Senior Secured Convertible
------------
Notes due 2002 issued pursuant to the Senior Note Purchase Agreement.
"Senior Note Purchase Agreement" means the Purchase Agreement for the
------------------------------
Senior Notes dated October 3, 1997 by and among the Corporation and certain
investors, as such agreement may from time to time be amended in accordance with
its terms.
"Series A Purchase Agreement" means the Purchase Agreement for the
---------------------------
Series A Preferred, dated as of June 27, 1996, by and among the Corporation and
certain investors, as such agreement may from time to time be amended in
accordance with its terms.
"Series B Purchase Agreement" means the Purchase Agreement for the
---------------------------
Series B Preferred, dated as of November 22, 1996, by and among the Corporation
and certain investors, as such agreement may from time to time be amended in
accordance with its terms.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
l. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding or effective with
respect to any provision of Sections 1 to 12 hereof without the prior written
consent of the holders of a majority of each class of the Series Preferred
(voting on an as-converted to Common Stock basis) outstanding at the time such
action is taken; provided that no such action shall change (i) the manner in
which dividends on the Series A Preferred accrue or the times at which such
dividends become payable or the amount payable on redemption of the Series A
Preferred or the times at which redemption of Series A Preferred is to occur,
without the prior written consent of the holders of at least 75% of the Series A
Preferred then outstanding, (ii) the Conversion Price of the Series A
22
<PAGE>
Preferred or the number of shares or class of stock into which the Series A
Preferred is convertible, without the prior written consent of the holders of at
least 75% of the Series A Preferred then outstanding or (iii) the percentage
required to approve any change described in clauses (i) and (ii) above, without
the prior written consent of the holders of at least 75% of the Series A
Preferred then outstanding; and provided, further, that no change in the terms
hereof may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Series A
Preferred then outstanding; (iv) the manner in which dividends on the Series B
Preferred accrue or the times at which such dividends become payable or the
amount payable on redemption of the Series B Preferred or the times at which
redemption of Series B Preferred is to occur, without the prior written consent
of the holders of at least 75% of the Series B Preferred then outstanding, (v)
the Conversion Price of the Series B Preferred or the number of shares or class
of stock into which the Series B Preferred is convertible, without the prior
written consent of the holders of at least 75% of the Series B Preferred then
outstanding or (vi) the percentage required to approve any change described in
clauses (iv) and (v) above, without the prior written consent of the holders of
at least 75% of the Series B Preferred then outstanding; and provided, further,
that no change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders of the
applicable percentage of the Series B Preferred then outstanding; (vii) the
manner in which dividends on the Series C Preferred accrue or the times at which
such dividends become payable, the amount payable on redemption of the Series C
Preferred or the times at which redemption of Series C Preferred is to occur, or
the priority or amount of payment to the Series C Preferred upon liquidation
without the prior written consent of the holders of at least 75% of the Series C
Preferred then outstanding, (viii) the Conversion Price of the Series C
Preferred or the number of shares or class of stock into which the Series C
Preferred is convertible, without the prior written consent of the holders of at
least 75% of the Series C Preferred then outstanding or (ix) the percentage
required to approve any change described in clauses (vii) and (viii) above,
without the prior written consent of the holders of at least 75% of the Series C
Preferred then outstanding; provided, further, that no change in the terms
hereof may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of the applicable percentage of the Series C
Preferred then outstanding. Notwithstanding anything to the contrary contained
herein, no amendment, modification or waiver with respect to any provision of
Sections 1 to 12 hereof may be made which improves the position of the holders
of the Series A Preferred and the holders of the Series B Preferred to the
detriment of the holders of the Series C Preferred without the prior written
consent of 66 2/3% of the Series C Preferred then outstanding.
M. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be delivered by registered or certified
mail, return
23
<PAGE>
receipt requested and postage prepaid, or by reputable overnight courier
service, charges prepaid, and shall be deemed to have been given when so mailed
or sent (i) to the Corporation, at its principal executive offices and (ii) to
any stockholder, at such holder's address as it appears in the stock records of
the Corporation (unless otherwise indicated by any such holder).
5.
a. A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
b. Any repeal or modification of this Article V shall be
prospective and shall not affect the rights under this Article V in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
6.
The directors shall have the power to adopt, amend or repeal
Bylaws, except as may be otherwise be provided in the Bylaws.
7.
The Corporation expressly elects not to be governed by Section 203
of the General Corporation Law of the State of Delaware.
8.
a. Each person who was or is made a party, is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he (or a person of whom he is the legal representative),
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary, or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, fiduciary or agent or in any other capacity while
serving as a director, officer, employee, fiduciary or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent which it
is empowered to do so by the General
24
<PAGE>
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment) against
all expense, liability and loss (including attorneys' fees actually and
reasonably incurred by such person in connection with such proceeding) and such
indemnification shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 2 of this
Article VIII, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the Board of Directors of the Corporation. The
right to indemnification conferred in this Article VIII shall be a contract
right and, subject to Sections 2 and 5 of this Article VIII, shall include the
right to payment by the Corporation of the expenses incurred in defending any
such proceeding in advance of its final disposition. The Corporation may, by
action of the Board of Directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
b. Any indemnification of a director or officer of the Corporation
under Section 1 of this Article VIII or advance of expenses under Section 5 of
this Article VIII shall be made promptly, and in any event within 30 days, upon
the written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article VIII is required, and the Corporation fails to respond within
sixty days to a written request for indemnity, the Corporation shall be deemed
to have approved the request. If the Corporation denies a written request for
indemnification or advancing of expenses, in whole or in part, or if payment in
full pursuant to such request is not made within 30 days, the right to
indemnification or advances as granted by this Article VIII shall be enforceable
by the director or officer in any court of competent jurisdiction. Such person's
costs and expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the Corporation to indemnify the claimant for the
amount claimed, but the burden of such defense shall be on the Corporation.
Neither the failure of the Corporation (including the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
25
<PAGE>
c. The rights to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article VIII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of this Amended and
Restated Certificate of Incorporation, the By-Laws, agreements, vote of
stockholders or disinterested directors or otherwise.
d. The Corporation may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a director, officer, employee,
fiduciary, or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity,
whether or not the Corporation would have the power to indemnify such person
against such liability under this Article VIII.
e. Expenses incurred by any person described in Section 1 of this
Article VIII in defending a proceeding shall be paid by the Corporation in
advance of such proceeding's final disposition unless otherwise determined by
the Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation. Such
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate.
f. Persons who are not covered by the foregoing provisions of
this Article VIII and who are or were employees or agents of the Corporation, or
who are or were serving at the request of the Corporation as employees or agents
of another corporation, partnership, joint venture, trust or other enterprise,
may be indemnified to the extent authorized at any time or from time to time by
the Board of Directors.
g. The provisions of this Article VIII shall be deemed to be a
contract right between the Corporation and each director or officer who serves
in any such capacity at any time while this Article VIII and the relevant
provisions of the General Corporation Law of the State of Delaware or other
applicable law are in effect, and any repeal or modification of this Article
VIII or any such law shall not affect any rights or obligations then existing
with respect to any state of facts or proceeding then existing.
h. For purposes of this Article VIII, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article VIII with respect to the
resulting or
26
<PAGE>
surviving corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
9.
The Corporation reserves the right to amend or repeal any
provisions contained in this Amended and Restated Certificate of Incorporation
from time to time and at any time in the manner now or hereafter prescribed by
the laws of the State of Delaware, and all rights conferred upon stockholders
and directors are granted subject to such reservation.
We, the undersigned, being the President and Secretary of the
Corporation, do make and file this Certificate, hereby declaring and certifying
that the facts herein stated are true, and accordingly have hereunto set our
hands this ____ day of October, 1997.
/s/ MICHAEL N. SIMKIN
------------------------------------------
Michael N. Simkin, Chief Executive Officer
/s/ BERNARD G. DVORAK
------------------------------------------
Bernard G. Dvorak, Secretary
27
<PAGE>
CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENTENNIAL COMMUNICATIONS CORP.
CENTENNIAL COMMUNICATIONS CORP., a corporation organized and existing under
and by virtue of the General Corporation law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The name of the corporation is CENTENNIAL COMMUNICATIONS CORP.
(hereinafter the "Corporation").
2. The Corporation's original Certificate of Incorporation was initially
filed with the Secretary of the State of Delaware on Thursday, October 26, 1995.
3. The following amendment to the Amended and Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance with
Sections 228 and 242 of the Delaware General Corporation Law, the Board of
Directors of the Corporation having adopted resolutions setting forth the
proposed amendment, declaring its advisability, and directing that it be
submitted to the stockholders of the Corporation for their approval; 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 having consented in writing to
the adoption thereof; and written notice of such adoption by the stockholders
without a meeting by less than unanimous written consent having been given to
those stockholders from whom such written consent was not received.
4. Article IV, Section 1(a) of the Amended and Restated Certificate of
Incorporation of the Company is hereby amended to read in full as follows:
ARTICLE IV
SECTION 1.
"(A) CLASSES OF STOCK. The Corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the Corporation is
authorized to issue is fifty-seven million four hundred thousand (57,400,000)
shares, forty million (40,000,000) shall be Common Stock, each having a par
value of one cent ($.01) per share.
<PAGE>
Seventeen million four hundred thousand (17,400,000) shares shall be Preferred
Stock, each having a par value of one cent ($.01) per share.
5. Article IV, Sections 4(a) and 4(b) of the Amended and Restated
Certificate of Incorporation of the Company is hereby amended to read in full as
follows:
ARTICLE IV
SECTION 4. REDEMPTIONS.
"(A) OPTIONAL SERIES C PREFERRED REDEMPTIONS.
Subject to the provisions contained herein, the Corporation shall
redeem, at the option of the holders of shares of Series C Preferred, shares of
Series C Preferred held by such holders at any time on or after January 31, 2006
(the "Redemption Effective Date"), at a price per share equal to the Liquidation
Value thereof (plus all of Series C Preferred declared, accrued and unpaid
dividends thereon). Any redemption requested by the holders of shares of Series
C Preferred must be received by the Corporation at least 30 days prior to the
date requested for redemption. The Corporation shall only be required to redeem
shares of Series C Preferred (i) on four occasions during each twelve month
period commencing with the Redemption Effective Date, and (ii) so long as the
holders of at least 5% of the outstanding shares of Series C Preferred request
redemption at such time."
(B) SCHEDULED REDEMPTIONS. The Corporation shall redeem a number of shares
of Series A Preferred equal to 33-1/3% of the total number of shares of Series A
Preferred issued under the Series A Purchase Agreement (or such lesser number
then outstanding) on each of March 1, 2006, March 1, 2007 and March 1, 2008 (the
"Scheduled Redemption Dates"), at a price per share of Series A Preferred equal
to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). The Corporation shall redeem a number of shares of Series B Preferred
equal to 33-1/3% of the total number of shares of Series B Preferred Stock
issued under the Series B Purchase Agreement (or such lesser number then
outstanding) on each of the Scheduled Redemption Dates, at a price per share of
Series B Preferred equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon).
6. The amendments set forth above were duly adopted in accordance with
the provisions of Sections 242 and 228 of the General Corporation law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the Chief Financial Officer of
the Corporation, for the purpose of amending the Certificate of Incorporation of
the Corporation pursuant to Section 242 of the General Corporation Law of the
State of Delaware, do make and file this Certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly have hereunto
set my hand this ___ day of December, 1997.
2
<PAGE>
CENTENNIAL COMMUNICATIONS CORP.
By:/s/ BERNARD G. DVORAK
----------------------------
Bernard G. Dvorak
Chief Financial Officer
3
<PAGE>
Exhibit 3.2
BY-LAWS
-------
OF
--
CENTENNIAL COMMUNICATIONS CORP.
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation in
---------- -----------------
the State of Delaware shall be located at 32 Loockerman Square, Suite L-100, in
the City of Dover. County of Kent. The name of the corporation's registered
agent at such address shall be The Prentice-Hall Corporation System, Inc. The
registered office and/or registered agent of the corporation may be changed from
time to time by action of the board of directors.
Section 2. Other Offices. 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. Place and Time of Meetings. An annual meeting of the
---------- --------------------------
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. The date,
time and place of the annual meeting may be determined by resolution of the
board of directors or as set by the president of the corporation.
Section 2. Special Meetings. Special meetings of stockholders may be called
---------- ----------------
for any purpose (including, without limitation, the filling of board vacancies
and newly created directorships), and may be held at such time and place, within
or without the State of Delaware, as shall be stated in a notice of meeting or
in a duly executed waiver of notice thereof. Such meetings may be called at any
time by two or more members of the board of directors or the president and shall
be called by the president upon the written request of holders of shares
entitled to cast not less than fifty percent (50%) of the outstanding shares of
any series or class of the corporation's Capital Stock.
<PAGE>
Section 3. Place of Meeting. The board of directors may designate any
--------- ----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
--------- ------
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meeting the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting. All such notices
shall be delivered, either personally or by mail, by or at the direction of the
board of directors, the president or the secretary, and if mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the stockholder at his, her or its address as the
same appears on the records of the corporation. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
--------- -----------------
of the corporation shall make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, 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 6. Quorum. Except as otherwise provided by applicable law or by the
--------- ------
Certificate of Incorporation, a majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time in accordance with Section
7 of this Article, until a quorum shall be present or represented.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
--------- ------------------
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting. 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 8. Vote Required. When a quorum is present, the affirmative vote of
--------- -------------
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject
-2-
<PAGE>
matter shall be the act of the stockholders, unless the question is one upon
which by express provisions of an applicable law 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. Where a separate vote by
class is required, the affirmative vote of the majority of shares of such class
present in person or represented by proxy at the meeting shall be the act of
such class.
Section 9. Voting Rights. Except as otherwise provided by the General
--------- -------------
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of common stock held
by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
---------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him, her or
it by proxy. Every proxy must be signed by the stockholder granting the proxy or
by his, her or its attorney-in-fact. No proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally.
Section 11. Action by Written Consent. 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 or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than a majority of
the shares entitled to vote, or, if greater, 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 and shall be
delivered to the corporation by delivery to its registered office in the state
of Delaware, or the corporation's principal place of business, or an officer or
agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All consents
properly delivered in accordance with this section shall be deemed to be
recorded when so delivered. No written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered to the corporation as required by this section, written
consents signed by the holders of a sufficient number of shares to take such
corporate action are so recorded. 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. Any action taken
pursuant to such written consent or consents of the stockholders shall have the
same force and effect as if taken by the stockholders at a meeting thereof
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<PAGE>
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
--------- -----------------------------------
which shall constitute the first board shall be three (3). Thereafter, the
number of directors shall be established from time to time by resolution of the
board. The directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote in
the election of directors. The directors shall be elected in this manner at the
annual meeting of the stockholders, except as provided in Section 4 of this
Article III. Each director elected shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire board of
--------- -----------------------
directors may be removed at any time, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
Whenever the holders of any class or series are entitled to elect one or more
directors by the provisions of the corporation's certificate of incorporation,
the provisions of this section shall apply, in respect to the removal without
cause or a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Any director may resign at any time upon written
notice to the corporation.
Section 4. Vacancies. Except as otherwise provided by the Certificate of
--------- ---------
Incorporation of the corporation or any amendments thereto, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority vote of the holders of the corporation's
outstanding stock entitled to vote thereon. Each director so chosen shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
--------- ---------------
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, 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 resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president or vice president on at least 24 hours notice to each
director, either personally, by telephone, by mail, or by telegraph, in like
manner and on like notice the president must call a special meeting on the
written request of at least a majority of the directors.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
--------- -------------------------------------
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of
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<PAGE>
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. 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 8. Committees. 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, which to the
extent provided in such resolution or these by-laws shall have and may exercise
the powers of the board of directors in the management and affairs of the
corporation except as otherwise limited by law. The board of directors 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. 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. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
--------- ---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
---------- ------------------------
any committee thereof may participate in and act at any meeting of such board or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
---------- ------------------------------------------
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
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<PAGE>
Section 12. Action by Written Consent. Unless otherwise restricted by the
---------- -------------------------
certificate of incorporation, 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.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the corporation shall be elected by the
--------- ------
board of directors and shall consist of a chairman, if any is elected, a
president, one or more vice presidents, a secretary, a treasurer, and such other
officers and assistant officers as may be deemed necessary or desirable by the
board of directors. Any number of offices may be held by the same person, except
that no person may simultaneously hold the office of president and secretary. In
its discretion, the board of directors may choose not to fill any office for any
period as it may deem advisable.
Section 2. Election and Term of Office. The officers of the corporation
--------- ---------------------------
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall appoint other officers to serve for such terms as he
or she deems desirable. Vacancies may be filled or new offices created and
filled at any meeting of the board of directors. Each officer shall hold office
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
--------- -------
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
--------- ---------
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the
--------- ------------
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. The Chairman of the Board. The Chairman of the Board, if one
--------- -------------------------
shall have been elected, shall be a member of the board, an officer of the
Corporation, and, if present, shall preside at each meeting of the board of
directors or shareholders. The Chairman of the Board shall, in the absence or
disability of the president, act with all of the powers and be subject to all
the restrictions of the president. He shall advise the president, and in the
president's absence, other officers of the Corporation, and shall perform such
other duties as may from time to time be assigned to him by the board of
directors.
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<PAGE>
Section 7. The President. The president shall be the chief executive
-------- -------------
officer of the corporation. In the absence of the Chairman of the Board or if a
Chairman of the Board shall have not been elected, the president shall preside
at all meetings of the stockholders and board of directors at which he or she is
present; subject to the powers of the board of directors, shall have general
charge of the business, affairs and property of the corporation, and control
over its officers, agents and employees; and shall see that all orders and
resolutions of the board of directors are carried into effect. The president
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or as may be provided in these by-laws.
Section 8. Vice-presidents. The vice-president, if any, or if there shall
--------- ---------------
be more than one, the vice-presidents in the order determined by the board of
directors shall, in the absence or disability of the president, act with all of
the powers and be subject to all the restrictions of the president. The vice-
presidents shall also perform such other duties and have such other powers as
the board of directors, the president or these by-laws may, from time to time,
prescribe.
Section 9. The Secretary and Assistant Secretaries. The secretary shall
--------- ---------------------------------------
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law shall have such powers
and perform such duties as the board of directors, the president or these by-
laws may, from time to time, prescribe; and shall have custody of the corporate
seal of the corporation. The secretary, or an assistant secretary, shall have
authority to affix the corporate seal to any instrument requiring it and when so
affixed, it may be attested by his or her 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 or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, 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, the president, or secretary may, from
time to time, prescribe.
Section 10. The Treasurer and Assistant Treasurer. The treasurer shall have
---------- -------------------------------------
the custody of the corporate funds and securities; shall keep fall and accurate
accounts of receipts and disbursements in books belonging to the corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the corporation as may be ordered by the board of directors; shall
cause the funds of the corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall
render to the president and the board of directors, at its regular meeting or
when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by the
board of directors, the treasurer shall give the corporation a bond (which shall
be rendered every six years) in such sums and with such surety or sureties as
shall be satisfactory to the board of directors for the faithful performance of
the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to
-7-
<PAGE>
the corporation. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors,
shall in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer. The assistant treasurers shall perform
such other duties and have such other powers as the board of directors, the
president or treasurer may, from time to time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the absence
---------- ---------------------------------
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS. DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
--------- -------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
fights than said law permitted the corporation to provide prior to such
amendment) against all expense, liability and loss (including attorney's fees
actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators provided, however, that, except as provided
in Section 2 hereof, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the board of directors of the corporation. The
right to indemnification conferred in this Article V shall be a contract fight
and, subject to Sections 2 and 5 hereof, shall include the right to be paid by
the corporation the expenses incurred in defending any such proceeding in
advance of its final disposition. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
-8-
<PAGE>
Section 2. Procedure for Indemnification of Directors and Officers. Any
--------- -------------------------------------------------------
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within 30 days, upon the written request of the
director or officer. If a determination by the corporation that the director or
officer is entitled to indemnification pursuant to this Article V is required,
and the corporation falls to respond within sixty days to a written request for
indemnity, the corporation shall be deemed to have approved the request. If the
corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request
is not made within 30 days, the right to indemnification or advances as granted
by this Article V shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person's costs and expenses incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such action shall also be indemnified by the
corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any, has
been tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the State
of Delaware for the corporation to indemnify the claimant for the amount
claimed, but the burden of such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
Section 3. Nonexclusivity of Article V. The rights to indemnification and
--------- ---------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article V shall not be exclusive of any
other night which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain its own
--------- ---------
insurance on behalf and on behalf of any person who is or was a director,
officer, employee, fiduciary, or agent of the corporation or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section 1
--------- --------
of this Article V in defending a proceeding shall be paid by the corporation in
advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses
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<PAGE>
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
--------- --------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
--------- ---------------
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
--------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. 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 of the board, the president or a vice-president and the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
such holder in the corporation. If such a certificate is countersigned (1) by a
transfer agent or an assistant transfer agent other than the corporation or its
employee or (2) by a registrar, other than the corporation or its employee, the
signature of any such chairman of the board, president, vice-president,
secretary, or assistant secretary may be facsimiles. In case any officer or
officers who have signed, or whose facsimile signature or signatures have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the corporation whether because of death, resignation or otherwise
before such certificate or certificates have been delivered by the corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures have been used thereon had not ceased to
be such officer or officers of the
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<PAGE>
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to issue
a new certificate to the person entitled thereto, cancel the old certificate or
certificates, and record the transaction on its books. The board of directors
may appoint a bank or trust company organized under the laws of the United
States or any state thereof to act as its transfer agent or registrar, or both
in connection with the transfer of any class or series of securities of the
corporation.
Section 2. Lost Certificates. The board of directors may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously 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 or her legal representative, to give the corporation a bond
sufficient to Indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. 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, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. 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.
Section 4. Fixing a Record Date for Action by Written Consent. In order
--------- --------------------------------------------------
that the corporation may determine the stockholders entitled to consent to
corporate action In writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
statute, shall be the first date
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<PAGE>
on which a signed written consent forth the action taken or proposed to be taken
is delivered to the corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by statute, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the board of
directors adopts the resolution taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
--------- -----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. 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. Before payment of any dividend, there may be set aside out of any
finds 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 any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
--------- ------------------------
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name
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<PAGE>
of the corporation shall be signed by such officer or officers, agent or agents
of the corporation, and in such manner, as shall be determined by resolution of
the board of directors or a duly authorized committee thereof
Section 3. Contracts. The board of directors may authorize any officer or
--------- ---------
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
--------- -----------
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors may provide a corporate
--------- --------------
seal which shall be in the form of a circle and shall have inscribed thereon the
name of the corporation 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.
Section 7. Voting Securities Owned By Corporation. Voting securities in any
--------- -------------------------------------
other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
--------- -------------------------------
Person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
-13-
<PAGE>
Section 9. Section Headings. Section headings in these by-laws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
---------- -----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws adopted
at any meeting of the board of directors by a majority vote. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of the same powers.
-14-
<PAGE>
EXHIBIT 4.1
Centennial Communications Corp.
40,000 Units, Each Unit Consisting of $1,000
Principal Amount at Maturity of 14% Senior Discount
Notes due 2005 and One Warrant to Purchase
64 Shares of Common Stock
PURCHASE AGREEMENT
------------------
January 12, 1998
New York, New York
Salomon Brothers Inc
Prudential Securities Incorporated
c/o Salomon Brothers Inc
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Centennial Communications Corp., a Delaware corporation (the "Company"),
-------
proposes, upon the terms and conditions set forth herein, to issue and sell to
Salomon Brothers Inc and Prudential Securities Incorporated, as the initial
purchasers (collectively, the "Initial Purchasers"), 40,000 Units (the "Initial
------------------ -------
Units"), each Unit consisting of $1,000 principal amount at maturity of 14%
- -----
Series A Senior Discount Notes due 2005 (each, an "Initial Series A Note" and
---------------------
collectively, the "Initial Series A Notes") of the Company and one Warrant
----------------------
(each, an "Initial Warrant" and collectively, the "Initial Warrants") to
--------------- ----------------
purchase 64 shares (the "Initial Warrant Shares") of common stock, par value
----------------------
$0.01 per share, of the Company (the "Common Stock"). The Company also proposes
------------
to issue and sell to the Initial Purchasers not more than 20,000 additional
Units (the "Additional Units") consisting of $1,000 principal amount at maturity
----------------
of 14% Series A Senior Discount Notes due 2005 (each, an "Additional Series A
-------------------
Note" and collectively, the "Additional Series A Notes") of the Company and one
- ---- -------------------------
Warrant (each, an "Additional Warrant" and collectively, the "Additional
------------------ ----------
Warrants") to purchase 64 shares (the "Additional Warrant Shares") of Common
- -------- -------------------------
Stock of the Company, if requested by the Initial Purchasers as provided in
Section 3 hereof. The Warrants (as defined below) are to be issued pursuant to
a Warrant Agreement (the "Warrant Agreement"), to be dated as of the Closing
-----------------
Date (as defined below), between the Company and State Street Bank and Trust
Company, as warrant agent (the "Warrant Agent"). The Indenture (as defined
-------------
below) will provide that in the event that the Company does not consummate a
Qualified Public Offering (as defined in the Indenture) of its Qualified Capital
Stock (as defined in the Indenture) on or prior to January 1, 2001, the Company
will be obligated to issue warrants (the "Contingent Warrants") to the holders
-------------------
of Notes exercisable for 7.5% of the Common Stock of the Company (the
"Contingent Warrant Shares") on a fully diluted basis as of the date of such
-------------------------
issuance after giving effect to the issuance of such Contingent Warrants;
provided that if the Company consummates a public or private offering or
offerings of its Qualified Capital Stock resulting in aggregate gross proceeds
of at least $25 million, the Company shall have until June 30, 2002 to
consummate a Qualified Public Offering. The Initial Units and the Additional
Units, the Initial Series A Notes and the Additional Series A Notes, the Initial
Warrants, the Additional Warrants and the Contingent Warrants, and the Initial
Warrant Shares, the Additional Warrants Shares and the Contingent Warrant
Shares, are referred to herein as the "Units," the "Series A Notes," the
----- --------------
"Warrants" and the "Warrant
-------- -------
<PAGE>
Shares," respectively. The Series A Notes are to be issued pursuant to the
- ------
provisions of an indenture (the "Indenture"), to be dated as of the Closing
---------
Date, between the Company and State Street Bank and Trust Company, as trustee
(the "Trustee"). The Series A Notes and the Series B Notes (as defined below)
-------
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Notes will be secured, pursuant to a pledge agreement (the "Pledge
------ ------
Agreement") between the Company and State Street Bank and Trust Company (in such
- ---------
capacity, the "Collateral Agent"), by a first priority security interest in (i)
----------------
100% of the Capital Stock of SMR Direct USA, Inc. ("USA") and all future
---
domestic direct Restricted Subsidiaries and (ii) 100% of the Capital Stock
(other than Excluded Stock (as defined in the Indenture)) of each of SMR Direct
Cayman Corp. and Centennial Cayman Corp. (together, the "Cayman Entities") and
---------------
100% of the Capital Stock (other than Excluded Stock) of all future foreign
direct Restricted Subsidiaries of the Company. As used herein, the term
"Securities" shall mean, collectively, the Units, the Notes, the Warrants and
----------
the Warrant Shares.
Simultaneously with the offering of the Initial Units, the Company is
issuing (the "Convertible Note Offering") $10 million in aggregate principal
-------------------------
amount of its 9% Convertible Subordinated Notes due 2006 (the "Convertible
-----------
Notes"). The Convertible Notes are to be issued pursuant to the provisions of a
- -----
purchase agreement (the "Convertible Note Purchase Agreement"), dated the date
-----------------------------------
hereof, between the Company and Merrill Lynch Global Allocation Fund, Inc.
("Merrill Lynch"). The Convertible Notes will be secured pursuant to the Pledge
-------------
Agreement. Holders of the Convertible Notes will have the registration rights
set forth in the Registration Agreement (as defined below), to be dated as of
the Closing Date.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to such terms in the Indenture or in the Offering
Memorandum.
The Company wishes to confirm as follows its agreement with the Initial
Purchasers in connection with the purchase and resale of the Units.
1. Preliminary Offering Memorandum and Offering Memorandum. The Units will
be offered and sold to the Initial Purchasers pursuant to one or more exemptions
from the registration requirements under the Securities Act of 1933, as amended
(the "Securities Act"). The Company has prepared a preliminary offering
--------------
memorandum, dated October 30, 1997 (the "Preliminary Offering Memorandum"), and
-------------------------------
a final offering memorandum, dated January 12, 1998 (the "Offering Memorandum"),
-------------------
setting forth information regarding the Company and the Units. Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto. The Company hereby
confirms that it has authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offering and resale of the
Units by the Initial Purchasers. The Company has also prepared a status report,
dated October 24, 1997, (the "Status Report") setting forth information as to
-------------
the status of the Company's pending letters of intent and current auctions.
The Company understands that the Initial Purchasers propose to make offers
and sales (the "Exempt Resales") of the Units purchased by the Initial
--------------
Purchasers hereunder only on the terms and in the manner set forth in the
Offering Memorandum and Section 2 hereof, as soon as the Initial Purchasers deem
advisable after this Agreement has been executed and delivered to persons whom
the Initial Purchasers reasonably believe to be qualified institutional buyers
("QIBs") as defined in Rule 144A under the Securities Act, as such rule may be
----
amended from time to time ("Rule 144A"), in transactions under Rule 144A (each
---------
such person, an "Eligible Purchaser").
------------------
It is understood and acknowledged that upon original issuance thereof, and
until such time as the same is no longer required under the applicable
requirements of the Securities Act, the Securities (and
2
<PAGE>
all securities issued in exchange therefor or in substitution thereof) shall
bear the following legend:
"THIS [NOTE/WARRANT/WARRANT SHARE] (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF.
BY ITS ACQUISITION HEREOF OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS
[NOTE/WARRANT/WARRANT SHARE] IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "IAI") (2) AGREES THAT IT WILL
NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO
ACCOUNT THE PROVISIONS OF RULE 144(D) UNDER THE SECURITIES ACT, IF
APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE
TRANSFER OF THIS [NOTE/WARRANT/WARRANT SHARE], RESELL OR OTHERWISE TRANSFER
THIS [NOTE/WARRANT/WARRANT SHARE] EXCEPT TO (A) THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(E) TO AN IAI, THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE [TRUSTEE/WARRANT
AGENT/TRANSFER AGENT AND REGISTRAR] A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS
[NOTE/WARRANT/WARRANT SHARE] (THE FORM OF WHICH CAN BE OBTAINED FROM THE
[TRUSTEE/WARRANT AGENT/TRANSFER AGENT AND REGISTRAR]) AND, IF SUCH TRANSFER
IS IN RESPECT OF [A PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF
LESS THAN $100,000/WARRANTS/WARRANT SHARES], AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) 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 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS [NOTE/WARRANT/WARRANT SHARE] OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN,
3
<PAGE>
THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
[INDENTURE/WARRANT AGREEMENT] CONTAINS A PROVISION REQUIRING THE
[TRUSTEE/WARRANT AGENT/TRANSFER AGENT AND REGISTRAR] TO REFUSE TO REGISTER
ANY TRANSFER OF THIS [NOTE/WARRANT/WARRANT SHARE] IN VIOLATION OF THE
FOREGOING."
It is also understood and acknowledged that holders (including subsequent
transferees) of the Series A Notes will have the registration rights set forth
in the notes registration rights agreement (the "Notes Registration Rights
-------------------------
Agreement"), to be dated the Closing Date, in the form of Exhibit A attached
- ---------
hereto, for so long as such Series A Notes constitute "Transfer Restricted
-------------------
Securities" (as defined in the Notes Registration Rights Agreement). Pursuant
- ----------
to the Notes 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
Securities Act (the "Exchange Offer Registration Statement") relating to the
-------------------------------------
Company's 14% Series B Senior Discount Notes due 2005 (the "Series B Notes") to
--------------
be offered in exchange for the Series A Notes (the "Registered Exchange Offer")
-------------------------
and (ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement" and,
----------------------------
together with the Exchange Offer Registration Statement, the "Registration
------------
Statements") relating to the resale by certain holders of the Series A Notes,
- ----------
and to use its best efforts to cause such registration statements to be declared
and remain effective and usable for the periods specified in the Notes
Registration Rights Agreement and to consummate the Registered Exchange Offer.
Holders of the Convertible Notes will have the registration rights set forth in
the Third Amended and Restated Registration Agreement (the "Registration
------------
Agreement"), to be dated the Closing Date, among the Company, the Initial
- ---------
Purchasers and the investors listed thereto. This Agreement, the Indenture, the
Warrant Agreement, the Pledge Agreement, the Notes Registration Rights
Agreement, the Registration Agreement and the Securities are hereinafter
referred to collectively as the "Operative Documents."
-------------------
2. Agreements to Sell, Purchase and Resell. (a) The Company hereby agrees,
on the basis of the representations, warranties and agreements of the Initial
Purchasers contained herein and subject to all the terms and conditions set
forth herein, to issue and sell to the Initial Purchasers and, upon the basis of
the representations, warranties and agreements of the Company contained herein
and subject to all the terms and conditions set forth herein, each Initial
Purchaser agrees, severally and not jointly, to purchase from the Company, the
number of Units set forth opposite the name of such Initial Purchaser in
Schedule I hereto at a purchase price of $511.03 per Unit; plus in the case of
Additional Units, if any, any applicable accretion on the Series A Notes from
the date hereof; provided, however, that neither of the Initial Purchasers shall
-------- -------
have any obligation to take or pay for any Units, Notes or Warrants to the
extent that any person to whom it intends to effect an Exempt Resale fails to or
refuses to purchase on the Closing Date or the Option Closing Date (as defined)
the Units which such person was to purchase pursuant to the terms of such agreed
upon Exempt Resale.
(b) Each of the Initial Purchasers hereby represents and warrants to the
Company that it will offer the Units for sale upon the terms and conditions set
forth in this Agreement and in the Offering Memorandum. Each of the Initial
Purchasers, severally and not jointly, hereby represents and warrants to, and
agrees with, the Company that such Initial Purchaser (i) is either a QIB or an
institutional "accredited investor," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act (an "Accredited Institution"), in either case, 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) is
not acquiring the Units with a view to any distribution thereof that would
violate the Securities Act or the securities laws of any State of the United
States or any other applicable jurisdiction; (iii) in connection with the Exempt
Resales, will
4
<PAGE>
solicit offers to buy the Units only from, and will offer to sell the Units only
to, the Eligible Purchasers in accordance with this Agreement and on the terms
contemplated by the Offering Memorandum; (iv) will offer to sell the Units only
to, and will solicit offers to buy the Units only from, persons who in
purchasing such Units will be deemed to have represented and agreed (A) 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, (B) that the Securities will not have been registered under the
Securities Act and may be resold, pledged or otherwise transferred only (1)(I)
to a person who the seller reasonably believes is a QIB in a transaction meeting
the requirements of Rule 144A, (II) in a transaction meeting the requirements of
Rule 144 under the Securities Act, (III) outside the United States in a
transaction meeting the requirements of Rule 904 under the Securities Act, (IV)
to an Accredited Institution that prior to such transfer, furnishes to [the
Trustee, Warrant Agent or Transfer Agent and Register], a signed letter
containing representations and agreements relating to the restrictions on
transfer of the [Notes, Warrants or Warrant Shares] (the form of which letter
can be obtained from the [Trustee, Warrant Agent or the Transfer Agent and
Register]) and, if such transfer is in respect of [a principal amount of Notes
at the time of transfer of less than $100,000/Warrants/Warrant Shares], an
opinion of counsel acceptable to the Company that such transfer is in compliance
with the Securities Act or (V) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of counsel if
the Company so requests), (2) to the Company or any of its subsidiaries or (3)
pursuant to an effective registration statement and, in each case, in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction and (C) that the holder will, and each subsequent
holder is required to, notify any purchaser from it of the security evidenced
thereby of the resale restrictions set forth in (B) above, and (v) will not
offer or sell the Units, nor has it offered or sold the Units by, or otherwise
engaged in, any form of general solicitation or general advertising (within the
meaning of Regulation D (as defined below) including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) in connection with the offering of the
Units.
The Initial Purchasers have advised the Company that they will offer the
Units to Eligible Purchasers at a price initially equal to $511.03 per Unit,
with respect to the Initial Units and at a price equal to the Accreted Value of
the Series A Notes on the date of purchase by the Eligible Purchasers with
respect to the Additional Units. Such prices may be changed by the Initial
Purchasers at any time without prior notice to the Company. The Initial
Purchasers will, as promptly as practicable, notify the Company of any changes
in such prices.
Each of the Initial Purchasers understands that the Company and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Sections 7(f) and 7(k) hereof, counsel to the Company and counsel to the Initial
Purchasers, will rely upon the accuracy and truth of the foregoing
representations and agreements and each Initial Purchaser hereby consents to
such reliance.
3. Delivery of the Securities and Payment Therefor. Delivery to the Initial
Purchasers of and payment for the Initial Units shall be made at the office of
Latham & Watkins, 885 Third Avenue, New York, New York 10022, at 10:00 A.M., New
York City time, on January 15, 1998 (the "Closing Date").
------------
On the basis of the representations, warranties and agreements herein
contained, but subject to the conditions set forth herein, the Company agrees to
issue and sell up to 20,000 Additional Units to the Initial Purchasers, and the
Initial Purchasers, severally and not jointly, shall have the right to purchase
up to 20,000 Additional Units, at the purchase price specified in Section 2(a)
hereof. The Initial Purchasers may exercise its right to purchase Additional
Units in whole or in part from time to time by giving written notice thereof to
the Company on or prior to February 13, 1998. Such notice shall specify the
aggregate principal
5
<PAGE>
amount at maturity of Additional Units to be purchased pursuant to such exercise
and the date for payment and delivery thereof (the "Option Closing Date"). The
-------------------
Option Closing Date specified in such notice shall be a business day (a) no
later than February 24, 1998, (b) no later than ten business days after such
notice has been given and (c) no earlier than two business days after such
notice has been given. Delivery to the Initial Purchasers of and payment for the
Additional Units shall be made at the office of Latham & Watkins, 885 Third
Avenue, New York, New York 10022, at 10:00 A.M., on the date specified in the
applicable exercise notice given pursuant to this paragraph. The place of
closing for the Initial Units and the Additional Units, and the Closing Date and
the Option Closing Date, may be varied by agreement between the Initial
Purchasers and the Company.
The Units will be delivered to the Initial Purchasers against payment of
the purchase price therefor in immediately available funds. Payment of the
purchase price for the Initial Units and the Additional Units shall be placed in
an escrow account by the Company and released in accordance with the terms of
the escrow agreement, dated the Closing Date (the "Escrow Agreement") between
----------------
the Company and Morgan Stanley, Dean Witter, Discover & Co., as escrow agent
(the "Escrow Agent"). The Units will be evidenced by one or more global
------------
securities in definitive form and will be registered in the name of Cede & Co.
as nominee of The Depository Trust Company ("DTC"). The Units to be delivered to
---
the Initial Purchasers shall be made available to the Initial Purchasers in New
York City for inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the Option Closing
Date, as applicable.
4. Agreements of the Company. The Company represents to and agrees with
each Initial Purchaser as follows:
(a) The Company will advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Securities for
offering or sale in any jurisdiction designated by the Initial Purchasers
pursuant to Section 4(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose and (ii) of the happening of any event during the period
referred to in Section 4(d) below that makes any statement of a material fact
made in the Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires 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 the Securities under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any of the 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) The Company will not make any amendment or supplement to the
Preliminary Offering Memorandum or to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which they shall
reasonably object after being so advised. During the period referred to in
Section 4(d) below, the Company shall promptly prepare upon the Initial
Purchasers' reasonable request, any amendment or supplement to the Preliminary
Offering Memorandum or the Offering Memorandum that the Initial Purchasers
believe necessary or advisable in connection with Exempt Resales.
(c) The Company will furnish to the Initial Purchasers, without charge,
such number of copies of the Offering Memorandum as may then be amended or
supplemented as they may reasonably request, on or prior to 12:00 (noon) within
two business days following the date of this Agreement. Prior to
6
<PAGE>
the execution and delivery of this Agreement, the Company shall have delivered
or will deliver to the Initial Purchasers, without charge, in such quantities as
the Initial Purchasers shall have requested or may hereafter reasonably request,
copies of the Preliminary Offering Memorandum. The Company consents to the use
made by the Initial Purchasers in connection with the Exempt Resales of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
and supplements thereto.
(d) If, after the date hereof during such period as in the opinion of
counsel for the Initial Purchasers an Offering Memorandum is required to be
delivered in connection with Exempt Resales by the Initial Purchasers, any event
shall occur that in the opinion of counsel for the Initial Purchaser should be
set forth in the Offering Memorandum in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or if
it is necessary to supplement or amend the Offering Memorandum in order to
comply with any law, statute, rule or regulation the Company will forthwith
prepare an appropriate supplement or amendment thereto of such document, and
will expeditiously furnish to the Initial Purchasers and such other persons as
the Initial Purchasers may designate such number of copies thereof as the
Initial Purchasers may reasonably request.
(e) The Company will cooperate with the Initial Purchasers and with
their counsel in connection with the qualification of the Securities for
offering and sale by the Initial Purchasers and by dealers under the securities
or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate
and will continue such qualification in effect so long as required for Exempt
Resales and will file such consents to service of process or other documents
necessary or appropriate in order to effect such qualification; provided, that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Units, in any jurisdiction where it is not now so
subject.
(f) So long as any of the Securities are outstanding, the Company will
furnish to the Initial Purchasers (i) as soon as available, a copy of each
report of the Company mailed to stockholders generally or filed with any stock
exchange or securities regulatory body and (ii) from time to time, such other
information concerning the Company as the Initial Purchasers may reasonably
request.
(g) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (other than by notice
given by the Initial Purchasers terminating this Agreement pursuant to Section
10 hereof) or if this Agreement shall be terminated by the Initial Purchasers
because of any failure or refusal on the part of the Company to comply with the
terms or fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the Initial Purchasers for all out-of-pocket expenses (including
reasonable fees and expenses of its counsel) reasonably incurred by it in
connection herewith, but without any further obligation on the part of the
Company for loss of profits or otherwise.
(h) The Company will apply the net proceeds from the sale of the Units
to be sold by it hereunder substantially in accordance with the description set
forth in the Offering Memorandum under the caption "Use of Proceeds."
(i) Except as stated in this Agreement and in the Preliminary Offering
Memorandum and the Offering Memorandum, neither the Company nor any Subsidiary
(as defined below) has taken, nor will it 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 the Units to facilitate the sale
or resale of the Units. Except as permitted by the Securities Act, the Company
will not distribute any offering material in connection with the Exempt Resales.
7
<PAGE>
(j) The Company will use its best efforts to permit the Units, the
Series A Notes, the Warrants and the Warrant Shares to be designated Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market
------
securities in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL Market
and to permit the Securities to be eligible for clearance and settlement through
DTC.
(k) From and after the later of the Closing Date or the Option Closing
Date, so long as any of the Securities are outstanding and are "restricted
securities" within the meaning of the Rule 144(a)(3) under the Securities Act
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"), the
------------
Company will furnish to holders of the Securities and prospective purchasers of
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in
connection with resale of the Securities.
(l) The Company agrees not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the Units in a manner
that would require the registration under the Securities Act of the sale to the
Initial Purchasers or the Eligible Purchasers of any of the Securities.
(m) The Company agrees to pay Salomon Brothers Inc, on behalf of the
Initial Purchasers, $350,000 on the Closing Date, by certified check or wire
transfer of immediately available funds, representing fees for advisory services
rendered to the Company in connection with the Convertible Note Offering.
(n) The Company agrees to comply with all the terms and conditions of
the Notes 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.
(o) The Company agrees to cause the Registered Exchange Offer, if
available, to be made in the appropriate form, as contemplated by the Notes
Registration Rights Agreement, to permit registration of the Series B Notes to
be offered in exchange for the Series A Notes, and to comply with all applicable
federal and state securities laws in connection with the Registered Exchange
Offer.
(p) The Company agrees that prior to any registration of the Notes
pursuant to the Notes Registration Rights Agreement, or at such earlier time as
may occur, the Indenture shall be qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), and any necessary supplemental indentures will be
entered into in connection therewith.
(q) The Company will not voluntarily claim, and will resist actively
all attempts by third parties on behalf of the Company to claim, the benefit of
any usury laws against holders of the Notes.
(r) The Company will do and perform all things required or necessary to
be done and performed under this Agreement by it prior to the Closing Date or
the Option Closing Date, as the case may be, and to satisfy all conditions
precedent to the Initial Purchasers' obligations hereunder to purchase the
Initial Units or the Additional Units, as the case may be.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and Offering Memorandum have
been
8
<PAGE>
prepared by the Company for use by the Initial Purchasers in connection with the
Exempt Resales. No order or decree preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum or any amendment or supplement
thereto, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Securities Act has
been issued and no proceeding for that purpose has commenced or is pending or,
to the knowledge of the Company, is contemplated by any governmental authority
or agency.
(b) The Preliminary Offering Memorandum and the Offering Memorandum as
of their respective dates and the Offering Memorandum as of the Closing Date and
the Option Closing Date, if any, did not and any supplement or amendment thereto
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) The transactions described in the Status Report, as of its date,
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the Status Report 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 Purchasers expressly for use
therein.
(d) The Company has full corporate power and authority to execute,
deliver and perform its obligations under the Operative Documents and to
consummate the transactions contemplated by the Operative Documents and to
issue, sell and deliver the Units pursuant to this Agreement.
(e) This Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms (assuming
the due authorization, execution and delivery hereof by the Initial Purchasers),
subject to the qualification that the enforceability of the Company's
obligations hereunder (including, without limitation, the provisions contained
in Section 6 hereof) may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles regardless of
whether such principles are enforceable at law or equity.
(f) On or prior to the Closing Date, the Indenture will be duly
authorized by the Company and, on the Closing Date, will have been validly
executed and delivered by the Company. When the Indenture has been validly
executed and delivered by the Company, the Indenture will constitute the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms (assuming the due authorization, execution and
delivery of the Indenture by the Trustee), subject to the qualification that the
enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles regardless of whether such principles are enforceable at
law or equity. No qualification of the Indenture under the TIA is required in
connection with the offer and sale of the Units contemplated hereby or in
connection with the Exempt Resales. On the Closing Date and the Option Closing
Date, if any, the Indenture will conform in all material respects to the
requirements of the TIA and the rules and regulations of the Commission
applicable to an Indenture which is qualified thereunder.
(g) On or prior to the Closing Date, the Units will be duly authorized
by the Company and (i) on the Closing Date, the Initial Series A Notes will have
been validly executed and delivered by the Company and (ii) on the Option
Closing Date, the Additional Units, if any, will have been validly executed and
delivered by the Company. When the Series A Notes have been validly issued,
executed and
9
<PAGE>
authenticated in accordance with the terms of the Indenture and upon delivery to
the Initial Purchasers of the Initial Units or the Additional Units, as the case
may be, against payment therefor in accordance with the terms hereof, the Series
A Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms (assuming the due authorization, execution and
delivery of the Indenture by the Trustee), subject to the qualification that the
enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles regardless of whether such principles are enforceable at
law or equity. On the Closing Date and the Option Closing Date, if any, the
Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(h) On or prior to the Closing Date, the Series B Notes will be duly
authorized by the Company and when duly issued and authenticated in accordance
with the terms of the Indenture and the Registered Exchange Offer, the Series B
Notes will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms (assuming the due authorization, execution and
delivery of the Indenture by the Trustee), subject to the qualification that the
enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles regardless of whether such principles are enforceable at
law or equity.
(i) On or prior to the Closing Date, the Notes Registration Rights
Agreement will be duly authorized by the Company and, on the Closing Date, will
have been validly executed and delivered by the Company. When the Notes
Registration Rights Agreement has been validly executed and delivered by the
Company, the Notes Registration Rights Agreement will constitute the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (assuming the due authorization, execution and delivery of the
Notes Registration Rights Agreement by the Initial Purchasers), subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles regardless of whether such principles are
enforceable at law or equity. On the Closing Date and the Option Closing Date,
if any, the Notes Registration Rights Agreement will conform as to legal matters
to the description thereof in the Offering Memorandum.
(j) On or prior to the Closing Date, the Pledge Agreement will be duly
authorized by the Company and, on the Closing Date, will have been validly
executed and delivered by the Company. When the Pledge Agreement has been
validly executed and delivered by the Company, the Pledge Agreement will
constitute the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms (assuming the due authorization,
execution and delivery of the Pledge Agreement by the Collateral Agent), subject
to the qualification that the enforceability of the Company's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles regardless of whether such
principles are enforceable at law or equity. The Pledge Agreement will create a
valid and perfected first priority security interest in the Pledged Collateral
(as defined in the Pledge Agreement) in favor of the Collateral Agent, on behalf
of and for the benefit of the holders of the Notes. On the Closing Date and the
Option Closing Date, if any, the Pledge Agreement will conform as to legal
matters to the description thereof in the Offering Memorandum.
(k) On or prior to the Closing Date, the Escrow Agreement will be duly
authorized by the Company and, on the Closing Date, will have been validly
executed and delivered by the Company. When the Escrow Agreement has been
validly executed and delivered by the Company, the Escrow
10
<PAGE>
Agreement will constitute the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (assuming the due
authorization, execution and delivery of the Escrow Agreement by the Escrow
Agent), subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles regardless of
whether such principles are enforceable at law or equity. On the Closing Date
and the Option Closing Date, if any, the Escrow Agreement will conform as to
legal matters to the description thereof in the Offering Memorandum.
(l) On or prior to the Closing Date, the Warrant Agreement will be duly
authorized by the Company and, on the Closing Date, will have been validly
executed and delivered by the Company. When the Warrant Agreement has been
validly executed and delivered, the Warrant Agreement will constitute the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms (assuming the due authorization, execution and
delivery of the Warrant Agreement by the Warrant Agent), subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles regardless of whether such principles are
enforceable at law or equity. On the Closing Date and the Option Closing Date,
if any, the Warrant Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(m) On or prior to the Closing Date, the Warrants will be duly
authorized by the Company and (i) on the Closing Date, the Initial Warrants will
have been validly executed and delivered by the Company, (ii) on the Option
Closing Date, if any, the Additional Warrants will have been validly executed
and delivered by the Company and (iii) on the date of issuance of the Contingent
Warrants, if any, the Contingent Warrants will have been validly executed and
delivered by the Company. When the Warrants have been validly issued, executed
and countersigned in accordance with the terms of the Warrant Agreement and (A)
upon delivery to the Initial Purchasers of the Initial Warrants or the
Additional Warrants, as the case may be, against payment therefor in accordance
with the terms hereof and (B) upon delivery to the Holders of the Notes of the
Contingent Warrants pursuant to the Indenture, the Warrants will be entitled to
the benefits of the Warrant Agreement and will be valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms
(assuming the due authorization, execution and delivery of the Warrant Agreement
by the Warrant Agent), subject to qualification that the enforceability of the
Company's obligation thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors rights generally and by general equitable principles
regardless of whether such principles are enforceable at law or equity. On the
Closing Date, the Option Closing Date, if any, and the date, if any, of the
issuance of the Contingent Warrants, the Warrants will conform as to legal
matters to the description thereof contained in the Offering Memorandum.
(n) On or prior to the Closing Date, the Company will duly authorize
and reserve for issuance the Warrant Shares to be issued upon the exercise of
the Warrants and, when issued and delivered upon the exercise of the Warrants
against payment of the exercise price as provided in the Warrant Agreement, the
Warrant Shares (i) will have been validly issued and will be fully paid and non
assessable, and the issuance of the Warrant Shares will not be subject to any
preemptive rights which have not been waived prior to the Closing Date and (ii)
will conform as to legal matters to the description thereof in the Offering
Memorandum.
(o) (i) The Initial Warrants, when issued and sold, will represent the
right to acquire upon exercise initially not less than 7.5% of the Common Stock
of the Company on a fully diluted basis as of the Closing Date and (ii) the
Additional Warrants, if all are issued and sold, will represent the right to
11
<PAGE>
acquire upon exercise not less than 3.75% of the Common Stock of the Company on
a fully diluted basis as of the Closing Date (fully diluted to be calculated in
each case by giving effect to the maximum number of shares of Common Stock of
the Company deliverable upon exercise, conversion or exchange of all shares of
preferred stock, warrants, stock options and restricted stock outstanding as of
the Closing Date or the Option Closing Date, as applicable, including, without
limitation, the Warrants.
(p) On or prior to the Closing Date, the Registration Agreement will be
duly authorized by the Company and, on the Closing Date, will have been validly
executed and delivered by the Company. When the Registration Agreement has been
validly executed and delivered by the Company, the Registration Agreement will
constitute the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms (assuming the due authorization,
execution and delivery of the Registration Agreement by Merrill Lynch, the
Initial Purchasers and the investors listed thereto), subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles regardless of whether such principles are
enforceable at law or equity. On the Closing Date and the Option Closing Date,
if any, the Registration Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(q) Simultaneously with the closing of the purchase and sale of the
Units and the Convertible Notes, (i) the aggregate outstanding principal amount
of the Company's 12% Senior Secured Convertible Notes due 2002 (the "Senior
------
Notes") and all accrued and unpaid interest thereon will be converted (the
- -----
"Senior Note Conversion") into shares of the Company's Series C Preferred (as
----------------------
defined below) and (ii) the pledge of the shares of Capital Stock of each of the
Cayman Entities securing the Senior Notes will have been released (the "Senior
------
Note Release").
- ------------
(r) The Convertible Note Purchase Agreement has been duly authorized
and validly executed and delivered by the Company and constitutes the valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (assuming the due authorization, execution and delivery of the
Convertible Note Purchase Agreement by Merrill Lynch), subject to the
qualification that the enforceability of the Company's obligations thereunder
may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights generally
and by general equitable principles regardless of whether such principles are
enforceable at law or equity.
(s) On or prior to the Closing Date, the Convertible Notes will be duly
authorized by the Company and on the Closing Date, the Convertible Notes will
have been validly executed and delivered by the Company. When the Convertible
Notes have been validly issued, executed and authenticated in accordance with
the terms of the Convertible Note Purchase Agreement and upon delivery to
Merrill Lynch of the Convertible Notes against payment therefor in accordance
with the terms of the Convertible Note Purchase Agreement, the Convertible Notes
will be entitled to the benefits of the Convertible Note Purchase Agreement and
will be valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms (assuming the due authorization,
execution and delivery of the Convertible Note Purchase Agreement by Merrill
Lynch), subject to the qualification that the enforceability of the Company's
obligations thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles regardless of
whether such principles are enforceable at law or equity.
(t) All the shares of capital stock of the Company outstanding prior to
the issuance of the Units have been duly authorized and validly issued and are
fully paid and nonassessable and not subject to any preemptive rights except as
set forth in the Preliminary Offering Memorandum and the Offering Memorandum;
the authorized capital stock of the Company conforms as to legal matters to the
description
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<PAGE>
thereof under the caption "Description of Capital Stock" in the Offering
Memorandum.
(u) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum, and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify does not have, individually or in the aggregate, a material
adverse effect on the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Company and the
Subsidiaries taken as a whole (a "Material Adverse Effect").
-----------------------
(v) The entities listed on Schedule II are the only subsidiaries,
direct or indirect, of the Company (the "Subsidiaries") as of the Closing Date.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing (to the extent such legal principle is applicable) in the jurisdiction
of its incorporation, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the Offering
Memorandum, and is duly registered and qualified to conduct its business and is
in good standing (to the extent such legal principle is applicable) in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify or be in good standing does not have a Material
Adverse Effect. All the outstanding shares of capital stock of, or other
ownership interests in, each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable, and are wholly owned by the
Company, directly or indirectly through one or more of the other Subsidiaries,
free and clear of any lien, adverse claim, security interest, equity or other
encumbrance. Except as set forth in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, options calls, convertible
securities, commitments of sale, liens, security interests or encumbrances
related to or entitling any person (other than the Company or its Subsidiaries)
to purchase or otherwise to acquire any shares of capital stock of, or ownership
interest in, any of the Subsidiaries.
(w) Except as described under the caption "Litigation" in the Offering
Memorandum, there are no legal or governmental proceedings, domestic or foreign,
pending or, to the knowledge of the Company, threatened or contemplated, against
the Company or any of the Subsidiaries or to which the Company or any of the
Subsidiaries or to which any of their respective properties, is subject, that
are not disclosed in the Offering Memorandum and which, if adversely decided,
might result, individually or in the aggregate, in a Material Adverse Effect or
materially affect the issuance of any of the Securities or the consummation of
the transactions contemplated by the Operative Documents. Neither the Company
nor any of the Subsidiaries is involved in any strike, job action or labor
dispute with any group of employees, and, to the Company's knowledge, no such
action or dispute is threatened.
(x) Neither the Company nor any of the Subsidiaries is or, immediately
after giving effect to the transactions contemplated by this Agreement and the
Senior Note Conversion, will be (i) in violation of its certificate or articles
of incorporation or by-laws or other organizational documents, (ii) in violation
of any law, ordinance, administrative or governmental rule or regulation
applicable to the Company or any of the Subsidiaries or of any decree of any
court or governmental agency or body having jurisdiction over the Company or any
of the Subsidiaries except as set forth in the Preliminary Offering Memorandum
and the Offering Memorandum and except where any such violation or violations
would not have, individually or in the aggregate, a Material Adverse Effect or
(iii) in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument that is material
to the Company and the Subsidiaries, taken as a whole, to which the Company or
any of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, in each case, which have not been waived or
cured prior to the date of this Closing Date.
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<PAGE>
(y) None of (i) the issuance, offer, sale or delivery of the Units,
(ii) the execution, delivery or performance of this Agreement or the other
Operative Documents, or (iii) the consummation by the Company of the
transactions contemplated hereby or thereby, (1) requires any consent, approval,
authorization or other order of, or registration or filing with, any court,
regulatory body, administrative agency or other governmental body, agency or
official, (2) conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, the certificate or articles of incorporation or
by-laws, or other organizational documents, of the Company or any of the
Subsidiaries, (3) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture, lease or
other instrument that is material to the Company and the Subsidiaries, taken as
a whole, to which the Company or any of the Subsidiaries is a party or by which
any of them or any of their respective properties may be bound except as set
forth in the Preliminary Offering Memorandum and the Offering Memorandum and
except for such conflicts which will be waived or consented to by the
stockholders of the Company prior to the Closing Date, (4) violates or will
violate any statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Company or any of the Subsidiaries or any of their
respective properties or result in revocation or termination of any Permits (as
defined below) held by the Company or any of the Subsidiaries or (5) will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries pursuant to the
terms of any agreement or instrument to which any of them is a party or by which
any of them may be bound or to which any of the property or assets of any of
them is subject.
(z) The accountants, Arthur Andersen LLP, who have certified or shall
certify the financial statements included as part of the Offering Memorandum (or
any amendment or supplement thereto), are independent public accountants under
Rule 101 of the AICPA's Code of Professional Conduct, and its interpretation and
rulings.
(aa) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum, present fairly the
consolidated financial position, results of operations and changes in
stockholders' equity and cash flows of the Company and the Subsidiaries on the
basis stated in the Offering Memorandum at the respective dates or for the
respective periods to which they apply; such statements and related notes have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and meet the requirements
of Regulation S-X under the Securities Act for registration statements on Form
S-1; and the other financial and statistical information and data set forth in
the Offering Memorandum is accurately presented and, to the extent such
information and data is derived from the financial books and records of the
Company, is prepared on a basis consistent with such financial statements and
the books and records of the Company.
(bb) Except as disclosed in, or specifically contemplated by, the
Offering Memorandum, subsequent to the date as of which such information is
given in the Offering Memorandum (or any amendment or supplement thereto),
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any material change in the
capital stock, or material increase in the short-term or long-term debt, of the
Company or any of the Subsidiaries or any material adverse change, or any
development involving or which could reasonably be expected to involve a
prospective material adverse change, in the condition (financial or other),
business, properties, prospects, net worth or results of operations of the
Company and the Subsidiaries taken as a whole.
(cc) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Offering Memorandum
as being owned by it, free and clear of all liens, claims, security interests or
other encumbrances except for the liens of E.F. Johnson Company,
14
<PAGE>
Boston Financial & Equity Corporation, Maxon America, Inc. and other equipment
suppliers in respect of leased equipment, the liens pursuant to the terms of the
FCC Debt (as described in the Offering Memorandum) and except such as are
described in the Offering Memorandum and all the property described in the
Offering Memorandum as being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases, with
only such exceptions as in the aggregate are not materially burdensome and do
not interfere in any material respect with the conduct of the business of the
Company and the Subsidiaries taken as a whole.
(dd) Except as permitted by the Securities Act, neither the Company nor
any of the Subsidiaries have distributed and, prior to the later to occur of the
Closing Date, the Option Closing Date and completion of the distribution of the
Units, will not distribute any offering material in connection with the offering
and sale of the Units other than the Preliminary Offering Memorandum and the
Offering Memorandum.
(ee) Each of the Company and the Subsidiaries have such permits,
licenses, franchises and other approvals or authorizations of governmental or
regulatory authorities ("Permits") as are necessary under applicable law to own
their respective properties and to conduct their respective businesses in the
manner described in the Offering Memorandum, except to the extent that the
failure to have any such Permits would not have, individually or in the
aggregate, a Material Adverse Effect; the Company and each of the Subsidiaries
have fulfilled and performed in, all their respective obligations with respect
to the Permits, and no event has occurred which allows, after notice or lapse of
time would allow, revocation or termination thereof or results in any other
impairment of the rights of the holder of any such Permit, subject in each case
to such qualification as may be set forth in the Offering Memorandum and except
to the extent that any such revocation or termination would not have
individually or in the aggregate, a Material Adverse Effect; and, except as
described in the Offering Memorandum, none of the Permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries.
(ff) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(gg) Neither the Company nor any of the Subsidiaries nor, to the
Company's knowledge, any employee or agent of the Company or any Subsidiary has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation, except to the
extent that the violation of such law, rule or regulation would not have,
individually or in the aggregate, a Material Adverse Effect.
(hh) Except for the Company's 1996 federal and Colorado state income tax
return, in respect of which an extension has been filed, the Company and each of
the Subsidiaries have filed all tax returns required to be filed, which returns
are true and correct in all material respects, and neither the Company nor any
Subsidiary is in default in the payment of any taxes which were payable pursuant
to said returns or any assessments with respect thereto, except where the
failure to file such returns and make such payments would not have, individually
or in the aggregate, a Material Adverse Effect.
15
<PAGE>
(ii) No holder of any security of the Company or any of the Subsidiaries
has any right to request or demand registration of shares of Common Stock or any
other security of the Company or any of the Subsidiaries because of the
consummation of the transactions contemplated by this Agreement, the Notes
Registration Rights Agreement or the Registration Agreement. Except as described
in the Offering Memorandum, there are no outstanding options, warrants or other
rights calling for the issuance of, and there are no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital stock of
the Company.
(jj) The Company is not and, after giving effect to the sale of the
Units and the application of the net proceeds to the Company of such sale as
described in the Offering Memorandum under the caption "Use of Proceeds," will
not be an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(kk) When the Units, Series A Notes and Warrants are issued and
delivered pursuant to this Agreement, no Unit, Series A Note or Warrant will be
of the same class (within the meaning of Rule 144A(d)(3) under the Securities
Act) as any security of the Company that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system.
(ll) Neither the Company nor any affiliate (as defined in Rule 501(b) of
Regulation D ("Regulation D") under the Securities Act) of the Company has
------------
directly, or through any agent (provided that no representation is made as to
the Initial Purchasers or any person acting on their behalf), (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the offering and sale of the Units in a manner that would require the
registration of the Units, the Series A Notes or the Warrants under the
Securities Act or (ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offering
of the Units.
(mm) Assuming (i) that the representations and warranties in Section 2
hereof are true, (ii) the Initial Purchasers comply with the covenants set forth
in Section 2 hereof and (iii) that each person to whom the Initial Purchasers
offer, sell or deliver the Units is a QIB, the purchase and sale of the Units
pursuant hereto (including the Initial Purchasers' proposed offering of the
Units on the terms and in the manner set forth in the Offering Memorandum and
Section 2 hereof) is exempt from the registration requirements of the Securities
Act.
(nn) The execution and delivery of this Agreement and the other
Operative Documents and the sale of the Units to the Initial Purchasers or by
the Initial Purchasers to Eligible Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of the Employee Retirement Income
Security Act, as amended, or the rules and regulations promulgated thereunder
("ERISA") or Section 4975 of the Internal Revenue Code of 1986, as amended,
-----
including the regulations and published interpretations thereunder (the "Code").
----
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 Eligible Purchasers as
set forth in the Offering Memorandum under the caption entitled "Notice to
Investors."
(oo) The Company and USA are in compliance in all material respects with
all presently applicable provisions of ERISA; no "reportable event" (as defined
in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company or USA would have any liability; neither the Company nor
USA has incurred or expects to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Code; and each "pension plan" for which the Company
would have any liability that is intended to be
16
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qualified under Section 401 (a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(pp) None of the Company, USA or, to the knowledge of the Company, any
of its Subsidiaries have violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws") which could reasonably be expected to have,
------------------
individually or in the aggregate, a Material Adverse Effect.
(qq) There is no alleged liability, or to the knowledge of the Company,
potential liability, (including, without limitation, alleged or potential
liability or investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damages, personal injuries or penalties) of
the Company or any of its Subsidiaries arising out of, based on or resulting
from (i) the presence or release into the environment of any Hazardous Material
(as defined herein) at any location, owned or operated by the Company or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect or (ii) any violation or alleged violation of any Environmental Law. The
term "Hazardous Material" means (A) any "hazardous substance" as defined by the
------------------
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (B) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any
polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material waste or substance regulated under or
within the meaning of any other Environmental Law.
(rr) None of the execution, delivery and performance of this Agreement,
the issuance and sale of the Units, the application of the proceeds from the
issuance and sale of the Units 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.
(ss) Each of the Preliminary Offering Memorandum and the Offering
Memorandum as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
6. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser and each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or Offering Memorandum or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to the Initial Purchasers furnished in writing to the Company by or on
behalf of the Initial Purchasers expressly for use in connection therewith. The
foregoing indemnity agreement shall be in addition to any liability which the
Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Initial Purchasers or any person controlling the Initial Purchasers in respect
of which indemnity may be sought against the Company, the Initial Purchasers or
such controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
--------------------
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. The Initial Purchasers or any
such controlling person shall have the right to employ separate counsel in any
such action, suit or proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall
17
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be at the expense of the Initial Purchasers or such controlling person unless
(i) the indemnifying parties have agreed in writing to pay such fees and
expenses, (ii) the indemnifying parties have failed to assume the defense and
employ counsel, or (iii) the named parties to any such action, suit or
proceeding (including any impleaded parties) include both the Initial Purchasers
or such controlling person and the indemnifying parties and the Initial
Purchasers or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of the Initial Purchasers or such
controlling person). It is understood, however, that the indemnifying parties
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for the Initial
Purchasers and controlling persons not having actual or potential differing
interests with the Initial Purchasers or among themselves, which firm shall be
designated in writing by Salomon Brothers Inc, and that all such fees and
expenses shall be reimbursed on a monthly basis as provided in paragraph (a)
hereof. The indemnifying parties shall not be liable for any settlement of any
such action, suit or proceeding effected without their written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the indemnifying parties agree
to indemnify and hold harmless the Initial Purchasers, to the extent provided in
paragraph (a), and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(c) The Initial Purchasers, severally and not jointly, agree to
indemnify and hold harmless the Company and its directors and officers, and any
person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
indemnity from the Company to the Initial Purchasers set forth in paragraph (a)
hereof, but only with respect to information relating to the Initial Purchasers
furnished in writing by or on behalf of the Initial Purchasers expressly for use
in the Preliminary Offering Memorandum or the Offering Memorandum or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors or officers, or any such
controlling person based on the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against the Initial Purchasers pursuant to this
paragraph (c), the Initial Purchasers shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof the Initial Purchasers shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the Initial
Purchasers' expense), and the Company, its directors and officers, and any such
controlling person shall have the rights and duties given to the Initial
Purchasers by paragraph (b) above. The foregoing indemnity agreement shall be in
addition to any liability which the Initial Purchasers may otherwise have.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Units, or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Initial Purchasers on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any
18
<PAGE>
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchasers on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total discounts received
by the Initial Purchasers, in each case, as set forth in the table on the cover
page of the Offering Memorandum. The relative fault of the Company on the one
hand and the Initial Purchasers on the other hand 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 on the one hand or by the Initial
Purchasers on the other hand and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 6 were determined by
a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 6, the Initial
Purchasers shall not be required to contribute any amount in excess of the
amount by which the total price of the Units underwritten by it and distributed
to the public exceeds the amount of any damages which the Initial Purchasers
have otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(f) Except as set forth in paragraph (b) hereof, losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 6 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution agreements
contained in this Section 6 and the representations and warranties of the
Company set forth in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of the Initial
Purchasers or any person controlling the Initial Purchasers, the Company, their
respective directors or officers or any person controlling the Company, (ii)
acceptance of any Units and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to the Initial Purchasers or any
person controlling the Initial Purchasers, or to the Company, their respective
directors or officers or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 6.
(g) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
7. Conditions of the Initial Purchaser's Obligations. The obligations
of the Initial Purchasers to purchase the Units hereunder are subject to the
satisfaction of each of the following conditions:
(a) At the time of execution of this Agreement and on the Closing Date,
and the Option Closing Date, as to the Additional Units, if any, no order or
decree preventing the use of the Offering Memorandum or any amendment or
supplement thereto, or any order asserting that the transactions
19
<PAGE>
contemplated by this Agreement are subject to the registration requirements of
the Securities Act shall have been issued and no proceedings for that purpose
shall have been commenced or shall be pending or, to the knowledge of the
Company, be contemplated. No stop order suspending the sale of the Securities in
any jurisdiction designated by the Initial Purchasers shall have been issued and
no proceedings for that purpose shall have been commenced or shall be pending
or, to the knowledge of the Company, shall be contemplated.
(b) There shall not have been any change in the capital stock of the
Company nor any material increase in the short-term or long-term debt of the
Company from that set forth or contemplated in the Offering Memorandum
(exclusive of any amendment or supplement thereto subsequent to the date of the
Offering Memorandum); (ii) the Company and the Subsidiaries shall not have any
liabilities or obligations, direct or contingent (whether or not in the ordinary
course of business), that are material to the Company and the Subsidiaries,
taken as a whole, other than those reflected in the Offering Memorandum
(exclusive of any amendment or supplement thereto subsequent to the date of the
Offering Memorandum); and (iii) all the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date or the
Option Closing Date, as the case may be, as if made on and as of the Closing
Date or the Option Closing Date, as the case may be, and the Initial Purchasers
shall have received a certificate, dated the Closing Date or the Option Closing
Date, as the case may be, and signed by the chief executive officer and the
chief accounting officer of the Company (or such other officers as are
acceptable to the Initial Purchasers), to the effect set forth in this Section
7(b) and in Sections 7(a), 7(c) and 7(c) hereof.
(c) The Company shall not have failed at or prior to the Closing Date or
the Option Closing Date, as the case may be, to have performed or complied with
any of its agreements herein contained and required to be performed or complied
with by it hereunder at or prior to the Closing Date or the Option Closing Date,
as the case may be.
(d) Subsequent to the date as of which information is given in the
Offering Memorandum, except as otherwise stated in the Offering Memorandum
(exclusive of any amendment or supplement thereto subsequent to the date of the
Agreement) there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting the condition (financial or
other), business, properties, net worth, results of operations or prospects of
the Company or the Subsidiaries not contemplated by the Offering Memorandum
(exclusive of any amendment or supplement thereto subsequent to the date of the
Agreement) which in the opinion of the Initial Purchasers, would adversely
affect the market for the Securities or (ii) any event or development relating
to or involving the Company, or any officer or director of the Company which
makes any statement made in the Offering Memorandum (exclusive of any amendment
or supplement thereto subsequent to the date of the Agreement) untrue or which,
in the opinion of the Company and its counsel or the Initial Purchasers and
their counsel, requires the making of any addition to or change in the Offering
Memorandum in order to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Offering Memorandum to reflect such event or development
would, in the opinion of the Initial Purchasers, adversely affect the market for
any of the Securities.
(e) The Offering Memorandum shall have been printed and copies thereof
distributed to the Initial Purchasers in such quantities as shall have been
previously specified by them not later than 9:00 a.m. New York City time, on
January 14, 1998, or at such later date and time as the Initial Purchasers may
approve in writing.
(f) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Holland & Hart LLP,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, and addressed to the Initial Purchasers and
20
<PAGE>
Merrill Lynch, to the effect that:
(i) Each of the Company and USA is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum;
(ii) All the outstanding shares of capital stock of USA have been duly
authorized and validly issued, are fully paid and nonassessable, and are wholly
owned by the Company directly, free and clear of any security interest, lien,
adverse claim, equity or other encumbrance;
(iii) All the shares of capital stock of the Company outstanding prior
to the issuance of the Securities have been duly authorized and validly issued
and are fully paid and nonassessable and not subject to any preemptive rights
except as described in the Offering Memorandum, such opinion to be given in
reliance upon the Certificate;
(iv) The Company has full corporate power and authority to execute,
deliver and perform its obligations under the Operative Documents and to
consummate the transactions contemplated by the Operative Documents and to
issue, sell and deliver the Units pursuant to this Agreement;
(v) This Agreement has been duly authorized and validly executed and
delivered by the Company;
(vi) The Indenture has been duly authorized and validly executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (assuming the due
authorization, execution and delivery of the Indenture by the Trustee), subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law); no qualification of
the Indenture under the TIA is required in connection with the offer and sale of
the Series A Notes contemplated hereby or in connection with the Exempt Resales;
the Indenture complies as to form in all material respects with the requirements
of the TIA, and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(vii) The Units have been duly and validly authorized by the Company;
the Series A Notes have been duly authorized by the Company and, when executed
and authenticated in accordance with the terms of the Indenture and, upon
delivery to the Initial Purchasers against payment therefor in accordance with
the terms hereof, the Series A Notes will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms (assuming the due
authorization, execution and delivery of the Indenture by the Trustee), subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law);
(viii) The Series B Notes have been duly authorized by the Company;
(ix) The Notes Registration Rights Agreement has been duly authorized
and validly executed and delivered by the Company and is a valid and binding
agreement of the Company,
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<PAGE>
enforceable against the Company in accordance with its terms (assuming the due
authorization, execution and delivery of the Notes Registration Rights Agreement
by the Initial Purchasers), subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law);
(x) The Escrow Agreement has been duly authorized and validly executed
and delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms (assuming
the due authorization, execution and delivery of the Escrow Agreement by the
Escrow Agent and any other party thereto other than the Company), subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws affecting creditors' rights generally and subject,
as to enforceability, to general equitable principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law);
(xi) The Pledge Agreement has been duly authorized and validly executed
and delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms (assuming
the due authorization, execution and delivery of the Pledge Agreement by the
Collateral Agent), subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law);
(xii) The Warrant Agreement has been duly authorized and validly
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
(assuming the due authorization, execution and delivery of the Warrant Agreement
by the Warrant Agent), subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law);
(xiii) The Warrants have been duly authorized by the Company and, when
executed and countersigned in accordance with the terms of the Warrant Agreement
and upon (A) delivery to the Initial Purchasers against payment therefor of the
Initial Warrants in accordance with the terms hereof, (B) delivery to the
applicable purchasers against payment therefor of the Additional Warrants, if
any, in accordance with the terms hereof, delivery to the Holders of the Initial
Series A Notes of the Contingent Warrants in accordance with the terms of the
Warrant Agreement, the Warrants will be entitled to the benefits of the Warrant
Agreement and will be valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms (assuming the due
authorization, execution and delivery of the Warrant Agreement by the Warrant
Agent) subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law);
(xiv) The Warrant Shares to be issued upon the exercise of the Warrants
have been duly authorized and reserved for issuance by the Company and, when
issued and delivered against payment of the exercise price as provided in the
Warrant Agreement, the Warrant Shares will have been validly issued and will be
fully paid and nonassessable and the issuance of the Warrant Shares will not be
subject to any preemptive rights;
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(xv) The Registration Agreement has been duly authorized and validly
executed and delivered by the Company and is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms
(assuming the due authorization, execution and delivery of the Registration
Agreement by Merrill Lynch, the Initial Purchasers and the investors listed
thereto), subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law);
(xvi) The Convertible Note Purchase Agreement has been duly authorized
and validly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms (assuming the due authorization, execution and delivery of the Convertible
Note Purchase Agreement by Merrill Lynch), subject to the qualification that the
enforceability of the Company's obligations thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles regardless of whether such principles are enforceable at
law or equity.
(xvii) The Convertible Notes have been duly authorized by the Company
and, when executed and authenticated in accordance with the terms of the
Convertible Note Purchase Agreement and, upon delivery to Merrill Lynch of the
Convertible Notes against payment therefor in accordance with the terms of the
Convertible Note Purchase Agreement, the Convertible Notes will be entitled to
the benefits of the Convertible Note Purchase Agreement and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms (assuming the due authorization, execution and
delivery of the Convertible Note Purchase Agreement by Merrill Lynch), subject
to the qualification that the enforceability of the Company's obligations
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights generally and by general equitable principles regardless of whether such
principles are enforceable at law or equity.
(xviii) None of (A) the issuance, offer, sale or delivery of the Units,
(B) the execution, delivery or performance of this Agreement or the other
Operative Documents, or (C) the consummation by the Company of the transactions
contemplated hereby or thereby, (1) requires any consent, approval,
authorization or other order of, or registration or filing with, any United
States federal, state or local court, regulatory body, administrative agency or
other governmental body, agency or official (except such as may be required in
connection under the securities or Blue Sky laws of various jurisdictions and
except as may be required under the Communications Act of 1934, as amended by
the Telecommunications Act of 1996 or the rules, regulations and written
policies of the FCC ("U.S. Telecommunications Law") as to which no opinion is
---------------------------
given), (2) conflicts with or constitutes a breach of, or a default under, the
certificate of incorporation or by-laws of the Company or USA, (3) conflicts
with or constitutes a breach of, or a default under, any agreement, indenture,
lease or other instrument, to which the Company or any of the Subsidiaries is a
party or by which any of them or any of their respective properties may be
bound, which is identified as material to the Company and the Subsidiaries,
taken as a whole, as set forth in an Officers' Certificate attached as an
exhibit to such opinion (the "Exhibit"), and which has not been waived prior to
-------
the date of such opinion, (4) violates the Delaware General Corporation Law or
any U.S. federal (other than U.S. Telecommunications Law of which such counsel
need not express an opinion) or Colorado statute, law, regulation or filing
applicable to the Company or USA or any of their respective properties, (5) to
our knowledge, violates any judgment, injunction, order or decree applicable to
the Company or USA or any of their respective properties or (6) will result in
the
23
<PAGE>
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or USA pursuant to the terms of any agreement or
instrument set forth in the Exhibit;
(xix) To the knowledge of such counsel, there are no material
agreements, contracts, indentures, leases or other instruments, that are not
described in the Offering Memorandum (or any amendment or supplement thereto);
(xx) The statements under the captions "Description of Capital Stock,"
"Description of Units," "Description of Notes," "Description of Warrants,"
"Certain United States Federal Income Tax Consequences" and "Notice to
Investors" in the Offering Memorandum, insofar as such statements constitute a
summary of legal matters or documents, are accurate in all material respects and
present fairly the information set forth therein with respect to such legal
matters and documents;
(xxi) No registration of any of the Securities under the Securities Act
is required for the sale of the Units to the Initial Purchasers as contemplated
in this Agreement or for the Exempt Resales (assuming the accuracy of the
Initial Purchasers' representations in Section 2 hereof and those of the Company
in this Agreement and compliance by them with their respective agreements
contained herein (it being understood that no opinion is being expressed as to
any resale subsequent to the Exempt Resales or any resale of the Securities by
any person other than the Initial Purchasers));
(xxii) The Company is not and, after giving effect to the Offering and
sale of the Units and the application of the net proceeds thereof as described
in the Offering Memorandum, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
(xxiii) (A) Neither the Company nor USA is in violation in respect of
its respective certificate of incorporation or by-laws, and (B) neither the
Company nor any of the Subsidiaries is currently in default in the performance
of any obligation, agreement or condition contained in any agreement, indenture,
lease or other instrument set forth in the Exhibit, except as disclosed in the
Offering Memorandum;
(xxiv) Except as described under the caption "Litigation" in the
Offering Memorandum and except as otherwise described in such opinion, to the
knowledge of such counsel based solely on inquiry of local counsel, with respect
to foreign proceedings and with respect to the Subsidiaries other than USA,
there are no legal or governmental proceedings, domestic or foreign, pending
against or affecting the Company or any of the Subsidiaries or to which any of
their respective properties is subject, that are not disclosed in the Offering
Memorandum;
(xxv) To the knowledge of such counsel, no holder of any security of the
Company or any of the Subsidiaries has any right to request or demand
registration of shares of Common Stock or any other security of the Company or
any of the Subsidiaries because of the consummation of the transactions
contemplated by this Agreement, the Warrant Agreement or the Notes Registration
Rights Agreement;
(xxvi) When the Units, Series A Notes and Warrants are issued and
delivered pursuant to this Agreement, no Unit, Series A Note or Warrant will be
of the same class (within the meaning of Rule 144(d)(3) under the Securities
Act) as any security of the Company that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is quoted in a
United States automated interdealer quotation system; and
24
<PAGE>
(xxvii) The Pledge Agreement creates a valid security interest in the
Pledged Collateral covered thereby under the Indenture and the Notes to the
extent that Article 9 of the Uniform Commercial Code of the State of New York
(the "Code") is applicable thereto, securing payment of the Obligations (as
defined in the Pledge Agreement). Assuming ownership by the Company of the
Pledged Collateral and that the Collateral Agent has taken the Pledged Stock in
good faith without notice (actual or constructive) of any adverse claim within
the meaning of the Code, the Pledge Agreement, together with the delivery of any
Pledged Collateral represented by certificates to the Collateral Agent in the
State of New York, together with an endorsement in blank, will result in the
creation and perfection of such security interest in the Pledged Collateral to
the extent that Article 9 is applicable, assuming the continuous possession of
such certificates thereafter in the State of New York by the Collateral Agent,
subject to the qualification that (A) in the case of proceeds (as such term is
defined in Section 9-306 of the Code), continuation of perfection of the
Collateral Agent's security interest therein is limited to the extent set forth
in Section 9-306 of the Code and (B) in the case of property that becomes
Pledged Collateral after the date hereof, Section 5522 of the Federal Bankruptcy
Code limits the extent to which property acquired by a debtor after the
commencement of a case under the Federal Bankruptcy Code may be subject to a
security interest arising from a security agreement entered into by the debtor
before the commencement of such case. No filings or recordings are required in
order to perfect the security interest created under the Pledge Agreement.
In addition, such counsel shall also state that such counsel has
participated in conferences with officers and representatives of the Company,
representatives of the independent public accountants for the Company and the
Initial Purchasers at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel is not passing upon and does
not assume any responsibility for and has not verified the accuracy,
completeness or fairness of the statements contained in the Offering Memorandum
(except as set forth in paragraph (xx) above), and has not made any independent
check or verification thereof, on the basis of the foregoing (relying as to
materiality to the extent such counsel deemed appropriate upon facts provided by
officers and other representatives of the Company), no facts have come to the
attention of such counsel that lead such counsel to believe that the Offering
Memorandum (as amended or supplemented), as of its date or as of the Closing
Date or the Option Date, as the case may be, contained or contains any untrue
statement of material fact or omitted or omits to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no belief or opinion with respect to the financial statements and
schedules and other financial and statistical data included therein).
(g) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Lukas, Nace,
Gutierrez & Sachs, communications counsel to the Company, dated the Closing Date
or the Option Closing Date, as the case may be, and addressed to the Initial
Purchasers and Merrill Lynch to the effect that:
(i) The statements under the caption "Business - Divestiture of the
United States Operations" in the Offering Memorandum, insofar as such statements
constitute a summary of legal matters, proceedings or documents, are accurate in
all material respects and present fairly the information set forth therein with
respect to such legal matters, proceedings and documents;
(ii) The Company holds licenses (the "FCC Licenses") authorizing the use
------------
of 430 900 MHz channels for the provision of SMR services;
(iii) The FCC Licenses have been validly issued and are in full force
and effect; the FCC Licenses expire on August 16, 2006;
25
<PAGE>
(iv) Neither the Company nor USA is subject to any proceeding, or to
such counsel's knowledge, any pending or threatened complaint or investigation
by or before the Federal Communications Commission (the "FCC"); and
---
(v) None of (A) issuance, offer, sale or delivery of the Units, (B) the
execution and delivery of this Agreement or the other Operative Documents or (C)
the consummation by the Company of the transactions contemplated hereby or
thereby, (1) requires any consent, approval or authorization of, or filing with
the FCC or (2) violates or will violate the U.S. Telecommunications Law
applicable to the Company and the Subsidiaries.
(h) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Estudio Fernandez
Portocarrero Canelo y Asociados, Peruvian counsel to the Company, dated the
Closing Date or the Option Closing Date, as the case may be, and addressed to
the Initial Purchasers and Merrill Lynch to the effect that:
(i) Each of CCC Holdings Peru, S.R.L., SMR Direct Peru S.R.L., Pompano
S.R.L., Telecom Supply S.R.L., C-Comunica, S.A. and Transnet del Peru, S.A.
(collectively, the "Peru Corporations") is a corporation or limitada duly
-----------------
incorporated and validly existing under the laws of Peru with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum;
(ii) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Peru Corporations have been duly authorized
and validly issued, are fully paid and nonassessable, and are wholly owned by
the Company indirectly through one or more of the Subsidiaries, free and clear
of any lien, adverse claim, security interest, equity or other encumbrance;
(iii) The statements under the caption "Business - Country-by-Country
Operations - Peru - Regulatory and Legal Overview" in the Offering Memorandum,
insofar as such statements constitute a summary of legal matters, proceedings or
documents, are accurate in all material respects and present fairly the
information set forth therein with respect to such legal matters, proceedings
and documents;
(iv) The Peru Corporations hold licenses (the "Peru Licenses")
authorizing the use of an aggregate of 144 800 MHz channels for the provision of
SMR service;
(v) The Peru Licenses have been validly issued and are in full force and
effect;
(vi) None of the Peru Corporations is subject to any proceeding, or to
the knowledge of such counsel, any pending or threatened complaint or
investigation by or before (A) the Organization for Supervision of Private
Investments in Telecommunications or (B) the Ministry of Transportation,
Communications, Housing and Construction;
(vii) To the knowledge of such counsel, none of the Peru Corporations
is in violation in respect of its respective certificate of incorporation, by-
laws or other organizational documents; and
(viii) None of (A) the issuance, offer, sale or delivery of the Units,
(B) the execution, delivery or performance of this Agreement or the other
Operative Documents, or (C) the consummation by the Company of the transactions
contemplated hereby or thereby, (1) requires any consent, approval,
authorization or other order of, or registration or filing with, any Peruvian
court, regulatory body, administrative agency or other governmental body, agency
or official, (2) conflicts
26
<PAGE>
with or constitutes a breach of, or a default under, the estatutos of any of the
Peru Corporations, (3) violates any Peruvian statute, law, regulation or filing
applicable to Peru Corporations or any of their respective properties, (4)
violates any judgement, injunction, order or decree applicable to the Peru
Corporations or any of their respective properties, (5) will result in the
imposition of any lien, charge or encumbrance upon any property or assets of the
Peru Corporations pursuant to the terms of any agreement, or instrument to which
any of them is a party or to which any of them may be bound or to which any of
the property or assets of any of them is subject, except for such creations and
impositions as would not have, individually or in the aggregate, a Material
Adverse Effect or (6) violates the terms of any Peru Licenses;
(i) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Estudio Izurieta Mora
Bowen, Ecuadorian counsel to the Company, dated the Closing Date or the Option
Closing Date, as the case may be, and addressed to the Initial Purchasers and
Merrill Lynch to the effect that:
(i) Each of Centennial Ecuador S.A. and Brunacci Compania Ltda.
(collectively, the "Ecuador Corporations") is a corporation or limitada duly
--------------------
incorporated and validly existing under the laws of Ecuador with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum;
(ii) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Ecuador Corporations have been duly
authorized and validly issued, are fully paid and nonassessable, and are wholly
owned by the Company indirectly through one or more of the Subsidiaries, free
and clear of any lien, adverse claim, security interest, equity or other
encumbrance;
(iii) The statements under the caption "Business - Country-by-Country
Operations - Ecuador - Regulatory and Legal Overview" in the Offering
Memorandum, insofar as such statements constitute a summary of legal matters,
proceedings or documents, are accurate in all material respects and present
fairly the information set forth therein with respect to such legal matters,
proceedings and documents;
(iv) The Ecuador Corporations hold licenses (the "Ecuador Licenses")
----------------
authorizing the use of 195 800 MHz channels for the provision of SMR service and
frequency contracts (the "Contracts," and together with the Ecuador Licenses,
---------
the "Ecuador Approvals") relating to 180 of such channels;
-----------------
(v) Each of the Ecuador Licenses and the Contracts have been validly
issued and are in full force and effect;
(vi) None of the Ecuador Corporations is subject to any proceeding, or
to the knowledge of such counsel, any pending or threatened complaint or
investigation by or before (A) the Consejo Nacional de Telecomunicaciones or (B)
the Secretaria Nacional de Telecomunicaciones;
(vii) To the knowledge of such counsel, none of the Ecuador Corporations
is in violation in respect of its respective certificate of incorporation, by-
laws or other organizational documents;
(viii) None of (A) the issuance, offer, sale or delivery of the Units,
(B) the execution, delivery or performance of this Agreement or the other
Operative Documents, or (C) the
27
<PAGE>
consummation by the Company of the transactions contemplated hereby or thereby,
(1) requires any consent, approval, authorization or other order of, or
registration or filing with, any Ecuadorian court, regulatory body,
administrative agency or other governmental body, agency or official, (2)
conflicts with or constitutes a breach of, or a default under, the estatutos of
either of the Ecuador Corporations, (3) violates any Ecuadorian statute, law,
regulation or filing applicable to the Ecuador Corporations or any of their
respective properties, (4) violates any judgement, injunction, order or decree
applicable to the Ecuadorian Corporations or any of their respective properties,
(5) will result in the imposition of any lien, charge or encumbrance upon any
property or assets of the Ecuador Corporations pursuant to the terms of any
agreement, or instrument to which any of them is a party or to which any of them
may be bound or to which any of the property or assets of any of them is
subject, except for such creations and impositions as would not have,
individually or in the aggregate, a Material Adverse Effect or (6) violates the
terms of any of the Ecuador Licenses or the Contracts;
(j) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Maples and Calder,
Cayman Islands counsel to the Company, dated the Closing Date or the Option
Closing Date, as the case may be, and addressed to the Initial Purchasers and
Merrill Lynch to the effect that:
(i) Each of the Cayman Entities is an exempted company duly incorporated
and validly existing as a company limited by shares under the laws of the Cayman
Islands with full corporate power and authority under the laws of the Cayman
Islands to own, lease and operate its properties and to conduct its business in
accordance with its Memorandum and Articles of Association;
(ii) According to the corporate records in our possession, 100 shares in
SMR Direct Cayman Corp. have been issued to the Company and 100 shares in
Centennial Cayman Corp. have been issued to the Company, and such shares
constitute all of the outstanding shares of each company. Such shares have been
duly authorized and validly issued, and, assuming they have been paid for in
full, are fully paid and nonassessable;
(iii) Assuming the point is pleaded, in any proceedings taken in the
Cayman Islands for the enforcement of the provisions of the Pledge Agreement the
choice of the laws of New York as the governing law thereof will be recognized
and enforced;
(iv) Although there is not statutory enforcement in the Cayman Islands
of judgements obtained in courts of New York, the courts of the Cayman Islands
will recognize and enforce a foreign judgement of a court of competent
jurisdiction, based on the principle that a judgement of a competent foreign
court imposes on the judgement debtor an obligation to pay the sum for which
judgement has been given, and provided such judgement is final, conclusive, for
a liquidated sum not in respect of penalties or taxes or a fine or similar
fiscal or revenue obligations, and was not obtained in a manner, and is not of a
kind of enforcement of which is, contrary to natural justice or the public
policy of the Cayman Islands. Proceedings may be stayed by a Cayman Islands
court if concurrent proceeding are being brought elsewhere;
(v) The Pledge Agreement is in proper legal from under the laws of the
Cayman Islands for the enforcement thereof in the courts of the Cayman Islands
(subject to payment of applicable stamp duty in respect thereof);
(vi) State Street Bank and Trust Company would, in principle, have the
right to sue as a plaintiff in the courts of the Cayman Islands in respect of
the Pledge Agreement and would not be
28
<PAGE>
subject to any conditions which are not applicable to persons within the
jurisdiction of the Cayman Islands, although, as a person outside the
jurisdiction, State Street Bank and Trust Company may be required to post
security for costs; and
(vii) Assuming that as a matter of New York law and all other relevant
laws (other than the laws of the Cayman Islands) the Pledge Agreement creates a
valid and binding fixed charge over the Pledge Collateral and that no further
steps are required as a matter of New York law or other relevant laws (other
than the laws of the Cayman Islands) to perfect such charge then (subject as
specified below) the courts of the Cayman Islands will recognize such security
interest over the Pledge Collateral. With respect to security over the Pledged
Collateral, the priority among competing equitable interests will, if Cayman
Islands domestic law is applied, be determined according to the time of creation
of the equitable interests and, accordingly, the security over the Pledged
Collateral, to the extent only an equitable interest is created, would rank
behind any pre-existing equitable interest in the Pledged Collateral. Such
security may also rank behind any security interest granted over the Pledged
Collateral in the nature of a legal mortgage and a bona fide purchaser for value
of the Pledged Collateral without notice of the security could obtain good title
to the Pledged Collateral. We would point out, however, that, in the light of
the English decisions in MacMillan Inc. v. Bishopsgate Trust (No. 3) [1996] 1
-------------------------------------------
W.L.R. 387 (which would be persuasive, though technically not binding, in the
courts of the Cayman Islands) it does not necessarily follow that, as a matter
of Cayman Islands conflict of laws rules, priorities of competing interests in
the Pledged Collateral will be determined according to Cayman Islands domestic
rules as the jurisdiction of incorporation of the relevant company since that
case suggests that in certain circumstances the issue of priority may be
determined according to the laws of the jurisdiction where the register of
members of a company is situated or the laws of the jurisdiction where the
relevant share certificates are situated. Save as aforesaid, no filing,
registration or other action is necessary in the Cayman Islands to effect or
perfect the security granted in respect of the Pledged Collateral pursuant to
the Pledge Agreement although notice to the Cayman Entities of the Pledge
Agreement should be given since in certain circumstances notice to the Cayman
Entities could affect priority. We would also note that the holders of an
equitable mortgage or charge over shares in a Cayman Islands company may obtain
temporary protection from the Cayman Islands courts by means of a stop notice
preventing the registration of the transfer of or payment of dividends on the
shares without the company first giving notice to the secured party, thus
enabling the secured party to then apply to the court for an injunction
restraining registration of the transfer of the shares or payment of the
dividend.
(k) The Initial Purchasers shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Latham & Watkins,
counsel for the Initial Purchasers, dated the Closing Date or the Option Closing
Date, as the case may be, and addressed to the Initial Purchasers and Merrill
Lynch, with respect to the Offering Memorandum and such other related matters as
the Initial Purchasers may reasonably request, and such counsel shall have
received such certificates, documents and information as they may reasonably
request to enable them to pass upon such matters.
(l) The Initial Purchasers shall have received letters addressed to the
Initial Purchasers, and dated the date hereof and the Closing Date or the Option
Closing Date, as the case may be, from Arthur Andersen, LLP, independent
certified public accountants, substantially in the forms heretofore approved by
the Initial Purchasers.
(m) The Initial Purchasers shall have received a certified check or a
wire transfer of immediately available funds, in the amount of $350,000, from
the Company, representing fees for advisory services rendered to the Company in
connection with the Convertible Note Offering.
29
<PAGE>
(n) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Securities Act, that (i) it is downgrading its rating assigned
to any class of securities of the Company or (ii) it is reviewing its ratings
assigned to any class of securities of the Company with a view to possible
downgrading, or with negative implications, or direction not determined.
(o) The Company and the Trustee shall have entered into the Indenture
and each of the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(p) The Company shall have executed the Notes Registration Rights
Agreement and each of the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(q) The Company and the Collateral Agent shall have entered into the
Pledge Agreement and each of the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(r) The Company and the Warrant Agent shall have entered into the
Warrant Agreement and each of the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(s) The Company and the Escrow Agent shall have entered into the Escrow
Agreement and each of the Initial Purchasers shall have received counterparts,
conformed as executed thereof.
(t) The Registration Agreement shall have been executed by the Company
and the investors holding at least 51% of the Company's capital stock listed
thereto and each of the Initial Purchasers shall have received counterparts,
conformed as executed thereof.
(u) The Units, Series A Notes, Warrants and Warrant Shares shall have
been approved for trading on PORTAL.
(v) The Senior Note Conversion and the Senior Note Release shall be
consummated prior to, or simultaneously with, the closing of the offering of
Initial Units and the Convertible Notes on substantially the terms described in
the Offering Memorandum.
(w) The Convertible Note Offering shall be consummated prior to, or
simultaneously with, the closing of the offering of Initial Units on
substantially the terms described in the Offering Memorandum and the Initial
Purchasers shall have received counterparts, conformed as executed of the
Convertible Note Purchase Agreement and the Convertible Notes and such other
documentation as they deem necessary to evidence the consummation thereof.
(x) Each holder of shares of (i) Common Stock, (ii) Series A Preferred
Stock, par value $0.01 per share, of the Company (the "Series A Preferred")
------------------
(iii) Series B Preferred Stock, par value $0.01 per share, of the Company (the
"Series B Preferred"), (iv) Senior Secured Convertible Notes due 2002 (the
------------------
"Existing Notes") of the Company and/or (v) Series C Preferred Stock, par value
--------------
$0.01 per share, of the Company (the "Series C Preferred") shall have waived
------------------
permanently all of their preemptive and similar rights that may be applicable or
relate to (1) the transactions contemplated by this Agreement, (2) the exercise
of the Warrants and (3) the issuance of the Warrant Shares and the Initial
Purchasers shall have received evidence satisfactory to the Initial Purchasers
of the consummation thereof.
(y) The Certificate of Designations with respect to the Series A
Preferred, the Series B
30
<PAGE>
Preferred and the Series C Preferred shall have been amended to provide that no
shares of Series A Preferred, Series B Preferred or Series C Preferred will be
required to be redeemed prior to January 1, 2006 and the Company shall deliver
to the Initial Purchasers copies of the amendments to the Certificates of
Designations required under Delaware law to be filed in order to effect such
amendments, in each case, as certified by the Secretary of State of the State of
Delaware. All corporate action (including, without limitation, shareholder
action) necessary in connection with the amendment of the Certificate of
Designations of the Series A Preferred, the Series B Preferred and the Series C
Preferred shall have been taken and the Initial Purchasers shall have received
evidence satisfactory to the Initial Purchasers of the taking thereof.
(z) The Company shall have furnished or caused to be furnished to the
Initial Purchasers such further certificates and documents as the Initial
Purchasers shall have requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Initial Purchasers and counsel for the Initial
Purchasers. Any certificate or document signed by any officer of the Company
and delivered to the Initial Purchasers, or to counsel for the Initial
Purchasers, shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the statements made therein. Each of the Initial
Purchasers understands that the Company and, for purposes of the opinions to be
delivered to the Initial Purchasers pursuant to Sections 7(f) and 7(k) hereof,
counsel to the Company and counsel to the Initial Purchasers, will rely upon the
accuracy and truth of the foregoing representations and agreements and each
Initial Purchaser hereby consents to such reliance.
8. Expenses. The Company agrees to pay the following costs and expenses
and all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction of the
Offering Memorandum (including financial statements thereto), and each amendment
or supplement to any of them, the Status Report, this Agreement and the
Indenture; (ii) the printing (or reproduction) and delivery (including postage,
air freight charges and charges for counting and packaging) of such copies of
the Offering Memorandum, the Preliminary Offering Memorandum, the Status Report,
and all amendments or supplements to any of them as may be reasonably requested
for use in connection with the offering and sale of the Units; (iii) the
preparation, printing, authentication, issuance and delivery of certificates for
the Securities, including any stamp taxes in connection with the original
issuance and sale of the Securities; (iv) the printing (or reproduction) and
delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda
and all other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Units; (v) the application for quotation of
the Units, Series A Notes, Warrants and Warrant Shares on the PORTAL market;
(vi) the qualification of the Units, Series A Notes and Warrants for offer and
sale under the securities or Blue Sky laws of the several states as provided in
Section 4(e) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Initial Purchasers relating to the preparation, printing or
reproduction, and delivery of the preliminary and supplemental Blue Sky
Memoranda and such qualification); (vii) the performance by the Company of its
obligations under the Notes Registration Rights Agreement; and (viii) the fees
and expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company. The Company hereby
agrees that it will pay in full on the Closing Date and the Option Closing Date
the fees and expenses referred to in clause (vi) of this Section 8 by delivering
to counsel for the Initial Purchasers on such date a check payable to such
counsel or wire transfer of immediately available funds in the requisite amount.
9. Effective Date of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by all the parties hereto.
31
<PAGE>
10. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchasers, without
liability on the part of the Initial Purchasers to the Company, by notice to the
Company, if prior to the delivery and payment for the Securities, (i) 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,
(ii) a general moratorium on commercial banking activities in the United States
or New York shall have been declared, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other U.S. or international calamity,
crisis or change in political, financial or economic conditions, the effect of
which on the financial markets of the United States is such as to make it, in
the judgment of the Initial Purchasers, impracticable or inadvisable to commence
or continue the offering of the Units on the terms set forth on the cover page
of the Offering Memorandum or to enforce contracts for the resale of the Units
by the Initial Purchasers. Notice of such termination may be given to the
Company by telecopy or telephone and shall be subsequently confirmed by letter.
11. Information Furnished by the Initial Purchasers. The statements set
forth in (i) the stabilization legend on the inside front cover and the last
paragraph on the cover page of the Preliminary Offering Memorandum and Offering
Memorandum and (ii) the first, third and fourth sentence of the third paragraph,
and the fourth sentence of the fourth paragraph under the caption entitled "Plan
of Distribution" of the Preliminary Offering Memorandum and the Offering
Memorandum, constitute the only information furnished by or on behalf of the
Initial Purchasers as such information is referred to in Sections 5(b) and 6
hereof.
12. Miscellaneous. Except as otherwise provided in Sections 4, 9 and 10
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1610 Wynkoop Street, Suite 300, Denver, Colorado 80202, Attention:
Chief Financial Officer, or (ii) if to the Initial Purchasers, to Salomon
Brothers Inc, 388 Greenwich Street, New York, NY 10013, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Initial Purchasers and the Company, their respective directors, their respective
officers and the controlling persons referred to in Section 6 hereof and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from the Initial Purchasers of any of
the Securities in his status as such purchaser.
13. Applicable Law; Counterparts; Facsimile. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York
and without regard to the conflicts of law principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto. This
Agreement may be executed by facsimile.
32
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the Initial Purchasers.
Very truly yours,
Centennial Communications Corp
By: /s/ Bernard G. Dvorak
--------------------------
Name: Bernard G. Dvorak
Title:Chief Financial
Officer
Confirmed as of the date first
above mentioned.
Salomon Brothers Inc
By: /s/ Shelley L. Sporleder
-----------------------------
Name: Shelley Sporleder
Title: Vice President
Prudential Securities Incorporated
By: /s/ George Alex
-----------------------------
Name: George Alex
Title: Managing Director
33
<PAGE>
SCHEDULE I
CENTENNIAL COMMUNICATIONS CORP.
Initial Purchaser Number of Units
- ----------------- ---------------
Salomon Brothers Inc 28,000
Prudential Securities Incorporated 12,000
------
Total 40,000
======
34
<PAGE>
SCHEDULE II
SUBSIDIARIES
SMR Direct USA, Inc.
SMR Direct Cayman Corp.
Centennial Cayman Corp.
CCC Holdings Peru, S.R.L.
Centennial Cayman Corp. Chile, Ltda.
Radioservicios Moviles, S.A.
Centennial Ecuador, S.A.
Centennial Telecomunicacions de Venezuela, S.A.
SMR Direct Peru, S.R.L.
Pompano, S.R.L.
C-Comunica S.A.
Telecom Supply S.R.L.
Brunacci Compania Ltda.
Transnet del Peru, S.A.
Chilean entity (subject to confidentiality restrictions)
35
<PAGE>
EXHIBIT A
NOTES REGISTRATION RIGHTS AGREEMENT
36
<PAGE>
EXHIBIT 4.2
INDENTURE dated as of January 15, 1998 between Centennial Communications
Corp., a Delaware corporation (the "Company"), and State Street Bank and 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 of the 14% Senior Discount
Notes due 2005 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Accreted Value" means, as of any date prior to January 1, 2003, an amount
per $1,000 principal amount at maturity of Notes that is equal to the sum of (i)
the initial offering price ($511.03 per $1,000 principal amount at maturity of
Notes) of such Notes and (ii) the portion of the excess of the principal amount
of such Notes over such initial offering price which shall have been amortized
through such date, such amount to be so amortized on a daily basis and
compounded semi-annually on each January 1 and July 1 at the rate of 14% per
annum from the date of original issue of the Notes through the date of
determination computed on the basis of a 360-day year of twelve 30-day months
and as of any date on or after January 1, 2003, the principal amount of each
Note.
"Acquired Debt" 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.
"Additional Warrants" means the warrants, if any, of the Company issued
upon exercise of the Option, each warrant to purchase such number of shares of
Common Stock of the Company as the Initial Warrants as of the date of issuance
of such Additional Warrants.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(that is not for security purposes) of any assets or rights (including, without
limitation, by way of a sale and leaseback) other than in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole
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will be governed by Section 4.17 hereof and/or Section 5.01 hereof and not by
Section 4.10 hereof), and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, 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
million or (b) for net proceeds in excess of $1 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted Subsidiary,
(ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary, (iii) the granting of a Lien that is
permitted by Section 4.12 hereof, and (iv) a Restricted Payment that is
permitted by Section 4.07 hereof 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.
"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 or limited liability
company, partnership or membership 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 270
days from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits maturing not more than 270 days from the date of acquisition,
bankers' acceptances with maturities not exceeding 270 days, overnight bank
deposits and money market deposit accounts, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bankwatch, Inc. 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 not
more than 270 days from the date of acquisition.
"Cayman Entities" means SMR Direct Cayman Corp. and Centennial Cayman
Corp.
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"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 Restricted Subsidiaries
(other than the sale, lease, transfer, conveyance or other disposition (that is
not for security purposes) of any of the assets of the Company's U.S. Operations
or all of the Capital Stock of the Company's wholly-owned subsidiary SMR Direct
USA, Inc. in conjunction with the sale of the Company's U.S. Operations), taken
as a whole, to any "person" (as such term is defined in Section 13(d)(3) of the
Exchange Act) or "group" (as such term is defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Principals and their Related
Parties, (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" (as defined above), or "group" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50.1% of the Voting Stock of
the Company (measured by voting power rather than number of shares), (iv) the
Company consolidates with, or merges with or into, another "person" (as defined
above) or "group" (as defined above) in a transaction or series of related
transactions in which the Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any transaction
where (A) the outstanding Voting Stock of the Company is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee corporation and (B) the "beneficial owners" (as defined above) of the
outstanding Voting Stock of the Company immediately prior to such transaction
own beneficially, directly or indirectly through one or more Subsidiaries, not
less than a majority of the total outstanding Voting Stock of the surviving or
transferee corporation immediately after such transaction or (v) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Collateral Agent" shall have the meaning set forth in the Pledge
Agreement.
"Company" means Centennial Communications Corp., a Delaware corporation,
and any and all successors thereto.
"Company Notes" means bonds, notes, debentures or similar instruments of
the Company issued in connection with the acquisition of assets or a new
Restricted Subsidiary.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) provision
for taxes based on income or profits of such Person and its Subsidiaries for
such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (ii) Consolidated Interest Expense
of such Person and its Restricted Subsidiaries for such period to the extent
that any such expense was deducted in computing such Consolidated Net Income,
plus (iii) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income, minus (iv)
non-cash items increasing such Consolidated Net Income for such period, in each
case,
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on a consolidated basis determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Restricted Subsidiary was included in calculating
the Consolidated Net Income of such Person.
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Restricted Subsidiaries, plus (ii) the total
amount of Indebtedness of any other Person, to the extent that such Indebtedness
has been guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus (iii) the aggregate liquidation value of all Disqualified
Stock of such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization or original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments on any
series of preferred stock of such Person or any of its Restricted Subsidiaries,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
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
paid in cash to the referent Person or a Restricted Subsidiary thereof, (ii) the
Net Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (which 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 Restricted 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, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Subsidiaries.
"Contingent Warrants" means warrants issued to the Holders of the Notes,
exercisable for 7.5% of the Common Stock of the Company on a fully diluted basis
as of the date of such issuance after giving effect to the issuance of such
Contingent Warrants, in the event that the Company does not consummate a
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Qualified Public Offering of its Qualified Capital Stock on or prior to January
1, 2001; provided that if the Company consummates a public or private offering
or offerings of its Qualified Capital Stock resulting in aggregate gross
proceeds of at least $25 million, the Company shall have until June 30, 2002 to
consummate a Qualified Public Offering.
"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 (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 or (iii) became a member of the Board of Directors as a
result of being designated by a stockholder pursuant to, and in accordance with,
the terms of Section 1 of the Stockholders Agreement, as such section is in
effect on the date of the Indenture.
"Convertible Notes" means the $10 million in aggregate principal amount of
the Company's 9% Convertible Subordinated Notes due 2006.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities or commercial paper facilities with banks or other institutional
lenders (including, without limitation, leasing companies) providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Debt to Cash Flow Ratio" means, as of any date of determination, the
ratio of (i) the Consolidated Indebtedness of the Company as of such date to
(ii) the Consolidated Cash Flow of the Company for the four most recent full
fiscal quarters ending immediately prior to such date for which internal
financial statements are available, determined on a pro forma basis after giving
effect to all acquisitions or dispositions of assets made by the Company and its
Restricted Subsidiaries from the beginning of such four-quarter period through
and including such date of determination (including any related financing
transactions) as if such acquisitions and dispositions had occurred at the
beginning of such four-quarter period. In addition, for purposes of calculating
Consolidated Cash Flow for the computation referred to above, (a) acquisitions
that have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the date on which the event for which the
calculation of the Debt to Cash Flow Ratio is made (the "Calculation Date")
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (b) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded.
"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 Note" means a certificated Note registered in the name of the
Holder thereof and
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issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto
except that such Note shall not bear the Global Note Legend and shall not have
the "Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Equity Proceeds" means any net cash proceeds received by the
Company after the date of this Indenture from the issuance and sale of its
Qualified Capital Stock (other than Qualified Capital Stock sold to a Subsidiary
of the Company) providing the basis for (i) a redemption of Notes in a
transaction consummated in compliance with Section 3.07(b) hereof, (ii) an
addition to the cumulative account calculated pursuant to clause (c) of the
first paragraph of Section 4.07 hereof, (iii) the incurrence of additional
Indebtedness pursuant to clause (viii) of the second paragraph of Section 4.09
hereof, (iv) an Investment pursuant to clause (vii) of the definition of
"Permitted Investments" or (v) an Investment in a Permitted Business in Eastern
Europe pursuant to the definition of "Permitted Business." In no event shall
the same net cash proceeds be treated as Designated Equity Proceeds for more
than one purpose under this Indenture. Once designated and used for a
particular purpose, such net cash proceeds may not be redesignated or used for
an alternative purpose. Not later than the date on which any such net cash
proceeds are to be used for a particular purpose, the Company shall deliver to
the Trustee an Officers Certificate stating the purpose for which such net cash
proceeds are to be used. The Company will not be required, by virtue of this
definition, to "earmark," segregate or otherwise separate any such net cash
proceeds received by the Company from the issuance and sale of its Qualified
Capital Stock.
"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 at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date on which the Notes mature.
"Eastern Europe" means the countries of Albania, Armenia, Azerbaijan,
Belarus, Bosnia, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia,
Herzegovina, Hungary, Latvia, Lithuania, Moldava, Poland, Romania, Russia,
Slovenia, Slovakia, Ukraine and Yugoslavia.
"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).
"Escrow Agent" means Morgan Stanley, Dean Witter, Discover & Co. as escrow
agent.
"Escrow Agreement" means the Escrow Agreement, dated as of January 15,
1998, by and among the Company, the Escrow Agent and any other parties listed
thereto, as such agreement may be amended, modified or supplemented from time to
time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f).
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"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Excluded Stock" means all of the outstanding shares of Capital Stock of
each foreign Subsidiary that, if pledged, would cause the undistributed earnings
of such foreign Subsidiary (if such foreign Subsidiary had any such
undistributed earnings) as determined for U.S. Federal income tax purposes to be
treated as a deemed dividend to any parent company of such foreign Subsidiary
for U.S. Federal income tax purposes; provided, however, that if any shares of
Capital Stock of a foreign Subsidiary may subsequently be pledged without
resulting in such a deemed dividend, such shares shall no longer be Excluded
Stock and shall be pledged pursuant to the Pledge Agreement.
"Existing Indebtedness" means up to $6,700,000 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under any Credit Facility) in existence on the date of this
Indenture, until such amounts are repaid.
"Expansion Event" means such time as (i) the Company has consummated a
Qualified Public Offering of its Qualified Public Stock and (ii) the Notes have
traded for 10 days after the occurrence of such Qualified Public Offering at a
price equal to 101% of their Accreted Value as demonstrated by a bid in writing
from a broker for at least $2 million in aggregate principal amount of the
Notes.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), (ii) the consolidated interest expense of such Person
and its Subsidiaries that was capitalized during such period, (iii) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such guarantee or Lien is called upon) and (iv)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person and its Subsidiaries for such period. In
the event that the Company or any of its Subsidiaries incurs, assumes,
guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that
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have been made by the Company or any of its Subsidiaries, including through
mergers or consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated Cash Flow for
such reference period shall be calculated without giving effect to clause (iii)
of the proviso set forth in the definition of Consolidated Net Income, (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"Full Accretion Date" means January 1, 2003, the date when interest shall
accrue on the Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Sections 2.01, 2.06(b)(ii),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this 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.
"Hedging Obligation" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements and
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) foreign exchange swap agreements, foreign exchange option
agreements, foreign exchange futures agreements and other agreements and
arrangements designed to protect such Person against fluctuations in foreign
currency exchange rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
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Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Public Offering" means the first underwritten public offering
(excluding any offering pursuant to Form S-8 under the Securities Act or any
other publicly registered offering pursuant to the Securities Act pertaining to
the issuance of shares of Common Stock or securities exercisable therefor under
any benefit plan, employee compensation plan, or employee or director stock
purchase plan) of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc and Prudential Securities
Incorporated, as Initial Purchasers.
"Initial Units" means 40,000 Units, each consisting of $1,000 in principal
amount at maturity of Notes and one Initial Warrant to purchase 64 shares of
Common Stock of the Company at an exercise price of $.01 per share, subject to
adjustment in certain circumstances.
"Initial Warrants" means the warrants of the Company issued on the date
hereof, each warrant initially to purchase 64 shares of Common Stock of the
Company.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"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 or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
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.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted 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
Person held by the Company or such Restricted Subsidiary immediately following
any such sale, disposition or issuance.
"Latin America" means the countries of South America, Central America, the
Caribbean and the Republic of Mexico.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, Hartford, Connecticut 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
9
<PAGE>
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"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.
"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 or accretion of mandatorily redeemable
preferred stock to redemption value, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
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 Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted 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), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
in connection with such Asset Sale, and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness of an Unrestricted Subsidiary (i)
as to which neither the Company nor any of its Restricted Subsidiaries (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 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 an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness (other
than the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable 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 or any of its Restricted
Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
10
<PAGE>
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"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
Sections 11.04 and 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Sections 11.04 and
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Option" means the option granted by the Company to the Initial
Purchasers, exercisable on or prior to February 13, 1998, to purchase up to an
additional 20,000 units, each consisting of $1,000 in principal amount at
maturity of Notes and one Additional Warrant.
"Participant" means, with respect to DTC, Euroclear or Cedel, a Person who
has an account with DTC, Euroclear or Cedel, respectively (and, with respect to
DTC, shall include Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means (i) any wireless telecommunications business in
Latin America or (ii) any business that is ancillary or related thereto in Latin
America; provided that (a) on the occurrence of an Expansion Event, "Permitted
Business" shall mean (1) any wireless telecommunications business or (2) any
business that is ancillary or related thereto and (b) the Company may apply the
aggregate net cash proceeds received by the Company after the date of this
Indenture from the issuance and sale of its Qualified Capital Stock to an
Investment in a Permitted Business in Eastern Europe to the extent the such net
cash proceeds have been, and continue to be, designated as Designated Equity
Proceeds to be applied pursuant to this definition as provided in the definition
of "Designated Equity Proceeds" and such Investment shall be treated as a
"Permitted Investment."
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company that is engaged in a Permitted Business;
(ii) any Investment in Cash Equivalents; (iii) any Investment by the Company in
a Person, if as a result of such Investment (a) such Person becomes a Restricted
Subsidiary of the Company that is engaged in a Permitted Business 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 Restricted Subsidiary of the Company and that is engaged in a Permitted
Business; (iv) any Restricted Investment made as a result of the receipt of non-
cash consideration from an
11
<PAGE>
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(v) any acquisition of assets in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (vi) any non-cash consideration
received in connection with an Asset Sale that complies with Section 4.10
hereof; and (vii) Investments in a Person engaged in a Permitted Business,
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (vii) that are
at the time outstanding, not to exceed the sum of (a) $7 million (which amount
may only be used in connection with Permitted Businesses in the Republic of
Chile) plus (b) 100% of the aggregate net cash proceeds received by the Company
after the date of this Indenture from the issuance and sale of its Qualified
Capital Stock to the extent that such net cash proceeds have been, and continue
to be, designated as Designated Equity Proceeds to be applied to make
Investments pursuant to this clause (vi) as provided in the definition thereof.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens on assets of the Company securing borrowings under Credit
Facilities permitted by the terms of this Indenture to be incurred and
outstanding;
(ii) Liens in favor of the Company or any of its Restricted
Subsidiaries;
(iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Restricted Subsidiary of
the Company; 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
or such Restricted Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were not incurred in connection with, or in contemplation of, such
acquisition and do not extend to any assets of the Company or any of its
Restricted Subsidiaries other than the property so acquired;
(v) Liens existing on the date of this Indenture;
(vi) 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;
(vii) Liens securing Obligations (other than Indebtedness) under
governmental licenses, concessions or other authorizations;
(viii) 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;
(ix) Liens securing Permitted Debt of Restricted Subsidiaries of the
Company;
(x) Liens securing Vendor Indebtedness permitted by clause (iv) of
Section 4.09 hereof; provided that such Liens shall not extend to any other
property or assets of the Company or of any
12
<PAGE>
Restricted Subsidiary other than the property or assets so acquired;
(xi) Liens securing the Notes;
(xii) Liens securing the Convertible Notes until the earlier of such time
as the Convertible Notes (a) are no longer outstanding or (b) have been
converted pursuant to the terms thereof;
(xiii) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries;
(xiv) Liens securing Indebtedness incurred to refinance Indebtedness that
has been secured by a Lien permitted under this Indenture; provided that (a)
any such Lien shall not extend to or cover any assets or property not
securing the Indebtedness so refinanced and (b) the refinancing Indebtedness
secured by such Lien shall have been permitted to be incurred under Section
4.09 hereof.
(xv) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do
not exceed $1.0 million at any one time outstanding;
(xvi) Liens to secure Attributable Debt that is permitted to be incurred
pursuant to Section 4.18 hereof; provided that any such Lien shall not extend
to or cover any assets of the Company other than the assets which are the
subject of the sale and leaseback transaction in which the Attributable Debt
is incurred; and
(xvii) Liens securing Indebtedness permitted by clause (vi) of Section
4.09 hereof; provided that such Liens shall not extend to any other property
or assets of the Company or of any Restricted Subsidiary other than the
property or assets so acquired.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries 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 or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses and reasonable prepayment premiums incurred in
connection therewith); (ii) such Permitted 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 Notes,
such Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof.
13
<PAGE>
"Pledge Agreement" means the Pledge Agreement dated as of the date of this
Indenture and substantially in the form attached as Exhibit E hereto, as such
agreement may be amended, modified or supplemented from time to time.
"Pledged Collateral" means any assets of the Company defined as Pledged
Collateral in the Pledge Agreement.
"Principals" means any of (i) William J. Elsner, Jeff E. Rhodes, Bernard
G. Dvorak, Stephen W. Schovee, William D. Stanfill, Robert F. McKenzie, Adam
Goldman, William Sprague, Michael N. Simkin, John Fullmer and Mark A. Leavitt,
(ii) Prudential Securities Incorporated and its Affiliates and (iii) Merrill
Lynch Global Allocation Fund, Inc. and its Subsidiaries (or a wholly owned
Subsidiary of the sole stockholder of any of the foregoing).
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Public Offering" means the sale, in an underwritten Initial
Public Offering registered under the Securities Act, of shares of the Company's
Common Stock in which (i) the aggregate gross proceeds received by the Company
for the shares is at least $25 million and (ii) the price per share paid by the
public is at least $6.00 (as adjusted for stock splits, reverse stock splits,
stock dividends and similar recapitalizations).
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of January 15, 1998, 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.
"Registration Agreement" means the Third Amended and Restated Registration
Agreement, dated as of January 15, 1998, by and among the Company, the Initial
Purchasers and the other parties named on the signature pages thereof.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) a trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"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.
14
<PAGE>
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest of (i) 360 days from the date of this
Indenture, (ii) such date as Salomon Brothers Inc may, in its discretion, deem
appropriate, and (iii) in the event of a Change in Control, the date the Company
mails a notice thereof.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"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 of this
Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Stockholders Agreement" means the second amended and restated
stockholders agreement, dated as of October 3, 1997, by and among the Company
and the persons identified on the signature pages thereto as in effect on the
date of this Indenture, and as amended from time to time thereafter.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the
15
<PAGE>
managing general partner of which is such Person or a Subsidiary of such Person
or (b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. "" 77aaa-77bbbb) as
in effect on the date on which this Indenture is qualified under the TIA.
"Triggering Event" means the date immediately following the occurrence of
the last of the following: (i) the consummation by the Company of a public or
private offering or offerings of its Capital Stock resulting in aggregate gross
proceeds of $50 million; (ii) the consummation by the Company of a Qualified
Public Offering (which may be satisfied by the occurrence of a public offering
described in clause (i) above that is a Qualified Public Offering); (iii) the
Convertible Notes are freely convertible into shares of Common Stock; and (iv)
after the occurrence of a Qualified Public Offering, the Common Stock is, for 10
consecutive days, trading at a price equal to two times the Conversion Price (as
defined in the Convertible Notes) then in effect at the time of such Qualified
Public Offering. The Convertible Notes will be deemed freely convertible into
shares of Common Stock if the sole reason they are not so convertible is that
they are subject to that certain Conversion Rights Agreement between the Company
and the holder of the Convertible Notes.
"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.
"U.S. Operations" means the Company's United States specialized mobile
radio operations and related assets.
"Unrestricted Global Note" means a permanent Global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than any
Subsidiary of the Company that owns all or a material portion of the assets
owned by the Company or any Subsidiary of the Company on the date of this
Indenture) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted
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<PAGE>
Subsidiaries and has at least one executive officer that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Company
shall be in default of such Section). The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Units" means the Initial Units and any additional units issued in
connection with the Option.
"Vendor Indebtedness" means any Indebtedness (including, without
limitation, Indebtedness under any credit facility entered into with any vendor
or supplier or any financial institution acting on behalf of such vendor or
supplier, including, without limitation, any financing provided by the Overseas
Private Investment Corporation); provided that such Indebtedness is incurred
solely for the purpose of financing the cost (including, without limitation, the
cost of design, development, delivery, freight, insurance, import duties, value-
added taxes, improvement, construction or integration) of equipment or other
tangible assets necessary for the operation of wireless telecommunications
networks or systems.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the board of
directors, managers or trustees of such Person.
"Warrants" means the Initial Warrants, the Additional Warrants, if any,
and the Contingent Warrants, if any.
"Warrant Agent" means State Street Bank and Trust Company, as Warrant
Agent pursuant to the Warrant
"Warrant Agreement" means the Warrant Agreement dated as of the date
hereof between the Company and State Street Bank and Trust Company, as Warrant
Agent.
"Warrant Shares" means shares of Common Stock of the Company issuable upon
exercise of the Initial Warrants, the Additional Warrants and the Contingent
Warrants pursuant to the terms of the Warrant Agreement.
"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
17
<PAGE>
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than (i) directors' qualifying shares or
(ii) shares of non-U.S. Restricted Subsidiaries sold to non-U.S. nationals as
required by the laws of the jurisdiction of incorporation of such non-U.S.
Restricted Subsidiary) shall at the time be owned by such Person or by one or
more Wholly Owned Restricted 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
"Change of Control Offer"......... 4.17
"Change of Control Payment"....... 4.17
"Change of Control Payment Date".. 4.17
"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
"Payment Default"................. 6.01
"Permitted Debt".................. 4.09
"Permitted Refinancing"........... 4.09
"Purchase Date"................... 3.09
"Refinancing Indebtedness"........ 4.09
"Registrar"....................... 2.03
"Restricted Payments"............. 4.07
"Unit Legend"..................... 2.06
"Warrant Agreement"............... 2.06
</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 Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
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<PAGE>
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(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;
(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 NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the 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. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
Notes issued in global form shall be substantially in the form of Exhibit
A attached hereto (including the Global Note Legend and the "Schedule of
Exchanges in the Global Note" attached thereto). Notes issued in definitive
form shall be substantially in the form of Exhibit A attached hereto (but
without the Global Note Legend and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and
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each shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding 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 aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the 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 Notes for the Company by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Notes for original issue up to the aggregate principal
amount stated in paragraph 4 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed such amount except as provided in
Section 2.08 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Paying Agent to Hold Money in Trust.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer of for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. 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 Note Custodian with respect to the Global Notes.
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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 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 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 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 " 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 Notes and
the Company shall otherwise comply with TIA " 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to Sections 2.07 or 2.10
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require
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compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Note may be transferred only to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note.
No written orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note to
a Person who takes delivery thereof in the form of a beneficial interest in
the same Global Note), the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase and the
Participant account to be decreased or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance
with the Applicable Procedures directing the Depositary to cause to be issued
a Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to the
Registrar containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or exchange
referred to in (1) above. Upon an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture, the
Notes and otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any holder
thereof for a beneficial interest in an Unrestricted Global Note or transferred
to a Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note if the exchange or transfer complies with the
requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, is not (1) a broker-dealer,
(2) a Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
thereof;
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are not required in order to maintain compliance
with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests in Global Notes for
Definitive Notes.
(i) If any holder of a beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a Restricted Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Restricted Definitive Note, then, upon receipt by
the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule 904
under the Securities Act, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (2) thereof;
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(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3)(d) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and
the Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Restricted Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Restricted Definitive Notes to the Persons in whose names such Notes are so
registered. Any Restricted Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial interest
in a Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for an Unrestricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(b) thereof;
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an Opinion
of Counsel in form reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance with the Securities Act
and that the restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act.
(iii) If any holder of a beneficial interest in an Unrestricted Global
Note proposes to exchange such beneficial interest for an Unrestricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable
Unrestricted Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Unrestricted
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Unrestricted Definitive Notes to the Persons in whose names such
Notes are so registered. Any Unrestricted Definitive Note issued in exchange
for a beneficial interest pursuant to this section 2.06(c)(iii) shall not
bear the Private Placement Legend. A beneficial interest in an Unrestricted
Global Note cannot be exchanged for a Restricted Definitive Note or
transferred to a Person who takes delivery thereof in the form of a
Restricted Definitive Note.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) If any Holder of a Restricted Definitive Note proposes to exchange
such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto, including
the certifications in items (2)(b) and (3) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(1) thereof;
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(C) if such Restricted Definitive Note is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to
an exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such Restricted Definitive Note is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to
be increased the aggregate principal amount of the Restricted Global Note.
(ii) A Holder of a Restricted Definitive Note may exchange such Note for a
beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
is not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restrictive Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof;
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(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that
such exchange or transfer is in compliance with the Securities Act, that
the restrictions on transfer contained herein and in the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act, and such Restrictive Definitive Notes are being exchanged
or transferred in compliance with any applicable blue sky securities laws
of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Restricted Definitive Notes
and increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Unrestricted Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of the Unrestricted Global Note.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
beneficial interests transferred pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes 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. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) Restricted Definitive Notes may be transferred to and registered in
the name of Persons who take delivery thereof if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904, then
the transferor must
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deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Any Restricted Definitive Note may be exchanged by the Holder thereof
for an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the Holder,
in the case of an exchange, or the transferee, in the case of a transfer,
is not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof;
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of an Unrestricted Definitive Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof; and
(3) in each such case set forth in this subparagraph (D), an Opinion
of Counsel in form reasonably acceptable to the Company to the effect that
such exchange or transfer is in compliance with the Securities Act, that
the restrictions on transfer contained herein and in the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act, and such Restricted Definitive Note is being exchanged or
transferred in compliance with any applicable blue sky securities laws of
any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request for such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof. Unrestricted Definitive Notes cannot
be exchanged for or transferred to Persons who take delivery thereof in the
form of a Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the
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Registration Rights Agreement, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by persons that are not (x)
broker-dealers, (y) Persons participating in the distribution of the Exchange
Notes or (z) Persons who are affiliates (as defined in Rule 144) of the Company
and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Unrestricted Definitive Notes in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (b) below, each Global Note and
each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the following
form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI") (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS
OF RULE 144(D) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE,
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT TO (A) THE COMPANY OR ANY OF
ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (E) TO AN IAI, THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THIS NOTE (THE FORM
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OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF A PRINCIPAL AMOUNT OF NOTES AT THE TIME OF TRANSFER OF LESS
THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G)
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 (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Unrestricted Global Note or
Unrestricted Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
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(iii) Unit Legend. Each Note issued prior to the Separation Date shall
bear the following legend (the "Unit Legend") on the face thereof:
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT AT
MATURITY OF THE NOTES AND ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF
TO PURCHASE 64 SHARES, PAR VALUE $.01 PER SHARE, OF THE COMPANY. PRIOR TO
THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) 360 DAYS FROM THE
DATE OF ISSUANCE, (ii) SUCH DATE AS SALOMON BROTHERS INC MAY, IN ITS
DISCRETION, DEEM APPROPRIATE, OR (iii) IN THE EVENT OF A CHANGE OF CONTROL,
THE DATE THE COMPANY MAILS A NOTICE THEREOF, THE NOTES EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS."
Under the terms of the warrant agreement relating to the Warrants (the
"Warrant Agreement"), the holder of this security may at any time on or after
the Separation Date, at its option, by notice to the Trustee, elect to
separate or separately transfer the Notes and the Warrants represented
hereby, in whole or in part, and shall thereafter surrender this security to
the Trustee for the exchange of this security, in whole or in part, for such
Warrant or Warrants and for a Note or Notes of a like aggregate principal
amount and of authorized denominations not bearing this Unit Legend; provided
that no delay or failure on the part of the Trustee or the Warrant Agent to
exchange this security for such Warrant or Warrants and Note or Notes shall
affect the separation of such Notes and Warrants represented hereby or their
separate transferability. Until such separation, the holder of this security
is, for each $1,000 principal amount at maturity of Notes, also the record
owner of one Warrant expiring January 1, 2005, to purchase 64 shares of
Common Stock of the Company, par value $.01 per share (subject to adjustment
as provided in the Warrant Agreement). The Company has deposited with the
Trustee, as custodian for the Holder of the Notes bearing this Unit Legend, a
certificate or certificates for Warrants to purchase an aggregate of
2,560,000 shares of Common Stock (subject to adjustment as provided in the
Warrant Agreement). Prior to the separation of the Notes and the Warrants as
described above, record ownership of the Warrants is transferable only by the
transfer of this Note on the Note register maintained by the Company pursuant
to this Indenture. After such separation, ownership of a Warrant is
transferable only by the transfer of the certificate representing such
Warrant in accordance with the provisions of the Warrant Agreement.
By accepting a security bearing this Unit Legend, each holder of this
security shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the
Warrant Agent).
Election to Exercise. On or after the date on which the Warrants may be
--------------------
exercised pursuant to the terms of the Warrant Agreement, the Warrants may be
exercised by obtaining from the Trustee, as custodian for Holders of
securities bearing this Unit Legend, the required forms of election to
exercise, declaration form and instructions for payment of the Exercise Price
(as such term is defined in the Warrant Agreement). Upon receiving the
required forms and payment of such Exercise Price, the Trustee as custodian
for the Holder of the security bearing this Unit Legend, shall exercise such
Warrants in accordance with the provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the security
--------------------
represented hereby elects to
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separate its Notes and Warrants and to exchange this security (representing
ownership of 64 Warrants evidenced by Warrant Certificates deposited with the
Trustee) for a new Note in the principal amount hereof and a Warrant
Certificate in the amount of said 64 Warrants.
The undersigned registered holder of the security represented hereby
irrevocably instructs the Trustee (A) to issue in the name of the undersigned
registered holder a new Note (CUSIP 15134BAA0) not containing the above Unit
Legend in the principal amount equal to the principal amount hereof and (B)
to deliver this security to the Warrant Agent pursuant to the provisions of
the Warrant Agreement with instructions to issue in the name of, or release
to, such holder a Warrant Certificate (CUSIP 15134B110) representing the
number of Warrants equal to the number of Warrants represented by this
security and to issue a new Warrant Certificate to replace the Warrant
Certificate held on deposit by the Trustee as custodian representing the
number of Warrants equal to the difference between (x) the number of Warrants
represented by the Warrant Certificate so held on deposit and (y) the number
of Warrants represented by this security.
Dated:
Name of Holder of this security:________________________
Address: ______________________________________________
Signature:______________________________________________
Note: The above signature must correspond with the name as written upon the
face of this security in every particular, without alteration or enlargement
whatever and if the certificate representing any principal amount at maturity
of this security or the associated Warrants is to be registered in a name
other than that in which this security is registered.
Until any Note and the Warrant with which it is initially issued are
separated or separately transferred pursuant to the terms of the Unit Legend,
the Trustee shall hold such Warrant as custodian on behalf of the holder of such
Note bearing such legends.
(iv) Original Issue Discount Legend. Each Note shall bear a legend in
substantially the following form:
"THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTION 1273 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. YOU MAY CONTACT THE CHIEF
FINANCIAL OFFICER OF CENTENNIAL COMMUNICATIONS CORP. AT 1600 WYNKOOP STREET,
SUITE 300, DENVER, COLORADO 80202, TELEPHONE NUMBER: (303) 571-5050, WHO WILL
PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING ORIGINAL ISSUE DISCOUNT."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each 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 or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an
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endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(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 Global Notes and Definitive
Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note 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 2.10, 3.06, 3.09, 4.10, 4.17 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer or
exchange of any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
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 Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption
under Section 3.02 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part or (C) to register the transfer of or to
exchange a 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
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
transfer or exchange may be submitted by facsimile.
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Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any 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 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 Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those 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 Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a 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 Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
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 Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Affiliate of the Company, 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
Notes that a Trustee knows are so owned shall be so disregarded.
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Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon a written order of the
Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the 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 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 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 Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
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
Notes to be redeemed and (iv) the redemption price.
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Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not so listed, on a
pro rata basis, by lot or in accordance with any other method the Trustee
considers fair and appropriate; provided, however, that no Note of $1,000 in
principal amount at maturity or less shall be redeemed in part. In the event of
partial redemption by lot, the particular 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 Notes not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in principal amounts at maturity of $1,000 or whole
multiples of $1,000; except that if all of the Notes of a Holder are to be
redeemed, the entire outstanding amount of 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 Notes called for
redemption also apply to portions of 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
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount at maturity of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
(i) in the case of Notes called for redemption on or after the Full Accretion
Date, interest and Liquidated Damages, if any, on Notes called for redemption
ceases to accrue on and after the redemption date and (ii) in the case of
Notes redeemed prior to Full Accretion Date the principal amount of, and
Liquidated Damages, if any, on Notes called for redemption ceases to accrete
on and after redemption date;
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(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the 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 Notes.
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, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price, plus accrued and unpaid interest and
Liquidated Damages, if any, to such date. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption or Purchase Price.
One Business Day prior to the redemption date or the date on which Notes
must be accepted for purchase pursuant to Section 3.09 or 4.17, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption or purchase price of and accrued interest and Liquidated Damages,
if any, on all Notes to be redeemed or purchased 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 or purchase price of, and accrued interest on
and Liquidated Damages on, if any, all Notes to be redeemed or purchased.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption or purchase date, interest and Liquidated Damages, if
any, shall cease to accrue on the Notes or the portions of Notes called for
redemption or purchase. If a Note is redeemed or purchased 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 Note was registered at the close of business on
such record date. If any 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 and Liquidated Damages, if any, 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 Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a 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 Note equal in principal amount to the
unredeemed portion of the Note surrendered.
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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 Notes pursuant to this Section 3.07
prior to January 1, 2003. Thereafter, the Notes shall be subject to redemption
at any time at the option of the Company, in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on January 1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003. . . . . . . . . . . . . . . . . . 114.00%
2004. . . . . . . . . . . . . . . . . . 107.00%
The Notes shall be redeemable at 100% of the principal amount on January 1,
2005.
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time on or before January 1, 2001, the Company may, on any one or
more occasions, redeem up to a maximum of 25% in aggregate principal amount at
maturity of Notes at a redemption price equal to 114% of the Accreted Value
thereof (determined at the redemption date) plus accrued and unpaid Liquidated
Damages, if any, to the date of redemption, with the net cash proceeds received
by the Company after the date of this Indenture from the issuance and sale of
its Qualified Capital Stock in a public or private offering to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 75% aggregate principal amount at maturity of
the Notes remain outstanding immediately after the occurrence of each such
redemption; provided, further, that with respect to any private offering of
Qualified Capital Stock of the Company to an Affiliate of the Company (or to any
person who would be an Affiliate of the Company upon consummation of any such
offering), such Qualified Capital Stock shall be issued and sold at a price no
lower than (i) the price at which the Qualified Capital Stock is being sold to
Persons that are not Affiliates of the Company in such offering if such Persons
are purchasing a majority of the Qualified Capital Stock being sold in such
offering or (ii) in all other cases, the fair market value thereof, as evidenced
by an independent investment banking firm of national standing delivered to the
Trustee and provided, further, that such redemption shall occur within 60 days
of the date of the closing of any such public or private offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.17 hereof, the Company
shall not be required to make mandatory redemption payments or sinking fund
payments with respect to the 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 Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
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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 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 Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
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 Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
On the Commencement Date, 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 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 Note not tendered or accepted for payment shall
continue to accrete or accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest and Liquidated Damages, if any, 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 Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the 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 Note the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Note purchased;
(h) that, if the aggregate Accreted Value or aggregate principal
amount, as the
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case may be, of Notes surrendered by Holders exceeds the Offer Amount, the
Company shall select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 in principal amount at maturity or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before 12:00 p.m. (New York City time) on each Purchase Date,
the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Notes equal to the Offer Amount, together with accrued and
unpaid interest and Liquidated Damages, if any, thereon, to be held for payment
in accordance with the terms of this Section 3.09. 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 Notes or portions thereof
tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has
been tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the Depositary 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
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. Any 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 Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, 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. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement. If any Liquidated
Damages become payable, the Company shall not later than three Business Days (i)
deliver on Officers' Certificate to the Trustee setting forth the amount of
Liquidated Damages payable to Holders and (ii) instruct the Paying Agent to pay
such amount of Liquidated Damages to Holders entitled to receive such Liquidated
Damages.
The Company shall pay interest (including post-petition interest in
any proceeding under
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any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in
excess of the then applicable interest rate on the Notes to the extent lawful;
it shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. 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 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 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 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.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the Holders
of 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" that describes
the financial condition and results of operations of the Company and its
Restricted Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (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, in each case, within the time
periods set forth in the SEC's rules and regulations. In addition, commencing
after the consummation of the Exchange Offer, 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) within the time periods set forth in the SEC's
rules and regulations and make such information available to securities analysts
and prospective investors upon request. The Company shall at all times comply
with TIA " 314(a).
(b) For so long as any Notes remain outstanding, the Company shall
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.
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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 and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and the Pledge Agreement, 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 the Pledge Agreement and is not in
default in the performance or observance of any of the terms, provisions and
conditions of this Indenture and the Pledge Agreement (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 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 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 to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
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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 shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or such Restricted Subsidiary or dividends or distributions payable
to the Company or any Wholly Owned Restricted Subsidiary); (ii) purchase, redeem
or otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except a payment of interest or principal, or premium, if any, at
Stated Maturity; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) 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 Debt) pursuant to the Debt to Cash Flow Ratio test set forth in
the first paragraph of Section 4.09; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the date of this Indenture
(other than Restricted Payments permitted by clauses (ii), (iii) or (iv) of
the following paragraph) shall not exceed, at the date of determination,
the sum of (i) 50% of the Company's Consolidated Net Income for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of this Indenture to the end of the
Company's most recently ended full fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, minus
100% of such deficit), plus (ii) an amount equal to the net cash proceeds
received by the Company after the date of this Indenture from the issuance
and sale of its Qualified Capital Stock to the extent such net cash
proceeds have
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been, and continue to be, designated as Designated Equity Proceeds to be
added to the cumulative amount calculated pursuant to this clause (c) as
provided in the definition thereof, plus (iii) an amount equal to the net
cash proceeds received by the Company from the sale of Disqualified Stock
or debt securities of the Company that have been converted into Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been
converted into Disqualified Stock), plus (iv) to the extent that any
Restricted Investment that was made after the date of this Indenture is
sold for cash or otherwise liquidated or repaid for cash, the lesser of (A)
the cash return of capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial amount of such
Restricted Investment, plus (v) 50% of any dividends received by the
Company or any Wholly Owned Restricted Subsidiary of the Company after the
date of this Indenture from an Unrestricted Subsidiary of the Company, to
the extent that such dividends were not otherwise included in Consolidated
Net Income of the Company for such period; provided that no cash proceeds
received by the Company from the issuance or sale of any Equity Interests
issued by the Company will be counted in determining the amount available
for Restricted Payments under this clause (c) to the extent such proceeds
were used to redeem, repurchase, retire or acquire any Equity Interests of
the Company pursuant to clause (ii) of the next succeeding paragraph.
The foregoing provisions shall not prohibit the following Restricted
Payments: (i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture; (ii) the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated Indebtedness or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
(other than any such net cash proceeds that constitute Designated Equity
Proceeds) of the substantially concurrent sale (other than to a Subsidiary of
the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (v) the payment of cash (in lieu of the issuance
of fractional shares of Common Stock) to holders of Warrants at the time of
exercise of such Warrants as required by the terms of the Warrant Agreement;
provided that the aggregate amount of such payments shall not exceed $100,000;
(vi) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Restricted Subsidiary of the Company
held by (A) any member of the Company's (or any of its Restricted Subsidiaries')
management or board of directors or (B) any consultant to the Company (or any of
its Restricted Subsidiaries), in each case, pursuant to any management equity
subscription agreement, stock option agreement or other similar agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $250,000 in any twelve-
month period and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; and (vii) the payment of amounts
in respect of Equity Interests by any Restricted Subsidiary organized as a
partnership, limited liability company or comparable entity necessary for the
holders of such Equity Interests to pay taxes in respect of the Net Income of
such Restricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose
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resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5 million. 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,
together with a copy of any fairness opinion or appraisal required by this
Indenture.
The Board of Directors may designate any Restricted Subsidiary (other
than any Subsidiary of the Company that owns all or a material portion of the
assets owned by the Company or any Subsidiary of the Company on the date of this
Indenture) to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this Section 4.07. All
such outstanding Investments will be deemed to constitute Investments in an
amount equal to the fair market value of such Investments at the time of such
designation. Such designation shall only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits or (ii) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances to the Company or any of its
Restricted Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reasons of (i) the terms of any Permitted Debt
permitted to be incurred by any Restricted Subsidiary of the Company, (ii)
Existing Indebtedness as in effect on the date of this Indenture, (iii) this
Indenture and the Notes, (iv) applicable law, rules and regulations, (v) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred, (vi) by reason of customary non-
assignment provisions in leases entered into in the ordinary course of business
and consistent with past practices, (vii) purchase money obligations or
installment purchase agreements for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (c) above on
the property so acquired or (viii) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
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Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) and issue shares of
Disqualified Stock if (a) the Company's Debt to Cash Flow Ratio at the time of
incurrence of such Indebtedness or the issuance of such Disqualified Stock,
after giving pro forma effect to such incurrence or issuance as of such date and
to the use of proceeds therefrom as if the same had occurred at the beginning of
the most recently ended four full fiscal quarter period of the Company for which
internal financial statements are available, would have been no greater than 4
to 1 and (b) the Company's Fixed Charge Coverage Ratio at the time of incurrence
of such Indebtedness or the issuance of such Disqualified Stock, after giving
pro forma effect to such incurrence or issuance as of such date and to the use
of proceeds therefrom as if the same had occurred at the beginning of the most
recently ended four full fiscal quarter periods of the Company for which
internal financial statements are available, would have been at least 2.75 to 1;
provided that after the occurrence of the Triggering Event, the Convertible
Notes shall not be included as Indebtedness for purposes of calculating the
Company's Debt to Cash Flow Ratio or the Company's Fixed Charge Coverage Ratio.
The provisions of the first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under Credit
Facilities; provided that the aggregate principal amount of all
Indebtedness (with outstanding letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
thereunder) outstanding under all Credit Facilities after giving effect to
such incurrence, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (i), does not exceed an amount equal to $10 million less the
aggregate amount of all Net Proceeds of Asset Sales that have been applied
since the date of this Indenture to repay Indebtedness under Credit
Facilities (or any such Permitted Refinancing Indebtedness) pursuant to
Section 4.10 hereof;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by (A)
the Notes issued as part of the Initial Units and (B) additional Notes
issued pursuant to the exercise of the Option in an amount not to exceed
$20 million in aggregate principal amount at maturity;
(iv) the incurrence by the Company or any Restricted Subsidiary of
the Company of up to $25 million in aggregate principal amount of Vendor
Indebtedness; provided that (A) to the extent such Vendor Indebtedness is
incurred for any purpose other than financing the cost of subscriber units,
the aggregate principal amount (or accreted value, as applicable) of such
Vendor Indebtedness does not exceed, as of the date of incurrence thereof,
the lesser of 75% of (1) the fair market value (as determined in good faith
by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the assets purchased with the proceeds of such
Vendor
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Indebtedness and (2) the cost of such assets and (B) to the extent such
Vendor Indebtedness is incurred to finance the cost of subscriber units,
the aggregate principal amount (or accreted value, as applicable) of such
Vendor Indebtedness does not exceed, as of the date of incurrence thereof,
the lesser of 100% of the fair market value of such subscriber units (as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) and the cost of such
subscriber units;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Restricted Subsidiary; provided that such Indebtedness was
incurred by the prior owner of such assets or such Subsidiary prior to such
acquisition by the Company and was not incurred in connection with, or in
contemplation of, such acquisition by the Company; and provided further
that the principal amount (or accreted value, as applicable) of such
Indebtedness, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant to
this clause (v), does not exceed (A) $8 million less (B) the principal
amount (or accreted value, as applicable) of Indebtedness outstanding
pursuant to clause (vi) below at any time outstanding;
(vi) the incurrence by the Company of Indebtedness represented by
Company Notes incurred substantially simultaneously with, and for the
purpose of financing all or any part of the purchase price or cost of any
acquisition of assets or a new Restricted Subsidiary; provided that the
principal amount (or accreted value, as applicable) of such Indebtedness,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (vi), does not exceed the amount equal to (A) $8 million less (B)
the principal amount (or accreted value, as applicable) of Indebtedness
outstanding pursuant to clause (v) above;
(vii) the incurrence by the Company of Indebtedness represented by
Convertible Notes incurred simultaneously with the date of this Indenture;
(viii) Indebtedness of the Company not to exceed, at any one time
outstanding, the net cash proceeds received by the Company after the date
of this Indenture from the issuance and sale of its Qualified Capital Stock
to the extent that such net cash proceeds have been, and continue to be,
designated as Designated Equity Proceeds to be used for the purpose of
incurring additional Indebtedness pursuant to this clause (viii) as
provided in the definition thereof, not to exceed $50 million;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by this Indenture
to be incurred;
(x) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (A) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (B)(1) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary and (2) any sale
or other transfer of any such Indebtedness to a Person that is not either
the Company or a
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Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company; and
(xii) Indebtedness of the Company or any Restricted Subsidiary of the
Company (A) in respect of statutory obligations, performance, surety or
appeal bonds or other obligations of a like nature incurred in the ordinary
course of business, (B) under Hedging Obligations; provided that such
agreements (1) are designed solely to protect the Company or its Restricted
Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (2) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities
and compensation payable thereunder.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest and the accretion
of accreted value shall not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
Notwithstanding the foregoing, the Company shall not incur any
Indebtedness that is contractually subordinated to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated to the Notes
on substantially identical terms; provided, however, that no Indebtedness of the
Company shall be deemed to be contractually subordinated to any other
Indebtedness of the Company solely by virtue of being unsecured.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 80% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash
and/or Cash Equivalents; provided that the amount of (x) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the Notes or
any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are, within 30 days, converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision. The Company shall not be
required to comply with the foregoing sentence to the extent an Asset Sale
consists solely of the sale or other disposition of obsolete or damaged
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equipment; provided that any cash received by the Company in connection with any
such sale or disposition shall be applied in accordance with the second
paragraph of this Section 4.10.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
Indebtedness under a Credit Facility (and to correspondingly reduce commitments
with respect thereto in the case of revolving borrowings) or (b) to the
acquisition of a controlling interest in another Permitted Business or the
making of a capital expenditure or the acquisition of other long-term assets, in
each case, in a Permitted Business. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness under any Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5 million, the Company shall commence an Asset Sale Offer
pursuant to Section 3.09 hereof to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the Accreted Value thereof, plus accrued and
unpaid Liquidated Damages, if any, thereon, to the date of purchase (if such
offer is prior to the Full Accretion Date) or 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of purchase (if such offer is on or after the Full
Accretion Date), in accordance with the procedures set forth in Section 3.09
hereof. To the extent that the Accreted Value or the aggregate principal
amount, as the case may be, of Notes tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use any remaining Excess Proceeds
for general corporate purposes. If the Accreted Value or the aggregate
principal amount, as the case may be, of Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
An Asset Sale Offer shall be made pursuant to the provisions of
Section 3.09 hereof. No later than the date which is five (5) Business Days
after the date on which the aggregate amount of Excess Proceeds exceeds $5
million, the Company shall notify the Trustee of such Asset Sale Offer in
accordance with Section 3.09 hereof and commence or cause to be commenced the
Asset Sale Offer on a date no later than fifteen (15) Business Days after such
notice (the "Commencement Date").
The Asset Sale Offer shall be made by the Company in compliance with
all applicable laws, including, without limitation, Rule 14e-1 under the
Exchange Act and the rules thereunder, to the extent applicable, and all other
applicable federal and state securities laws.
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Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
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 transaction, 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 Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
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 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (x) any employment, consulting or service agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (y) transactions between or among the Company
and/or its Restricted Subsidiaries and (z) Restricted Payments that are
permitted by Section 4.07 hereof, in each case, shall not be deemed Affiliate
Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries 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.
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Section 4.13. Limitation on Foreign Subsidiary Structure.
(i) Each of the Cayman Entities and each future foreign direct Wholly
Owned Restricted Subsidiary of the Company shall at all times continue to be a
direct Wholly Owned Restricted Subsidiary of the Company; (ii) all foreign
Restricted Subsidiaries of the Company shall also be (A) a direct or indirect
Subsidiary of either or both of the Cayman Entities, (B) a direct Wholly Owned
Restricted Subsidiary of the Company or (C) a direct or indirect Subsidiary of a
direct Wholly Owned Restricted Subsidiary of the Company; (iii) neither of the
Cayman Entities nor any future foreign Wholly Owned Restricted Subsidiary of the
Company shall consolidate or merge with or into any other Person other than a
direct Wholly Owned Restricted Subsidiary of the Company whose stock has been
pledged pursuant to the Pledge Agreement; (iv) the Company shall not, and shall
not permit either of the Cayman Entities or any future foreign direct Wholly
Owned Restricted Subsidiary of the Company to, directly or indirectly create,
incur, assume or suffer to exist any Lien (other than pursuant to the Pledge
Agreement) on any of its Capital Stock or any other assets of either of the
Cayman Entities or any foreign direct Wholly Owned Restricted Subsidiary of the
Company; (v) neither of the Cayman Entities nor any future foreign direct Wholly
Owned Restricted Subsidiary of the Company shall incur any Indebtedness; (vi)
the Company shall not permit either of the Cayman Entities to issue any Equity
Interest to any Person after the date of the Indenture; and (vii) the Company
shall not permit any future foreign direct Wholly Owned Restricted Subsidiary of
the Company to (A) issue any Equity Interest other than Capital Stock or (B)
issue any Capital Stock to any Person other than the Company or any Wholly Owned
Subsidiary of the Company. This Section 4.13 shall not prohibit the Company
from designating any foreign Restricted Subsidiary as an Unrestricted Subsidiary
in accordance with the terms of this Indenture or from selling Capital Stock of
any foreign Restricted Subsidiary in accordance with the terms of this
Indenture.
Section 4.14. Limitation on Domestic Subsidiary Structure.
Each of (i) SMR Direct USA, Inc. and (ii) each future domestic
Restricted Subsidiary of the Company shall be a direct Wholly Owned Restricted
Subsidiary of the Company or a direct or indirect Wholly Owned Restricted
Subsidiary of SMR Direct USA, Inc. or the Company for so long as such Subsidiary
is a Restricted Subsidiary of the Company. The foregoing sentence shall not
prohibit the Company from designating any Restricted Subsidiary to be an
Unrestricted Subsidiary in accordance with the terms of this Indenture or from
selling the Capital Stock of any domestic Restricted Subsidiary in accordance
with the terms of this Indenture.
Section 4.15. Business Activities.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than a Permitted Business.
Section 4.16. Corporate Existence.
Subject to Article Five 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, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
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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 Notes.
Section 4.17. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon, to the date of repurchase (or if such Change of Control Offer is
consummated prior to the Full Accretion Date, 101% of the Accreted Value thereof
on the date of repurchase plus accrued and unpaid Liquidated Damages, if any).
Within 20 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 4.17 and that all Notes tendered will be accepted for
payment; (2) the purchase price and the purchase date, which shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"); (3) that any Note not tendered will continue
to accrete or accrue interest and Liquidated Damages, if any; (4) that, unless
the Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrete or accrue interest and Liquidated Damages, if any, after the Change of
Control Payment Date; (5) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the 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 Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have the Notes purchased; and
(7) that Holders whose Notes are being purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount at maturity or an integral multiple thereof.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all 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 Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount (or, if prior to the Full Accretion Date, the
Accreted Value) of Notes or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note shall be in a principal
amount at maturity of $1,000 or an integral multiple thereof. The 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.
The Company shall not be required to make a Change of Control Offer
upon a Change of
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Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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 the Notes as a result of a Change of Control.
Section 4.18. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Debt to Cash
Flow Ratio test set forth in the first paragraph of Section 4.09 hereof and (ii)
the Lien to secure such Indebtedness does not extend to or cover any assets of
the Company other than the assets which are the subject of the sale and
leaseback transaction, (iii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iv) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
Section 4.19. Contingent Warrants.
The Company shall issue to Holders of the Notes Contingent Warrants
exercisable for 7.5% of the Common Stock of the Company on a fully diluted basis
as of the date of such issuance after giving effect to the issuance of such
Contingent Warrants, in the event that the Company does not consummate a
Qualified Public Offering of its Qualified Capital Stock on or prior to January
1, 2001; provided that if the Company consummates a public or private offering
or offerings of its Qualified Capital Stock resulting in aggregate gross
proceeds of at least $25 million, the Company shall have until June 30, 2002 to
consummate a Qualified Public Offering; provided, further, that with respect to
any private offering of Qualified Capital Stock of the Company to an Affiliate
of the Company (or to any person who would be an Affiliate of the Company upon
consummation of any such offering), such Qualified Capital Stock shall be issued
and sold at a price no lower than (i) the price at which the Qualified Capital
Stock is being sold to Persons that are not Affiliates of the Company in such
offering if such Persons are purchasing a majority of the Qualified Capital
Stock being sold in such offering or (ii) in all other cases, the fair market
value thereof, as evidenced by an independent investment banking firm of
national standing delivered to the Trustee. Such Contingent Warrants will have
certain rights pursuant to the Warrant Agreement and holders thereof will have
the benefit of the Registration Agreement. The Company shall not be obligated
to issue the Contingent Warrants in the event of a Change of Control prior to
January 1, 2001.
Section 4.20. 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 Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent,
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waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Section 4.21. Escrow Arrangements.
The Company acknowledges that $28.6 of the proceeds from the initial
sale of the Notes and the Convertible Notes shall be placed in escrow (the
"Escrow Account") with the Escrow Agent. The Company shall not use any funds
released from the Escrow Account or request the release of such funds except in
connection with and upon compliance with any certification requirements set
forth in the Escrow Agreement and the following conditions:
(i) with respect to the funding of the acquisition of an Acquisition
Target (as defined in the Escrow Agreement), (a) the Company shall have
prepared, with the assistance of U.S. and local counsel, as appropriate, a
detailed and complete due diligence report with respect to the Acquisition
Target, including legal advice regarding each significant legal issue (to
be considered in the light of the circumstances, but including, for
example, opinions as to the effectiveness of the licenses or concessions
for channels), (b) the Company shall have prepared, with the assistance of
financial advisors, a financial analysis of the Acquisition Target
(including verification of the number of subscribers, if any, of the
Acquisition Target) and reviewed an audit of the financial statements for
the most recent fiscal period practicable and (c) the Company's Board of
Directors shall have, on the basis of the reports, analysis and review
referred to above, approved the acquisition of the Acquisition Target. In
addition, the Acquisition Target shall be a direct or indirect subsidiary
of the Cayman Entities or the Company as required by Section 4.13 hereof;
and
(ii) with respect to (a) the funding of Permitted Investments (except
working capital, unless permitted by clause (c) below, (b) the funds
required for the acquisition of channels, spectrum and other assets related
to the operation of a Permitted Business or (c) the funding of buildout in
connection with the acquisition of a Permitted Business, a Permitted
Investment or channels, spectrum and other assets related to the operation
of a Permitted Business or the funding of operating losses, such losses not
to exceed $3 million in the aggregate, in connection with the Company's
current and future operations in the Republic of Chile (each a "Permitted
Transaction"), the Company's Board of Directors shall have approved the
Permitted Transaction. In addition, the assets and/or services which
comprise the Permitted Transaction shall be held in an entity that is a
direct or an indirect subsidiary of the Cayman Entities or the Company as
required by Section 4.13 hereof.
Notwithstanding the foregoing, the Company may, with the consent of
the Majority Noteholders (as defined in the Pledge Agreement), request the
release of funds deposited into the Escrow Account for other valid business
purposes.
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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 Notes
and this 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; (iv) such transaction will not result in the
loss or suspension or material impairment of any licenses or other
authorizations that are material to the future prospects of the Company and its
Restricted Subsidiaries, taken as a whole; and (v) except in the case of a
merger of the Company with or into a Wholly Owned Restricted 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 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 pursuant to the Debt to Cash Flow Ratio test set forth in the first
paragraph of Section 4.09 hereof.
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
(i) the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest and Liquidated Damages, if any, on the Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof and (ii) solely for purposes of computing Consolidated Net
Income for purposes of clause (c) of the first paragraph of Section 4.07 hereof,
the Consolidated Net Income of any Person other than the Company and its
Restricted Subsidiaries shall be included for periods subsequent to the
effective time of such merger, consolidation, combination or transfer of assets.
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ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults for 30 days in the payment when due of
interest and Liquidated Damages, if any, on the Notes;
(b) the Company defaults in the payment when due of the principal
of or premium, if any, on the Notes;
(c) the Company fails to comply with any of the provisions of
Sections 4.07, 4.09, 4.10, 4.17 or 5.01 hereof;
(d) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in this Indenture or the
Notes for 60 days after notice to the Company by the Trustee or the
Holders of at least 25% in aggregate principal amount at maturity of
the Notes then outstanding;
(e) a 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 this Indenture, which
default (i) 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 (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of 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 million or more;
(f) 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 and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 90 days, provided that the aggregate of all
such undischarged judgments exceeds $5 million;
(g) the Company or any of its Significant Subsidiaries or any
group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary pursuant to or within the meaning of Bankruptcy
Law:
(i) commences a voluntary case,
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(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;
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries 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 group of Subsidiaries 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 group of Subsidiaries 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 group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 90
consecutive days;
(i) breach by the Company of any representation or warranty set
forth in the Pledge Agreement, or default by the Company in the
performance of any covenant set forth in the Pledge Agreement, or
repudiation by the Company of its obligations under the Pledge
Agreement or the unenforceability of the Pledge Agreement against the
Company for any reason;
(j) default by the Company in the performance of any covenant set
forth in the Escrow Agreement, or repudiation by the Company of its
obligations under the Escrow Agreement or the unenforceability of the
Escrow Agreement against the Company for any reason; or
(k) breach by the Company of the registration rights provisions
of the Warrant Agreement.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries 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 at maturity of the
then outstanding Notes may
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declare all the Notes to be due and payable immediately. Upon such declaration,
the principal of (or, if prior to the Full Accretion Date, the Accreted Value
of), premium, if any, and accrued and unpaid interest and Liquidated Damages, if
any, on the Notes shall become due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01
hereof occurs with respect to the Company, any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, the foregoing amount shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount at maturity of the then outstanding 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.
If an Event of Default occurs on or after January 1, 2003 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by applicable law, anything in this Indenture or in the Notes
to the contrary notwithstanding. If an Event of Default occurs prior to January
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable, to the extent permitted by applicable law, in an amount, for each of
the years beginning on January 1 of the years set forth below, as set forth
below (expressed as a percentage of the Accreted Value to the date of payment
that would otherwise be due but for the provisions of this sentence):
YEAR PERCENTAGE
---- ----------
1998................................... 149.00%
1999................................... 142.00%
2000................................... 135.00%
2001................................... 128.00%
2002................................... 121.00%
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 and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a 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.
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Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount at
maturity of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the 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, if any, interest or Liquidated
Damages, if any, on the Notes. 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 at maturity of the then
outstanding 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. 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 Notes or that may
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount at maturity of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of 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 90 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 90-day period the Holders of a majority in principal amount
at maturity of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any,
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the 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.
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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, if any, Liquidated Damages, if any, and interest
remaining unpaid on the 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.
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 Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the 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 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 Notes for amounts due and unpaid on the Notes
for principal, premium, if any, Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium, if any, Liquidated Damages,
if any, and interest, respectively;
Third: without duplication, to the Holders for any other Obligations
owing to the Holders under this Indenture and the Notes; and
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Fourth: 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 Notes pursuant to this Section 6.10.
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
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding 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
the Pledge Agreement, and use the same degree of care and skill in its exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his or her 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; provided, that 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 7.01;
(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
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faith in accordance with a direction received by it pursuant to Section 6.05
hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture and the Pledge Agreement that in any way relates to the Trustee is
subject to paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 and
Section 7.02.
(e) No provision of this Indenture or the Pledge Agreement 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 under provisions of
this Indenture or the Pledge Agreement, 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 or under the Pledge Agreement 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 or the Pledge Agreement.
(e) Unless otherwise specifically provided in this Indenture or the Pledge
Agreement, 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 or the Pledge Agreement 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.
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Section 7.03. Individual Rights of Trustee.
The Trustee, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with the Company or 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 Notes, it shall not be
accountable for the Company's use of the proceeds from the 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 Notes or
any other document in connection with the sale of the 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 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 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 Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA " 313(a) (but if no event described in TIA
" 313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA "
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA " 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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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 the Pledge Agreement and
services hereunder and thereunder, respectively. 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 and the Pledge
Agreement, including the costs and expenses of enforcing this Indenture and the
Pledge Agreement 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 or under the Pledge Agreement, except to the
extent any such loss, liability or expense is solely 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 or under the
Pledge Agreement. 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 or under the
Pledge Agreement 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 Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular 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 " 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 7.08.
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 Notes of a
majority in principal amount of the then
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outstanding 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 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 Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a 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 duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
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.
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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 and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA " 310(a)(1), (2) and (5). The Trustee is subject to TIA "
310(b).
Section 7.11. Preferential Collection of Claims Against the Company.
The Trustee is subject to TIA " 311(a), excluding any creditor
relationship listed in TIA " 311(b). A Trustee who has resigned or been removed
shall be subject to TIA " 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 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 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 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 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 Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes under Article Two 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.
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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 3.09, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.14, 4.17, 4.18, 4.19 and 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the 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 Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding 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 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, Section 6.01(a) through
6.01(f) 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 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, cash in United States 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 and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(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 (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this 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 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;
(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 Notes will not recognize income, gain or loss for Federal income tax
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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 borrowing of funds to be applied to such deposit) or insofar
as Section 6.01(g) or 6.01(h) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Significant Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel in the United States 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 over any other creditors of the Company or 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 in the United States, each stating that
all conditions precedent provided for or 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.
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 Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such 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 Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest and
Liquidated Damages, if any, 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 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
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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 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 or Liquidated Damages, if any, on any 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 Note shall thereafter 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 authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 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 Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes in the case of a merger or consolidation pursuant
to Article Five hereof;
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(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of Notes; and
(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
7.02 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.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.17 hereof) and the Notes may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount at maturity of the
Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, 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 Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount at maturity of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the 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 Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 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 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 Notes 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 at maturity of the Notes then outstanding
may waive compliance in a particular instance by the Company with any provision
of this Indenture or the Notes. However, without the consent of each Holder
affected, an
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amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption
of the Notes other than with respect to Sections 3.09, 4.10 and 4.17
hereof;
(c) reduce the rate of or change the time for payment of interest or
Liquidated Damages, if any, on any Note or reduce the rate of
accretion on the Accreted Value or alter the Full Accretion Date;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest or Liquidated Damages, if any, on the
Notes (except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount at maturity of
the Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest or Liquidated
Damages, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 or 4.17 hereof);
(h) make any change in the foregoing amendment and waiver provisions;
or
(i) contractually subordinate in right of payment, or otherwise
contractually subordinate, the Notes to any other Indebtedness or
obligation of the Company.
The Company may, but shall not be obligated to, fix a record date for
determining which Holders of the Notes must consent to such amendment,
supplement or waiver. If the Company fixes a record date, the record shall be
fixed at (i) the later of 30 days prior to the first solicitation of such
consent or the date of the most recent list of Holders of Notes furnished for
the Trustee prior to such solicitation pursuant to Section 2.05 hereof or (ii)
such other date as the Company shall designate.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
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Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its 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.
The Company may, but shall not be obligated to, fix a record date for
determining which Holders of the Notes must consent to such amendment,
supplement or waiver. If the Company fixes a record date, the record date shall
be fixed at (i) the later of 30 days prior to the first solicitation of such
consent or the date of the most recent list of Holders of Notes furnished for
the Trustee prior to such solicitation pursuant to Section 2.05 hereof or (ii)
such other date as the Company shall designate.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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 Officers Certificate and an Opinion of
Counsel stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
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ARTICLE 10
COLLATERAL AND SECURITY
Section 10.01. Pledge Agreement.
The due and punctual payment of the principal of and interest and
Liquidated Damages, if any, on the Notes when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by acceleration,
repurchase, redemption or otherwise, and interest on the overdue principal of
and interest and Liquidated Damages (to the extent permitted by law), if any, on
the Notes and performance of all other obligations of the Company to the Holders
of Notes or the Trustee under this Indenture and the Notes, according to the
terms hereunder or thereunder, shall be secured as provided in the Pledge
Agreement which the Company has entered into simultaneously with the execution
of this Indenture and which is attached as Exhibit E hereto. Each Holder of
Notes, by its acceptance thereof, consents and agrees to the terms of the Pledge
Agreement (including, without limitation, the provisions providing for
foreclosure and release of Pledged Collateral) as the same may be in effect or
may be amended from time to time in accordance with its terms and authorizes and
directs the Collateral Agent to enter into the Pledge Agreement and to perform
its obligations and exercise its rights thereunder in accordance therewith. The
Company shall deliver to the Trustee copies of all documents delivered to the
Collateral Agent pursuant to the Pledge Agreement, and shall do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to the
Trustee and the Collateral Agent the security interest in the Pledged Collateral
contemplated hereby, by the Pledge Agreement or any part thereof, as from time
to time constituted, so as to render the same available for the security and
benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein expressed. The Company shall take, or shall cause
its Subsidiaries to take, upon request of the Trustee, any and all actions
reasonably required to cause the Pledge Agreement to create and maintain, as
security for the Obligations of the Company hereunder, a valid and enforceable
perfected first priority Lien in and on all the Pledged Collateral, in favor of
the Collateral Agent for the benefit of the Holders of Notes, superior to and
prior to the rights of all third Persons and subject to no other Liens than
Permitted Liens.
Section 10.02. Recording and Opinions.
(a) The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Pledge Agreement, and reciting with respect to the security
interests in the Pledged Collateral, the details of such action, or (ii) stating
that, in the opinion of such counsel, no such action is necessary to make such
Lien effective.
(b) The Company shall furnish to the Collateral Agent and the Trustee
on January 15 in each year beginning with January 15, 1999, an Opinion of
Counsel, dated as of such date, either (i) (A) stating that, in the opinion of
such counsel, action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and refiling of all supplemental
indentures, financing statements, continuation statements or other instruments
of further assurance as is necessary to maintain the Lien of the Pledge
Agreement and reciting with respect to the security interests in the Pledged
Collateral the details of such action or referring to prior Opinions of Counsel
in which such details are given and (B) stating that, based on relevant laws as
in effect on the date of such Opinion of Counsel, all financing statements and
continuation statements have been executed and filed that are necessary as of
such date and
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during the succeeding 12 months fully to preserve and protect, to the extent
such protection and preservation are possible by filing, the rights of the
Holders of Notes and the Collateral Agent and the Trustee hereunder and under
the Pledge Agreement with respect to the security interests in the Pledged
Collateral, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to maintain such Lien and assignment.
(c) The Company shall otherwise comply with the provisions of TIA
"314(b).
Section 10.03. Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 10.03,
Pledged Collateral may be released from the Lien and security interest created
by the Pledge Agreement at any time or from time to time in accordance with the
provisions of the Pledge Agreement or as provided hereby. In addition, upon the
request of the Company pursuant to an Officers' Certificate certifying that all
conditions precedent hereunder have been met and stating whether or not such
release is in connection with an Asset Sale and (at the sole cost and expense of
the Company) the Collateral Agent shall release (i) Pledged Collateral that is
sold, conveyed or disposed of in compliance with the provisions of this
Indenture; provided, that if such sale, conveyance or disposition constitutes an
Asset Sale, the Company shall apply the Net Proceeds in accordance with Section
4.10 hereof. Upon receipt of such Officers' Certificate the Collateral Agent
shall execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Pledged
Collateral permitted to be released pursuant to this Indenture or the Pledge
Agreement.
(b) No Pledged Collateral shall be released from the Lien and security
interest created by the Pledge Agreement pursuant to the provisions of the
Pledge Agreement unless there shall have been delivered to the Collateral Agent
the certificate required by this Section 10.03.
(c) At any time when a Default or Event of Default shall have occurred
and be continuing and the maturity of the Notes shall have been accelerated
(whether by declaration or otherwise) and the Trustee shall have delivered a
notice of acceleration to the Collateral Agent, no release of Pledged Collateral
pursuant to the provisions of the Pledge Agreement shall be effective as against
the Holders of Notes.
(d) The release of any Pledged Collateral from the terms of this
Indenture and the Pledge Agreement shall not be deemed to impair the security
under this Indenture in contravention of the provisions hereof if and to the
extent the Pledged Collateral is released pursuant to the terms of the Pledge
Agreement. To the extent applicable, the Company shall cause TIA " 313(b),
relating to reports, and TIA " 314(d), relating to the release of property or
securities from the Lien and security interest of the Pledge Agreement and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Pledge Agreement, to be
complied with. Any certificate or opinion required by TIA " 314(d) may be made
by an Officer of the Company except in cases where TIA " 314(d) requires that
such certificate or opinion be made by an independent Person, which Person shall
be an independent engineer, appraiser or other expert selected or approved by
the Trustee and the Collateral Agent in the exercise of reasonable care.
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Section 10.04. Certificates of the Company.
The Company shall furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Pledged Collateral pursuant to the Pledge
Agreement, (i) all documents required by TIA "314(d) and (ii) an Opinion of
Counsel, which may be rendered by internal counsel to the Company, to the effect
that such accompanying documents constitute all documents required by TIA
"314(d). The Trustee may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.
Section 10.05. Certificates of the Trustee.
In the event that the Company wishes to release Pledged Collateral in
accordance with the Pledge Agreement and has delivered the certificates and
documents required by the Pledge Agreement and Sections 10.03 and 10.04 hereof,
the Trustee shall determine whether it has received all documentation required
by TIA "314(d) in connection with such release and, based on such determination
and the Opinion of Counsel delivered pursuant to Section 10.04 hereof, shall
deliver a certificate to the Collateral Agent setting forth such determination.
Section 10.06. Authorization of Actions to Be Taken by the Trustee Under the
Pledge Agreement.
Subject to the provisions of Section 7.01 and 7.02 hereof, the Trustee
may, in its sole discretion and without the consent of the Holders of Notes,
direct, on behalf of the Holders of Notes, the Collateral Agent to, take all
actions it deems necessary or appropriate in order to (a) enforce any of the
terms of the Pledge Agreement and (b) collect and receive any and all amounts
payable in respect of the Obligations of the Company hereunder. The Trustee
shall have power to institute and maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Pledged Collateral by any acts
that may be unlawful or in violation of the Pledge Agreement or this Indenture,
and such suits and proceedings as the Trustee may deem expedient to preserve or
protect its interests and the interests of the Holders of Notes in the Pledged
Collateral (including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest hereunder or be prejudicial to the interests
of the Holders of Notes or of the Trustee).
Section 10.07. Authorization of Receipt of Funds by the Trustee Under the
Pledge Agreement.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Notes distributed under the Pledge Agreement, and to make further
distributions of such funds to the Holders of Notes according to the provisions
of this Indenture.
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Section 10.08. Termination of Security Interest.
Upon the payment in full of all Obligations of the Company under this
Indenture and the Notes, or upon Legal Defeasance, the Trustee shall, at the
request of the Company, deliver a certificate to the Collateral Agent stating
that such Obligations have been paid in full, and instruct the Collateral Agent
to release the Liens pursuant to this Indenture and the Pledge Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA "318(c), the imposed duties shall control.
Section 11.02. 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:
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
Telecopier No.: (303) 571-5050
Attention: Chief Financial Officer
With a copy to:
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, Colorado 80202
Telecopier No.: (303) 295-8261
Attention: Michael S. Quinn, Esq.
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Telecopier No.: (860) 986-1889
Attention: Corporate Trust Department
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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, when receipt acknowledged; 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 " 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 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA " 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA "
312(c).
Section 11.04. 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 11.05 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 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
Section 11.05. 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 " 314(a)(4)) shall comply with the provisions of TIA "
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or
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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 11.06. 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 11.07. 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 Notes, this Indenture or the Pledge Agreement or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES.
Section 11.09. 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 11.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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Section 11.12. 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 11.13. 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]
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SIGNATURES
Dated as of January 15, 1998
Centennial Communications Corp.
/s/ BERNARD G. DVORAK
By: __________________________
Name:Bernard G. Dvorak
Title:Chief Financial Officer
Dated as of January 15, 1998
State Street Bank and Trust Company
/s/ PHILIP KANE, JR.
By: __________________________________
Name:Philip Kane, Jr.
Title:Vice President
<PAGE>
EXHIBIT A
(Face of Note)
_______________________________________________________________________________
CUSIP NO. 15134BAC6
_______________________________________________________________________________
"THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTION 1273
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. YOU MAY CONTACT THE
CHIEF FINANCIAL OFFICER OF CENTENNIAL COMMUNICATIONS CORP. AT 1600 WYNKOOP
STREET, SUITE 300, DENVER, COLORADO 80202, TELEPHONE NUMBER: (303) 571-
5050, WHO WILL PROVIDE YOU WITH ANY REQUIRED INFORMATION REGARDING ORIGINAL
ISSUE DISCOUNT."
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI") (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(D) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES
ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT TO (A) THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (D) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(E) TO AN IAI, THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE)
AND, IF SUCH TRANSFER IS IN RESPECT OF A PRINCIPAL AMOUNT OF NOTES AT THE
TIME OF TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN
A-1
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COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) 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 (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE AND REGISTRAR TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
"THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT AT
MATURITY OF THE NOTES AND ONE WARRANT INITIALLY ENTITLING THE HOLDER
THEREOF TO PURCHASE 64 SHARES, PAR VALUE $.01 PER SHARE, OF THE COMPANY.
PRIOR TO THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) 360 DAYS
FROM THE DATE OF ISSUANCE, (ii) SUCH DATE AS SALOMON BROTHERS INC MAY, IN
ITS DISCRETION, DEEM APPROPRIATE, OR (iii) IN THE EVENT OF A CHANGE OF
CONTROL, THE DATE THE COMPANY MAILS A NOTICE THEREOF, THE NOTES EVIDENCED
BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM,
BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE WARRANTS."
Under the terms of the warrant agreement relating to the Warrants (the
"Warrant Agreement"), the holder of this security may at any time on or
after the Separation Date, at its option, by notice to the Trustee, elect
to separate or separately transfer the Notes and the Warrants represented
hereby, in whole or in part, and shall thereafter surrender this security
to the Trustee for the exchange of this security, in whole or in part, for
such Warrant or Warrants and for a Note or Notes of a like aggregate
principal amount and of authorized denominations not bearing this Unit
Legend; provided that no delay or failure on the part of the Trustee or the
Warrant Agent to exchange this security for such Warrant or Warrants and
Note or Notes shall affect the separation of such Notes and Warrants
represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal
amount at maturity of Notes, also the record owner of one Warrant expiring
January 1, 2005, to purchase 64 shares of Common Stock of the Company, par
value $.01 per share (subject to adjustment as provided in the Warrant
Agreement). The Company has deposited with the Trustee, as custodian for
the Holder of the Notes bearing this Unit Legend, a certificate or
certificates for Warrants to purchase an aggregate of 2,560,000 shares of
Common Stock (subject to adjustment as provided in the Warrant Agreement).
Prior to the separation of the Notes and the Warrants as described above,
record ownership of the Warrants is transferable only by the transfer of
this Note on the Note register maintained by the Company pursuant to this
Indenture. After such separation, ownership of a Warrant is transferable
only by the transfer of the certificate representing such Warrant in
accordance with the provisions of the Warrant Agreement.
By accepting a security bearing this Unit Legend, each holder of this
security shall be bound by all of the terms and provisions of the Warrant
Agreement (a copy of which is available on request to the Company or the
Warrant Agent).
A-2
<PAGE>
Election to Exercise. On or after the date on which the Warrants may be
--------------------
exercised pursuant to the terms of the Warrant Agreement, the Warrants may
be exercised by obtaining from the Trustee, as custodian for Holders of
securities bearing this Unit Legend, the required forms of election to
exercise, declaration form and instructions for payment of the Exercise
Price (as such term is defined in the Warrant Agreement). Upon receiving
the required forms and payment of such Exercise Price, the Trustee as
custodian for the Holder of the security bearing this Unit Legend, shall
exercise such Warrants in accordance with the provisions of the Warrant
Agreement.
Election of Exchange. The undersigned registered holder of the security
--------------------
represented hereby elects to separate its Notes and Warrants and to
exchange this security (representing ownership of 64 Warrants evidenced by
Warrant Certificates deposited with the Trustee) for a new Note in the
principal amount hereof and a Warrant Certificate in the amount of said 64
Warrants.
The undersigned registered holder of the security represented hereby
irrevocably instructs the Trustee (A) to issue in the name of the
undersigned registered holder a new Note (CUSIP 15134BAA0) not containing
the above Unit Legend in the principal amount equal to the principal amount
hereof and (B) to deliver this security to the Warrant Agent pursuant to
the provisions of the Warrant Agreement with instructions to issue in the
name of, or release to, such holder a Warrant Certificate (CUSIP 15134B110)
representing the number of Warrants equal to the number of Warrants
represented by this security and to issue a new Warrant Certificate to
replace the Warrant Certificate held on deposit by the Trustee as custodian
representing the number of Warrants equal to the difference between (x) the
number of Warrants represented by the Warrant Certificate so held on
deposit and (y) the number of Warrants represented by this security.
Dated:
Name of Holder of this security:_______________________
Address: _____________________________________________
Signature:_____________________________________________
Note: The above signature must correspond with the name as written upon
the face of this security in every particular, without alteration or
enlargement whatever and if the certificate representing any principal
amount at maturity of this security or the associated Warrants is to be
registered in a name other than that in which this security is registered.
A-3
<PAGE>
14% Senior Discount Notes due 2005
No. 1 $40,000,000
CENTENNIAL COMMUNICATIONS CORP.
promises to pay to CEDE & CO.
or registered assigns,
the principal sum of FORTY MILLION DOLLARS ($40,000,000)
on January 1, 2005.
Interest Payment Dates: January 1 and July 1, commencing July 1, 2003
Record Dates: December 15, and June 15
Issue Date: January 15, 1998
Dated: January 15, 1998
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Bernard G. Dvorak
---------------------
Name: Bernard G. Dvorak
Title:
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company,
as Trustee
By: /s/ Philip Kane, Jr.
----------------------
Name: Philip Kane, Jr.
Title: Vice President
_______________________________________________________________________________
A-4
<PAGE>
(Back of Note)
14% Senior Discount Notes due 2005
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. No interest will accrue on the Notes until January 1, 2003
(the "Full Accretion Date") but the Accreted Value (as defined in the Indenture)
will accrete (representing the amortization of original issue discount) between
the date of original issuance and such date, 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 Notes on the
Full Accretion Date. Centennial Communications Corp., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 14% per annum from July 1, 2003 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages semi-
annually on January 1 and July 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Full Accretion
Date; provided that if there is no existing Default in the payment of interest,
and if this 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; provided, further, that the first
Interest Payment Date shall be July 1, 2003. The Company shall 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, 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 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 of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the December 15 or June 15 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium, if any, Liquidated Damages, if any,
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 and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium, if any, and
Liquidated Damages, if any, on, all Global Notes and all other 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, State Street Bank and Trust
Company, the Trustee under the Indenture, will 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.
4. Indenture and Pledge Agreement . The Company issued the Notes under an
Indenture dated
A-5
<PAGE>
as of January 15, 1998 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code "" 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $40.0 million in aggregate
principal amount; provided, however, that on or prior to February 16, 1998, the
Company may issue up to an additional $20.0 million in aggregate principal
amount of Notes at maturity under the circumstances contemplated by that certain
Purchase Agreement, dated January 12, 1998, among the Company, Salomon Brothers
Inc and Prudential Securities Incorporated. Such additional Notes, if any, shall
be treated for all purposes as "Notes" under the Indenture. The Notes are
secured by a pledge of (i) 100% of the Capital Stock of SMR Direct USA, Inc. and
all future domestic direct Restricted Subsidiaries of the Company and (ii) 100%
of the Capital Stock (other than Excluded Stock) of each of the Cayman Entities
and 100% of the Capital Stock (other than Excluded Stock) of all future foreign
direct Restricted Subsidiaries of the Company pursuant to the Pledge Agreement
referred to in the Indenture.
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 Notes prior to January 1, 2003.
Thereafter, the Notes will be subject to redemption at any time 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 January
1 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2003.................................... 114.00%
2004.................................... 107.00%
The Notes shall be redeemable at 100% of the principal amount on January 1,
2005.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time on or before January 1, 2001, the Company may, on any one or more
occasions, redeem up to a maximum of 25% in aggregate principal amount of
maturity of Notes at a redemption price equal to 114% of the Accreted Value
thereof (determined at the redemption date) plus accrued and unpaid Liquidated
Damages, if any, to the date of redemption, with the net cash proceeds received
by the Company after the date of this Indenture from the issuance and sale of
its Qualified Capital Stock in a public or private offering to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 75% aggregate principal amount at maturity of
the Notes remain outstanding immediately after the occurrence of each such
redemption; provided, further, that with respect to any private offering of
Qualified Capital Stock of the Company to an Affiliate of the Company (or to any
person who would be an Affiliate of the Company upon consummation of any such
offering), such Qualified Capital Stock shall be issued and sold at a price no
lower than (i) the price at which the Qualified Capital Stock is being sold to
Persons that are not Affiliates of the Company in such offering if such Persons
are purchasing a majority of the Qualified Capital Stock being sold in such
offering or (ii) in all other cases, the fair market value thereof, as evidenced
by an independent investment banking firm of national standing delivered to the
Trustee and provided, further, that such redemption shall occur within 60 days
of the date of the closing of any such public or private offering.
A-6
<PAGE>
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments or sinking fund payments with respect to
the Notes.
7. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at an offer price
in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the date of repurchase (or if such Change of
Control Offer is consummated prior to the Full Accretion Date, 101% of the
Accreted Value thereof on the date of repurchase plus accrued and unpaid
liquidated damages, if any). Within 20 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) When the aggregate amount of Excess Proceeds exceeds $5 million, the
Company shall commence an offer to all Holders of Notes (an "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the Accreted Value thereof, plus
accrued and unpaid Liquidated Damages, if any, thereon, to the date of purchase
(if such offer is prior to the Full Accretion Date) or 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase (if such offer is on or after the Full Accretion
Date), in accordance with the procedures set forth in the Indenture. To the
extent that the Accreted Value or the aggregate amount, as the case may be, of
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
the Company may use any such remaining Excess Proceeds for general corporate
purposes. If the Accreted Value or the aggregate principal amount, as the case
may be, of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis.
(c) Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer or Change of Control Offer from the Company prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. Notice of Redemption. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notes in
denominations larger than $1,000 in principal amount at maturity may be redeemed
in part but only in whole multiples of $1,000 in principal amount at maturity,
unless all of the Notes held by a Holder are to be redeemed. On and after the
redemption date, interest and Liquidated Damages, if any, ceases to accrue on
Notes or portions thereof called for redemption (or, if such redemption date is
prior to the Full Accretion Date, the Notes, or any portion of them called for
redemption, cease to accrete).
9. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 in principal amount at maturity and
integral multiples of $1,000 in principal amount at maturity. The transfer of
Notes may be registered and Notes may be exchanged as provided in 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 need not exchange or register the
A-7
<PAGE>
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of 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 Note may be treated
as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount at maturity of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount at maturity of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of 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 and Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes; (iii) failure by the Company to comply with Section 4.07, 4.09, 4.10,
4.17 or 5.01 of the Indenture; (iv) failure by the Company for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in principal
amount at maturity of the Notes then outstanding to comply with certain other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company 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 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 million
or more; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 90 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
(viii) breach by the Company of any representation or warranty set forth in the
Pledge Agreement, or default by the Company in the performance of any covenant
set forth in the Pledge Agreement, or repudiation by the Company of its
obligations under the Pledge Agreement or the unenforceability of the Pledge
Agreement against the Company for any reason; and (ix) default by the Company in
the performance of any covenant set forth in the Escrow Agreement, or
repudiation by the Company of its obligations under the Escrow Agreement or the
unenforceability of the Escrow Agreement against the Company for any reason. 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 Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the 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 Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing
A-8
<PAGE>
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of principal or premium,
if any, interest or Liquidated Damages, if any, on the 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 Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. Authentication. This 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 Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Note Registration Rights
Agreement dated as of January 15, 1998, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
18. Contingent Warrants. In the event that the Company does not consummate
a Qualified Public Offering of its Qualified Capital Stock on or prior to
January 1, 2001, pursuant to Section 4.19 of the Indenture and in accordance
with the terms of the Warrant Agreement between the Company and the Initial
Purchasers, the Company will issue Contingent Warrants to Holders of the Notes.
Such Contingent Warrants will be exercisable for 7.5% of the Common Stock of the
Company on a fully diluted basis as of the date of such issuance after giving
effect to the issuance of such Contingent Warrants; provided that if the Company
consummates a public or private offering or offerings of its Qualified Capital
Stock resulting in aggregate gross proceeds of at least $25 million, the Company
shall have until June 30, 2002 to consummate a Qualified Public Offering.
19. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will 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:
A-9
<PAGE>
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
Attention: Chief Financial Officer
A-10
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this 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 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 Note)
Signature Guarantee.
A-11
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.17 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.17
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.17 of the Indenture, state the
amount you elect to have purchased: $___________
Date: ___________________ Your Signature: _________________________
(Sign exactly as your name appears on
the Note)
Tax Identification No.:__________________
Signature Guarantee.
A-12
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Date of Exchange
- ------------------- Amount of decrease in Amount of increase in Principal Amount Signature of
Principal Amount Principal Amount at maturity of authorized officer of
at maturity of at maturity of this Global Note Trustee or Note
this Global Note this Global Note following such Custodian
decrease
(or increase)
---------------------- ---------------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Re: 14% Senior Discount Notes due 2005
Reference is hereby made to the Indenture, dated as of January 15, 1998
(the "Indenture"), between Centennial Communications Corp., as issuer (the
---------
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
- --------
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to transfer the
----------
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
--------
to __________ (the "Transferee"), as further specified in Annex A hereto. In
----------
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being
- ------------------------------------------------------
effected pursuant to and in accordance with Rule 144A under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the
--------------
Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believed
and believes is purchasing the beneficial interest or Definitive Note for its
own account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is
- ---------------------------------------------------------
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and
B-1
<PAGE>
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on Transfer
enumerated in the Private Placement Legend printed on the Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN THE GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF
- -----------------------------------------------------------------------------
THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
- -------------------------------------------------------
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of
a principal amount of Notes at the time of transfer of less than $100,000, an
Opinion of Counsel provided by the Transferor or the Transferee (a copy of which
the Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Global Note
and/or the Definitive Notes and in the Indenture and the Securities Act.
B-2
<PAGE>
4. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
---------------------------------------------------------------------
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
- --------------------------------------------------------------
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
---------------------------
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: _________________, ______
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the Global Note (CUSIP _________); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] Restricted Global Note (CUSIP ________), or
(ii) [_] Unrestricted Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Re: 14% Senior Discount Notes due 2005
(CUSIP _____________________)
Reference is hereby made to the Indenture, dated as of January 15,
1998 (the "Indenture"), between Centennial Communications Corp., as issuer (the
---------
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
-------
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Owner") owns and proposes to exchange the
-----
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
--------
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
- -----------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
--------------
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state
B-1
<PAGE>
of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
- -----------------------------------------------
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the Restricted Global Note with an equal principal amount, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Notes and
pursuant to and in accordance with the Securities Act, and in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
______________________
[Insert Name of Owner]
By: __________________
Name:
Title:
Dated: _________________, _____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Re: 14% Senior Discount Notes due 2005
Reference is hereby made to the Indenture, dated as of January 15,
1998 (the "Indenture"), between Centennial Communications Corp. as issuer (the
---------
"Company"), and State Street Bank and Trust Company, as trustee. Capitalized
-------
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
--------------
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $100,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144 under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive
D-1
<PAGE>
Note or beneficial interest in a Global Note from us in a transaction meeting
the requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
____________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: _________________, ______
D-2
<PAGE>
EXHIBIT E
FORM OF PLEDGE AGREEMENT
D-3
<PAGE>
EXECUTION COPY
________________________________________________________________________________
CENTENNIAL COMMUNICATIONS CORP.
14% SENIOR DISCOUNT NOTES DUE 2005
INDENTURE
Dated as of January 15, 1998
State Street Bank and 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)................... 11.03
(c)................... 11.03
313 (a)................... 7.06
(b)(1)................ 10.03
(b)(2)................ 7.07
(c)................... 7.06;11.02
(d)................... 7.06
314 (a)................... 4.03;11.02
(b)................... 10.02
(c)(1)................ 11.04
(c)(2)................ 11.04
(c)(3)................ N.A.
(d)................... 10.03;10.04; 10.05
(e)................... 11.05
(f)................... N.A.
315 (a)................... 7.01
(b)................... 7.05,11.02
(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)................... 11.01
(b)................... N.A.
(c)................... 11.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
EXHIBITS
Exhibit A . . . . . . . . . . . Form of Note
Exhibit B . . . . . . . . . . . Form of Certificate of Transfer
Exhibit C . . . . . . . . . . . Form of Certificate of Exchange
Exhibit D . . . . . . . . . . . Form of Certificate of Acquiring
Institutional Accredited Investor
Exhibit E . . . . . . . . . . . Form of Pledge Agreement
i
<PAGE>
EXHIBIT 4.3
CUSIP NO. 15134BAC6
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "IAI") (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(D) UNDER THE
SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE
OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT TO
(A) THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (E) TO AN IAI, THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF A PRINCIPAL AMOUNT OF NOTES AT THE TIME OF
TRANSFER OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
<PAGE>
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE AND REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF THIS
NOTE IN VIOLATION OF THE FOREGOING.
THIS SECURITY WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT UNDER SECTION 1273 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED. YOU MAY CONTACT THE CHIEF FINANCIAL
OFFICER OF CENTENNIAL COMMUNICATIONS CORP. AT 1600 WYNKOOP STREET, SUITE 300,
DENVER, COLORADO 80202, TELEPHONE NUMBER: (303) 571-5050, WHO WILL PROVIDE YOU
WITH ANY REQUIRED INFORMATION REGARDING ORIGINAL ISSUE DISCOUNT.
THE NOTES EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT AT MATURITY
OF THE NOTES AND ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE
64 SHARES, PAR VALUE $.01 PER SHARE, OF THE COMPANY. PRIOR TO THE CLOSE OF
BUSINESS UPON THE EARLIEST TO OCCUR OF (i) 360 DAYS FROM THE DATE OF ISSUANCE,
(ii) SUCH DATE AS SALOMON BROTHERS INC MAY, IN ITS DISCRETION, DEEM APPROPRIATE,
OR (iii) IN THE EVENT OF A CHANGE OF CONTROL, THE DATE THE COMPANY MAILS A
NOTICE THEREOF, THE NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE WARRANTS.
Under the terms of the warrant agreement relating to the Warrants (the "Warrant
Agreement"), the holder of this security may at any time on or after the
Separation Date, at its option, by notice to the Trustee, elect to separate or
separately transfer the Notes and the Warrants represented hereby, in whole or
in part, and shall thereafter surrender this security to the Trustee for the
exchange of this security, in whole or in part, for such Warrant or Warrants and
for a Note or Notes of a like aggregate principal amount and of authorized
denominations not bearing this Unit Legend; provided that no delay or failure on
the part of the Trustee or the Warrant Agent to exchange this security for such
Warrant or Warrants and Note or Notes shall affect the separation of such Notes
and Warrants represented hereby or their separate transferability. Until such
separation, the holder of this security is, for each $1,000 principal amount at
maturity of Notes, also the record owner of one Warrant expiring January 1,
2005, to purchase 64 shares of Common Stock of the Company, par value $.01 per
share (subject to adjustment as provided in the Warrant Agreement). The Company
has deposited with the Trustee, as custodian for the Holder of the Notes bearing
this Unit Legend, a certificate or certificates for Warrants to purchase an
aggregate of 2,560,000 shares of Common Stock (subject to adjustment as provided
in the Warrant Agreement). Prior to the separation of the Notes and the
Warrants as described above, record ownership of the Warrants is transferable
only by the transfer of this Note on the Note register maintained by the Company
<PAGE>
pursuant to this Indenture. After such separation, ownership of a Warrant is
transferable only by the transfer of the certificate representing such Warrant
in accordance with the provisions of the Warrant Agreement.
By accepting a security bearing this Unit Legend, each holder of this security
shall be bound by all of the terms and provisions of the Warrant Agreement (a
copy of which is available on request to the Company or the Warrant Agent).
Election to Exercise. On or after the date on which the Warrants may be
- --------------------
exercised pursuant to the terms of the Warrant Agreement, the Warrants may be
exercised by obtaining from the Trustee, as custodian for Holders of securities
bearing this Unit Legend, the required forms of election to exercise,
declaration form and instructions for payment of the Exercise Price (as such
term is defined in the Warrant Agreement). Upon receiving the required forms
and payment of such Exercise Price, the Trustee as custodian for the Holder of
the security bearing this Unit Legend, shall exercise such Warrants in
accordance with the provisions of the Warrant Agreement.
Election of Exchange. The undersigned registered holder of the security
- --------------------
represented hereby elects to separate its Notes and Warrants and to exchange
this security (representing ownership of 40,000 Warrants evidenced by Warrant
Certificates deposited with the Trustee) for a new Note in the principal amount
hereof and a Warrant Certificate in the amount of said 40,000 Warrants.
The undersigned registered holder of the security represented hereby irrevocably
instructs the Trustee (A) to issue in the name of the undersigned registered
holder a new Note (CUSIP 15134BAA0) not containing the above Unit Legend in the
principal amount equal to the principal amount hereof and (B) to deliver this
security to the Warrant Agent pursuant to the provisions of the Warrant
Agreement with instructions to issue in the name of, or release to, such holder
a Warrant Certificate (CUSIP 15134B110) representing the number of Warrants
equal to the number of Warrants represented by this security and to issue a new
Warrant Certificate to replace the Warrant Certificate held on deposit by the
Trustee as custodian representing the number of Warrants equal to the difference
between (x) the number of Warrants represented by the Warrant Certificate so
held on deposit and (y) the number of Warrants represented by this security.
Dated:
Name of Holder of this security:________________________
Address: _____________________________________
________________________________
Signature:______________________________________
Note: The above signature must correspond with the name as written upon the
face of this security in every particular, without alteration or
enlargement whatever and if the certificate representing any principal
amount at maturity of this security or the associated Warrants is to be
registered in a name other than that in which this security is registered.
14% Senior Discount Notes due 2005
<PAGE>
No. 1 $
CENTENNIAL COMMUNICATIONS CORP.
promises to pay to CEDE & CO.
or registered assigns,
the principal sum of
on January 1, 2005.
Interest Payment Dates: January 1 and July 1, commencing July 1, 2003
Record Dates: December 15, and June 15
Issue Date: January , 1998
Dated: January , 1998
Centennial Communications Corp.
By: /s/ Michael N. Simkin
-------------------------
Name: Michael N. Simkin
Title: Chief Executive Officer
(SEAL)
By: /s/ Bernard G. Dvorak
-------------------------
Name: Bernard G. Dvorak
Title:
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
State Street Bank and Trust Company,
as Trustee
By: [illegible signature]
---------------------
<PAGE>
14% Senior Discount Notes due 2005
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. No interest will accrue on the Notes until January 1, 2003 (the
"Full Accretion Date") but the Accreted Value (as defined in the Indenture) will
accrete (representing the amortization of original issue discount) between the
date of original issuance and such date, 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 Notes on the Full
Accretion Date. Centennial Communications Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 14%
per annum from January 15, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company will pay interest and Liquidated Damages semi-
annually on January 1 and July 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Full Accretion
Date; provided that if there is no existing Default in the payment of interest,
and if this 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; provided, further, that the first
Interest Payment Date shall be July 1, 2003. The Company shall 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, 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 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 of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the December 15 or June 15 next
preceding the Interest Payment Date, even if such Notes are cancelled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium, if any, Liquidated Damages, if any,
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 and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium, if any, and
Liquidated Damages, if any, on, all Global Notes and all other 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, State Street Bank and Trust
Company, the Trustee under the Indenture, will 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.
4. INDENTURE AND PLEDGE AGREEMENT. The Company issued the Notes under an
Indenture dated as of January 15, 1998 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (SS) 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and
<PAGE>
be controlling. The Notes are obligations of the Company limited to $40.0
million in aggregate principal amount at maturity; provided, however, that on or
prior to February 13, 1998, the Company may issue up to an additional $20.0
million in aggregate principal amount of Notes at maturity under the
circumstances contemplated by that certain Purchase Agreement, dated January 12,
1998, among the Company, Salomon Brothers Inc and Prudential Securities
Incorporated. Such additional Notes, if any, shall be treated for all purposes
as "Notes" under the Indenture. The Notes are secured by a pledge of (i) 100% of
the Capital Stock of SMR Direct USA, Inc. and all future domestic direct
Restricted Subsidiaries of the Company and (ii) 100% of the Capital Stock (other
than Excluded Stock) of each of the Cayman Entities and 100% of the Capital
Stock (other than Excluded Stock) of all future foreign direct Restricted
Subsidiaries of the Company pursuant to the Pledge Agreement referred to in the
Indenture.
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 Notes prior to January 1, 2003.
Thereafter, the Notes will be subject to redemption at any time 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 January
1 of the years indicated below:
Year PERCENTAGE
---- ----------
2003................................... 114.00%
2004................................... 107.00%
The Notes shall be redeemable at 100% of the principal amount on January 1,
2005.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5,
at any time on or before January 1, 2001, the Company may, on any one or more
occasions, redeem up to a maximum of 25% in aggregate principal amount of
maturity of Notes at a redemption price equal to 114% of the Accreted Value
thereof (determined at the redemption date) plus accrued and unpaid Liquidated
Damages, if any, to the date of redemption, with the net cash proceeds received
by the Company after the date of this Indenture from the issuance and sale of
its Qualified Capital Stock in a public or private offering to the extent that
such net cash proceeds have been, and continue to be, designated as Designated
Equity Proceeds to be used for such purpose as provided in the definition
thereof; provided that at least 75% aggregate principal amount at maturity of
the Notes remain outstanding immediately after the occurrence of each such
redemption; provided, further, that with respect to any private offering of
Qualified Capital Stock of the Company to an Affiliate of the Company (or to any
person who would be an Affiliate of the Company upon consummation of any such
offering), such Qualified Capital Stock shall be issued and sold at a price no
lower than (i) the price at which the Qualified Capital Stock is being sold to
Persons that are not Affiliates of the Company in such offering if such Persons
are purchasing a majority of the Qualified Capital Stock being sold in such
offering or (ii) in all other cases, the fair market value thereof, as evidenced
by an independent investment banking firm of national standing delivered to the
Trustee and provided, further, that such redemption shall occur within 60 days
of the date of the closing of any such public or private offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be required
to make mandatory redemption payments or sinking fund payments with respect to
the Notes.
<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at an offer price
in cash (the "Change of Control Payment") equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the date of repurchase (or if such Change of
Control Offer is consummated prior to the Full Accretion Date, 101% of the
Accreted Value thereof on the date of repurchase plus accrued and unpaid
liquidated damages, if any). Within 20 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) When the aggregate amount of Excess Proceeds exceeds $5 million, the
Company shall commence an offer to all Holders of Notes (an "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds at an offer
price in cash in an amount equal to 100% of the Accreted Value thereof, plus
accrued and unpaid Liquidated Damages, if any, thereon, to the date of purchase
(if such offer is prior to the Full Accretion Date) or 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase (if such offer is on or after the Full Accretion
Date), in accordance with the procedures set forth in the Indenture. To the
extent that the Accreted Value or the aggregate amount, as the case may be, of
Notes tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
the Company may use any such remaining Excess Proceeds for general corporate
purposes. If the Accreted Value or the aggregate principal amount, as the case
may be, of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis.
(c) Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer or Change of Control Offer from the Company prior to
any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notes in
denominations larger than $1,000 in principal amount at maturity may be redeemed
in part but only in whole multiples of $1,000 in principal amount at maturity,
unless all of the Notes held by a Holder are to be redeemed. On and after the
redemption date, interest and Liquidated Damages, if any, ceases to accrue on
Notes or portions thereof called for redemption (or, if such redemption date is
prior to the Full Accretion Date, the Notes, or any portion of them called for
redemption, cease to accrete).
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 in principal amount at maturity and
integral multiples of $1,000 in principal amount at maturity. The transfer of
Notes may be registered and Notes may be exchanged as provided in 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 need not exchange or register the transfer of any Note
or portion of a Note selected for redemption, except for the unredeemed portion
of any Note being redeemed in part. Also, it need not exchange or register the
transfer of any Notes for a period of 15 days before a selection of 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 Note may be treated
as its owner for all purposes.
<PAGE>
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount at maturity of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount at maturity of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of 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 and Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes; (iii) failure by the Company to comply with Section 4.07, 4.09, 4.10,
4.17 or 5.01 of the Indenture; (iv) failure by the Company for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in principal
amount at maturity of the Notes then outstanding to comply with certain other
agreements in the Indenture or the Notes; (v) default under certain other
agreements relating to Indebtedness of the Company 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 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 million
or more; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 90 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary; (viii) breach by the Company of any representation or warranty set
forth in the Pledge Agreement, or default by the Company in the performance of
any covenant set forth in the Pledge Agreement, or repudiation by the Company of
its obligations under the Pledge Agreement or the unenforceability of the Pledge
Agreement against the Company for any reason; (ix) default by the Company in the
performance of any covenant set forth in the Escrow Agreement, or repudiation by
the Company of its obligations under the Escrow Agreement or the
unenforceability of the Escrow Agreement against the Company for any reason; or
(x) breach by the Company of the registration rights provisions of the Warrant
Agreement. 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 Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the 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 Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
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
principal or premium, if any, interest or Liquidated Damages, if any, on the
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
<PAGE>
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 Notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
15. AUTHENTICATION. This 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 RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Notes Registration Rights
Agreement dated as of January 15, 1998, between the Company and the parties
named on the signature pages thereof (the "Registration Rights Agreement").
18. CONTINGENT WARRANTS. In the event that the Company does not consummate
a Qualified Public Offering of its Qualified Capital Stock on or prior to
January 1, 2001, pursuant to Section 4.19 of the Indenture and in accordance
with the terms of the Warrant Agreement between the Company and the Initial
Purchasers, the Company will issue Contingent Warrants to Holders of the Notes.
Such Contingent Warrants will be exercisable for 7.5% of the Common Stock of the
Company on a fully diluted basis as of the date of such issuance after giving
effect to the issuance of such Contingent Warrants; provided that if the Company
consummates a public or private offering or offerings of its Qualified Capital
Stock resulting in aggregate gross proceeds of at least $25 million, the Company
shall have until June 30, 2002 to consummate a Qualified Public Offering.
19. 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 Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
<PAGE>
The Company will 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:
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, Colorado 80202
Attention: Chief Financial Officer
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this 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 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 Note)
Signature Guarantee.
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.17 of the Indenture, check the box below:
[_]Section 4.10 [_]Section 4.17
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.17 of the Indenture, state the
amount you elect to have purchased: $___________
Date:_________________ Your Signature:________________________
(Sign exactly as your name
appears on the Note)
Tax Identification No.:________________
Signature Guarantee.
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount Signature of
- ---------------- Principal Amount Principal Amount at maturity of authorized officer of
at maturity of at maturity of this Global Note Trustee or Note
this Global Note this Global Note following such decrease Custodian
--------------------- --------------------- (or increase) ---------------------
-----------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT 4.5
- --------------------------------------------------------------------------------
EXECUTION COPY
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of January 15, 1998
by and among
Centennial Communications Corp.
and
Salomon Brothers Inc
Prudential Securities Incorporated
- --------------------------------------------------------------------------------
<PAGE>
This Notes Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of January 15, 1998, by and among Centennial Communications
Corp., a Delaware corporation (the "Company"), Salomon Brothers Inc and
-------
Prudential Securities Incorporated (each an "Initial Purchaser" and,
-----------------
collectively, the "Initial Purchasers").
------------------
This Agreement is made pursuant to the Purchase Agreement, dated January
12, 1998, (the "Purchase Agreement"), by and among the Company and the Initial
------------------
Purchasers, relating to, among other things, the agreement of the Company to
sell, and the agreement of the Initial Purchasers to purchase (the "Initial
-------
Placement"), the Company's 40,000 units (the "Units"), each Unit consisting of
- --------- -----
$1,000 in principal amount at maturity of 14% Series A Senior Discount Notes due
2005 of the Company (each, a "Series A Notes" and collectively, the "Series A
-------------- --------
Notes") and one warrant to purchase 64 shares of common stock (the "Common
- ----- ------
Stock"), par value $.01 per share, of the Company. Under certain circumstances
contemplated by the Purchase Agreement, on or prior to February 13, 1998, the
Company may issue and sell to the Initial Purchasers up to an additional 20,000
Units, each Unit consisting of $1,000 in principal amount at maturity of Series
A Notes and one warrant to purchase 64 shares of Common Stock of the Company.
To the extent that any additional Series A Notes are issued under the
circumstances contemplated by the Purchase Agreement, such additional Series A
Notes shall be treated for purposes of this Agreement as "Series A Notes" issued
on January 15, 1998. In order to induce the Initial Purchasers to purchase the
Units, 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 as set forth in Section 7 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:
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 Notes that are
--------------------------------------------
acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A 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 Notes
acquired directly from the Company or any of its affiliates).
Closing Date: The date hereof.
------------
<PAGE>
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
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 Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Transfer Restricted Securities,
--------------------
each Interest Payment Date.
Definitive Notes: As defined in the Indenture.
----------------
Effectiveness Target Date: As defined in Section 5 hereof.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by the Company under the Act of the
--------------
Series B 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 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 Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, as such rule may be amended from
time to time, in transactions under Rule 144A.
Global Noteholder: The Depository Trust Company or its nominee.
-----------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated the Closing Date, between the Company and
---------
State Street Bank and Trust Company, as trustee (the "Trustee"), pursuant to
-------
which the 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 Notes.
---------------------
2
<PAGE>
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Series A Notes and the Series B Notes.
-----
Offering Memorandum: As defined in the Purchase Agreement.
-------------------
Participating Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
---------------------------
Transfer Restricted Securities.
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.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
relating to (a) an offering of Series B 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.
Series B Notes: The Company's 14% Series B Senior Discount Notes due 2005
--------------
to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon
the request of any Holder of Series A Notes covered by a Shelf Registration
Statement, in exchange for such Series A 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 Note, until the earliest to occur of
------------------------------
(a) the date on which such 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 Note has
been effectively registered under the Act and has been disposed of in accordance
with the Shelf Registration Statement, (c) following the exchange by a Broker-
Dealer in the Exchange Offer of a Series A Note for a Series B Note, the date on
which such Series B Note is
3
<PAGE>
disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contained
in the Exchange Offer Registration Statement (including delivery of the
Prospectus contained therein) or (d) the date on which such 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 the Exchange Offer Registration
Statement with the Commission on or prior to the earlier to occur of (A) an
offering of securities of the Company pursuant to which the Company is
thereafter subject to the reporting requirements of the Exchange Act and (B) 300
days after the Closing Date (such date to be the "Filing Date"), (ii) use its
best efforts to cause such Exchange Offer Registration Statement to be declared
effective at the earliest possible time, but in no event later than 60 days
after the Filing Date, (iii) in connection with the foregoing, (A) file all pre-
effective 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 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 Notes to be offered in
exchange for the Series A Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Participating
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 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 unless a
longer period is required under applicable federal and state securities laws.
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(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 Participating Broker-Dealer who holds Series A 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 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 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 Participating 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 Notes held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in law or 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 Participating 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 180 days from the date on which the Exchange Offer
Registration Statement became effective under the Act.
The Company shall promptly provide sufficient copies of the latest version
of such Prospectus to such Participating 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.
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SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
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Exchange Offer Registration Statement with respect to the Series B Notes or
permitted to Consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (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 prior to the 20th day
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 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 Notes acquired directly from the Company or one of its
affiliates, then the Company shall use its best efforts to (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 (y) cause
such Shelf Registration Statement to be declared effective by the Commission on
or prior to 90 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 two years (as extended
pursuant to Section 6(d)) following the date on which such Shelf Registration
Statement first becomes effective under the Act or such shorter period ending
when all of the Transfer Restricted Securities available for sale thereunder
have been sold.
(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 15 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 provided all such information. Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish
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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 after the Effectiveness Target Date
or such longer period as is required under applicable federal or state
securities laws with respect to the Exchange Offer Registration Statement 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 to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount at maturity of Transfer Restricted Securities held by such Holder for
each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in principal amount at maturity of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages of $.50 per week
per $1,000 principal amount at maturity of Transfer Restricted Securities.
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 shall be paid to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Definitive Notes by mailing checks to their registered addresses on
each Damages Payment Date. 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.
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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
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 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 Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B 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 Notes obtained by such Holder in exchange for Series A Notes
acquired by such Holder directly from the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the
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<PAGE>
Company shall provide a supplemental letter to the Commission (A) stating
that the Company is 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 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 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 Notes received in the
Exchange Offer 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 Participating 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
9
<PAGE>
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 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 under
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;
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<PAGE>
(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) 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 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
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<PAGE>
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 to each selling Holder and each underwriter, if any, upon
the effectiveness of the Shelf Registration Statement and to each
Participating 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 or any Vice President and (y) a principal financial or
accounting officer of the Company, confirming, as of the date thereof,
the matters set forth in Exhibit A hereto and such other similar
matters as the Holders, underwriter(s) and/or Participating 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 paragraph (f) of Section 7 of the Purchase
Agreement and such other matter as the Holders, underwriters and/or
Participating 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 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 is not passing upon
and does not assume any responsibility for and has not verified the
accuracy, completeness or fairness of such statements, and has not made
any independent check or verification thereof; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality
to the extent such counsel deems appropriate upon facts provided by
officers and other representatives of the Company), 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 (it being understood that such counsel need
express no belief or opinion with respect to the financial statements
and schedules and other financial and statistical data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus); and
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(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 7(l) of the Purchase Agreement, without exception;
(B) set forth in full or incorporated 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
Participating 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 Participating 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 their
respective 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 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 Notes covered
by any Shelf Registration Statement contemplated by this Agreement, Series B
Notes having an aggregate principal amount equal to the aggregate principal
amount of Series A Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the purchaser(s) of
such Notes, as the case may be; in return, the Series A 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
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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 its 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 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 Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xviii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission in respect of any Registration
Statement, 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);
(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 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
14
<PAGE>
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 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 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
counsel for the Holders of Transfer Restricted Securities as provided in Section
7(b); (v) all application and filing fees in connection with listing the 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).
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.
15
<PAGE>
(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.
16
<PAGE>
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Initial
Purchaser, (ii) each Holder, (iii) each person, if any, who controls (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Initial
Purchaser or Holder (any of the persons referred to in this clause (iii) being
hereinafter referred to as a "controlling person") and (iv) the respective
officers, directors, partners, employees, representatives and agents of any
Initial Purchaser or Holder or any controlling person (any person referred to in
clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
- -------------------
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Initial Purchasers or the Holders furnished in writing to
the Company by any of the Initial Purchasers or Holders expressly for use
therein. The Company also agrees to reimburse each Indemnified Holder for any
and all fees and expenses (including, without limitation, the fees and expenses
of counsel) as they are incurred in connection with enforcing such Indemnified
Holder's rights under this Agreement (including, without limitation, its rights
under this Section 8).
17
<PAGE>
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company, such Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company in writing (provided, that
the failure to give such notice shall not relieve the Company of its obligations
pursuant to this Agreement). Such Indemnified Holder shall have the right to
employ its own counsel in any such action and the fees and expenses of such
counsel shall be paid, as incurred, by the Company (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Company shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for such Indemnified Holders, which firm shall be designated by the
Indemnified Holders. The Company shall be liable for any settlement of any such
action or proceeding effected with the Company's prior written consent, which
consent shall not be withheld unreasonably, and the Company agrees to indemnify
and hold harmless each Indemnified Holder from and against any loss, claim,
damage, liability or expense by reason of any settlement of any action effected
with the written consent of the Company. The Company shall not, without the
prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and its 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 respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Company 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 directors or officers or
any such controlling person in respect of which indemnity may be sought against
a Holder of Transfer Restricted Securities, such Holder shall have the rights
and duties given the Company, and the Company, 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 amount by which the total received by such
Holder with respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein,
18
<PAGE>
then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received by such indemnifying party, on the one hand, and such indemnified
party, on the other hand, from the Initial Placement and the sale of Transfer
Restricted Securities pursuant to the applicable Registration Statement or if
such allocation is not permitted by applicable law, the relative fault of such
indemnifying party, on the one hand, and of such indemnified party, on the other
hand, 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 shall be
deemed to be equal to the sum of (i) the total proceeds from the Initial
Placement (net of the Initial Purchasers' commissions, but before deducting
expenses) as set forth on the cover page of the Offering Memorandum and (ii) the
total amount of additional interest which the Company was not required to pay as
a result of registering the securities covered by the Registration Statement
which resulted in such losses, claims, damages, liabilities or expenses. The
relative benefits of the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of the
Offering Memorandum and benefits received by any other Indemnified Holders shall
be deemed to be equal to the value of receiving the Notes registered under the
Act. The relative fault of such indemnifying party, on the one hand, and of such
indemnified party, on the other hand, 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 such indemnifying party or by such indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Initial Purchasers and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Initial Purchaser or its related Indemnified
Holders shall be required to contribute, in the aggregate, any amount in excess
of the amount equal to (A) the amount of the total purchase discounts and
commissions applicable to such Transfer Restricted Securities less (B) any
amount paid or contributed by any Initial Purchaser under the Purchase
Agreement; nor shall any Holder or its related Indemnified Holders 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. 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. The obligations of the
Initial Purchasers and the Holders to contribute pursuant to this Section 8(c)
are several in proportion to the respective
19
<PAGE>
principal amount of Series A Notes held by each of the Holders hereunder and not
joint.
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."
20
<PAGE>
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
--------
rights provided herein, in the Indenture 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. Except as disclosed in the
Offering Memorandum, 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 Notes. The Company will not take any
-------------------------------
action, or voluntarily permit any change to occur, with respect to the 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), 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:
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
21
<PAGE>
Denver, CO 80202
Telecopier No.: (303) 571-5050
Attention: Chief Financial Officer
With a copy to:
Holland & Hart LLP
555 17th Street, Suite 3200
Denver, CO 80202
Telecopier No.: (303) 295-8261
Attention: Michael Quinn, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if 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
22
<PAGE>
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.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Centennial Communications Corp.
By: /s/ Bernard G. Dvorak
--------------------------------
Name: Bernard G. Dvorak
Title: Chief Financial Officer
Salomon Brothers Inc
By: /s/ Shelley L. Sporleder
--------------------------------
Name: Shelley Sporleder
Title: Vice President
Prudential Securities Incorporated
By: /s/ George Alex
----------------------------------
Name: George Alex
Title: Managing Director
<PAGE>
EXHIBIT A
(a) No stop order suspending the qualification or exemption from
qualification of the Notes in any jurisdiction referred to in Section 6(c)(xi)
of the Note Registration Rights Agreement shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending,
threatened or, to the Company's knowledge, contemplated.
(b) (i) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
that would as of the date of Consummation of the Exchange Offer or the date of
the effectiveness of the Shelf Registration Statement, prevent the issuance or
sale of the Notes; (ii) no injunction, restraining order or order of any nature
by a federal or state court of competent jurisdiction shall have been issued as
of the date of the Consummation of the Exchange Offer or the date of the
effectiveness of the Shelf Registration Statement, as the case may be, that
would prevent the issuance or sale of the Notes; and (iii) on the date of the
Consummation of the Exchange Offer or the date of the effectiveness of the Shelf
Registration Statement, as the case may be, no action suit or proceeding shall
be pending against or affecting or threatened against the Company or any of its
respective subsidiaries before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, would individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) (i) Since the date of the latest balance sheet in the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, there
shall not have been any material adverse change, or any development involving,
or which could reasonably be expected to involve a prospective material adverse
change, in the condition (financial or other), business, properties, prospects,
net worth or results of operations, whether or not arising in the ordinary
course of business of the Company and its subsidiaries taken as a whole (ii)
since the date of the latest balance sheet included in the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable, there
shall not have been any material change, or any development that is reasonably
likely to result in a material change, in the capital stock or in the long-term
debt, or material increase in short-term debt, of the Company and its
subsidiaries, taken as a whole, except for that set forth in the Exchange Offer
Registration Statement or Shelf Registration Statement, as applicable and (iii)
neither the Company nor any of its subsidiaries shall have any liability or
obligation, direct or contingent, which is material to the Company, except as
set forth in the Exchange Offer Registration Statement or Shelf Registration
Statement.
25
<PAGE>
EXHIBIT 4.6
COLLATERAL PLEDGE AGREEMENT
THIS COLLATERAL PLEDGE AGREEMENT (this "Agreement") is made and
---------
entered into as of January 15, 1998 by Centennial Communications Corp., a
Delaware corporation (the "Pledgor"), in favor of State Street Bank and Trust
-------
Company, as collateral agent (the "Collateral Agent"), for the benefit of the
----------------
holders (the "Senior Noteholders") of the Pledgor's 14% Senior Discount Notes
------------------
due 2005 and the holders (the "Convertible Noteholders") of the Pledgor's 9%
-----------------------
Convertible Subordinated Notes due 2006.
W I T N E S S E T H:
WHEREAS, the Pledgor and State Street Bank and Trust Company, as
trustee (the "Trustee"), have entered into that certain indenture dated as of
-------
January 15, 1998 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which the Pledgor
---------
issued $40,000,000 units (the "Units"), each consisting of $1,000 in principal
-----
amount at maturity of 14% Senior Discount Notes due 2005 of the Pledgor
(together with any notes issued in replacement thereof or in exchange or
substitution therefor, the "Senior Notes") and one warrant (the "Initial
------------ -------
Warrants") to purchase 64 shares (the "Initial Warrant Shares") of common stock,
- --------
par value $0.01 per share, of the Pledgor (the "Common Stock");
WHEREAS, under the circumstances contemplated by the purchase
agreement (the "Purchase Agreement"), dated as of January 15, 1998, among the
------------------
Pledgor, Salomon Brothers, Inc and Prudential Securities Incorporated (together,
the "Initial Purchasers"), on or prior to February 13, 1998, the Pledgor may
------------------
issue and sell to the Initial Purchasers up to an additional 20,000 Units, each
Unit consisting of $1,000 in principal amount at maturity of 14% Senior Discount
Notes due 2005 and one warrant to purchase 64 shares of Common Stock of the
Pledgor;
WHEREAS, to the extent that any additional notes are issued under the
circumstances contemplated by the Purchase Agreement, such additional notes,
together with any notes issued in replacement thereof or in exchange or
substitution therefor, shall be treated as "Senior Notes" for all purposes of
------------
this Agreement;
WHEREAS, the terms of the Indenture require that the Pledgor (i)
pledge to the Collateral Agent for the ratable benefit of the Senior
Noteholders, and grant to the Collateral Agent for the ratable benefit of the
Senior Noteholders a security interest in, the Pledged Collateral (as defined
herein) and (ii) execute and deliver this Agreement in order to secure the
payment and performance by the Pledgor of all of the Obligations of the Pledgor
under the Indenture;
WHEREAS, the Pledgor and Merrill Lynch Global Allocation Fund, Inc.
("Merrill Lynch") have entered into that certain purchase agreement dated as of
-------------
January 15, 1998 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Convertible Note Purchase Agreement"), pursuant
-----------------------------------
to which the Pledgor issued $10,000,000 in aggregate principal amount at
maturity of 9% Convertible Subordinated Notes due 2006 (together with any
Convertible Notes issued in replacement thereof or in exchange or substitution
therefor, the "Convertible Notes");
-----------------
WHEREAS, the terms of the Convertible Note Purchase Agreement require
the Pledgor (i) pledge to the Collateral Agent for the ratable benefit of the
Convertible Noteholders, and grant to the
<PAGE>
2
Collateral Agent for the ratable benefit of the Convertible Noteholders a
security interest in, the Pledged Collateral (as defined herein) and (ii)
execute and deliver this Agreement in order to secure the payment and
performance by the Pledgor of all the Obligations of the Pledgor under the
Convertible Note Purchase Agreement;
WHEREAS, the Convertible Notes are subordinated to the Senior Notes on
the terms described in the Convertible Notes. The rights of the Convertible
Noteholders to the Pledged Collateral are subject to the rights of the Senior
Noteholders as provided in the Convertible Notes and, subsequently, the rights
of the Convertible Noteholders to the Pledged Collateral are junior and
subordinated to the rights of the Senior Noteholders with respect to the same
Pledged Collateral;
WHEREAS, the Pledgor hereby appoints State Street Bank and Trust
Company as Collateral Agent for purposes of this Agreement;
WHEREAS, it is a condition precedent to the effectiveness of the
Indenture, the Purchase Agreement and Convertible Note Purchase Agreement that
the Pledgor shall have made the pledge contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and in order to
induce the Senior Noteholders to purchase the Senior Notes and the Convertible
Noteholders to purchase the Convertible Notes, the Pledgor hereby agrees with
the Collateral Agent for its benefit and the ratable benefit of the Senior
Noteholders and the Convertible Noteholders as follows:
SECTION 1. Defined Terms.
-------------
(a) Unless otherwise defined in this Agreement, capitalized terms
shall have the meanings given to them in the Indenture if related to the Senior
Notes and the Convertible Note Purchase Agreement if related to the Convertible
Notes.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
---------
supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code from time to time in effect in
----
the State of New York.
"Domestic Issuer": as of any date, (i) SMR Direct USA, Inc. and (ii)
---------------
all future domestic direct Restricted Subsidiary (as defined in the
Indenture) of the Pledgor.
"Event of Default": means any Event of Default as defined in the
----------------
Indenture so long as any Senior Note remains outstanding; provided that, if
all Senior Notes have been paid, Event of Default shall mean any Event of
Default as defined in the Convertible Note Purchase Agreement.
"Excluded Stock": all of the outstanding shares of Capital Stock
--------------
listed on Schedule III to this Agreement, which shall include the shares of
------------
capital stock of each Foreign Issuer that, if pledged to the Collateral
Agent at such time pursuant to this Agreement, would cause the
undistributed earnings of such Foreign Issuer (if such Foreign Issuer had
any such undistributed
<PAGE>
3
earnings) as determined for U.S. Federal income tax purposes to be treated
as a deemed dividend to any parent company of such Foreign Issuer for U.S.
Federal income tax purposes; provided, however, that if any shares of
Capital Stock of a Foreign Issuer may subsequently be pledged to the
Collateral Agent without resulting in such deemed dividend, such shares
shall no longer be Excluded Stock, in which case Schedule II and
-----------
Schedule III to this Agreement shall promptly be amended to reflect
------------
such change.
"Foreign Issuer": as of any date, each of (i) SMR Direct Cayman
--------------
Corp., (ii) Centennial Cayman Corp. and (iii) all future foreign direct
Restricted Subsidiary of the Pledgor (as defined in the Indenture).
"Issuers": the collective reference to the Domestic Issuers and the
-------
Foreign Issuers; individually each an "Issuer."
------
"Majority Noteholders" means from time to time and as long as any
--------------------
Senior Note remains outstanding, Senior Noteholders representing more than
50% of then aggregate principal amount outstanding of the Senior Notes;
provided that if the Indenture permits the Trustee to direct the Collateral
Agent to take actions, such direction shall be deemed for the purposes of
this definition to be a direction of all the Senior Noteholders. Once all
Senior Notes have been paid in full, "Majority Noteholders" shall mean from
--------------------
time to time, Convertible Noteholders representing more than 50% of the
then aggregate principal amount outstanding of the Convertible Notes.
"Obligations": means any principal, interest, penalties, fees,
-----------
indemnifications, reimbursement, damages and other liabilities payable
under the Indenture or the Convertible Purchase Agreement.
"Person": means any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization
or governmental or agency or political subdivision thereof.
"Pledged Collateral": as defined in Section 2 hereof.
------------------
"Pledged Stock": all shares of Capital Stock (other than Excluded
-------------
Stock) of the Issuers owned or acquired by the Pledgor at any time prior to
the termination of this Agreement.
"Securities Act": the Securities Act of 1933, as amended.
--------------
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section and subsection
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined in this Agreement shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. Pledge. (a) Subject to Section 2(b) hereof, the Pledgor
------
hereby pledges, mortgages and charges to the Collateral Agent for its benefit
and for the ratable benefit of the Senior Noteholders and the Convertible
Noteholders, and grants to the Collateral Agent for the ratable benefit of the
Senior Noteholders and the Convertible Noteholders, a continuing first priority
security interest in all of its right, title and interest in the following (the
"Pledged Collateral"):
------------------
<PAGE>
4
(i) the Pledged Stock and the certificates representing the Pledged
Stock, and all products and proceeds of any of the Pledged Stock,
including, without limitation, all dividends, cash, options, warrants,
economic rights, voting rights, instruments, subscriptions and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Stock or any of the foregoing; and
(ii) all additional shares of, and all securities convertible into and
all warrants, options or other rights to purchase, Capital Stock (other
than Excluded Stock) of, or other Equity Interests (as defined in the
Indenture) in, the Issuers from time to time acquired by the Pledgor in any
manner, and the certificates representing such additional shares and Equity
Interests (any such additional shares and Equity Interests and other items
shall constitute part of the Pledged Stock under and as defined in this
Agreement), and all products and proceeds of any of the foregoing,
including, without limitation, all dividends, cash, options, warrants,
economic rights, instruments, subscriptions, and other property or proceeds
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the foregoing.
(b) In the event that a valid first priority security interest in the
Capital Stock of any Foreign Issuer cannot be granted to the Collateral Agent,
for the ratable benefit of the Senior Noteholders and the Convertible
Noteholders, under any applicable foreign laws by physical delivery of such
Capital Stock to the Collateral Agent, the Pledgor shall take all actions that
are necessary or desirable under applicable law to grant a valid first priority
security interest in such Capital Stock to the Collateral Agent, for the ratable
benefit of the Senior Noteholders and the Convertible Noteholders.
SECTION 3. Security for Obligations. This Agreement secures the
------------------------
prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all Obligations of the Pledgor under
the Indenture and the Senior Notes and under the Convertible Note Purchase
Agreement and the Convertible Notes (including, without limitation, interest and
any other Obligations accruing after the date of any filing by the Pledgor of
any petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceeding with respect to the Pledgor); provided that, upon
certification to the Collateral Agent by the Pledgor and the Convertible
Noteholders holding at least a majority of the Convertible Notes that the
Triggering Event (as defined in the Convertible Notes and the Indenture) shall
have occurred, this Agreement shall no longer secure the Obligations of the
Pledgor under the Convertible Note Purchase Agreement or the Convertible Notes
and the holders of the Convertible Notes shall not have any future rights
hereof.
SECTION 4. Delivery of Pledged Collateral. Pledgor hereby agrees
------------------------------
that all certificates or instruments representing or evidencing the Pledged
Collateral shall be immediately delivered to and held at all times by the
Collateral Agent pursuant hereto in the State of New York and shall be in
suitable form for transfer by delivery, or issued in the name of Pledgor and
accompanied by instruments of transfer or assignment duly executed in blank and
undated, and in either case having attached thereto all requisite federal or
state stock transfer tax stamps, all in form and substance satisfactory to the
Collateral Agent.
SECTION 5. Representations and Warranties. The Pledgor hereby makes
------------------------------
all representations and warranties applicable to the Pledgor contained in the
Indenture and the Convertible Note Purchase Agreement. The Pledgor further
represents and warrants that:
(a) The execution, delivery and performance by the Pledgor of this
Agreement are within the Pledgor's corporate powers, have been duly authorized
by all necessary corporate action, and
<PAGE>
5
do not contravene, or constitute a default under, any provision of applicable
law or regulation or of the certificate of incorporation or bylaws of the
Pledgor or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Pledgor or imposition of any Lien on any assets of
the Pledgor, other than the Lien contemplated hereby.
(b) All shares of the Pledged Stock have been duly authorized and
validly issued and are fully paid and non-assessable.
(c) The shares of Pledged Stock listed in Schedule I to this Agreement
----------
constitute all the issued and outstanding shares of all classes of Capital Stock
and Equity Interests issued by Domestic Issuers owned, held or possessed by the
Pledgor.
(d) The shares of Pledged Stock listed in Schedule II to this
-----------
Agreement constitute all the issued and outstanding shares of all classes of
Capital Stock and Equity Interests issued by Foreign Issuers owned, held or
possessed by the Pledgor other than the Excluded Stock. All of the shares of
Excluded Stock owned, held or possessed by the Pledgor are listed on Schedule
--------
III to this Agreement.
- ---
(e) The Pledgor is the legal, record and beneficial owner of the
Pledged Collateral, free and clear of any Lien or claims of any Person except
for the security interest created by this Agreement.
(f) The Pledgor has full power and authority to enter into this
Agreement and has the right to vote, pledge and grant a security interest in the
Pledged Collateral as provided by this Agreement.
(g) This Agreement has been duly executed and delivered by the Pledgor
and constitutes a legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms.
(h) Upon the delivery to the Collateral Agent of the stock
certificates evidencing the Pledged Collateral (other than the Capital Stock of
the Foreign Issuers for which the Collateral Agent, for the ratable benefit of
the Senior Noteholders and the Convertible Noteholders, cannot obtain a valid
first priority security interest in such Capital Stock under applicable foreign
law by taking possession of such Capital Stock), the Pledged Collateral created
by this Agreement will constitute a valid and duly perfected first priority
security interest in such Pledged Collateral, securing the payment of the
Obligations for the benefit of the Collateral Agent, the Senior Noteholders and
the Convertible Noteholders, and enforceable as such against all creditors of
the Pledgor and any Persons purporting to purchase any of the Pledged Collateral
from the Pledgor; provided that the rights of the Convertible Noteholders shall
be subordinated to the rights of the Senior Noteholders as set forth in the
Convertible Note.
(i) The Pledgor has taken all actions necessary to grant the
Collateral Agent, for the ratable benefit of the Senior Noteholders and the
Convertible Noteholders, a valid and perfected first priority security interest
in all of the Capital Stock of the Foreign Issuers and the security interest
created by this Agreement in such Pledged Collateral will constitute a valid and
duly perfected first priority security interest in such Pledged Collateral,
securing the payment of the Obligations for the benefit of the Collateral Agent,
the Senior Noteholders and the Convertible Noteholders, and enforceable as such
against all creditors of the Pledgor and any Persons purporting to purchase any
such Pledged Collateral from the Pledgor; provided that the rights of the
Convertible Noteholders shall be subordinated to the
<PAGE>
6
rights of the Senior Noteholders as set forth in the Convertible Note.
(j) No consent of any other Person and no consent, authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the pledge by the
Pledgor of the Pledged Collateral pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by the Pledgor or (ii) for
the exercise by the Collateral Agent of the voting or other rights provided for
in this Agreement or the remedies in respect of the Pledged Collateral pursuant
to this Agreement (except as may be required in connection with such disposition
by laws affecting the offering and sale of securities and the recordation of
such pledge and foreclosure in the books and records of the Foreign Issuers).
(k) No litigation, investigation or proceeding of or before any
arbitrator or governmental authority is pending or, to the best knowledge of the
Pledgor, threatened by or against the Pledgor or against any of its properties
or revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(l) The pledge of the Pledged Collateral pursuant to this Agreement is
not prohibited by and does not violate any applicable law or governmental
regulation, release, interpretation or opinion of the Board of Governors of the
Federal Reserve System or other regulatory agency (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System).
(m) All information set forth herein relating to the Pledged
Collateral is accurate and complete in all respects.
SECTION 6. Further Assurance. (a) Pledgor will at all times cause
-----------------
the security interests granted pursuant to this Agreement to constitute valid
and duly perfected first priority security interests in the Pledged Collateral,
enforceable as such against all creditors of Pledgor and (except as otherwise
specifically provided herein) any Persons purporting to purchase any Pledged
Collateral from Pledgor. The Pledgor will, promptly upon request by the
Collateral Agent, execute and deliver or cause to be executed and delivered, or
use its best efforts to procure, all stock powers, proxies, tax stamps,
assignments, instruments and other documents, all in form and substance
satisfactory to the Collateral Agent, deliver any instruments to the Collateral
Agent and take any other actions that are necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect, continue the perfection
of, or protect the first priority of the Collateral Agent's security interest
in, the Pledged Collateral, to protect the Pledged Collateral against the
rights, claims, or interests of third persons, to enable the Collateral Agent to
exercise or enforce its rights and remedies hereunder, or otherwise to effect
the purposes of this Agreement. The Pledgor also hereby authorizes the
Collateral Agent to file any financing or continuation statements with respect
to the Pledged Collateral without the signature of the Pledgor to the extent
permitted by applicable law. The Pledgor will pay all reasonable costs incurred
in connection with any of the foregoing.
(b) In the event that the Pledgor is unable to subdivide the stock
certificates representing the Capital Stock of a Foreign Issuer in such a manner
that only stock certificates representing Pledged Stock are delivered to the
Collateral Agent, for the ratable benefit of the Senior Noteholders and the
Convertible Noteholders, then the Pledgor may deliver to the Collateral Agent,
for the ratable benefit of the Senior Noteholders and the Convertible
Noteholders, stock certificates that represent both Pledged Stock and Excluded
Stock; provided, however, that if any stock certificates are delivered to the
Collateral Agent, for the ratable benefit of the Senior Noteholders and the
Convertible
<PAGE>
7
Noteholders, that represent any Excluded Stock, neither the Collateral Agent nor
any Senior Noteholder or any Convertible Noteholder shall have any interest in
such Excluded Stock and the Collateral Agent shall hold such Excluded Stock for
the benefit of the Pledgor; provided further, however, that if any stock
certificate representing Pledged Stock and Excluded Stock is delivered to the
Collateral Agent, for the ratable benefit of the Senior Noteholders and the
Convertible Noteholders, the Pledgor shall promptly take such actions as are
necessary to subdivide each such stock certificate in such manner that the only
stock certificates in the possession of the Collateral Agent represent Pledged
Stock and, in any event, the Pledgor shall deliver all such divided stock
certificates to the Collateral Agent, for the ratable benefit of the Senior
Noteholders and the Convertible Noteholders, within thirty days of the Closing
Date.
SECTION 7. Voting Rights; Dividends; Etc.
-----------------------------
(a) So long as no Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Stock or any part thereof for
any purpose not inconsistent with the terms of this Agreement, the Indenture or
the Convertible Note Purchase Agreement; provided, however, that the Pledgor
shall not exercise or shall refrain from exercising any such right if such
action would have a material adverse effect on the value of the Pledged
Collateral or any part thereof or be inconsistent with or violate any provisions
of this Agreement, the Indenture or the Convertible Note Purchase Agreement;
provided further that such Pledgor shall give the Collateral Agent at least ten
days' written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising of, any such right; provided that if a
meeting at which such rights are to be exercised was convened upon less than
five days' notice such Pledgor shall give the Collateral Agent the notice
required hereunder as soon as possible after such meeting is convened but in any
event before such meeting is held.
(b) So long as no Event of Default shall have occurred and be
continuing, and subject to the other terms and conditions of the Indenture and
the Convertible Note Purchase Agreement, the Pledgor shall be entitled to
receive, and to utilize (subject to the provisions of the Indenture and the
Convertible Note Purchase Agreement) free and clear of the Lien of this
Agreement, all regular and ordinary cash dividends paid from time to time in
respect of the Pledged Stock.
(c) Any and all (i) dividends, other distributions, interest and
principal payments paid or payable in the form of instruments and/or other
property and cash dividends permitted under Section 7(c) hereof) received,
receivable or otherwise distributed in respect of, or in exchange for, any
Pledged Collateral, (ii) dividends and other distributions paid or payable in
cash in respect of any Pledged Stock in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus, and (iii) cash paid, payable or otherwise
distributed in redemption of, or in exchange for, any Pledged Collateral, shall
in each case be forthwith delivered to the Collateral Agent to hold as Pledged
Collateral and shall, if received by the Pledgor, be received in trust for the
benefit of the Collateral Agent, the Senior Noteholders and the Convertible
Noteholders, be segregated from the other property and funds of the Pledgor and
be forthwith delivered to the Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsements).
(d) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights that it is entitled to exercise pursuant to
Sections 7(a) through 7(c) above.
<PAGE>
8
(e) Upon the occurrence and during the continuance of an Event of
Default, (i) all rights of the Pledgor to exercise the voting and other
consensual rights that it would otherwise be entitled to exercise pursuant to
Section 7(a) shall automatically cease, and all such rights shall thereupon
become vested in the Collateral Agent, which, to the extent permitted by law,
shall thereupon have the right to exercise such voting and other consensual
rights at the written direction of the Majority Noteholders, and (ii) all cash
interest payments and dividends and other distributions payable in respect of
the Pledged Collateral shall be paid to the Collateral Agent and the Pledgor's
right to receive such cash payments pursuant to Sections 7(b) and 7(c) hereof
shall automatically cease.
(f) Upon the occurrence and during the continuance of an Event of
Default, the Pledgor shall execute and deliver (or cause to be executed and
delivered) to the Collateral Agent all such proxies, dividend and interest
payment orders and other instruments as the Collateral Agent may reasonably
request for the purpose of enabling the Collateral Agent to exercise the voting
and other rights that it is entitled to exercise pursuant to Section 7(e) above.
(g) All payments of interest, principal or premium and all dividends
and other distributions that are received by the Pledgor contrary to the
provisions of this Section 7 shall be received in trust for the benefit of the
Collateral Agent, the Senior Noteholders and Convertible Noteholders, shall be
segregated from the other property or funds of the Pledgor and shall be
forthwith delivered to the Collateral Agent as Pledged Collateral in the same
form as so received (with any necessary endorsements or assignments).
SECTION 8. Covenants. The Pledgor hereby covenants and agrees with
---------
the Collateral Agent, the Senior Noteholders and the Convertible Noteholders
that it will comply with all of the obligations, requirements and restrictions
applicable to the Pledgor contained in the Indenture and the Convertible Note
Purchase Agreement. The Pledgor further covenants and agrees, from and after
the date of this Agreement and until the Obligations have been paid in full, as
follows:
(a) The Pledgor agrees that it will not (i) sell, assign, transfer,
convey or otherwise dispose of, or grant any option or warrant with respect to,
any of the Pledged Collateral without the prior written consent of the
Collateral Agent consent which will be given at the written direction of the
Majority Noteholders, (ii) create or permit to exist any Lien upon or with
respect to any of the Pledged Collateral, except for the security interest
granted under this Agreement, and at all times the Pledgor will be the sole
beneficial owner of the Pledged Collateral, (iii) enter into any agreement or
understanding that purports to or that may restrict or inhibit the Collateral
Agent's rights or remedies hereunder, including, without limitation, the
Collateral Agent's right to sell or otherwise dispose of the Pledged Collateral,
(iv) take any action, or permit the taking of any action by any Issuer, with
respect to the Pledged Collateral the taking of which would result in a material
impairment of the economic value of the Pledged Collateral as Collateral or a
violation of the Indenture, this Agreement or the Convertible Note Purchase
Agreement or (v) fail to pay or discharge any tax, assessment or levy of any
nature not later than five days prior to the date of any proposed sale under any
judgement, writ or warrant of attachment with regard to the Pledged Collateral.
(b) The Pledgor agrees that immediately upon acquiring or becoming the
beneficial owner of any additional shares of Capital Stock (other than Excluded
Stock) or Equity Interests (other than Excluded Stock) of any Issuer (including
as a result of the merger or consolidation of any Issuer with or into another
entity) it will pledge and deliver to the Collateral Agent for its benefit and
the ratable benefit of the Senior Noteholders and Convertible Noteholders and
grant to the Collateral Agent for its benefit and the ratable benefit of the
Senior Noteholders and the Convertible Noteholders, a continuing
<PAGE>
9
first priority security interest in such shares or Equity Interests (as well as
instruments of transfer or assignment duly executed in blank and undated and any
necessary stock transfer tax stamps, all in form and substance satisfactory to
the Collateral Agent) provided, however, if the Pledgor becomes entitled to
receive or shall receive any shares of Capital Stock or Equity Interests of a
Foreign Issuer (other than Excluded Stock) and the Collateral Agent, for the
ratable benefit of the Senior Noteholders and the Convertible Noteholders,
cannot obtain a valid first priority security interest in such Capital Stock or
Equity Interests under applicable foreign law by taking physical delivery of
such Capital Stock or Equity Interests, the Pledgor shall not be required to
deliver such Capital Stock or Equity Interests to the Collateral Agent but shall
promptly take all actions that are necessary or desirable under applicable law
to grant the Collateral Agent, for the ratable benefit of the Senior Noteholders
and the Convertible Noteholders, a valid first priority security interest in
such Capital Stock or Equity Interests to the extent legally practicable. The
Pledgor further agrees that it will promptly (i) deliver to the Collateral Agent
a certificate executed by a principal executive officer of the Pledgor
describing such additional shares or other Equity Interests and certifying that
the same have been duly pledged and delivered to the Collateral Agent hereunder
and (ii) deliver a supplement to this Agreement substantially in the form of
Exhibit A to this Agreement adding such shares of Capital Stock to Schedule I or
- --------- ----------
Schedule II, as applicable, to this Agreement. If the Pledgor shall at any time
- -----------
acquire or own any shares of Excluded Stock not listed on Schedule III to this
------------
Agreement, the Pledgor shall promptly amend Schedule III to include such shares
------------
of Excluded Stock.
(c) If following a change in the relevant sections of the Code or the
regulations, rules, rulings, notices or other official pronouncements issued or
promulgated thereunder, counsel for the Pledgor reasonably acceptable to the
Collateral Agent and the Majority Noteholders does not within 30 days after a
request from the Collateral Agent and the Majority Noteholders deliver evidence,
in form and substance reasonably satisfactory to the Collateral Agent and the
Majority Noteholders with respect to any Foreign Issuer which has not already
had all of its stock pledged pursuant to this Agreement, that a pledge of 66% or
more of the total combined voting power of all classes of Capital Stock of such
Foreign Issuer entitled to vote, would cause the undistributed earnings of such
Foreign Issuer as determined for Federal income tax purposes to be treated as a
deemed dividend to any direct or indirect United States parent of such Foreign
Issuer for Federal income tax purposes, then that portion of such Foreign
Issuer's outstanding Capital Stock not theretofore pledged pursuant to this
Agreement shall promptly be pledged to the Collateral Agent, for the ratable
benefit of the Senior Noteholders and the Convertible Noteholders, pursuant to
this Agreement and the Pledgor shall deliver such related documents as required
pursuant to this Agreement to the Collateral Agent. Until such time, the
Pledgor shall be required to pledge 66% of the combined voting power of all
class of Capital Stock of such Foreign Issuer to vote.
SECTION 9. Power of Attorney. The Pledgor hereby appoints and
-----------------
constitutes the Collateral Agent as the Pledgor's attorney-in-fact to exercise
all of the following powers upon and at any time after the occurrence and
continuance of an Event of Default: (i) collection of proceeds of any Pledged
Collateral; (ii) conveyance of any item of Pledged Collateral to any purchaser
thereof; (iii) giving of any notices or recording of any Liens under Section 6
hereof; (iv) making of any payments or taking any acts under Section 10 hereof
and (v) paying or discharging taxes or Liens levied or placed upon or threatened
against the Pledged Collateral, the legality or validity thereof and the amounts
necessary to discharge the same to be determined by the Collateral Agent in its
sole discretion, and such payments made by the Collateral Agent to become the
obligations of the Pledgor to the Collateral Agent, due and payable immediately
without demand. The Collateral Agent's authority hereunder shall include,
without limitation, the authority to endorse and negotiate, for the Collateral
Agent's own account, any checks or instruments in the name of the Pledgor
relating to the Pledged Collateral, execute and give receipt for any certificate
of ownership or any document, transfer title to any item of Pledged Collateral,
<PAGE>
10
sign the Pledgor's name on all financing statements or any other documents
deemed necessary or appropriate to preserve, protect or perfect the security
interest in the Pledged Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and prepare, file and sign the
Pledgor's name on a proof of claim in bankruptcy or similar document against any
customer of the Pledgor, and to take any other actions arising from or incident
to the powers granted to the Collateral Agent in this Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 10. Collateral Agent May Perform. If the Pledgor fails to
----------------------------
perform any agreement contained herein, the Collateral Agent may itself perform,
or cause performance of, such agreement, and the reasonable expenses of the
Collateral Agent incurred in connection therewith shall be payable by the
Pledgor under Section 15 hereof.
SECTION 11. No Assumption of Duties; Reasonable Care. The rights and
----------------------------------------
powers granted to the Collateral Agent hereunder are being granted in order to
preserve and protect the Collateral Agent's, the Senior Noteholders' and the
Convertible Noteholders' security interest in and to the Pledged Collateral
granted hereby and shall not be interpreted to, and shall not, impose any duties
on the Collateral Agent in connection therewith. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Collateral Agent accords its own
property, it being understood that the Collateral Agent shall not have any
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
SECTION 12. Subsequent Changes Affecting Collateral. The Pledgor
---------------------------------------
represents to the Collateral Agent, the Senior Noteholders and the Convertible
Noteholders that the Pledgor has made its own arrangements for keeping informed
of changes or potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of dividends,
payments of interest and/or principal, reorganization or other exchanges, tender
offers and voting rights), and the Pledgor agrees that the Collateral Agent, the
Senior Noteholders and the Convertible Noteholders shall have no responsibility
or liability for informing the Pledgor of any such changes or potential changes
or for taking any action or omitting to take any action with respect thereto.
The Pledgor covenants that it will not, without the prior written consent of the
Collateral Agent which consent will be given at the written direction of the
Majority Noteholders, vote to enable, or take any other action to permit, any of
the Issuers to issue any Capital Stock, Equity Interests or other securities or
to sell or otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral or create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral, except for the security interests granted under
this Agreement. The Pledgor will defend the right, title and interest of the
Collateral Agent, the Senior Noteholders and the Convertible Noteholders in and
to the Pledged Collateral against the claims and demands of all Persons.
SECTION 13. Remedies Upon Default.
---------------------
(a) If any Event of Default shall have occurred and be continuing, the
Collateral Agent, the Senior Noteholders and the Convertible Noteholders shall
have, in addition to all other rights given by law, by this Agreement, the
Indenture or the Convertible Note Purchase Agreement, all of the rights and
remedies with respect to the Pledged Collateral of a secured party under the
Code as in effect
<PAGE>
11
in the State of New York at that time. If any Event of Default shall occur and
be continuing, the Collateral Agent may, without notice and at the written
direction of the Majority Noteholders, transfer or register, and the Pledgor
shall register or cause to be registered upon request therefor by the Collateral
Agent, the Pledged Collateral or any part thereof on the books of the Issuers
into the name of the Collateral Agent or the Collateral Agent's nominee(s), with
any indication that such Pledged Collateral is subject to the security interest
hereunder. In addition, if any Event of Default shall have occurred and be
continuing with respect to any Pledged Collateral that shall then be in or shall
thereafter come into the possession or custody of the Collateral Agent, the
Collateral Agent may at the written direction of the Majority Noteholders sell
or cause the same to be sold at any broker's board or at public or private sale,
in one or more sales or lots, at such price or prices as the Collateral Agent
may deem best, for cash or on credit or for future delivery, without assumption
of any credit risk. The purchaser of any or all Pledged Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance or right
of any kind whatsoever. Unless any of the Pledged Collateral threatens to
decline speedily in value or is or becomes of a type sold on a recognized
market, the Collateral Agent will give Pledgor reasonable notice of the time and
place of any public sale thereof, or of the time after which any private sale or
other intended disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of banks, insurance
companies, commercial finance companies, or other financial institutions
disposing of property similar to the Pledged Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be met if
such notice is mailed to the Pledgor as provided below in Section 19.1, at least
ten days before the time of the sale or disposition. Any other requirement of
notice, demand or advertisement for sale is, to the extent permitted by law,
waived. The Collateral Agent, any Senior Noteholder and any Convertible
Noteholder may, in its own name or in the name of a designee or nominee, buy any
of the Pledged Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and reasonable
attorneys' fees and disbursements) of, or incident to, the enforcement of any of
the provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Pledged Collateral.
(b) If the Collateral Agent shall determine to exercise its right to
sell at the written direction of the Majority Noteholders any or all of the
Pledged Stock pursuant to Section 13(a) above, and if in the opinion of counsel
for the Collateral Agent it is necessary, or if in the opinion of the Collateral
Agent it is advisable, to have the Pledged Stock or that portion thereof to be
sold, registered under the provisions of the Securities Act, Pledgor will cause
each Issuer to (i) execute and deliver, and cause its directors and officers to
execute and deliver, all at such Issuer's expense, all such instruments and
documents, and to do or cause to be done all such other acts and things as may
be necessary or, in the opinion of the Collateral Agent, advisable to register
such Pledged Stock under the provisions of the Securities Act, (ii) cause the
registration statement relating thereto to become effective and to remain
effective for a period of 180 days from the date of the first public offering of
such Pledged Stock, or that portion thereof to be sold and (iii) make all
amendments thereto and/or to the related prospectus that, in the opinion of the
Collateral Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Pledgor agrees to cause
each Issuer to comply with the provisions of the securities or "Blue Sky" laws
of any jurisdiction that the Collateral Agent shall designate for the sale of
the Pledged Stock and to make available to such Issuer's security holders, as
soon as practicable, an earnings statement (which need not be audited) that will
satisfy the provisions of Section 11(a) of the Securities Act. The Pledgor will
cause such Issuer to furnish to the Collateral Agent such number of copies as
the Collateral Agent may reasonably request of each preliminary and final
prospectus, to notify the Collateral Agent promptly of the happening of any
event as a result of which any then effective prospectus includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of then existing circumstances, and to cause the
<PAGE>
12
Collateral Agent to be furnished with such number of copies as the Collateral
Agent may request of such supplement to or amendment of such prospectus. The
Pledgor will cause each Issuer, to the extent permitted by law, to indemnify,
defend and hold harmless the Collateral Agent, the Senior Noteholders and the
Convertible Noteholders from and against all losses, liabilities, expenses or
claims (including reasonable legal expenses and the reasonable costs of
investigation) that the Collateral Agent, the Senior Noteholders and the
Convertible Noteholders may incur under the Securities Act or otherwise, insofar
as such losses, liabilities, expenses or claims arise out of or are based upon
any alleged untrue statement of a material fact contained in such registration
statement (or any amendment thereto) or in any preliminary or final prospectus
(or any amendment or supplement thereto), or arise out of or are based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the extent
that any such losses, liabilities, expenses or claims arise solely out of or are
based upon any such alleged untrue statement made or such alleged omission to
state a material fact included or excluded on the written direction of the
Collateral Agent. Pledgor will cause each Issuer to bear all costs and expenses
of carrying out its obligations hereunder.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after an Event of Default, Pledgor agrees that upon
the occurrence or existence of any Event of Default, the Collateral Agent may,
at the written direction of the Majority Noteholders, from time to time, attempt
to sell all or any part of the Pledged Collateral by means of a private
placement, restricting the prospective purchasers to those who will represent
and agree that they are purchasing for investment only and not for distribution.
In so doing, the Collateral Agent may solicit offers to buy the Pledged
Collateral, or any part of it, for cash, from a limited number of investors who
might be interested in purchasing the Pledged Collateral. The Pledgor
acknowledges and agrees that any such private sale may result in prices and
terms less favorable than if such sale were a public sale and, notwithstanding
such circumstances, agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner. The Collateral Agent shall be
under no obligation to delay a sale of any of the Pledged Collateral for the
period of time necessary to permit the Issuer to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer agrees to do so.
(d) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Collateral pursuant to this Section 13 valid
and binding and in compliance with any and all other applicable requirements of
law. The Pledgor further agrees that a breach of any of the covenants contained
in this Section 13 will cause irreparable injury to the Collateral Agent, the
Senior Noteholders and the Convertible Noteholders, that the Collateral Agent,
the Senior Noteholders and the Convertible Noteholders have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 13 shall be specifically enforceable against
the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Indenture or the
Convertible Note Purchase Agreement.
SECTION 14. Irrevocable Authorization and Instruction to the Issuer.
-------------------------------------------------------
The Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by such Issuer from the Collateral Agent that (i) states
that an Event of Default has occurred and is continuing and (ii) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that each Issuer shall be
fully protected in so complying.
SECTION 15. Fees and Expenses. The Pledgor will upon demand pay to
-----------------
the Collateral
<PAGE>
13
Agent the amount of any and all reasonable fees and expenses (including, without
limitation, the reasonable fees and disbursements of its counsel, of any
investment banking firm, business broker or other selling agent and of any other
experts and agents retained by the Collateral Agent) that the Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent, the Senior Noteholders
and the Convertible Noteholders hereunder or (iv) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 16. Note and Convertible Note Interest Absolute. All rights
-------------------------------------------
of the Collateral Agent, the Senior Noteholders and the Convertible Noteholders
and the security interests created hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Indenture, the
Convertible Note Purchase Agreement or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture or the
Convertible Note Purchase Agreement;
(c) any taking, exchange, surrender, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the Obligations; or
(d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Pledgor in respect of the Obligations
in the Indenture, the Convertible Note Purchase Agreement or of this
Agreement.
SECTION 17. Application of Proceeds. Upon the occurrence and during
-----------------------
the continuance of an Event of Default and a vote of acceleration by the
Majority Noteholders, the proceeds of any sale of, or other realization upon,
all or any part of the Pledged Collateral and any cash held shall be applied by
the Collateral Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization,
-----
including reasonable compensation to agents and counsel for the Collateral
Agent, and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, and any other unreimbursed fees and
expenses for which the Collateral Agent is to be reimbursed pursuant to Section
15 hereof;
second, to the ratable payment (based on the outstanding principal
------
amount of Senior Notes at the time of distribution) of accrued but unpaid
interest on the then outstanding Senior Notes;
third, to the ratable payment of accrued but unpaid principal of the
-----
then outstanding Senior Notes;
fourth, to the ratable payment of all other Obligations under the
------
Indenture, until such Obligations shall have been paid in full;
fifth, to the ratable payment (based on the outstanding principal
-----
amount of Convertible Notes at the time of distribution) of accrued but unpaid
interest on the then outstanding Convertible
<PAGE>
14
Notes;
sixth, to the ratable payment of unpaid principal of the then
-----
outstanding Convertible Notes;
seventh, to the ratable payment of all other Obligations under the
-------
Convertible Note Purchase Agreement, until such Obligations shall have been paid
in full; and
finally, to payment to the Pledgor or its successors or assigns, or as
-------
a court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 18. Uncertificated Securities. Notwithstanding anything to
-------------------------
the contrary contained herein, if any Pledged Stock (whether now owned or
hereafter acquired) is uncertificated Pledged Stock, the Pledgor shall promptly
notify the Collateral Agent, and shall promptly take all actions required to
perfect the security interest of the Collateral Agent under applicable law
(including, in any event, under Sections 8-301 and 8-307 of the New York Uniform
Commercial Code). The Pledgor further agrees to take such actions as the
Collateral Agent deems necessary or desirable to effect the foregoing and to
permit the Collateral Agent to exercise any of its rights and remedies
hereunder, and agrees to provide an Opinion of Counsel satisfactory to the
Pledgee with respect to any such pledge of uncertificated Pledged Stock promptly
upon request of the Collateral Agent.
SECTION 19. Miscellaneous Provisions.
------------------------
Section 19.1 Notices. All notices, approvals, consents or other
-------
communications required or desired to be given hereunder 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,
Centennial Communications Corp., 1610 Wynkoop Street, Suite 300, Denver,
Colorado 80202, Telecopier No.: (303) 571-5050, Attention: Chief Financial
Officer, with a copy to Holland & Hart LLP, 555 17th Street, Suite 3200, Denver,
Colorado 80202, Telecopier No.: (303) 295-8261, Attention: Michael S. Quinn,
Esq., or, in the case of the Collateral Agent, to: State Street Bank and Trust
Company, 777 Main Street, Hartford, Connecticut 06115, Attention: Corporate
Trust Department, Telecopier No.: (806) 986-7920.
All notices and communications (other than those sent to Senior
Noteholders) 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, when receipt acknowledged; 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 Senior Noteholder or Convertible
Noteholder 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, to the extent required
by the TIA. Failure to mail a notice or communication to a Senior Noteholder or
Convertible Noteholder or any defect in it shall not affect its sufficiency with
respect to other Senior Noteholders or Convertible Noteholders.
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.
<PAGE>
15
The Company or the Trustee, by notice to others may designate
additional or different addresses for subsequent notices or communications.
Section 19.2 Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Pledgor to the Collateral Agent to take
any action or omit to take any action under this Agreement, the Pledgor shall
deliver to the Collateral Agent an Officers' Certificate and/or an Opinion of
Counsel in accordance with the requirements of Section 10.04 of the Indenture.
Section 19.3 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor, any Issuer or any subsidiary thereof. No such pledge,
security or debt agreement may be used to interpret this Agreement.
Section 19.4 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
Section 19.5 No Recourse Against Others. No director, officer,
--------------------------
employee, stockholder or affiliate, as such, of the Pledgor or any Issuer shall
have any liability for any obligations of the Pledgor under this Agreement or
for any claim based on, in respect of or by reason of such obligations or their
creation. Each Senior Noteholder, by accepting a Note and each Convertible
Noteholder, by accepting a Convertible Note, waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Senior Notes and the Convertible Notes.
Section 19.6 Headings. The headings of the Articles and Sections of
--------
this Agreement have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 19.7 Counterpart Originals; Facsimile. This Agreement may be
--------------------------------
signed in two or more counterparts. Each signed copy shall be an original, but
all of them together represent one and the same agreement. Each counterpart may
be executed and delivered by telecopy, if such delivery is promptly followed by
the original manually signed copy sent by overnight courier this Agreement may
be executed by facsimile.
Section 19.8 Benefits of Agreement. Nothing in this Agreement,
---------------------
express or implied, shall give to any Person, other than the parties hereto and
their successors hereunder, and the Senior Noteholders and the Convertible
Noteholders of the Convertible Notes, any benefit or any legal or equitable
right, remedy or claim under this Agreement.
Section 19.9 Amendments, Waivers and Consents. The Pledgor and the
--------------------------------
Collateral Agent may amend or supplement this Agreement without the consent of
the Majority Noteholders:
(a) to cure any ambiguity, defect or inconsistency; and
(b) to make any change that would provide any additional rights or
benefits to the Senior Noteholders and Convertible Noteholders or that does not
adversely effect the legal rights hereunder of any Senior Noteholder or
Convertible Noteholder.
<PAGE>
16
Except as provided above, the Pledgor and the Collateral Agent may
amend or supplement this Agreement if the Collateral Agent has been directed in
writing to do so by the Majority Noteholders and neither the Collateral Agent
nor any Senior Noteholder or any Convertible Noteholder shall be deemed, by any
act, delay, indulgence, omission or otherwise, to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. Failure of the Collateral
Agent, any Senior Noteholder or any Convertible Noteholder to exercise, or delay
in exercising, any right, power or privilege hereunder shall not operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent, any
Senior Noteholder or any Convertible Noteholder of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy that
the Collateral Agent, such Senior Noteholder, or such Convertible Noteholder
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
Section 19.10 Interpretation of Agreement. Time is of the essence in
---------------------------
each provision of this Agreement of which time is an element. All terms not
defined herein, in the Indenture or in the Convertible Note Purchase Agreement
shall have the meaning set forth in the applicable Code, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Indenture or the Convertible Note Purchase Agreement and is
not dealt with herein with more specificity, the Indenture or the Convertible
Note Purchase Agreement, as may be the case, shall control with respect to the
subject matter of such term or provision. Any conflicts between the Indenture
and the Convertible Note Purchase Agreement shall be resolved in favor of the
Indenture. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant to determine the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
Section 19.11 Continuing Security Interest; Transfer of Senior Notes.
------------------------------------------------------
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall (i) remain in full force and effect until the payment in
full of all the Obligations and all the fees and expenses owing to the
Collateral Agent, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent, the Senior Noteholders, the
Convertible Noteholders and their respective successors, transferees and
assigns.
Section 19.12 Reinstatement. This Agreement shall continue to be
-------------
effective or be reinstated if at any time any amount received by the Collateral
Agent, any Senior Noteholder or any Convertible Noteholder in respect of the
Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent, any Senior Noteholder or any Convertible Noteholder upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
Section 19.13 Survival of Provisions. All representations,
----------------------
warranties and covenants of the Pledgor contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Pledgor of the Obligations under the
Indenture and the Convertible Note Purchase Agreement.
Section 19.14 Waivers. The Pledgor waives presentment and demand for
-------
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations,
<PAGE>
17
and all other notices to which the Pledgor might otherwise be entitled, except
as otherwise expressly provided herein, in the Indenture or the Convertible Note
Purchase Agreement.
Section 19.15 Authority of the Collateral Agent.
---------------------------------
(a) The Collateral Agent shall have and be entitled to exercise all
powers hereunder that are specifically granted to the Collateral Agent by the
terms hereof, together with such powers as are reasonably incident thereto. The
Collateral Agent may perform any of its duties hereunder or in connection with
the Pledged Collateral by or through agents or employees and shall be entitled
to retain counsel and to act in reliance upon the advice of counsel concerning
all such matters. Neither the Collateral Agent nor any director, officer,
employee, attorney or agent of the Collateral Agent shall be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Collateral Agent and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. The Pledgor agrees to
indemnify and hold harmless the Collateral Agent, the Senior Noteholders, the
Convertible Noteholders and any other Person from and against any and all costs,
expenses (including the reasonable fees and disbursements of counsel (including,
the allocated costs of inside counsel)), claims and liabilities incurred by the
Collateral Agent, the Senior Noteholders, the Convertible Noteholders or such
Person hereunder, unless such claim or liability shall be due to willful
misconduct or gross negligence on the part of the Collateral Agent, the Senior
Noteholders, the Convertible Noteholders or such Person.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Collateral Agent under this Agreement with respect to any action taken by
the Collateral Agent or the exercise or non-exercise by the Collateral Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as among the
Collateral Agent, the Senior Noteholders and the Convertible Noteholders, be
governed by the Indenture, the Convertible Note Purchase Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Collateral Agent and the Pledgor, the Collateral Agent shall
be conclusively presumed to be acting as agent for the Senior Noteholders and
the Convertible Noteholders with full and valid authority so to act or refrain
from acting, and the Pledgor shall not be obligated or entitled to make any
inquiry respecting such authority.
Section 19.16 Resignation or Removal of the Collateral Agent. Until
----------------------------------------------
such time as the Obligations shall have been paid in full, the Collateral Agent
may at any time, by giving written notice to the Pledgor, Senior Noteholders and
Convertible Noteholders, resign and be discharged of the responsibilities hereby
created, such resignation to become effective upon (i) the appointment of a
successor Collateral Agent and (ii) the acceptance of such appointment by such
successor Collateral Agent. As promptly as practicable after the giving of any
such notice, the Majority Noteholders shall appoint a successor Collateral
Agent, which successor Collateral Agent shall be reasonably acceptable to the
Pledgor. If no successor Collateral Agent shall be appointed and shall have
accepted such appointment within 90 days after the Collateral Agent gives the
aforesaid notice of resignation, the Collateral Agent may apply to any court of
competent jurisdiction to appoint a successor Collateral Agent to act until such
time, if any, as a successor shall have been appointed as provided in this
Section 19.16. Any successor so appointed by such court shall immediately and
without further act be superseded by any successor Collateral Agent appointed by
the Majority Noteholders, as provided in this Section 19.16. Simultaneously
with its replacement as Collateral Agent hereunder, the Collateral Agent so
replaced shall deliver to its successor all documents, instruments, certificates
and other items of whatever kind (including, without limitation, the
certificates and instruments evidencing the Pledged
<PAGE>
18
Collateral and all instruments of transfer or assignment) held by it pursuant to
the terms hereof. The Collateral Agent that has resigned shall be entitled to
fees, costs and expenses to the extent incurred or arising, or relating to
events occurring, before its resignation or removal.
Section 19.17 Release; Termination of Agreement.
---------------------------------
(a) Subject to the provisions of Section 19.12 hereof, this Agreement
shall terminate (i) upon full and final payment and performance of the
Obligations (and upon receipt by the Collateral Agent of the Pledgor's written
certification that all such Obligations have been satisfied) and payment in full
of all fees and expenses owing by the Pledgor to the Collateral Agent or (ii) on
the day after the first anniversary of the Legal Defeasance of all of the
Obligations pursuant to Section 8.02 of the Indenture (other than those
surviving Obligations specified therein unless the Obligations in respect of the
Convertible Notes are still outstanding in which case clause (i) hereof shall
apply). At such time, the Collateral Agent shall, at the request of the
Pledgor, reassign and redeliver to the Pledgor all of the Pledged Collateral
hereunder that has not been sold, disposed of, retained or applied by the
Collateral Agent in accordance with the terms hereof. Such reassignment and
redelivery shall be without warranty by or recourse to the Collateral Agent,
except as to the absence of any prior assignments by the Collateral Agent of its
interest in the Pledged Collateral, and shall be at the expense of the Pledgor.
(b) The Pledgor agrees that it will not, except as permitted by the
Indenture and the Convertible Note Purchase Agreement, sell or dispose of, or
grant any option or warrant with respect to, any of the Pledged Collateral;
provided, however, that if the Pledgor shall sell any of the Pledged Collateral
in accordance with the terms of the Indenture, including the requirement that
Pledgor apply the Net Proceeds of such sale in accordance with Section 4.10 of
the Indenture, the Collateral Agent shall, at the request of the Pledgor and
subject to requirements of Section 10.03 of the Indenture, release the Pledged
Collateral subject to such sale free and clear of the Lien and security interest
under this Agreement.
Section 19.18 Final Expression. This Agreement, together with any
----------------
other agreement executed in connection herewith, is intended by the parties as a
final expression of their Agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof.
Section 19.19 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
----------------------------------------------------
JURY TRIAL; WAIVER OF DAMAGES.
- -----------------------------
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS
OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR,
THE COLLATERAL AGENT, THE SENIOR NOTEHOLDERS AND THE CONVERTIBLE NOTEHOLDERS
IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO THE CONFLICTS OF LAWS PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.
(ii) EXCEPT AS PROVIDED IN THE NEXT PARAGRAPH AND IN PARAGRAPH (vi)
BELOW, THE PLEDGOR AND THE COLLATERAL AGENT AGREE THAT ALL DISPUTES BETWEEN OR
AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT,
<PAGE>
19
EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK, BUT THE PLEDGOR AND THE COLLATERAL AGENT, ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF NEW YORK, NEW YORK. THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS.
(iii) THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL, IN ITS OWN
NAME OR IN THE NAME AND ON BEHALF OF ANY SENIOR NOTEHOLDER AND ANY CONVERTIBLE
NOTEHOLDER, HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION
REASONABLY SELECTED IN GOOD FAITH TO ENABLE THE COLLATERAL AGENT TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE COLLATERAL AGENT. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE COLLATERAL AGENT TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
COLLATERAL AGENT. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(iv) THE PLEDGOR, THE COLLATERAL AGENT, THE SENIOR NOTEHOLDERS AND
THE CONVERTIBLE NOTEHOLDERS EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING
OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTES RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
(v) THE PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
PLEDGOR AT ITS ADDRESS SET FORTH IN SECTION 11.02 OF THE INDENTURE AND SECTION K
OF THE CONVERTIBLE NOTE PURCHASE AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE
FIVE (5) BUSINESS DAYS AFTER SUCH MAILING.
(vi) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT,
ANY SENIOR NOTEHOLDER AND ANY CONVERTIBLE NOTEHOLDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE PLEDGOR IN ANY OTHER JURISDICTION.
(vii) THE PLEDGOR HEREBY AGREES THAT NEITHER THE COLLATERAL AGENT NOR
ANY SENIOR NOTEHOLDER OR ANY CONVERTIBLE NOTEHOLDER SHALL HAVE ANY LIABILITY TO
THE PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT OR
<PAGE>
20
OTHERWISE) FOR LOSSES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OF A COURT THAT IS BINDING ON THE COLLATERAL AGENT OR SUCH SENIOR
NOTEHOLDER OR SUCH CONVERTIBLE NOTEHOLDER, AS THE CASE MAY BE, THAT SUCH LOSSES
WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE COLLATERAL AGENT OR SUCH
SENIOR NOTEHOLDER OR SUCH CONVERTIBLE NOTEHOLDERS, AS THE CASE MAY BE,
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(viii) THE PLEDGOR WAIVES ALL RIGHTS OF NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY THE COLLATERAL AGENT, ANY SENIOR NOTEHOLDER AND
ANY CONVERTIBLE NOTEHOLDER OF ITS RIGHTS DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT AND A VOTE OF ACCELERATION BY THE MAJORITY NOTEHOLDERS TO REPOSSESS THE
COLLATERAL WITH JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON THE
COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS. THE PLEDGOR WAIVES THE
POSTING OF ANY BOND OTHERWISE REQUIRED OF THE COLLATERAL AGENT, ANY SENIOR
NOTEHOLDER OR ANY CONVERTIBLE NOTEHOLDER IN CONNECTION WITH ANY JUDICIAL PROCESS
OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY, ATTACH OR LEVY UPON COLLATERAL
OR OTHER SECURITY FOR THE OBLIGATIONS, TO ENFORCE ANY JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT, ANY SENIOR NOTEHOLDER OR ANY
CONVERTIBLE NOTEHOLDER, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION THIS AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR, THE COLLATERAL AGENT, THE
SENIOR NOTEHOLDERS AND THE CONVERTIBLE NOTEHOLDERS.
Section 19.20 Acknowledgments. The Pledgor hereby acknowledges that:
---------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement;
(b) neither the Collateral Agent nor any Senior Noteholder or any
Convertible Note holder has any fiduciary relationship to the Pledgor, and
the relationship between the Collateral Agent, the Senior Noteholders and
the Convertible Noteholders, on the one hand, and the Pledgor, on the other
hand, is solely that of a secured party and a creditor; and
(c) no joint venture exists among the Senior Noteholders, the
Convertible Noteholders or among the Pledgor, the Senior Noteholders and
the Convertible Noteholders.
[Signature Page Follows]
<PAGE>
21
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have each
caused this Agreement to be duly executed and delivered as of the date first
above written.
PLEDGOR
CENTENNIAL COMMUNICATIONS CORP.,
a Delaware corporation
By: /s/ Bernard G. Dvorak
---------------------
Name: Bernard G. Dvorak
Title: Chief Financial Officer
COLLATERAL AGENT:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Philip Kane, Jr.
----------------
Name: Philip Kane, Jr.
Title: Vice President
<PAGE>
SCHEDULE I
----------
PLEDGED SHARES OF DOMESTIC ISSUERS
----------------------------------
<TABLE>
<CAPTION>
Number of Pledged Share Certificate Percentage of
----------------- ----------------- -------------
Issuer Shares Number Outstanding
- ------ ------ ------ -----------
<S> <C> <C> <C>
SMR Direct USA, Inc. 100 C-1 100%
</TABLE>
<PAGE>
SCHEDULE II
-----------
PLEDGED SHARES OF FOREIGN ISSUERS
---------------------------------
<TABLE>
<CAPTION>
Number of Pledged Share Certificate Percentage of
Issuers ----------------- ----------------- -------------
- ------- Shares Number Outstanding
------ ------ -----------
<S> <C> <C> <C>
SMR Direct Cayman 66 003 66%
Corp.
Centennial Cayman Corp. 66 002 66%
</TABLE>
<PAGE>
SCHEDULE III
------------
List of Excluded Stock
----------------------
<TABLE>
<CAPTION>
Issuers Number of Pledged Share Certificate Percentage of
- ------- ----------------- ----------------- -------------
Shares Number Outstanding
------ ------ -----------
<S> <C> <C> <C>
SMR Direct Cayman 2 002 34%
Corp. 32 004
Centennial Cayman 2 001 34%
Corp. 32 003
</TABLE>
<PAGE>
EXHIBIT A
STOCK PLEDGE AGREEMENT SUPPLEMENT
---------------------------------
STOCK PLEDGE AGREEMENT SUPPLEMENT, dated as of January ___, 1998 (this
"Supplement"), made by CENTENNIAL COMMUNICATIONS CORP. (the "Pledgor") in favor
---------- -------
of State Street Bank and Trust Company, as agent (in such capacity, the
"Collateral Agent") for the holders (the "Senior Noteholders") of the Pledgor's
- ----------------- ------------------
14% Senior Discount Notes due 2005 and for the holders (the "Convertible
-----------
Noteholders") of the Pledgor's 9% Convertible Subordinated Notes due 2006.
- -----------
1. Reference is hereby made to that certain Pledge Agreement, dated
as of January, 1998 (as amended, supplemented or otherwise modified as of
the date of this Supplement, the "Pledge Agreement"), made by the Pledgor
----------------
in favor of the Collateral Agent. Unless otherwise defined in this
Supplement, capitalized terms shall have the meanings given them in the
Pledge Agreement.
2. The Pledgor hereby confirms and reaffirms the security interest in
the Collateral granted to the Collateral Agent, for the ratable benefit of
the Senior Noteholders and the Convertible Noteholders, under the Pledge
Agreement and, as additional collateral security for the prompt and
complete payment when and as due (whether at stated maturity, by
acceleration or otherwise) of the Obligations, the Pledgor hereby delivers
to the Collateral Agent, for the ratable benefit of the Senior Noteholders
and the Convertible Noteholders, the shares of Capital Stock of [INSERT
NAME OF ISSUER] (the "New Issuer") listed in Schedule I to this Supplement,
----------
together with all stock certificates, options, or rights of any nature
whatsoever (other than Excluded Stock) that may be issued or granted by the
New Issuer in respect of such stock while the Pledge Agreement, as
supplemented by this Supplement, is in force (the "Additional Pledged
------------------
Stock" and, as used in the Pledge Agreement as supplemented by this
Supplement, "Pledged Stock" shall be deemed to include the Additional
-------------
Pledged Stock) and hereby grants to the Collateral Agent, for the ratable
benefit of the Banks, a valid and duly perfected first priority security
interest in the Additional Pledged Stock and all Proceeds thereof.
3. The Pledgor hereby represents and warrants that all of the
representations and warranties contained in Section 5 of the Pledge
Agreement as supplemented by this Supplement are true and correct on the
date of this Supplement.
4. This Supplement is supplemental to the Pledge Agreement, forms a
part thereof and is subject to the terms thereof and the Pledge Agreement
is hereby supplemented as provided in this Supplement. Without limiting
the foregoing, [Schedule I] [Schedule II] to the Pledge Agreement shall
hereby be deemed to include each item listed in Schedule I to this
Supplement and all references in the Pledge Agreement to (i) ["Domestic
--------
Issuer"] ["Foreign Issuer"] and "Issuers" shall include the New Issuer, and
------ -------------- -------
(ii) the "Pledge Agreement" shall mean the Pledge Agreement as supplemented
----------------
by this Supplement and any other supplements entered into by the Pledgor.
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Supplement to be duly
executed and delivered on the date first set forth above.
CENTENNIAL COMMUNICATIONS CORP.
By: ---------------------------
Name:
Title:
<PAGE>
SCHEDULE I TO
STOCK PLEDGE AGREEMENT SUPPLEMENT
---------------------------------
Description of Additional Pledged Stock
---------------------------------------
<TABLE>
<S> <C> <C> <C>
Number of Pledged Share Certificate Percentage of
----------------- ----------------- -------------
Issuer Shares Number Outstanding
- ------ ------ ------ -----------
</TABLE>
<PAGE>
Exhibit 4.7
EXECUTION COPY
ESCROW AGREEMENT
Morgan Stanley, Dean Witter, Discover & Co., as escrow agent (the "Escrow
Agent") and Centennial Communications Corp. ("CCC") enter into this Escrow
Agreement (this "Agreement") as of January 15, 1998.
A. Defined terms used in this Agreement and not otherwise defined herein
shall have the meanings indicated in the Indenture (the "Indenture") dated
January 15, 1998 between CCC and State Street Bank and Trust Company as trustee
(the "Trustee"), a copy of which is attached as Annex I hereto or the Purchase
Agreement dated the date hereof between the Company and the Purchaser set forth
therein (the "Convertible Note Purchase Agreement") a copy of which is attached
as Annex II hereto.
B. As provided in the Indenture and the Convertible Note Purchase
Agreement, an aggregate amount of $28,600,000 of the proceeds (the "Escrow
Proceeds") from the issuance by the Company of the Notes and the Convertible
Notes (as defined in the Indenture) will be deposited on the date hereof in an
account to be established pursuant to this Agreement for the benefit of CCC.
Subject to the terms and conditions of this Agreement, funds in the Escrow Fund
(as defined below) shall be released and paid over to CCC upon the Escrow
Agent's receipt of a certificate in the form of Exhibit A or Exhibit B attached
hereto. The holders of the Notes, the Convertible Notes and CCC have agreed to
establish the Escrow Fund with the Escrow Agent pursuant to the terms set forth
herein, in the Indenture and in the Convertible Notes Purchase Agreement.
NOW THEREFORE, the Escrow Agent, and CCC in consideration of the covenants
herein contained agree as follows:
1. Escrow Agent. The Escrow Agent, having as of the date of this
------------
Agreement an office at 555 California Street, San Francisco, California 94104,
hereby agrees to serve as the Escrow Agent hereunder.
2. Escrow Fund. The Escrow Agent hereby agrees to deposit the
-----------
Escrow Proceeds received by it on the date hereof into an escrow fund (the
"Escrow Fund") to be held in the custody of the Escrow Agent separate and apart
from all other funds and accounts of the holders of the Notes, the holders of
the Convertible Notes, CCC or the Escrow Agent.
3. Escrow Fund Investments. The Escrow Proceeds delivered to the
-----------------------
Escrow Agent for deposit in the Escrow Fund shall be invested by the Escrow
Agent in such Cash Equivalents (as defined in Schedule I) as CCC shall specify
in writing. Such investment shall be deemed to be part of the Escrow Fund. The
Escrow Agent shall not be liable for any loss resulting from the making or
retention of any investment in accordance with this Agreement.
<PAGE>
4. Release or Return of Escrow Proceeds. The escrow hereby created
------------------------------------
shall be released in whole or in part upon the receipt by the Escrow Agent of a
certificate of the Chief Executive Officer or Chief Financial Officer of CCC in
the form of Exhibit A or Exhibit B attached hereto (the "Escrow Certificates")
(the receipt of such certificate being referred to as, the "Escrow Release
Condition").
Upon the occurrence of the Escrow Release Condition, the Escrow Agent shall
wire transfer the amount specified in the Escrow Certificate, in accordance with
wire transfer instructions then provided by CCC.
5. Termination. This Agreement shall terminate on the complete
-----------
distribution of the funds in the Escrow Account in accordance with the terms of
this Agreement; provided that if at any time after the first anniversary of the
date hereof the amount in the Escrow Fund is less than $3,000,000, this
Agreement shall automatically terminate (each such occurrence, a "Termination
Event"). Within five Business Days of the occurrence of a Termination Event, the
Escrow Agent shall give CCC written notice of the occurrence of such event,
specify any amounts owed to the Escrow Agent that will be subtracted from the
Escrow Fund pursuant to this Agreement and shall request wire transfer
instructions from CCC. Upon receipt of such wire transfer instruction from CCC,
the Escrow Agent shall promptly distribute all remaining funds in the Escrow
Account to CCC.
Except as provided in this Agreement, the Escrow Agent shall not release
any funds without the consent of the Majority Noteholders (as defined in the
Collateral Pledge Agreement dated as of the date hereof by CCC in favor of the
Trustee as collateral agent for the benefit of the holders of the Notes and the
holders of the Convertible Notes).
After the full amount of Escrow Fund has been released or returned, the
Escrow Agent shall have no further liability to CCC.
6. Liability of Escrow Agent Limited. The acceptance by the Escrow
---------------------------------
Agent of its duties under this Agreement is subject to the following terms and
conditions, which the parties to this Agreement agree shall govern and control
with respect to its rights, duties, liabilities, and immunities:
a. The Escrow Agent shall be protected in acting upon any written
notice, request, waiver, consent, receipt, or other paper or document furnished
to it, not only as to its due execution and validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information
therein contained which the Escrow Agent in good faith believes to be genuine
and what it purports to be.
b. The Escrow Agent shall not be liable for any error of judgment, or
for any act done or steps taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection herewith, except its own gross negligence or willful misconduct and
CCC
2
<PAGE>
shall indemnify and hold the Escrow Agent harmless against any and all claims,
liability, loss, costs, and expenses (including attorney's fees and court costs)
arising out of the performance of this Agreement except as a result of the
Escrow Agent's lack of good faith, gross negligence or willful misconduct. In
the event that such costs or expenses are incurred by the Escrow Agent, the
Escrow Agent shall be entitled to reimburse itself out of the Escrow Funds.
c. The Escrow Agent may consult with, or obtain advice from, legal
counsel in the event of any question as to any of the provisions hereof or its
duties hereunder, and it shall incur no liability and shall be fully protected
in acting in good faith in accordance with the opinion and instructions of such
counsel.
d. The Escrow Agent is only a stake holder with respect to any funds
deposited hereunder, and in the event of a dispute among the parties hereto, the
Escrow Agent may continue to hold the money from the Escrow Fund until joint
instructions from the Majority Noteholders and CCC or an order of court of
jurisdiction directs disposition of the money; or the Escrow Agent may, at the
expense of the CCC, deposit by appropriate procedure the money into court.
7. Escrow Agent's Duties. The Escrow Agent shall perform such duties
---------------------
in the administration of this Agreement, and only such duties, as are
specifically set forth in this Agreement.
8. Notices. All notices, requests, demands or instructions to CCC, the
-------
holders of the Notes, the holders of the Convertible Notes or to the Escrow
Agent which are given hereunder shall be in writing and shall be deemed
sufficiently given if sent by registered or certified mail, postage prepaid or
delivered during the business hours as follows:
To CCC: Centennial Communications Corp.
1610 Wynkoop Street
Suite 300
Denver, CO 80202
Attention: Chief Financial Officer
To Escrow Agent: Morgan Stanley, Dean Witter,
Discover & Co.
555 California Street
San Francisco, CA 94104
Attention: James Mahon
To the holders of the Notes: At the address shown on the register
kept by the Registrar (as defined in the
Indenture)
3
<PAGE>
To the holders of the Convertible Notes: At the address indicated on
the Schedule of Purchasers
attached to the Convertible Note
Purchase Agreement
In addition, copies of all such notices, requests, demands or instructions
shall be sent to the Trustee (as defined in the Indenture) pursuant to the terms
set forth in the Indenture.
9. Escrow Agent Compensation. CCC shall pay, when billed, the fees of
-------------------------
the Escrow Agent for its services under this Agreement as set forth in the
schedule of fees attached hereto as Exhibit C. CCC also agrees to pay, when
billed, the Escrow Agent's reasonable cost and expenses, including the fees and
expenses of counsel to the Escrow Agent incurred in connection with its duties
hereunder. To secure payment of the Escrow Agent's compensation under this
Agreement, the Escrow Agent shall have a lien (legal and equitable) prior to
CCC's on all money or property held under this Agreement by the Escrow Agent.
10. Successors Assigns. The rights and obligations of the parties to this
------------------
Agreement shall inure to and be binding upon their respective successors and
assigns.
11. Severability. If any one or more of the covenants or agreements
------------
provided for this Agreement on the part of the parties hereto to be performed
should be determined by a court of competent jurisdiction to be contrary to law,
such covenant or agreement shall be deemed and construed to be severable from
the remaining covenants and agreements herein contained and shall in no way
affect the validity of the remaining provisions of this Agreement.
12. Governing Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of Connecticut and any suits and actions
arising out of this Agreement shall be instituted in a court of competent
jurisdiction in said State.
13. Counterparts; Facsimile. This Agreement may be executed in several
-----------------------
counterparts, each of which shall be deemed to be an original; but such
counterparts together shall constitute one and the same instrument. This
Agreement may be executed and delivered by facsimile.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed as of the day and year
shown above.
MORGAN STANLEY, DEAN WITTER,
DISCOVER & CO., as Escrow Agent
By: /s/ James J. Mahon
---------------------------
Title: Managing Director
------------------------
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Bernard G. Dvorak
---------------------------
Title: Chief Financial Officer
------------------------
5
<PAGE>
EXHIBIT A
FORM OF ESCROW CERTIFICATE
Pursuant to Section 4.20 of the Indenture dated as of January 15, 1998
between Centennial Communications Corp. (the "Company") and State Street Bank
and Trust Company, as trustee (the "Indenture") and Section 4 of the Escrow
Agreement dated as of January 15, 1998 between the Company and Morgan Stanley,
Dean Witter, Discover & Co. (the "Escrow Agreement"), the undersigned hereby
requests that $____ be delivered to the Company at ____________ Account
#____________ in order to fund the acquisition of [Company Name and Location]
(the "Acquisition Target").
The undersigned hereby certifies the following:
1. A due diligence report of local counsel and U.S. counsel, as
appropriate, to the Company in respect of the Acquisition Target
has been delivered to the Board for its review.
2. An audit of the financial statements for the most recent fiscal
period practicable of the Acquisition Target has been performed by
or reviewed by the Company's independent public accountants and a
report of such audit and/or review has been delivered to the Board
for its review.
3. The Board of Directors of the Company (the "Board") has duly
authorized and approved the acquisition of the Acquisition Target.
4. The Acquisition Target will be a direct or indirect subsidiary of
the Cayman Entities (as defined in the Indenture) or the Company
as required by Section 4.13 of the Indenture and will be a
"Restricted Subsidiary" (as defined in the Indenture).
6
<PAGE>
EXHIBIT B
FORM OF ESCROW CERTIFICATE
Pursuant to Section 4.20 of the Indenture dated as of January 15, 1998
between Centennial Communications Corp. (the "Company") and State Street Bank
and Trust Company, as trustee (the "Indenture") and Section 4 of the Escrow
Agreement dated as of January 15, 1998 between the Company and Morgan Stanley,
Dean Witter, Discover & Co. (the "Escrow Agreement"). The undersigned hereby
requests that $_____ be delivered to the Company at ____________ Account
#____________ in connection with (each of 1, 2 and 3 a "Transaction"):
1. the funding of Permitted Investments (as defined in the
Indenture);
2. funds required for the acquisition of channels, spectrum and other
assets related to the operation of a Permitted Business (as
defined in the Indenture); or
3. the funding of buildout in connection with the acquisition of a
Permitted Business, a Permitted Investment or the acquisition of
channels, spectrum and other assets related to the operation of a
Permitted Business or the funding of operating losses, as
permitted in the Indenture, in connection with a Permitted
Business.
The undersigned hereby certifies that the Board of Directors has approved
the entrance into the Transaction by the Company.
The undersigned hereby further certifies that the assets and/or services
which comprise the Transaction shall be held in an entity that is a direct or
indirect subsidiary of the Cayman Entities or the Company (as defined in the
Indenture).
7
<PAGE>
EXHIBIT C
SCHEDULE OF FEES
<PAGE>
MORGAN STANLEY EXTERNAL MEMORANDUM
- -------------------------------------------------------------------------------
TO: Kari Maier - Centennial Communications Corp. DATE: 1-15-98
Billi McCullough - Holland & Hart LLP
FROM: Michael Grunwald
SUBJECT: MANAGEMENT FEES FOR CENTENNIAL COMMUNICATIONS CORP. ESCROW ACCOUNT
- -------------------------------------------------------------------------------
There will be no charge for setting up the Centennial Communications Corp.
Escrow Account.
The ongoing management fee will be charged at a rate of 10 Basis Points.
<PAGE>
ANNEX I
INDENTURE
<PAGE>
ANNEX II
CONVERTIBLE NOTE PURCHASE AGREEMENT
<PAGE>
SCHEDULE I
CASH EQUIVALENTS
Cash Equivalent 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 270 days
from the date of acquisition, (iii) certificates of deposit and eurodollar time
deposits maturing not more than 270 days from the date of acquisition, bankers'
acceptances with maturities not exceeding 270 days, overnight bank deposits and
money market deposit accounts, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bankwatch,
Inc. voting of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described 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 not more than 270 days from the date of acquisition.
<PAGE>
Exhibit 10.1
PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 8, 1995, between Centennial
Communications Corp., a Delaware corporation (the "Company"), and the Persons
listed on the Schedule of Purchasers attached hereto (collectively referred to
herein as the "Purchasers" and individually as a "Purchaser"). Except as
otherwise indicated herein, capitalized terms used herein are defined in Section
6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
-------------------------
1A. Authorization of the Common Stock. The Company shall authorize the
---------------------------------
issuance and sale to the Purchasers of 297 shares of its common stock, par value
$.01 per share (the "Common Stock").
1B. Purchase and Sale of the Common Stock. At the Closing, the Company
-------------------------------------
shall sell to each Purchaser and, subject to the terms and conditions set forth
herein, each Purchaser shall purchase from the Company, the number of shares of
Common Stock set forth opposite such Purchaser's name on the Schedule of
Purchasers attached hereto at a price of $10,000.00 per share. The sale of
Common Stock to each Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the separate purchases and sales of the
-----------
Common Stock (the "Closing") shall take place at the offices of The Centennial
Funds, 1999 Broadway, Suite 2100, Denver, Colorado 80202 at 10:00 a.m. on the
date of this Agreement, or at such other place or on such other date as may be
mutually agreeable to the Company and each Purchaser. At the Closing, the
Company shall deliver to each Purchaser stock certificates evidencing the Common
Stock to be purchased by such Purchaser, registered in such Purchaser's or its
nominee's name, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds to an
account to be designated by the Company.
Section 2. Conditions of Each Purchaser's Obligation at the Closing. The
--------------------------------------------------------
obligation of each Purchaser to purchase and pay for the Common Stock at the
Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties. The representations and warranties
------------------------------
contained in Section 5 hereof shall be true and correct in all material respects
at and as of the Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein, and the Company shall
have performed in all material respects all of the covenants required to be
performed by it hereunder prior to the Closing.
<PAGE>
2B. Bylaws and Charter. The Company's bylaws and Certificate of
------------------
Incorporation as previously provided to each Purchaser shall be in full force
and effect as of the Closing and shall not have been amended or modified.
2C. Registration Agreement. The Company and the Purchasers shall have
----------------------
entered into a registration agreement in form and substance as set forth in
Exhibit A attached hereto (the "Registration Agreement"), and the Registration
Agreement shall be in full force and effect as of the Closing.
2D. Stockholders Agreement. The Company and each Purchaser shall have
----------------------
entered into a stockholders agreement in form and substance as set forth in
Exhibit B attached hereto (the "Stockholders Agreement"), and the Stockholders
Agreement shall be in full force and effect as of the Closing.
2E. Sale of Common Stock to Each Purchaser. The Company shall have
--------------------------------------
sold to each Purchaser the Common Stock to be purchased by it hereunder at the
Closing and shall have received payment therefore in full.
2F. Blue Sky Clearance. The Company shall have made all filings
------------------
under applicable state securities laws necessary to consummate the issuance of
the Common Stock pursuant to this Agreement in compliance with such laws.
2G. Closing Documents. The Company shall have delivered to each
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating
that the conditions specified in Section 1 and paragraphs 2A through 2F,
inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement, Stockholders
Agreement and each of the other agreements contemplated hereby, the
issuance and sale of the Common Stock, and the consummation of all other
transactions contemplated by this Agreement;
(iii) copies of the Certificate of Incorporation and the Company's
bylaws, each as in effect at the Closing; and
(iv) copies of all governmental and other consents, approvals and
filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings).
2H. Proceedings. All corporate and other proceedings taken or
-----------
required to be taken by the Company in connection with the transactions
contemplated hereby to be
2
<PAGE>
consummated at or prior to the Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to each Purchaser and its
special counsel.
2I. Waiver. Any condition specified in this Section 2 may be waived
------
if consented to by each Purchaser; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing executed by
such Purchaser.
Section 3. Covenants.
---------
3A. Financial Statements and Other Information. The Company shall
------------------------------------------
deliver to each Purchaser so long as such Purchaser holds at least 25% of the
Common Stock purchased by such Purchaser pursuant to this Agreement:
(i) as soon as available but in any event within 30 days after the
end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period
from the beginning of the fiscal year to the end of such month, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each
case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal
year-end adjustments;
(ii) accompanying the financial statements referred to in
subparagraph (i) above, an Officer's Certificate stating that neither the
Company nor any of its Subsidiaries is in default under any of its material
agreements or, if any such default exists, specifying the nature and period
of existence thereof and what actions the Company and its Subsidiaries have
taken and propose to take with respect thereto;
(iii) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such
fiscal year, setting forth in each case comparisons to the annual budget
and to the preceding fiscal year, all prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
(a) with respect to the consolidated portions of such statements, an
opinion of an independent accounting firm of recognized national standing,
(b) a certificate from such accounting firm, addressed to the Company's
board of directors, stating that in the course of its examination nothing
came to its attention that caused it to believe that there was any default
by the Company or any Subsidiary in the fulfillment of or compliance with
any of the terms, covenants, provisions or conditions of any material
agreement to which the Company or any Subsidiary is a party or, if such
accountants have reason to believe any such default by the Company or any
Subsidiary exists, a certificate specifying the nature and
3
<PAGE>
period of existence thereof, and (c) a copy of such firm's annual
management letter to the board of directors;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(v) at least 30 days but not more than 90 days prior to the
beginning of each fiscal year, a five-year strategic plan and an annual
budget prepared on a monthly basis for the Company and its Subsidiaries for
such fiscal year (displaying anticipated statements of income and cash
flows and balance sheets), and promptly upon preparation thereof any other
significant budgets prepared by the Company and any revisions of such
annual or other budgets, and within 30 days after any monthly period in
which there is a material adverse deviation from the annual budget, an
Officer's Certificate explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto;
(vi) promptly (but in any event within five business days) after the
discovery or receipt of notice of any default under any material agreement
to which it or any of its Subsidiaries is a party or any other material
adverse event or circumstance affecting the Company or any Subsidiary
(including the filing of any material litigation against the Company or any
Subsidiary or the existence of any dispute with any Person which involves a
reasonable likelihood of such litigation being commenced), an Officer's
Certificate specifying the nature and period of existence thereof and what
actions the Company and its Subsidiaries have taken and propose to take
with respect thereto;
(vii) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders and
copies of all registration statements and all regular, special or periodic
reports which it files, or (to its knowledge) any of its officers or
directors file with respect to the Company, with the Securities and
Exchange Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's businesses; and
(viii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this paragraph 3A may reasonably
request.
To the best of the Company's knowledge, each of the financial statements
referred to in subparagraph (i) and (iii) shall be true and correct in all
material respects as of the dates and for the periods stated therein, subject in
the case of the unaudited financial statements to
4
<PAGE>
changes resulting from normal year-end audit adjustments (none of which would,
alone or in the aggregate, be materially adverse to the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole).
For purposes of this Agreement and the Registration Agreement, all
holdings of Common Stock by Persons who are Affiliates of each other shall be
aggregated for purposes of meeting any threshold tests under this Agreement and
the Registration Agreement. "Affiliate" means any Person which controls, is
controlled by or is under common control with another Person and for purposes of
this Agreement and the Registration Agreement Persons which have received
distributions of securities from a partnership holding such securities.
3B. Compliance with Agreements. The Company shall perform and
--------------------------
observe (i) all of its obligations to each holder of the Common Stock set forth
in the Certificate of Incorporation and the Company's bylaws, and (ii) all of
its obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
3C. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
3D. Observation Rights. If a Purchaser is not represented on the
------------------
Company's Board of Directors, the Company shall give a representative of
Purchaser copies of all notices, minutes, consents, and other material that it
provides to its directors; provided, however, that the Company reserves the
right to exclude such representative from access to any material or portion
thereof if the Company believes upon advice of counsel that such exclusion is
reasonably necessary to preserve the attorney-client privilege or to protect
highly confidential proprietary information. Upon reasonable notice and at a
scheduled meeting of the Board or such other time, if any, as the Board may
determine in its sole discretion, such representative may address the Board of
Directors with respect to Purchaser's concerns regarding significant business
issues facing the Company.
5
<PAGE>
3E. First Refusal Rights.
--------------------
(i) Except for the issuance of Common Stock (a) to the Company's
employees, (b) in connection with the acquisition of another business, or (c)
pursuant to a public offering registered under the Securities Act, if the
Company authorizes the issuance or sale of any shares of Common Stock or any
securities containing options or rights to acquire any shares of Common Stock
(other than as a dividend on the outstanding Common Stock), the Company shall
first offer to sell to each Purchaser a portion of such stock or securities
equal to the quotient determined by dividing (1) the number of shares of Common
Stock held by such Purchaser by (2) the sum of the total number of shares of
Common Stock held by the Purchasers and the number of shares of Common Stock
outstanding which are not held by the Purchasers. Each Purchaser shall be
entitled to purchase such stock or securities at the most favorable price and on
the most favorable terms as such stock or securities are to be offered to any
other Persons. The purchase price for all stock and securities offered to the
Purchasers of the Common Stock shall be payable in accordance with the terms and
conditions of said offer in cash or, to the extent otherwise provided
thereunder, notes issued by such holders.
(ii) In order to exercise its purchase rights hereunder, a Purchaser
must within 15 days after receipt of written notice from the Company describing
in reasonable detail the stock or securities being offered, the purchase price
thereof, the payment terms and such holder's percentage allotment deliver a
written notice to the Company describing its election hereunder. If all of the
stock and securities offered to the Purchasers is not fully subscribed by such
holders, the remaining stock and securities shall be reoffered by the Company to
the Purchasers purchasing their full allotment upon the terms set forth in this
paragraph, except that such Purchasers must exercise their purchase rights
within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the
Purchasers have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any stock or securities offered or sold by
the Company after such 90-day period must be reoffered to the Purchasers
pursuant to the terms of this paragraph.
(iv) The rights under this paragraph shall terminate upon the closing
of an underwritten public offering of Common Stock pursuant to a registration
statement filed by the Company with the Securities and Exchange Commission under
the Securities Act resulting in gross proceeds to the Company of at least $10
million.
6
<PAGE>
Section 4. Transfer of Restricted Securities.
---------------------------------
(i) Restricted Securities are transferable only pursuant to (a)
public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A
of the Securities and Exchange Commission (or any similar rule or rules then in
force) if such rule is available and (c) subject to the conditions specified in
subparagraph (ii) below, any other legally available means of transfer.
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 4(i)(a) or (b) above), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, and, if requested by the
Company, an opinion of counsel, which counsel to the Company's reasonable
satisfaction is knowledgeable in securities law matters, to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of counsel
reasonably acceptable to the Company that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new certificates
for such Restricted Securities which do not bear the Securities Act legend set
forth in paragraph 7B(i). If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7B(i).
(iii) Upon the request of any holder of Restricted Securities, the
Company shall remove the foregoing legend from the certificates for such
holder's Restricted Securities; provided that such Restricted Securities are
eligible for sale pursuant to Rule 144(k).
Section 5. Representations and Warranties of the Company. As a
---------------------------------------------
material inducement to the Purchasers to enter into this Agreement and purchase
the Common Stock, the Company hereby represents and warrants that:
5A. Organization and Corporate Power. The Company is a corporation
---------------------------------
duly organized, validly existing and in good standing under the laws of Delaware
and is qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Company's
charter documents and bylaws which have been furnished to the Purchasers'
7
<PAGE>
counsel reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete.
5B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 1,000 shares of Common Stock, of
which 327 shares shall be issued and outstanding. As of the Closing, neither
the Company nor any Subsidiary shall have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or containing
any profit participation features, nor shall it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans, except as set forth in this
Agreement and the Stockholders Agreement. As of the Closing, the Company shall
not be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock. As of the Closing, all of
the outstanding shares of the Company's capital stock shall be validly issued,
fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Common Stock hereunder except as set forth in
this Agreement. To the best of the Company's knowledge, the Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Common Stock hereunder do not require registration under the
Securities Act or any applicable state securities laws. To the best of the
Company's knowledge, there are no agreements between the Company's stockholders
with respect to the voting or transfer of the Company's capital stock or with
respect to any other aspect of the Company's affairs, except as contemplated by
this Agreement.
5C. Subsidiaries; Investments. Except as set forth on the Schedule
-------------------------
of Investments the Company does not own or hold any rights to acquire any shares
of stock or any other security or interest in any other Person, and the Company
has never had any Subsidiary.
5D. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement, the Registration Agreement and the Stockholders
Agreement and all other agreements contemplated hereby to which the Company is a
party, have been duly authorized by the Company. This Agreement, the
Registration Agreement and the Stockholders Agreement and all other agreements
contemplated hereby each constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms. The execution and delivery
by the Company of this Agreement, the Registration Agreement and the
Stockholders Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering, sale and issuance of the Common Stock
hereunder, and the fulfillment of and compliance with the respective terms
hereof and thereof by the
8
<PAGE>
Company, do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Company's capital stock or assets pursuant to, (iv) give any third
party the right to modify, terminate or accelerate any obligation under, (v)
result in a violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to, the charter or bylaws of the Company, or any law,
statute, rule or regulation to which the Company is subject, or any agreement,
instrument, order, judgment or decree to which the Company is subject.
5E. No Operating History. The Company was formed on October 26,
--------------------
1995, and has conducted no material business operations to date other than
(i) making application to the Federal Communications Commission for 900 MHz SMR
licenses and (ii) those incident to its formation and entering into this
Agreement, the Stockholders Agreement, the Registration Agreement and the
transactions contemplated hereby and thereby.
5F. Contracts and Commitments. Except as expressly contemplated by
-------------------------
this Agreement, as of the Closing, neither the Company is not a party to any
material written or oral contract, agreement or other arrangement except for
Peruvian contract.
5G. Governmental Consent, etc. No permit, consent, approval or
--------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby, except as expressly contemplated
herein or in the exhibits hereto.
5H. Investments in United States Real Property Interests. The
----------------------------------------------------
Company represents and warrants that its capital stock does not constitute a
United States real property interest as that term is defined in Section
897(c)(1)(A)(ii) of the Internal Revenue Code of 1986, as amended (the "Code").
The preceding representation is based on a determination by the Company that the
Company is not and has not been a United States real property holding
corporation (as that term is defined in Section 897(c)(2) of the Code) since its
incorporation on October 26, 1995. The Company shall use its best efforts to
ensure that it does not at any time in the future become a United States real
property holding corporation. If at any time in the future the Company should
become a United States real property holding corporation, the Company shall, as
promptly as possible, notify Purchasers of such change in status.
5I. Unrelated Business Taxable Income. The Company represents and
---------------------------------
warrants that any gross income derived by Purchasers from the Company shall be
in the form of dividends, interest, capital gains and losses from the
disposition of property, and rents and royalties, but only such rents and
royalties as are excluded pursuant to Code
9
<PAGE>
Sections 512(b)(2) and 512(b)(3), respectively, in calculating unrelated
business taxable income and only such dividends, interest, capital gains and
losses, and rents and royalties that are not included under Section 512(b)(4) of
the Code in calculating unrelated business taxable income.
5J. Qualified Small Business. The Company represents and warrants
------------------------
that, to the best of its knowledge, it qualifies as a "Qualified Small Business"
as defined in Section 1202(d) of the Code and covenants that so long as its
shares are held by Purchasers (or a transferee in whose hands the shares are
eligible to qualify as Qualified Small Business Stock as defined in Section
1202(c) or the Code), it will use its reasonable best efforts to cause the
shares to qualify as Qualified Small Business Stock.
5K. Disqualified Persons List. The Company has reviewed the attached
-------------------------
"Disqualified Persons List" dated January 1, 1995, and knows of no direct or
indirect holdings (including expected holdings after the current financing) in
the Company by "Disqualified Persons" or "Designated Entities," except for
Centennial Fund IV, L.P. and Centennial Rural Wireless, Inc.
5L. Closing Date. The representations and warranties of the Company
------------
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to any Purchaser shall be true and
correct in all material respects on the date of the Closing as though then made,
except as affected by the transactions expressly contemplated by this Agreement.
Section 6. Definitions. For the purposes of this Agreement, the
-----------
following terms have the meanings set forth below:
"Affiliate" of any particular person or entity means any other
---------
person or entity controlling, controlled by or under common control with such
particular person or entity.
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Restricted Securities" means (i) the Common Stock issued hereunder,
---------------------
(ii) any securities issued with respect to the Common Stock referred to in (I)
above by way of a stock dividend or stock split or in connection with a
combination of shares,
10
<PAGE>
recapitalization, merger, consolidation or other reorganization. As to any
particular Restricted Securities, such securities shall cease to be Restricted
Securities when they have (a) been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them,
(b) become eligible for sale pursuant to Rule 144(k) (or any similar provision
then in force) under the Securities Act or (c) been otherwise transferred and
new certificates for them not bearing the Securities Act legend set forth in
paragraph 7B have been delivered by the Company in accordance with paragraph
4(ii). Whenever any particular securities cease to be Restricted Securities, the
holder thereof shall be entitled to receive from the Company, without expense,
new securities of like tenor not bearing a Securities Act legend of the
character set forth in paragraph 7B.
"Securities Act" means the Securities Act of 1933, as amended, or
--------------
any similar federal law then in force, and the rules and regulations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force, and the rules and
regulations thereunder.
"Securities and Exchange Commission" includes any governmental body
----------------------------------
or agency succeeding to the functions thereof.
"Subsidiary" means any corporation of which the securities having a
----------
majority of the ordinary voting power in electing the board of directors are, at
the time as of which any determination is being made, owned by the Company
either directly or through one or more Subsidiaries.
Section 7. Miscellaneous.
-------------
7A. Remedies. Each Purchaser and its immediate transferees who are
--------
Affiliates shall have all rights and remedies set forth in this Agreement, the
Certificate of Incorporation and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7B. Purchaser's Investment Representations. Each Purchaser hereby
--------------------------------------
represents and warrants that:
(i) Such Purchaser is acquiring the Common Stock purchased hereunder
or acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent any Purchaser and
11
<PAGE>
subsequent holders of Common Stock from transferring such securities in
compliance with the provisions of Section 4 hereof. Such Purchaser understands
that the Common Stock has not been registered under the Securities Act by reason
of its issuance by the Company in a transaction exempt from the registration
requirements of the Act. Each certificate for Common Stock shall be imprinted
with a legend in substantially the following form:
"The Securities represented by this certificate were originally issued on
December 7, 1995, and have not been registered under the Securities Act of
1933, as amended. The transfer of the securities represented by this
certificate is subject to the conditions specified in the Purchase
Agreement dated as of December 7, 1995, between the issuer (the "Company")
and certain investors, and the Company reserves the right to refuse the
transfer of such securities until such conditions have been fulfilled with
respect to such transfer. A copy of such conditions shall be furnished by
the Company to the holder hereof upon written request and without charge."
(ii) Such Purchaser recognizes that investing in the Common Stock
involves a high degree of risk, and is in a financial position to hold the
Common Stock indefinitely and is able to bear the economic risk and withstand a
complete loss of its investment in the Common Stock; the Purchaser understands
that it may incur a complete loss of its investment in the Common Stock.
(iii) Such Purchaser is a sophisticated investor and is capable of
evaluating the merits and risks of investing in the Company given its stage of
development.
(iv) Such Purchaser has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management, has
been given full and complete access to information concerning the Company, and
has utilized such access to its satisfaction for the purpose of obtaining
information or verifying information and has had the opportunity to inspect the
Company's facilities.
(v) Such Purchaser has had the opportunity to ask questions of, and
receive answers from, the management of the Company (and any person acting on
its behalf) concerning the Common Stock and the terms and conditions of this
Agreement and the agreements and transactions contemplated hereby, and to obtain
any additional information as such Purchaser may have requested in making its
investment decision.
(vi) Such Purchaser has the power (corporate or otherwise) and
requisite authority, and has taken all action (corporate or otherwise)
necessary, to execute, deliver and perform this Agreement and to subscribe for
and purchase the Common Stock.
(vii) The Agreement, upon execution by such Purchaser, will be duly
executed and delivered by such Purchaser, and will be the legal and binding
obligation of such Purchaser, enforceable in accordance with its terms, subject
to applicable laws of
12
<PAGE>
bankruptcy, insolvency and similar laws affecting creditors' rights and the
application of general rules of equity.
(viii) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, or other restriction of any government, governmental agency, or court
to which such Purchaser is subject, or any provision of such Purchaser's
charter or bylaws or other internal governing documents or (ii) conflict with,
result in a breach of, or constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under, any agreement, contract, lease, permit, license,
instrument, or any other arrangement to which such Purchaser is a party or by
which it is bound or to which its assets are subject. No notice, consent,
filing, authorization or approval of any government or governmental agency is
required for such Purchaser to consummate the transactions contemplated hereby.
7C. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Purchasers then holding a majority of the outstanding Common stock purchased
hereunder. No other course of dealing between the Company and any Purchaser or
any delay in exercising any rights hereunder or under the Certificate of
Incorporation shall operate as a waiver of any rights of any such holders. For
purposes of this Agreement, shares of Common Stock held by the Company or any
Subsidiaries shall not be deemed to be outstanding.
7D. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
7E. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not. In addition, and whether or not any express assignment has been made,
the provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock or Underlying Common Stock are also for
the benefit of, and enforceable by, any subsequent holder of such Common Stock.
7F. Generally Accepted Accounting Principles. Except as provided in
----------------------------------------
paragraph 3A, where any accounting determination or calculation is required to
be made under this Agreement or the exhibits hereto, such determination or
calculation (unless otherwise provided) shall be made in accordance with
generally accepted accounting
13
<PAGE>
principles, consistently applied, except that if because of a change in
generally accepted accounting principles the Company would have to alter a
previously utilized accounting method or policy in order to remain in compliance
with generally accepted accounting principles, such determination or calculation
shall continue to be made in accordance with the Company's previous accounting
methods and policies unless otherwise directed by the Board of Directors.
7G. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7H. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
7I. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
Section of this Agreement. The use of the word "including" in this Agreement
shall be by way of example rather than by limitation.
7J. Governing Law. The corporate law of Delaware shall govern all
-------------
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of Delaware.
7K. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address indicated below:
Centennial Communications Corp.
c/o 1999 Broadway, Suite 2100
Denver, Colorado 80202
Attention: Stephen W. Schovee, Acting President
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
14
<PAGE>
7L. Understanding Among the Purchasers. The determination of each
----------------------------------
Purchaser to purchase the Preferred Stock pursuant to this Agreement has been
made by such Purchaser independent of any other Purchaser and independent of
any statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser.
* * * * *
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
CENTENNIAL COMMUNICATIONS CORP.
/s/ Stephen W. Schovee
----------------------------------
By: Stephen W. Schovee
Its: Acting President
PURCHASERS
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its: General Partner
/s/ Steven C. Halstedt
----------------------------------
By: Steven C. Halstedt
Its: General Partner
CENTENNIAL HOLDINGS, INC.
/s/ G. Jackson Tankersley, Jr.
----------------------------------
By: G. Jackson Tankersley, Jr.
Its: President
TELECOM PARTNERS, L.P.
/s/ Stephen W. Schovee
----------------------------------
By: Stephen W. Schovee
Its: Managing Member of the
General Partner
16
<PAGE>
SCHEDULE OF PURCHASERS
----------------------
<TABLE>
<CAPTION>
No. of Shares Cash
of Common Note Purchase
Names and Addresses Stock Conversion Price Total
- ------------------- ----- ---------- ----- -----
<S> <C> <C> <C> <C>
Telecom Partners, L.P. 135 $450,000 $ 900,000 $1,350,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attention: Stephen W. Schovee
Centennial Holdings, Inc. 12 33,334 86,667 120,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attention: Steven C. Halstedt
Centennial Fund IV, L.P. 150 416,667 1,083,333 1,500,000
1999 Broadway, Suite 2100
Denver, CO 80202
Attention: Steven C. Halstedt
--- -------- ---------- ----------
TOTALS 297 $900,001 $2,070,000 $2,970,000
=== ======== ========== ==========
</TABLE>
17
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A - Registration Agreement
Exhibit B - Stockholders Agreement
18
<PAGE>
Exhibit 10.2
STOCKHOLDERS AGREEMENT
----------------------
THIS AGREEMENT is made as of December 8, 1995, by and among Centennial
Communications Corp., a Delaware corporation (the "Company"), and each of the
investors listed on the signature pages hereto (the "Stockholders").
Capitalized terms used herein are defined in paragraph 5 hereof.
The Stockholders will purchase shares of the Company's Common Stock
pursuant to a Purchase Agreement between the Stockholders and the Company dated
as of the date hereof (the "Purchase Agreement").
The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (i) establishing the composition of the Company's
Board of Directors (the "Board"), (ii) assuring continuity in the management and
ownership of the Company and (iii) limiting the manner and terms by which the
Stockholders' Common Stock may be transferred. The execution and delivery of
this Agreement is a condition to the Stockholders' purchase of the Company's
stock pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
------------------
(a) From and after the Closing (as defined in the Purchase Agreement) and
until the provisions of this paragraph 1 cease to be effective, each Stockholder
shall vote all of its Stockholder Shares (as defined in paragraph 5 hereof) and
any other voting securities of the Company over which such Stockholder has
voting control and shall take all other necessary or desirable actions within
its control (whether in its capacity as a stockholder, director, member of a
board committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) subject to paragraph 1(e) below, the authorized number of
directors on the Board shall be established at five directors;
(ii) the following persons shall be elected to the Board:
a. two representatives designated by Centennial Fund IV, L.P.,
initially Adam Goldman and Steven C. Halstedt;
<PAGE>
b. two representatives designated by Telecom Partners, L.P.,
initially Stephen W. Schovee and Robert McKenzie; and
c. one representative designated by the Company, initially
Jeffrey Rhodes.
(iii) the removal from the Board (with or without cause) of any
representative designated hereunder by a Stockholder shall be at such
Stockholder's written request, but only upon such written request and under
no other circumstances; and
(iv) in the event that any representative designated hereunder by a
Stockholder for any reason ceases to serve as a member of the Board during
his term of office, the resulting vacancy on the Board shall be filled by a
representative designated by such Stockholder as provided hereunder, and
(v) in the event that any representative designated hereunder by the
Company for any reason ceases to serve as a member of the Board during his
term of office, the resulting vacancy on the Board shall be filled by a
representative designated by the Company as provided hereunder.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred
by each director in connection with attending the meetings of the Board and any
committee thereof.
(c) The rights of each Stockholder under this paragraph 1 shall terminate
at such time as such Stockholder and its Permitted Transferees (as defined in
paragraph 2(d) hereof) hold in the aggregate less than 80% of the Stockholder
Shares held by such persons on the date hereof.
(d) The provisions of this paragraph 1 shall terminate automatically and
be of no further force and effect upon the first to occur of (i) the tenth
anniversary of the date hereof or (ii) a Qualified Public Offering (as defined
in paragraph 5 hereof).
(e) If any party fails to designate a representative to fill a
directorship pursuant to the terms of paragraph 1(ii) or within 30 days after
the date of any subsequent vacancy, the election of a person to such
directorship shall be accomplished in accordance with the Company's bylaws and
applicable law.
2. Restrictions on Transfer of Stockholder Shares.
----------------------------------------------
(a) Transfer of Stockholder Shares. No Stockholder shall sell, transfer,
------------------------------
assign, pledge or otherwise dispose of (a "Transfer") any interest in any
Stockholder Shares except pursuant to the provisions of this paragraph 2 or
pursuant to a Public Sale. Each Stockholder agrees not to consummate any
Transfer (other than a Public Sale) until 30 days after the later of the
delivery to the Company and the other Stockholders of such Stockholder's Offer
Notice or Sale Notice (if any), unless the parties to the Transfer have been
finally determined pursuant to this paragraph 4 prior to the expiration of such
30-day period (the "Election Period").
2
<PAGE>
(b) First Offer Right. At least 30 days prior to making any Transfer of
-----------------
any Stockholder Shares (other than a Public Sale), the transferring Stockholder
(the "Transferring Stockholder") shall deliver a written notice (the "Offer
Notice") to the Company and the other Stockholders (the "Other Stockholders").
The Offer Notice shall disclose in reasonable detail the proposed number of
Stockholder Shares to be transferred and the proposed terms and conditions of
the Transfer. First, the Company may elect to purchase all (but not less than
all) of the Stockholder Shares specified in the Offer Notice at the price and on
the terms specified therein by delivering written notice of such election to the
Transferring Stockholders and the Other Stockholders as soon as practical but in
any event within ten days after the delivery of the Offer Notice. If the Company
has not elected to purchase all of the Stockholder Shares within such ten-day
period, each Other Stockholder may elect to purchase all (but not less than all)
of his Pro Rata Share (as defined below) of the Stockholder Shares specified in
the Offer Notice at the price and on the terms specified therein by delivering
written notice of such election to the Transferring Stockholder as soon as
practical but in any event within 20 days after delivery of the Offer Notice.
Any Stockholder Shares not elected to be purchased by the end of such 20-day
period shall be reoffered for the ten-day period prior to the expiration of the
Election Period by the Transferring Stockholder on a pro rata basis to the Other
Stockholders who have elected to purchase their Pro Rata Share. If the Company
or any Other Stockholders have elected to purchase Stockholder Shares from the
Transferring Stockholder, the transfer of such shares shall be consummated as
soon as practical after the delivery of the election notices, but in any event
within 15 days after the expiration of the Election Period. To the extent that
the Company and the Other Stockholders have not elected to purchase all of the
Stockholder Shares being offered, the Transferring Stockholder may, within 90
days after the expiration of the Election Period and subject to the provisions
of subparagraph (c) below, transfer such Stockholder Shares to one or more third
parties at a price no less than 95% of the price per share specified in the
Offer Notice and on other terms no more favorable to the transferees than
offered to the Company and the Other Stockholders in the Offer Notice. The
purchase price specified in any Offer Notice shall be payable solely in cash at
the closing of the transaction or in installments over time, and no Stockholder
Shares may be pledged except on terms and conditions satisfactory to the
Stockholders. Each Stockholder's "Pro Rata Share" shall be based upon such
Stockholder's proportionate ownership of all Stockholder Shares on a fully-
diluted basis.
(c) Participation Rights. At least 30 days prior to any Transfer of
--------------------
Stockholder Shares (other than a Public Sale or a Transfer to the Company or the
Other Stockholders pursuant to paragraph 2(b)), the Stockholder making such
Transfer (the "Transferring Stockholder") shall deliver a written notice (the
"Sale Notice") to the Company and the other Stockholders (the "Other
Stockholders"), specifying in reasonable detail the identity of the prospective
transferee(s) and the terms and conditions of the Transfer. The Other
Stockholders may elect to participate in the contemplated Transfer by delivering
written notice to the Transferring Stockholder within 30 days after delivery of
the Sale Notice. If any Other Stockholders have elected to participate in such
Transfer, the Transferring Stockholder and such Other Stockholders shall be
entitled to sell in the contemplated Transfer, at the same price and on the same
terms, a number of Stockholder Shares equal to the product of (i) the quotient
determined by dividing the percentage of Stockholder Shares owned by such person
by the aggregate percentage of Stockholder Shares owned by the Transferring
Stockholder and the Other Stockholders participating in such sale and (ii) the
number of Stockholder Shares to be sold in the contemplated Transfer.
3
<PAGE>
For example, if the Sale Notice contemplated a sale of 100 Stockholder
-----------
Shares by the Transferring Stockholder, and if the Transferring Stockholder
at such time owns 30% of all Stockholder Shares and if one Other
Stockholder elects to participate and owns 20% of all Stockholder Shares,
the Transferring Stockholder would be entitled to sell 60 shares (30%, 50%
x 100 shares) and the Other Stockholder would be entitled to sell 40 shares
(20%, 50% x 100 shares).
Each Stockholder shall use best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Other Stockholders in any
contemplated Transfer, and each Stockholder shall not transfer any of its
Stockholder Shares to the prospective transferee(s) if the prospective
transferee(s) declines to allow the participation of the Other Stockholders.
(d) Permitted Transfers. The restrictions contained in this paragraph 2
-------------------
shall not apply with respect to any Transfer of Stockholder Shares by any
Stockholder among its Affiliates (collectively referred to herein as "Permitted
Transferees"); provided that the restrictions contained in this paragraph 2
shall continue to be applicable to the Stockholder Shares after any such
Transfer and provided further that the transferees of such Stockholder Shares
shall have agreed in writing to be bound by the provisions of this Agreement
affecting the Stockholder Shares so transferred. "Affiliate" of a Stockholder
means any other person, entity or investment fund controlling, controlled by or
under common control with the Stockholder and any partner of a Stockholder which
is a partnership.
(e) Termination of Restrictions. The restrictions set forth in this
---------------------------
paragraph 2 shall continue with respect to each Stockholder Share until the
earlier of (i) the date on which such Stockholder Share has been transferred in
a Public Sale, (ii) the date on which such Stockholder Share has been
transferred pursuant to this paragraph 2 (other than subparagraph 2(d)), (iii)
the fifth anniversary of the date of this Agreement or (iv) the consummation of
a Qualified Public Offering.
3. Legend. Each certificate evidencing Stockholder Shares and each
------
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"The securities represented by this certificate are subject to a
Stockholders Agreement dated as of December 7, 1995, among the issuer
of such securities (the "Company") and certain of the Company's
stockholders. A copy of such Stockholders Agreement will be furnished
without charge by the Company to the holder hereof upon written
request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with paragraph 2 hereof.
4. Transfer. Prior to transferring any Stockholder Shares (other than in
--------
a Public Sale) to any person or entity, the transferring Stockholder shall
cause the prospective
4
<PAGE>
transferee to execute and deliver to the Company and the other Stockholders a
counterpart of this Agreement.
5. Definitions.
-----------
"Independent Third Party" means any person who, immediately prior to the
-----------------------
contemplated transaction, does not own in excess of 5% of the Company's Common
Stock on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other persons.
"Permitted Transferee" shall have the meaning set forth in paragraph 2(d)
--------------------
hereof.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
-----------
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Qualified Public Offering" means the sale in an underwritten public
-------------------------
offering registered under the Securities Act of shares of the Company's Common
Stock resulting in aggregate gross proceeds to the Company of at least $10
million.
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
------------------
acquired by any Stockholder, (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock referred to in clause
(i) above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of any class or series of capital
stock of the Company held by a Stockholder. As to any particular shares
constituting Stockholder Shares, such shares will cease to be Stockholder Shares
when they have been (x) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (y)
sold to the public through a broker, dealer or market maker pursuant to Rule 144
(or any similar provision then in force) under the Securities Act.
"Sale of the Company" means the sale of the Company to an Independent Third
-------------------
Party or group of Independent Third Parties pursuant to which such party or
parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
6. Transfers in Violation of Agreement. Any Transfer or attempted
-----------------------------------
Transfer of any Stockholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
5
<PAGE>
7. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company or the holders of at
least a majority of the Stockholder Shares, respectively. The failure of any
party to enforce any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions and shall not affect the right of such
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
8. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
9. Entire Agreement. Except as otherwise expressly set forth herein,
----------------
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
10. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
11. Counterparts. This Agreement may be executed in separate counterparts
------------
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
12. Remedies. The Company and the Stockholders shall be entitled to
--------
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company and any Stockholder may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
13. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the schedules hereto and to any subsequent
holder of Stockholder Shares subject to this Agreement at such address as
indicated by the Company's records, or at such address or to the attention of
such other person as the recipient party has specified by prior written notice
to the sending party. Notices will be deemed to have been given
6
<PAGE>
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
Centennial Communications Corp.
c/o 1999 Broadway, Suite 2100
Denver, Colorado 80202
Attention: Stephen W. Schovee
The address for each Stockholder is set forth on the signature pages hereto.
14. Governing Law. The corporate law of Delaware shall govern all issues
-------------
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal law, and not the law of conflicts,
of Delaware.
15. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
* * * * * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
COMPANY CENTENNIAL COMMUNICATIONS CORP.
By /s/ Stephen W. Schovee
---------------------------------
Name: Stephen W. Schovee
Title: Acting President
STOCKHOLDERS CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its: General Partner
By /s/ Steven C. Halstedt
---------------------------------
Name: Steven C. Halstedt
Title: General Partner
Address: 1999 Broadway
Suite 2100
Denver, CO 80202
CENTENNIAL HOLDINGS, INC.
By /s/ G. Jackson Tankersley, Jr.
---------------------------------
Name: G. Jackson Tankersley, Jr.
Title: President
Address: 1999 Broadway
Suite 2100
Denver, CO 80202
TELECOM PARTNERS, L.P.
By /s/ Stephen W. Schovee
---------------------------------
Name: Stephen W. Schovee
Title: Managing Member of its
General Partner
Address: 1999 Broadway
Suite 2100
Denver, CO 80202
8
<PAGE>
EXHIBIT 10.3
PURCHASE AGREEMENT
Dated: June 27, 1996
BETWEEN
CENTENNIAL COMMUNICATIONS CORP.
and
CENTENNIAL FUND IV, L.P.
TELECOM PARTNERS, L.P.
CENTENNIAL HOLDINGS, INC.
TRAILHEAD VENTURES, L.P.
BOULDER VENTURES, L.P.
GC&H INVESTMENTS
MGVF II, LTD.
BILL ELSNER
ROBERT MCKENZIE
JEFF E. RHODES
<PAGE>
TABLE OF CONTENTS
1. Authorization and Closing.
--------------------------
A. Authorization of the Preferred Stock.............................. 1
B. Purchase and Sale of the Preferred Stock.......................... 1
C. The Closing....................................................... 1
D. Subsequent Closings............................................... 1
2. Conditions of Each Purchaser's Obligations at the Closing.......... 2
----------------------------------------------------------
A. Representations and Warranties.................................... 2
B. Certificate of Designation........................................ 2
C. Registration Agreement............................................ 2
D. Stockholders Agreement............................................ 2
E. Amended and Restated Stockholders Agreement....................... 2
F. Sale of Preferred Stock to Each Purchaser......................... 3
G. Blue Sky Clearances............................................... 3
H. Disqualified Persons.............................................. 3
I. Opinion of the Company's Counsel.................................. 3
J. Closing Documents................................................. 3
K. Proceedings....................................................... 4
L. Waiver............................................................ 4
M. Expenses.......................................................... 4
3. Covenants.......................................................... 4
----------
A. Financial Statements and Other Information........................ 4
i
<PAGE>
B. Inspection of Property........................................... 7
C. Attendance at Board Meetings..................................... 7
D. Designation of Directors......................................... 8
E. Restrictions..................................................... 8
F. Affirmative Covenants............................................ 10
G. Compliance with Agreements....................................... 11
H. Current Public Information....................................... 11
I. Reservation of Common Stock...................................... 11
J. Enforcement of Other Agreements.................................. 11
K. Proprietary Rights............................................... 12
L. Limited First Refusal Rights..................................... 12
M. Qualified Small Business......................................... 13
N. Unrelated Taxable Income......................................... 13
O. Investments in United States Real Property Interests............. 13
4. Transfer of Restricted Securities................................. 13
----------------------------------
5. Representations and Warranties of the Company..................... 14
----------------------------------------------
A. Organization and Corporate Power................................. 14
B. Capital Stock and Related Matters................................ 14
C. Subsidiaries; Investments........................................ 15
D. Authorization; No Breach......................................... 16
E. Financial Statements............................................. 16
F. Absence of Undisclosed Liabilities............................... 17
G. No Material Adverse Change....................................... 17
H. Absence of Certain Developments.................................. 17
ii
<PAGE>
I. Assets............................................................ 18
J. Tax Matters....................................................... 19
K. Contracts and Commitments......................................... 19
L. Proprietary Rights................................................ 21
M. Litigation, etc................................................... 21
N. Brokers........................................................... 22
O. Governmental Consent, etc......................................... 22
P. Insurance......................................................... 22
Q. Employees and ERISA............................................... 22
R. Compliance with Laws.............................................. 23
S. Affiliated Transactions........................................... 23
T. Disclosure........................................................ 23
U. Closing Date...................................................... 24
6.Definitions......................................................... 24
-----------
7. Miscellaneous...................................................... 26
--------------
A. Expenses.......................................................... 26
B. Remedies.......................................................... 26
C. Purchaser's Investment Representations............................ 27
D. Treatment of the Preferred Stock.................................. 28
E. Consent to Amendments............................................. 28
F. Survival of Representations and Warranties........................ 28
G. Successors and Assigns............................................ 28
H. Capital and Surplus; Special Reserves............................. 28
I. Severability...................................................... 29
iii
<PAGE>
J. Counterparts..................................................... 29
K. Descriptive Headings; Interpretation............................. 29
L. Governing Law.................................................... 29
M. Notices.......................................................... 29
N. Understanding Among the Purchasers............................... 30
iv
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT is made as of June 27, between Centennial Communications
Corp., a Delaware corporation (the "Company"), and the Persons listed on the
Schedule of Purchasers attached hereto (collectively referred to herein as the
"Purchasers" and individually as a "Purchaser"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 6 hereof.
The parties hereto agree as follows:
1. Authorization and Closing.
-------------------------
A. Authorization of the Preferred Stock. The Company shall authorize
the issuance and sale to the Purchasers of 345 shares of its Series A Preferred
Stock, par value $.01 per share (the "Preferred Stock"), having the rights and
preferences set forth in Exhibit A attached hereto. The Preferred Stock is
---------
convertible into shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock").
B. Purchase and Sale of the Preferred Stock. At each Closing (as
defined below) the Company shall sell to each Purchaser and, subject to the
terms and conditions set forth herein, each Purchaser shall purchase from the
Company the number of shares of Preferred Stock set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto at a price of
$25,000 per share. The sale of Preferred Stock to each Purchaser shall
constitute a separate sale hereunder.
C. The Closing. Any closing of the separate purchase and sales of the
Preferred Stock shall take place at such place and on such date as may be
mutually agreeable to the Company and each Purchaser making a purchase of
Preferred Stock. The initial closing (the "Initial Closing") shall take place
at the officer of Holland & Hart LLP at 9:00 a.m. on June 27, 1996 or at such
other place and on such other date as may be mutually agreeable to the Company
and each Purchaser. Additional purchases may be made at a subsequent closing
(the "Subsequent Closing," whether there are one or more such closings). (The
Initial Closing and each Subsequent Closing are referred to as a "Closing.") At
each Closing, the Company shall deliver to each Purchaser stock certificates
evidencing the Preferred Stock to be purchased by such Purchaser, registered in
such Purchaser's or its nominees name, upon payment of the purchase price
thereof by a cashier's or certified check, or by wire transfer of immediately
available funds to an account to be designated by the Company.
D. Subsequent Closings. At any time or times after the Initial
Closing until July 31, 1996, the Company may sell additional shares of Preferred
Stock to additional purchasers (the "Additional Purchasers") on the same terms
and conditions as such Preferred Stock is being sold to the Purchasers. If such
additional sales are made,
<PAGE>
(i) a Supplementary Schedule of Purchasers listing the Additional Purchasers and
the number of shares of Preferred Stock being purchased by each will be prepared
and (ii) the Additional Purchasers will sign counterpart signature pages to this
Agreement, the Registration Agreement (as defined below) and the Stockholders
Agreement (as defined below). The parties to this Agreement also agree to
execute such documents and take all other actions necessary to permit the
Additional Purchasers to become parties to this Agreement, the Registration
Agreement and the Stockholders Agreement. At any Subsequent Closing the Company
will deliver to the Additional Purchasers copies of all documents delivered at
the Initial Closing.
2. Conditions of Each Purchaser's Obligations at the Closing. The
---------------------------------------------------------
obligation of each Purchaser to purchase and pay for the Preferred Stock at each
Closing is subject to the satisfaction as of the Closing of the following
conditions:
A. Representations and Warranties. The representations and warranties
contained in Section 5 hereof shall be true and correct in all material respects
at and as of the Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein.
B. Certificate of Designation. The Company shall have duly adopted,
executed and filed with the Secretary of State of Delaware an amended and
restated Certificate of Incorporation containing a Certificate of Designation of
Rights and Preferences (the "Certificate of Designation") establishing the terms
and the relative rights and preferences of the Preferred Stock in the form set
forth in Exhibit A hereto (the "Certificate of Incorporation"), and the Company
---------
shall not have adopted or filed any other document designating terms, relative
rights or preferences of its preferred stock. The Certificate of Incorporation
shall be in full force and effect as of the Closing under the laws of Delaware
and shall not have been amended or modified.
C. Registration Agreement. The Company, the Purchasers and the
holders of the Common Stock shall have entered into a registration agreement in
form and substance as set forth in Exhibit B attached hereto (the "Registration
---------
Agreement"), and the Registration Agreement shall be in full force and effect as
of the Closing.
D. Stockholders Agreement. The Company, the Purchasers and each major
holder of Common Stock shall have entered into a stockholders agreement in form
and substance set forth in Exhibit C attached hereto (the "Stockholders
---------
Agreement"), and the Stockholders Agreement shall be in full force and effect as
of the Closing.
E. Amended and Restated Stockholders Agreement. The Company and the
existing holders of Common Stock shall have entered into an Amended and Restated
Original Stockholders Agreement in form and substance set forth in Exhibit D
attached hereto (the "Initial Stockholders Agreement") and the Initial
Stockholders Agreement shall be in full force and effect as of the Closing.
2
<PAGE>
F. Sale of Preferred Stock to Each Purchaser. The Company shall have
sold to each Purchaser the Preferred Stock to be purchased by it hereunder at
the Closing and shall have received payment therefor in full of at least
$5,000,000 in the aggregate at each Closing.
G. Blue Sky Clearances. The Company shall have made all filings under
applicable state securities laws necessary to consummate the issuance of the
Preferred Stock pursuant to this Agreement in compliance with such laws.
H. Disqualified Persons. The Company shall have provided Centennial
Fund IV, L.P. ("Centennial") a certification of the direct and indirect holdings
of securities of the Company by certain persons designated by Centennial as
required by Centennial's governing documents.
I. Opinion of the Company's Counsel. Each Purchaser shall have
received from Cooley Godward Castro Huddleson & Tatum, counsel for the Company,
an opinion with respect to the matters set forth in Exhibit E attached hereto,
---------
which shall be addressed to each Purchaser, dated the date of the Initial
Closing and in form and substance reasonably satisfactory to each Purchaser.
J. Closing Documents. The Company shall have delivered to each
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and paragraphs 2.A through
2.H., inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and performance
of this Agreement, the Registration Agreement and each of the other agreements
contemplated hereby, the filing of the amendment to the Certificate of
Incorporation referred to in paragraph 2.B., the issuance and sale of the
Preferred Stock, the reservation of a sufficient number of shares of Common
Stock for issuance upon conversion of all of the outstanding shares of the
Preferred Stock and the consummation of all other transactions contemplated by
this Agreement, and (b) the resolutions duly adopted by the Company's
stockholders adopting the amendment to the Certificate of Incorporation referred
to in paragraph 2.B.;
(iii) certified copies of the Certificate of Incorporation and the
Company's bylaws, each as in effect at the Closing;
(iv) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky filings and waivers of
all preemptive rights and rights of first refusal);
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K. Proceedings. All corporate and other proceedings taken or required
to be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to each Purchaser and its
special counsel.
L. Waiver. Any condition specified in this Section 2 may be waived if
consented to by each Purchaser; provided that no such waiver shall be effective
against any Purchaser unless it is set forth in a writing executed by each
Purchaser.
M. Expenses. The Company shall have reimbursed the Purchasers for the
fees and expenses of their special counsel as provided in paragraph 8.A. hereof.
3. Covenants.
---------
A. Financial Statements and Other Information . The Company shall
deliver to each Purchaser (so long as such Purchaser holds any Preferred Stock
or any Underlying Common Stock) and to each holder of at least 10% of the
Underlying Common Stock:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period from the
beginning of the fiscal year to the end of such month, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the annual budget
and to the corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the exclusion of footnote
disclosure and normal year-end audit adjustments;
(ii) as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and for the period from
the beginning of the fiscal year to the end of such quarter, and consolidating
and consolidated balance sheets of the Company and its subsidiaries as of the
end of such quarterly period, setting forth in each case comparisons to the
annual budget and to the corresponding period in the preceding fiscal year, and
all such statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied, subject to the exclusion of
footnote disclosure and normal year-end audit adjustments;
(iii) within 90 days after the end of each fiscal year, consolidated
and consolidating statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the annual budget and to the preceding
fiscal year, all prepared in
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accordance with generally accepted accounting principles, consistently applied,
and accompanied by (a) with respect to the consolidated portions of such
statements, an opinion of an independent accounting firm of recognized national
standing, (b) a certificate from such accounting firm, addressed to the
Company's board of directors, stating that in the course of its examination
nothing came to its attention that caused it to believe that there was an Event
of Noncompliance in existence or that there was any other default by the Company
or any Subsidiaries in the fulfillment of or compliance with any of the terms,
covenants, provisions or conditions of any other material agreement to which the
Company or any Subsidiaries is a party or, if such accountants have reason to
believe any Event of Noncompliance or other default by the Company or any
Subsidiaries exists, a certificate specifying the nature and period of existence
thereof, and (c) a copy of such firm's annual management letter to the board of
directors;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant aspects
of the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
(v) at least 30 days (but not more than 90 days) prior to the
beginning of each fiscal year, (a) an annual budget prepared on a monthly basis
for the Company and its Subsidiaries for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets), (b) a five
year strategic plan for the subsequent five fiscal years of the Company, and
promptly upon preparation thereof any other significant budgets or plans
prepared by the Company and any revisions of such annual or other budgets or
five year strategic plan or other plans, and within 30 days after any monthly
period in which there is a material adverse deviation from the annual budget, an
Officer's Certificate explaining the deviation and what actions the Company has
taken and proposes to take with respect thereto;
(vi) promptly (but in any event within five business days) after
the discovery or receipt of notice of any default under any material agreement
to which it or any of its Subsidiaries is a party or any other material adverse
event or circumstance affecting the Company or any Subsidiaries (including the
filing of any material litigation against the Company or any Subsidiaries or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
(vii) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or (to its knowledge) any of its officers or directors file with respect
to the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made
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available generally by the Company to the public concerning material
developments in the Company's businesses; and
(viii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this paragraph 3.A. may reasonably
request.
Each of the financial statements referred to in subparagraph (i), (ii) and (iii)
shall fairly present the financial condition and results of operation as of the
dates and for the periods stated therein, subject in the case of the unaudited
financial statements to changes resulting from normal year-end audit adjustments
(none of which would, alone or in the aggregate, be materially adverse to the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the provisions of this paragraph 3.A. shall
cease to be effective so long as the Company (a) is subject to the periodic
reporting requirements of the Securities Exchange Act and continues to comply
with such requirements and (b) promptly provides to each Person otherwise
entitled to receive information pursuant to this paragraph 3.A. all reports and
other materials filed by the Company with the Securities and Exchange Commission
pursuant to the periodic reporting requirements of the Securities Exchange Act;
provided that so long as any Preferred Stock remains outstanding, the Company
shall continue to deliver to each Purchaser (so long as such Purchaser holds any
Preferred Stock) and to each holder of at least 10% of the outstanding Preferred
Stock the information specified in subparagraphs 3.A.(iii), 3.A.(iv)(b) and
3.A.(vii).
Except as otherwise required by law or judicial order or decree or by any
governmental agency or authority, each Person entitled to receive information
regarding the Company and its Subsidiaries under paragraph 3.A., 3.B. or 3.C.
shall use its best efforts to maintain the confidentiality of all nonpublic
information obtained by it hereunder which the Company has reasonably designated
as proprietary or confidential in nature; provided that each such Person (i)
may, to the extent required by law, disclose such information in connection with
the sale or transfer of any Preferred Stock or Underlying Common Stock if such
Person's transferee agrees in writing to be bound by the provisions hereof, and
(ii) may disclose such information to any partner, subsidiary or parent of such
Person for the purpose of evaluating its investment in the Company so long as
such partner, subsidiary or parent is advised of the confidential nature of the
information.
If a Purchaser is requested to disclose any of the confidential
information, and that Purchaser is advised by counsel that it must disclose such
information or else stand liable for contempt or other penalty or censure, that
Purchaser will promptly notify the Company of such request so that the Company
may seek a protective order or other appropriate remedy. Each Purchaser agrees
to cooperate with the Company, at the Company's expense, in its efforts to
obtain such remedies, but this provision will not be
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construed to require a Purchaser to undertake litigation or other legal
proceedings. If such protective order or other remedy is not promptly obtained,
such information as, pursuant to the advice of counsel, is required to be
disclosed may be disclosed.
For purposes of paragraphs 3.A., 3.B. and 3.C. hereof, the term "Purchaser"
shall include any partner of a Purchaser who received shares of Preferred Stock
or Underlying Common Stock pursuant to a distribution from or a liquidation of
such Purchaser.
For purposes of this Agreement and the Registration Agreement, all holdings
of Preferred Stock and Underlying Common Stock by Persons who are Affiliates of
each other shall be aggregated for purposes of meeting any threshold tests under
this Agreement and Registration Agreement. "Affiliate" shall have the meaning
set forth in Section 6 hereof and for purposes of meeting such threshold tests
shall include Persons which have received distributions of securities from a
partnership holding such securities.
B. Inspection of Property. The Company shall permit any
representatives designated by any Purchaser (so long as such Purchaser holds any
Underlying Common Stock) or any holder of at least 10% of the Underlying Common
Stock, upon reasonable notice and during normal business hours, to (i) visit and
inspect any of the properties of the Company and its Subsidiaries, (ii) examine
the corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries; provided,
however, the Company shall not be obligated under this Section 3.B with respect
to a competitor of the Company or with respect to information which the board of
directors determines in good faith is confidential and should not, therefore, be
disclosed. The presentation of an executed copy of this Agreement by any
Purchaser to the Company's independent accountants shall constitute the
Company's permission to its independent accountants to participate in
discussions with such Persons.
C. Attendance at Board Meetings. The Company shall give each Purchaser
(so long as such Purchaser holds any Underlying Common Stock) and each holder of
at least 10% of the Underlying Common Stock written notice of each meeting of
its board of directors and each committee thereof at the same time and in the
same manner as notice is given to the directors (which notice shall be confirmed
in writing to each such Person) and the Company shall permit a representative of
each such Person to attend as an observer all meetings of its board of directors
and all committees thereof; provided that in the case of telephonic meetings
conducted in accordance with the Company's bylaws and applicable law, each such
Person's representative shall be given the opportunity to listen to such
telephonic meetings; and provided further that the Company have the right to
exclude the representatives from the entire meeting or portion thereof if
attendance by the representative at such meeting or portion thereof or
dissemination of such information would, in the reasonable determination of the
board of directors materially compromise or adversely affect the attorney-client
privilege or
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result in a conflict of interest situation. Each representative shall be
entitled to receive all written materials and other information (including,
without limitation, copies of meeting minutes) given to directors in connection
with such meetings at the same time such materials and information are given to
the directors. If the Company proposes to take any action by written consent in
lieu of a meeting of its board of directors or of any committee thereof, the
Company shall give written notice thereof to each such Person prior to the
effective date of such consent describing in reasonable detail the nature and
substance of such action.
D. Designation of Directors. The holders of the Preferred Stock shall
have the right to select representatives to be elected to the Company's board of
directors, as set forth in the Stockholders Agreement. The Company shall use
its best efforts to cause such representatives to be elected to the board of
directors.
E. Restrictions. So long as any of the Preferred Stock remains
outstanding, the Company shall not, without the consent of the holders of a
majority of the Preferred Stock:
(i) directly or indirectly declare or pay any dividends or make any
distributions upon any of its equity securities other than the Preferred Stock
pursuant to the terms of the Certificate of Incorporation, except for dividends
payable in shares of Common Stock issued upon the outstanding shares of Common
Stock;
(ii) directly or indirectly redeem, purchase or otherwise acquire,
or permit any Subsidiaries to redeem, purchase or otherwise acquire, any of the
Company's equity securities (including, without limitation, warrants, options
and other rights to acquire equity securities) other than the Preferred Stock
pursuant to terms of the Certificate of Incorporation and except for repurchases
of Common Stock from employees of the Company and its Subsidiaries upon
termination of employment pursuant to arrangements approved by the Company's
board of directors.
(iii) except as expressly contemplated by this Agreement, authorize,
issue or enter into any agreement providing for the issuance (contingent or
otherwise) of, (a) any notes or debt securities containing equity features
(including, without limitation, any notes or debt securities convertible into or
exchangeable for equity securities, issued in connection with the issuance of
equity securities or containing profit participation features, (b) any equity
securities (or any securities convertible into or exchangeable for any equity
securities) which are senior to or on a parity with the Preferred Stock with
respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise or (c) any additional shares of Preferred Stock;
(iv) merge or consolidate with any Person or, permit any Subsidiary
to merge or consolidate with any Person (other than a wholly-owned
Subsidiary);
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(v) sell, lease or otherwise dispose of, or permit any Subsidiary
to sell, lease or otherwise dispose of, more than 50% of the consolidated assets
of the Company and its Subsidiaries (computed on the basis of book value,
determined in accordance with generally accepted accounting principles
consistently applied, or fair market value, determined by the Company's board of
directors in its reasonable good faith judgment) in any transaction or series of
related transactions (other than sales in the ordinary course of business) or
sell or permanently dispose of any of its or any Subsidiary's Proprietary
Rights;
(vi) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation) any
reorganization into partnership form); provided that any reorganization in
partnership form shall require the consent of the holders of at least 75% of the
Underlying Common Stock;
(vii) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than wireless
communications and ancillary activities;
(viii) become subject to, or permit any of its Subsidiaries to become
subject to, any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform the provisions of this
Agreement, the Registration Agreement, the Certificate of Incorporation or the
Company's bylaws (including, without limitation, provisions relating to payment
of dividends on and making redemptions of the Preferred Stock and conversions of
the Preferred Stock);
(ix) except as expressly contemplated by this Agreement, make any
amendment to the Certificate of Incorporation or the Company's bylaws, or file
any resolution of the board of directors with the Delaware Secretary of State
containing any provisions, which would increase the number of authorized shares
of the Preferred Stock or adversely affect or otherwise impair the rights or
relative priority of the holders of the Preferred Stock or the Underlying Common
Stock under this Agreement, the Certificate of Incorporation, the Company's
bylaws or the Registration Agreement;
(x) change the authorized size of its board of directors;
(xi) increase the number of shares of Common Stock issuable
pursuant to stock option plans or stock ownership plans above 15% of the number
of shares of Common Stock outstanding on or before July 31, 1996 (as such number
is proportionately adjusted for stock splits, combinations and dividends
affecting the Common Stock and including all such employee stock options, other
purchase rights and conversion rights outstanding on or before July 31, 1996)
(the "Authorized Management Stock"), otherwise amend or modify any stock option
plan or employee stock ownership plan as in existence as of the Closing (the
"Stock Option Agreements"), adopt any new stock option plan or employee stock
ownership plan or issue any shares of Common
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Stock to its or its Subsidiaries' employees other than pursuant to
the Company's existing stock option and employee stock ownership plans;
(xii) use the proceeds from the sale of the Preferred Stock other
than for wireless communication activities or such other activities as may be
approved by the board of directors.
F. Affirmative Covenants. So long as any Preferred Stock remains
outstanding, the Company shall, and shall cause each Subsidiary to (unless
waived by the holders of a majority of the Preferred Stock):
(i) at all times cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working order
and condition, and from time to time make all necessary and desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
(iii) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies to the extent to
which the failure to pay or discharge such obligations would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books with
respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due unless and to the extent that the same
are being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books with
respect thereto;
(v) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole;
(vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in such
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amounts as are customary for corporations of similar size engaged in similar
lines of business;
(vii) maintain proper books of record and account which fairly
present its financial condition and results of operations and make provisions on
its financial statements for all such proper reserves as in each case are
required in accordance with generally accepted accounting principles,
consistently applied; and
(viii) enter into and maintain nondisclosure and noncompete
agreements with its key employees in the form approved by the board of
directors.
G. Compliance with Agreements. The Company shall perform and observe
(i) all of its obligations to each holder of the Preferred Stock and all of its
obligations to each holder of the Underlying Common Stock set forth in the
Certificate of Incorporation and the Company's bylaws, and (ii) all of its
obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
H. Current Public Information. At all times after the Company has
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the rules and regulations adopted by the Securities
and Exchange Commission thereunder and shall take such further action as any
holder or holders of Restricted Securities may reasonably request, all to the
extent required to enable such holders to sell Restricted Securities pursuant to
(i) Rule 144 adopted by the Securities and Exchange Commission under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulations hereunder adopted by the Securities and Exchange Commission,
or (ii) a registration statement on Form S-2 or S-3 or any similar registration
form hereafter adopted by the Securities and Exchange Commission. Upon request,
the Company shall deliver to any holder of Restricted Securities a written
statement as to whether it has complied with such requirements.
I. Reservation of Common Stock. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the Preferred Stock,
such number of shares of Common Stock issuable upon the conversion of all
outstanding Preferred Stock. All shares of Common Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable laws or governmental regulation or
any requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
J. Enforcement of Other Agreements. The Company shall enforce the
provisions of the Stock Option Agreements.
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K. Proprietary Rights. The Company shall, and cause each Subsidiary
to, possess and maintain all material Proprietary Rights necessary to the
conduct of their respective businesses and own all right, title and interest in
and to, or have a valid license for, all material Proprietary Rights used by the
Company and each Subsidiary in the conduct of their respective businesses.
Neither the Company nor any Subsidiary shall take any action, or fail to take
any action, which would result in the invalidity, abuse, misuse or
unenforceability of such Proprietary Rights or which would infringe upon any
rights of other Persons.
L. Limited First Refusal Rights.
(i) Except for the issuance of Common Stock (a) to the Company's
employees as contemplated by paragraph 3.D.(xi) hereof, (b) upon the conversion
of the Preferred Stock, (c) in connection with issuance to non-Affiliates of the
Company for consideration other than cash, (d) pursuant to a public offering
registered under the Securities Act or (e) in connection with the acquisition of
another business entity by the Company, (f) in connection with any stock split,
stock dividend, or recapitalization or (g) to a lender or equipment lessor in
connection with any loan or lease financing transaction, if the Company
authorizes the issuance or sale of any shares of Common Stock or any securities
containing options or rights to acquire any shares of Common Stock (other than
as a dividend on the outstanding Common Stock), the Company shall first offer to
sell to each of the holders of Underlying Common Stock its "pro rata portion" of
50% of such stock or securities. A holder's "pro rata portion" shall equal the
quotient determined by dividing (1) the number of shares of Common Stock and
Underlying Common Stock held by each such holder by the (2) sum of the total
number of shares of Underlying Common Stock and Common Stock held by all holders
of Underlying Common Stock. Each holder of Underlying Common Stock shall be
entitled to purchase such stock or securities at the most favorable price and on
the most favorable terms as such stock or securities are to be offered to any
other Persons. The purchase price for all stock and securities offered to the
holders of the Underlying Common Stock shall be payable in cash or, to the
extent otherwise required hereunder, notes issued by such holders.
(ii) In order to exercise its purchase rights hereunder, a holder of
Underlying Common Stock must within 15 days after receipt of written notice from
the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms and such holder's
percentage allotment deliver a written notice to the Company describing its
election hereunder. If all of the stock and securities offered to the holders of
Underlying Common Stock is not fully subscribed by such holders, the remaining
stock and securities shall be reoffered by the Company to the holders purchasing
their full allotment upon the terms set forth in this paragraph, except that
such holders must exercise their purchase rights within five days after receipt
of such reoffer.
(iii) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the holder
of
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Underlying Common Stock have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any stock or securities
offered or sold by the Company after such 90-day period must be reoffered to the
holders of Underlying Common Stock pursuant to the terms of this paragraph.
(iv) The rights under this paragraph shall terminate upon the
effectiveness of a registration statement filed by the Company with the
Securities and Exchange Commission under the Securities Act with respect to an
offering of Common Stock with an aggregate selling price of at least $20,000,000
and a price per share of at least 400% of the conversion price as defined in the
Certificate of Incorporation in effect on the Closing (as adjusted for stock
splits, reverse stock splits, and similar recapitalizations); provided that if
the registration statement is withdrawn or abandoned before any shares of Common
Stock are sold thereunder, the provisions of this paragraph shall remain in
effect.
M. Qualified Small Business. The Company qualifies as a "Qualified
Small Business" as defined in Section 1202(c) of the Internal Revenue Code of
1986, as amended (the "Code") and covenants that, so long as any of the Shares
of Underlying Common Stock are held by a Purchaser in whose hands shares of
Underlying Common Stock are eligible to qualify as Qualified Small Business
Stock as defined in Section 1202(c) of the Code, it will use its best efforts to
cause the shares of Underlying Common Stock to qualify as Qualified Small
Business Stock.
N. Unrelated Taxable Income. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3), respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income.
O. Investments in United States Real Property Interests. The Company's
capital stock does not constitute a United States real property interest as that
term is defined in Section 897(c)(1)(A)(ii) of the Code. The preceding
representation is based on a determination by the Company that the Company is
not and has not been a United States real property holding corporation (as that
term is defined in Section 897(c)(2) of the Code) since the date of its
incorporation. The Company shall use its best efforts to ensure that it does
not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such status.
4. Transfer of Restricted Securities.
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(i) Restricted Securities are transferable pursuant to (a) public
offerings registered under the Securities Act, (b) Rule 144 of the Securities
and Exchange Commission (or any similar rule then in force) if such rule is
available and (c) subject to the conditions specified in subparagraph (ii)
below, any other legally available means of transfer.
(ii) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 4(i)(a) or (b) above), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities delivers
to the Company an opinion of counsel that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new certificates
for such Restricted Securities which do not bear the securities Act legend set
forth in paragraph 7.C. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7.C.
5. Representations and Warranties of the Company. As a material
---------------------------------------------
inducement to the Purchasers to enter into this Agreement and purchase the
Preferred Stock, the Company hereby represents and warrants that:
A. Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the
Company's and each Subsidiary's charter documents and bylaws which have been
furnished to the Purchasers' special counsel reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
B. Capital Stock and Related Matters.
(i) As of the Initial Closing and immediately thereafter, the
authorized capital stock of the Company shall consist of (a) 1,000 shares of
preferred stock, of which 1,000 shares shall be designated as Preferred Stock
(all of which shall be issued and outstanding) and (b) 1,150 shares of Common
Stock, of which 350 shares
14
<PAGE>
shall be issued and outstanding and 600 shares shall be reserved for issuance
upon conversion of the Preferred Stock. As of the Closing, neither the Company
nor any Subsidiary shall have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock, except for the Preferred
Stock and except as set forth on the attached "Capitalization Schedule." The
Capitalization Schedule accurately sets forth the following with respect to all
outstanding options and rights to acquire the Company's capital stock: the
holder, the number of shares covered, the exercise price and the expiration
date. As of the Closing neither the Company nor any Subsidiary shall be subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except as set forth on the Capitalization
Schedule and except pursuant to the Certificate of Incorporation. As of the
Closing, all of the outstanding shares of the Company's capital stock shall be
validly issued, fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Preferred Stock hereunder or the issuance of the
Common Stock upon conversion of the Preferred Stock. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Preferred Stock hereunder do not require registration under the
Securities Act or any applicable state securities laws. To the best of the
Company's knowledge, there are no agreements between the Company's stockholders
with respect to the voting or transfer of the Company's capital stock or with
respect to any other aspect of the Company's affairs, except for the Initial
Stockholders Agreement, and the stock option agreements set forth on the
Capitalization Schedule.
C. Subsidiaries; Investments. The attached "Subsidiary Schedule"
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of each
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole. All of the outstanding shares of
capital stock of each Subsidiary are validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any lien, charge or encumbrance. Except as set
forth on the Subsidiary Schedule, neither the Company nor any Subsidiary owns or
holds the right to acquire any shares of stock or any other security or interest
in any other Person.
15
<PAGE>
D. Authorization; No Breach. The execution, delivery and performance
of this Agreement, the Registration Agreement and all other agreements
contemplated hereby to which the Company is a party and the filing of the
amendment and restatement of the Certificate of Incorporation have been duly
authorized by the Company. This Agreement, the Registration Agreement, the
amended and restated Certificate of Incorporation (containing the Certificate of
Designation) and all other agreements contemplated hereby each constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms. The execution and delivery by the Company of this Agreement, the
Registration Agreement, and all other agreements contemplated hereby to which
the Company is a party, the offering, sale and issuance of the Preferred Stock
hereunder, the issuance of the Common Stock upon conversion of the Preferred
Stock, the filing of the amendment and restatement of the Certificate of
Incorporation and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to accelerate any
obligations under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the amended and
restated Certificate of Incorporation or the bylaws of the Company or any
Subsidiary, or any law, statute, rule or regulation to which the Company or the
charter or bylaws or any Subsidiary is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the Restrictions Schedule, none of the Subsidiaries is
subject to any restrictions upon making loans or advances or paying dividends
to, transferring property to, or repaying any Indebtedness owed to, the Company
or another Subsidiary.
E. Financial Statements. Attached hereto as the "Financial Statements
Schedule" are the following financial statements:
(i) the unaudited balance sheets of the Company as of December 31,
1995, for the twelve-month period then ended; and
(ii) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of May 31, 1996 (the "Latest Balance Sheet) for the five-month
period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) fairly presents the financial condition and results of
operations at the dates and for the periods indicated, is consistent with the
books and records of the Company (which, in turn, are accurate and complete in
all material respects) and has been prepared in accordance with generally
accepted accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the lack of footnote disclosure and changes
resulting from normal year-end audit adjustments (none of which would, alone
16
<PAGE>
or in the aggregate, be materially adverse to the financial condition, operating
results, assets, operations or business prospects of the Company).
F. Absence of Undisclosed Liabilities. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, wither or not known to the Company or any Subsidiary,
whether due or to become due and regardless of when asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing other than: (i) liabilities set forth on the Latest Balance Sheet
(including any notes thereto), (ii) liabilities and obligations which have
arisen after the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, claim or lawsuit) (iii) other
liabilities and obligations (including liabilities and obligations under
executory contracts) expressly disclosed in the other Schedules to this
Agreement and (iv) liabilities under executory contracts not required to be
disclosed on the Contracts Schedule.
G. No Material Adverse Change. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, business prospects, employee relations or
customer or supplier relations of the Company and its Subsidiaries taken as a
whole.
H. Absence of Certain Developments.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Development Schedule," since the date of the Latest
Balance Sheet, neither the Company has not:
(a) issued any notes, bonds or other debt securities or any
equity securities or any securities convertible, exchangeable or
exercisable into any equity securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts entered into in the
ordinary course of business;
(c) discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability, other than current liabilities
paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its stock or purchased
or redeemed any shares of its stock or any warrants, options or other
rights to acquire its stock;
17
<PAGE>
(e) mortgaged or pledged any of its properties or assets or
subjected them to any material lien, security interest, charge or other
encumbrance, except liens for current property taxes not yet due and
payable;
(f) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or cancelled any material debts
or claims;
(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other intangible
assets, or disclosed any proprietary confidential information to any
Person;
(h) suffered any extraordinary losses or waived any right of
material value, whether or not in the ordinary course of business or
consistent with past practice;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(j) entered into any other material transaction, whether or
not in the ordinary course of business;
(k) made any loans or advances to, guarantees for the benefit
of, or any Investments in, any Persons in excess of $250,000 in the
aggregate;
(l) made any charitable contributions or pledges;
(m) suffered any damage, destruction or casualty loss
exceeding in the aggregate $250,000, whether or not covered by insurance;
or
(n) made any Investment in or taken steps to incorporate any
Subsidiary.
(ii) Neither the Company nor any Subsidiary has at any time made any
payments for political contributions or made any bribes, kickback payments or
other illegal payments.
I. Assets. Except as set forth on the "Assets Schedule," the Company
and each Subsidiary have good and marketable title to, or a valid leasehold
interest in, the properties and assets used by them, located on their premises
or shown on the Latest Balance Sheet or acquired thereafter, free and clear of
all liens, security interests, charges and encumbrances, except for properties
and assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for liens disclosed on the Latest Balance Sheet
(including any notes thereto) and liens for current property taxes not yet due
and payable. Except as described on the Assets Schedule, the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in
18
<PAGE>
good operating condition in all materials respects and are fit for use in the
ordinary course of business.
J. Tax Matters. Except as set forth in the attached "Taxes Schedule":
the Company and each Subsidiary have filed all tax returns which they are
required to file; all such returns are true and correct in all material
respects; the Company and each Subsidiary have in all material respects paid all
taxes owed by them and withheld and paid over all taxes which they are obligated
to withhold from amounts owing to any employee, creditor or third party; neither
the Company nor any Subsidiary has waived any statute of limitations with
respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency; the assessment of any additional taxes for periods for
which returns have been filed is not expected; the federal income tax returns of
the Company and its Subsidiaries have not been audited; and there are no pending
questions or claims concerning the Company's or any Subsidiary's tax liability.
K. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule," as of the Closing, neither the
Company nor any Subsidiary is a party to any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any contract with any labor union, or any severance
agreements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $100,000 or contract
relating to loans to officers, directors or affiliates;
(c) contract under which the Company or a Subsidiary has advanced
or loaned any other Person amounts in the aggregate exceeding $100,000;
(d) agreement or indenture relating to the borrowing of money or
the mortgaging, pledging or otherwise placing a lien on any material asset
or material group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation;
(f) lease or agreement under which the Company or any Subsidiary
is lessee of or holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal property under
which the aggregate annual rental payments do not exceed $25,000;
19
<PAGE>
(g) lease or agreement under which the Company or any Subsidiary
is lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company or any Subsidiary;
(h) contract or group of related contracts with the same party or
group of affiliated parties the performance of which involves a
consideration in excess of $150,000;
(i) assignment, license, indemnification or agreement with
respect to any intangible property (including, without limitation, any
patent, trademark, trade name, copyright, know-how, trade secret or
confidential information;
(j) warranty agreement with respect to its services rendered or
its products sold or leased;
(k) agreements under which it has granted any Person any
registration rights (including piggyback rights);
(l) contract, agreement or other arrangement with any officer,
director, employee or Affiliate, or any Affiliate of any officer, director
or employee except employment agreements terminable at will;
(m) contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world; and
(n) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $150,000
annually.
(ii) The Company and each Subsidiary have performed all material
obligations required to be performed by them and are not in default under or in
breach of nor in receipt of any claim of default or breach under any material
contract, agreement or instrument to which the Company or any Subsidiary is
subject; no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance under
any material contract, agreement or instrument to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; neither
the Company nor any Subsidiary has knowledge of any breach or anticipated breach
by the other parties to any material contract or commitment to which it is a
party; and neither the Company nor any Subsidiary is a party to any materially
adverse contract or commitment.
(iii) The Purchasers' special counsel has been supplied with a true
and correct copy of each of the written contracts and an accurate description of
the oral contracts which are referred to on the Contracts Schedule, together
with all amendments, waivers or other changes thereto.
20
<PAGE>
L. Proprietary Rights. The attached "Proprietary Rights Schedule"
contains a complete and accurate list of (i) all patented and registered
Proprietary Rights owned by the Company or any Subsidiary, (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by the Company or any Subsidiary, (iii) all unregistered trade
names and corporate names owned or used by the Company and its Subsidiaries and
(iv) all unregistered trademarks, service marks and copyrights and computer
software which are material to the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole. The Proprietary Rights Schedule also contains a complete and
accurate list of all licenses and other rights granted by the Company or any
Subsidiary to any third party with respect to any Proprietary Rights and all
licenses and other rights granted by any third party to the Company or any
Subsidiary with respect to any Proprietary rights. The Company or one of its
Subsidiaries owns or has the right to use pursuant to a valid license all
Proprietary Rights necessary for the operation of the businesses of the Company
and its Subsidiaries as presently conducted and as presently proposed to be
conducted. The loss or expiration of any Proprietary Right or related group of
Proprietary Rights would not have a material adverse effect on the conduct of
the Company's and its Subsidiaries' respective businesses, and no such loss or
expiration is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
necessary actions to maintain and protect the Proprietary Rights which they own
and use. To the best of the Company's knowledge, the owners of any Proprietary
Rights licensed to the Company or any Subsidiary have taken all necessary
actions to maintain and protect the Proprietary Rights which are subject to such
licenses. Except as indicated on the Proprietary Rights Schedule, (i) the
Company and its Subsidiaries own all right, title, and interest in and to all of
the Proprietary Rights listed on such schedule and all other Proprietary Rights
material to the operation of the businesses of the Company and its Subsidiaries,
(ii) there have been no claims made against the Company or any Subsidiary
asserting the invalidity, misuse or unenforceability of any of such rights, and,
to the best of the Company's knowledge, there are no grounds for the same, (iii)
neither the Company nor any Subsidiary has received a notice of conflict with
the asserted rights of others, and (iv) the conduct of the Company's and each
Subsidiary's business has not infringed or misappropriated and does not infringe
or misappropriate any Proprietary Rights of other Persons, nor would any future
conduct as presently contemplated infringe any Proprietary Rights of other
Persons and, to the best of the Company's knowledge, the Proprietary Rights
owned by the Company or any Subsidiary have not been infringed or
misappropriated by other Persons.
M. Litigation, etc. There are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any Subsidiary (or to the best of
the Company's knowledge, pending or threatened against or affecting any of the
officers, directors or employees of the Company and its Subsidiaries with
respect to their businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without
21
<PAGE>
limitations, any actions, suit, proceedings or investigations with respect to
the transactions contemplated by this Agreement); neither the Company nor any
Subsidiary is subject to any arbitration proceedings under collective bargaining
agreements or otherwise or, to the best of the Company's knowledge, any
governmental investigations or inquiries (including inquiry as to the
qualification to hold or receive any license or permit); and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. Neither the
Company nor any Subsidiary is subject to any judgment, order or decree of any
court or other governmental agency. Neither the Company nor any Subsidiary has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
N. Brokers. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon the Company or
any Subsidiary. The Company shall pay, and hold each Purchaser harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
O. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the exhibits hereto.
P. Insurance. The attached "Insurance Schedule" contains a description
of each insurance policy maintained by the Company and its Subsidiaries with
respect to its properties, assets and businesses, and each such policy is in
full force and effect as of the Closing. Neither the Company nor any Subsidiary
is in default with respect to its obligations under any insurance policy
maintained by it. The insurance coverage of the Company and its Subsidiaries is
customary for corporations of similar size engaged in similar lines of business.
Q. Employees and ERISA.
(i) The Company is not aware that any executive or key employee of
the Company or any Subsidiary or any group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and the Company is not aware
that it or any Subsidiary has any material labor relations problems (including
any union organization activities, threatened or actual strikes or work
stoppages or material grievances).
22
<PAGE>
(ii) Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge after due inquiry, any of their employees is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreements relating to, affecting or in conflict with the present or proposed
business activities of the Company and its Subsidiaries, except for agreements
between the Company and its present and former employees.
(iii) Neither the Company nor any Subsidiary presently maintains or
contributes to, or ever has maintained or contributed to, any "employee benefit
plan," as such term is defined in Section 3 of the Employee Retirement Income
Security act of 1974, as amended ("ERISA"), with respect to which the Company is
required to file Internal Revenue Service ("IRS") Form 5500, and neither the
Company nor any Subsidiary presently contributes to or ever has contributed
to any "multiemployer plan," as such term is defined in Section 3 of ERISA.
(iv) Attached as F is a copy of the Company's 1996 Stock Option
Plan, and forms of Notice of Exercise and Early Exercise Stock Purchase
Agreement (the "Stock Option Agreements"). The Stock Option Agreements contain
vesting provisions and give the Company a repurchase right and a right of first
refusal to purchase shares of an optionee's Common Stock on the terms set forth
therein. The repurchase right and right of first refusal can be assigned to the
Investors.
R. Compliance with Laws. Neither the Company nor any Subsidiary has
violated any law or any governmental regulation or requirement which violation
would reasonably be expected to have a material adverse effect upon the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole, and neither the Company
nor any Subsidiary has received notice of any such violation. Neither the
Company nor the Subsidiary is subject to any clean up liability, or has reason
to believe it may become subject to any clean up liability, under any federal,
state or local environmental law, rule or regulation.
S. Affiliated Transactions. Except as set forth on the attached
"Affiliated Transactions Schedule," no officer, director or stockholder of the
Company or any Subsidiary or any person related by blood or marriage to any such
person or any entity in which any such person owns any beneficial interest, is a
party to any agreement, contract, commitment or transaction with the Company or
any Subsidiary or has any material interest in any material property used by the
Company or any Subsidiary.
T. Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items prepared
or supplied to any Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading.
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<PAGE>
U. Closing Date. The representations and warranties of the Company
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to any Purchaser shall be true and
correct in all material respects on the date of the Closing as though then made,
except as affected by the transactions expressly contemplated by this Agreement.
6. Definitions. For purposes of this Agreement, the following terms
-----------
have the meanings set forth below:
"Affiliate" of any particular person or entity means any other person or
---------
entity controlling, controlled by or under common control with such particular
person or entity.
"Indebtedness" means all indebtedness for borrowed money (including
------------
purchase money obligations) maturing one year or more from the date of creation
or incurrence thereof or renewable or extendible at the option of the debtor to
a date one year or more from the date of creation or incurrence thereof, all
indebtedness under revolving credit arrangements extending over a year or more,
all capitalized lease obligations and all guarantees of any of the foregoing.
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Proprietary Rights" means all (i) patents, patent applications, patent
------------------
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
24
<PAGE>
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights, and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"Restricted Securities" means (i) the Preferred Stock issued hereunder,
---------------------
(ii) the Common Stock issued upon conversion of Preferred Stock and (iii) any
securities issued with respect to the securities referred to in clauses (i),
(ii) or (iii) above by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7.C. have been delivered by the
Company in accordance with paragraph 4.(ii). Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to like
tenor not bearing a Securities Act legend of the character set forth in
paragraph 7.C.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended, or any similar federal law the in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
-----------------------
upon conversion of the Preferred Stock and (ii) any Common Stock issued or
issuable
25
<PAGE>
with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
of this Agreement, any Person who holds Preferred Stock shall be deemed to be
the holder of the Underlying Common Stock obtainable upon conversion of the
Preferred Stock in connection with the transfer thereof or otherwise regardless
of any restriction or limitation on the conversion of the Preferred Stock. As
to any particular shares of Underlying Common Stock, such shares shall cease to
be Underlying Common Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
7. Miscellaneous.
-------------
A. Expenses. The Company agrees to pay, and hold each Purchaser and
all holders of Preferred Stock and Underlying Common Stock harmless against
liability for the payment of, (i) the fees (not to exceed $20,000, provided that
no material unforeseen issues or conditions arise) and expenses of Holland &
Hart, special counsel to the Investors, arising in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement which shall be payable at the
Closing, (ii) the reasonable fees and expenses incurred with respect to any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, the agreements contemplated hereby or the Certificate
of Incorporation (including, without limitation, in connection with any proposed
merger, sale or recapitalization of the Company), (iii) stamp and other taxes
which may be payable in respect of the execution and delivery of this Agreement
or the issuance, delivery or acquisition of any shares of Preferred Stock or any
shares of Common Stock issuable upon conversion of Preferred Stock, (iv) the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby and the Certificate of Incorporation, and (v) the reasonable
fees and expenses incurred at the request of the Company by each such Person in
any filing with any governmental agency with respect to its investment in the
Company or in any other filing with any governmental agency with respect to the
Company which mentions such Person.
B. Remedies.
(i) Each holder of Preferred Stock and Underlying Common Stock shall
have all rights and remedies set forth in this Agreement and the Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
26
<PAGE>
(ii) The Company agrees to indemnify and hold the Purchaser harmless
against any loss, liability, damage or expense (including reasonable legal fees
and costs) which such Purchasers may suffer, sustain or become subject to as a
result of or in connection with the breach by the Company of any representation,
warranty, covenant or agreement of the Company contained in this Agreement, the
Certificate of Incorporation or the other agreements contemplated hereby.
C. Purchaser's Investment Representations. Each Purchaser, as to
itself only, hereby represents that:
(i) it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act;
(ii) it is acquiring the Restricted Securities purchased hereunder
or acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent any Purchaser and subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of Section 4 hereof. Each certificate for Restricted Securities shall
be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on _____________, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented
to the conditions specified in the Purchase Agreement, dated as of
_____________, between the issuer (the "Company") and certain
investors, and the Company reserves the right to refuse the transfer
of such securities until such conditions have been fulfilled with
respect to such transfer. A copy of such conditions shall be
furnished by the Company to the holder hereof upon written request and
without charge."
(iii) it understands that it must bear the economic risk of the
investment in the Restricted Securities for an indefinite period of time because
the Restricted Securities have not been registered under the Securities Act and
applicable state securities laws and therefore cannot be sold unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available; and
(iv) the execution, delivery and performance by such Purchaser of
this Agreement and all other agreements to which such Purchaser is a party have
been duly authorized by such Purchaser and each constitutes a valid and binding
obligation of such Purchaser, enforceable in accordance with its terms.
27
<PAGE>
D. Treatment of the Preferred Stock. The Company covenants and agrees
that so long as federal income tax laws prohibit a deduction for distributions
made by the Company with respect to preferred stock (i) it shall treat all
distributions paid by it on the Preferred Stock as non-deductible dividends on
all of its tax returns and (ii) it shall treat the Preferred Stock as preferred
stock in all of its financial statements and other reports and shall treat all
distributions paid by it on the Preferred Stock as dividends on preferred stock
in such statements and reports.
E. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of a majority of the outstanding Preferred Stock; provided that if there
is no Preferred Stock outstanding, the provisions of this Agreement may be
amended and the Company may take any action herein prohibited, only if the
Company has obtained the written consent of the holders of a majority of the
Underlying Common Stock. No other course of dealing between the Company and the
holder of any Preferred Stock or Underlying Common Stock or any delay in
exercising any rights hereunder or under the Certificate of Incorporation shall
operate as a waiver of any rights of any such holders. For purposes of this
Agreement, shares of Preferred Stock, or Underlying Common Stock held by the
Company or any Subsidiaries shall not be deemed to be outstanding. If the
Company pays any consideration to any holder of Preferred Stock or Underlying
Common Stock for such holder's consent to any amendment, modification or waiver
hereunder, the Company shall also pay each other holder of Preferred Stock or
Underlying Common Stock granting its consent hereunder equivalent consideration
computed on a pro rata basis.
F. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
G. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock or Underlying Common Stock are also for
the benefit of, and enforceable by, any subsequent holder of such Preferred
Stock or such Underlying Common Stock.
H. Capital and Surplus; Special Reserves. The Company agrees that the
capital of the Company (as such term is used in Section 154 of the General
Corporation Law of Delaware) in respect of the Preferred Stock issued pursuant
to this Agreement shall be equal to the aggregate par value of such shares and
that it shall not
28
<PAGE>
increase the capital of the Company with respect to any shares of the Company's
capital stock at any time on or after the date of this Agreement. The Company
also agrees that it shall not create any special reserves under Section 171 of
the General Corporation Law of Delaware without the prior written consent of the
holders of a majority of the outstanding Preferred Stock.
I. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
J. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
K. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be
by way of example rather than by limitation.
L. Governing Law. The corporate laws of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of Colorado.
M. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address listed below:
Centennial Communications Corp.
1999 Broadway, Suite 2100
Denver, CO 80202
Attention: President
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
29
<PAGE>
N. Understanding Among the Purchasers . The determination of each
Purchaser to purchase the Preferred Stock pursuant to this Agreement has been
made by such Purchaser independent of any other Purchaser and independent of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser. In addition, it
is acknowledged by each of the other Purchasers that Centennial has not acted as
an agent of such Purchaser in connection with making its investment hereunder
and that Centennial shall not be acting as an agent of such Purchaser in
connection with monitoring its investment hereunder.
* * * * *
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Jeff E. Rhodes
-----------------------------------
Title:________________________________
CENTENNIAL FUND IV, L.P. TELECOM PARTNERS, L.P.
By: Centennial Holdings, IV, L.P. By: /s/ Stephen W. Schovee
Its: General Partner -----------------------------------
Title: Managing Member of the General
Partner
By: /s/ Stephen C. Halstedt
-----------------------------------
Title: General Partner
TRAILHEAD VENTURES, L.P. BOULDER VENTURES, L.P.
By: Wind River Partners By: /s/ Kyle Lefkoff
-----------------------------------
Title: Partner
--------------------------------
By: /s/ William D. Stanfill
-----------------------------------
Title: General Partner
GC&H INVESTMENTS
By: /s/ John L. Cardoza /s/ Bill Elsner
----------------------------------- --------------------------------------
Title: Bill Elsner
/s/ Robert McKenzie
- -------------------------------------- --------------------------------------
Robert McKenzie Mark Geller
/s/ Jeff E. Rhodes
--------------------------------------
Jeff E. Rhodes
CENTENNIAL HOLDINGS, INC.
By /s/ Stacey S. McKittrick
------------------------------------
Name: Stacey S. McKittrick
Title: Vice President, Legal Admin.
MGVF II, Ltd.
By: [illegible signature]
-----------------------------------
General Partner
31
<PAGE>
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Name and Address No. Of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Telecom Partners, L.P. 30 $ 750,000
1999 Broadway, Suite 2100
Denver, Colorado 80202
Centennial Fund IV, L.P. 175 4,375,000
1999 Broadway, Suite 2100
Denver, Colorado 80202
Centennial Holdings, Inc. 14 350,000
1999 Broadway, Suite 2100
Denver, CO 80202
Jeff E. Rhodes 4 100,000
1999 Broadway, Suite 2100
Denver, CO 80202
Robert McKenzie 2 50,000
60 Kearney Street
Denver, Colorado 80220
William Elsner 4 100,000
83 Glenmoor Place
Englewood, Colorado 80110
Trailhead Ventures, L.P. 80 2,000,000
730 17th Street, Suite 690
Denver, CO 80202
MGVF II, Ltd. 20 500,000
1200 Smith St., Suite 3400
Houston, TX 77002
Boulder Ventures 14 350,000
Suite 301
1634 Walnut Street
Boulder, Colorado 80202
</TABLE>
Schedule of Purchasers
Page 1
<PAGE>
<TABLE>
<CAPTION>
Name and Address No. Of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
- -------------------------------------------------------------------------------------------
<S> <C> <C>
GC&H Investments 2 50,000
Maritime Plaza
20th Floor
San Francisco, CA 94111
TOTAL: 345 $8,625,000
--- ----------
</TABLE>
Schedule of Purchasers
Page 2
<PAGE>
LIST OF EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Registration Agreement
Exhibit C Stockholders Agreement
Exhibit D Initial Stockholder Agreement
Exhibit E Opinion of Counsel
Exhibit F Stock Option Agreements
List of Exhibits
Page 1
<PAGE>
ATTORNEYS AT LAW San Francisco, CA
415 693-2000
2595 Canyon Boulevard Palo Alto, CA
Suite 250 415 843-5000
Boulder, CO
80302-6737 Menlo Park, CA
MAIN: 303 546-4000 415 843-5000
FAX: 303 546-4099
San Diego, CA
619 550-6000
Denver, CO
303 606-4800
WEB http://www.cooley.com
JAMES C. T. LINFIELD
Direct: (303) 546-4010
Internet: [email protected]
July 3, 1996
To the Purchasers
of Series A Preferred Stock
of Centennial Communications Corp.
listed on Schedule A hereto
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the issuance and sale of 82
shares of the Company's Series A Preferred Stock (the "Shares") to you under the
Series A Preferred Stock Purchase Agreement dated as of June 27, 1996 (the
"Agreement"). We are rendering this opinion pursuant to Section 2.I of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters (but not legal conclusions)
contained in and made pursuant to the Agreement, the Registration Agreement and
the Stockholders Agreement by and among the various parties, and originals or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Registration Agreement and the Stockholders
Agreement), where authorization, execution and delivery are prerequisites to the
effectiveness of such documents. We have also assumed: that all individuals
executing and delivering documents had the legal capacity to so execute and
<PAGE>
To the Purchasers of Series A Preferred
July 3, 1996
Page Two
deliver; that you have received all documents you were to receive under the
Agreement; that the Agreement, the Registration Agreement and the Stockholders
Agreement are obligations binding upon you; and that there are no extrinsic
agreements or understandings among the parties to the Agreement, the
Registration Agreement and the Stockholders Agreement that would modify or
interpret the terms of the Agreement, the Registration Agreement or the
Stockholders Agreement or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Colorado and the General Corporation
Law of the State of Delaware. We express no opinion as to whether the laws of
any particular jurisdiction apply, and no opinion to the extent that the laws of
any jurisdiction other than those identified above are applicable to the subject
matter hereof. We are not rendering any opinion as to compliance with any
antifraud law, rule or regulation relating to securities, or to the sale or
issuance thereof.
With regard to our opinion in paragraph 5 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
With regard to our opinion in paragraph 6 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) inquiries of officers of the Company, (ii) a list supplied to us by the
Company of material agreements to which the Company is a party, or by which it
is bound, and (iii) an examination of the items on the aforementioned list; we
have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and assets
and to conduct its business, is qualified to do business in the State of
Colorado, and to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any other jurisdiction in the United
States.
<PAGE>
To the Purchasers of Series A Preferred
July 3, 1996
Page Three
3. The Agreement, the Registration Agreement and the Stockholders Agreement
have been duly and validly authorized, executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as rights to indemnity under
Section 6 of the Registration Agreement may be limited by applicable laws and
public policy and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific performance.
4. The Restated Certificate of Incorporation (the "Restated Certificate") has
been duly and validly authorized, executed and filed with the Delaware Secretary
of State and does not violate or conflict with the provisions of the General
Corporation Law of the State of Delaware.
5. The Company's authorized capital stock consists of (a) one thousand one
hundred and fifty (1,150) shares of Common Stock, of which three hundred fifty
(350) shares are issued and outstanding and (b) one thousand (1,000) shares of
Preferred Stock, all of which shares have been designated Series A Preferred
Stock, two hundred sixty-three (263) of which were issued and outstanding prior
to the Closing. All issued and outstanding shares of the Company's Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. The rights, preferences and privileges of the Series A Preferred
Stock are as stated in the Restated Certificate. The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, the Shares will be validly issued,
outstanding, fully paid and nonassessable. The shares of Common Stock issuable
upon conversion of the Shares have been duly authorized and reserved for
issuance, and upon conversion of the Shares in accordance with the Restated
Certificate, will be validly issued, outstanding, fully paid and nonassessable.
To the best of our knowledge, except as disclosed in the Agreement or the
Disclosure Schedules thereto, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
any of the authorized but unissued capital stock of the Company, other than (i)
the conversion privileges of the Series A Preferred Stock and (ii) rights
created in connection with the transactions contemplated by the Agreement, the
Registration Agreement and the Stockholders Agreement.
<PAGE>
To the Purchasers of Series A Preferred
July 3, 1996
Page Four
6. The execution and delivery of the Agreement, the Registration Agreement and
the Stockholders Agreement by the Company and the offer and sale of the Shares
pursuant thereto do not violate any provision of the Company's Restated
Certificate or Bylaws, and do not constitute a material default under the
provisions of any material agreement known to us to which the Company is a party
or by which it is bound, and do not violate or contravene (a) any governmental
statute, rule or regulation applicable to the Company or (b) any order, writ,
judgment, injunction, decree, determination or award which has been entered
against the Company and of which we are aware, the default, violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreement, the
Registration Agreement and the Stockholders Agreement or might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition, or operations of the Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Agreement, have been made or obtained.
9. Based in part upon the representations of the Purchasers contained in the
Agreement, the offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933 and the qualification or registration
requirements of the Colorado Securities Act, each as amended to date.
<PAGE>
To the Purchasers of Series A Preferred
July 3, 1996
Page Five
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By _________________________
James C.T. Linfield
<PAGE>
[LETTERHEAD OF JAMES C. T. LINFIELD APPEARS HERE]
June 27, 1996
To the Purchasers
of Series A Preferred Stock
of Centennial Communications Corp.
listed on Schedule A hereto
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the issuance and sale of 263
shares of the Company's Series A Preferred Stock (the "Shares") to you under the
Series A Preferred Stock Purchase Agreement dated as of June 27, 1996 (the
"Agreement"). We are rendering this opinion pursuant to Section 2.I of the
Agreement. Except as otherwise defined herein, capitalized terms used but not
defined herein have the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters (but not legal conclusions)
contained in and made pursuant to the Agreement, the Registration Agreement and
the Stockholders Agreement by and among the various parties, and originals or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Registration Agreement and the Stockholders
Agreement), where authorization, execution and delivery are prerequisites to the
effectiveness of such documents. We have also assumed: that all individuals
executing and delivering documents had the legal capacity to so execute and
deliver; that you have received all documents you were to receive under the
Agreement;
<PAGE>
To the Purchasers of Series A Preferred
June 27, 1996
Page Two
that the Agreement, the Registration Agreement and the Stockholders
Agreement are obligations binding upon you; and that there are no extrinsic
agreements or understandings among the parties to the Agreement, the
Registration Agreement and the Stockholders Agreement that would modify or
interpret the terms of the Agreement, the Registration Agreement or the
Stockholders Agreement or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Colorado, the General Corporation
Law of the State of Delaware and the securities laws of the State of California
and the State of Texas. We express no opinion as to whether the laws of any
particular jurisdiction apply, and no opinion to the extent that the laws of any
jurisdiction other than those identified above are applicable to the subject
matter hereof. With respect to securities laws of the State of California and
the State of Texas, we have based our opinion solely upon our examination of
such laws and the rules and regulations of the authorities administering such
laws, all as reported in unofficial compilations. Neither a special ruling of
such authority nor an opinion of counsel in such jurisdiction has been obtained.
We are not rendering any opinion as to compliance with any antifraud law, rule
or regulation relating to securities, or to the sale or issuance thereof.
With regard to our opinion in paragraph 5 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
With regard to our opinion in paragraph 6 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) inquiries of officers of the Company, (ii) a list supplied to us by the
Company of material agreements to which the Company is a party, or by which it
is bound, and (iii) an examination of the items on the aforementioned list; we
have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware.
<PAGE>
To the Purchasers of Series A Preferred
June 27, 1996
Page Three
2. The Company has the requisite corporate power to own its property and assets
and to conduct its business, is qualified to do business in the State of
Colorado, and to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any other jurisdiction in the United
States.
3. The Agreement, the Registration Agreement and the Stockholders Agreement
have been duly and validly authorized, executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as rights to indemnity under
Section 6 of the Registration Agreement may be limited by applicable laws and
public policy and except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific performance.
4. The Restated Certificate of Incorporation (the "Restated Certificate") has
been duly and validly authorized, executed and filed with the Delaware Secretary
of State and does not violate or conflict with the provisions of the General
Corporation Law of the State of Delaware.
5. The Company's authorized capital stock consists of (a) one thousand one
hundred and fifty (1,150) shares of Common Stock, of which three hundred fifty
(350) shares are issued and outstanding and (b) one thousand (1,000) shares of
Preferred Stock, all of which shares have been designated Series A Preferred
Stock, none of which were issued and outstanding prior to the Closing. All
issued and outstanding shares of the Company's Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. The rights,
preferences and privileges of the Series A Preferred Stock are as stated in the
Restated Certificate. The Shares have been duly authorized, and upon issuance
and delivery against payment therefor in accordance with the terms of the
Agreement, the Shares will be validly issued, outstanding, fully paid and
nonassessable. The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance, and upon conversion
of the Shares in accordance with the Restated Certificate, will be validly
issued, outstanding, fully paid and nonassessable. To the best of our
knowledge, except as disclosed in the Agreement or the Disclosure Schedules
thereto, there are no options, warrants, conversion privileges, preemptive
rights or other rights presently outstanding to purchase any of the authorized
but unissued capital stock of the Company, other than (i) the conversion
privileges of the
<PAGE>
To the Purchasers of Series A Preferred
June 27, 1996
Page Four
Series A Preferred Stock and (ii) rights created in connection with the
transactions contemplated by the Agreement, the Registration Agreement and the
Stockholders Agreement.
6. The execution and delivery of the Agreement, the Registration Agreement and
the Stockholders Agreement by the Company and the offer and sale of the Shares
pursuant thereto do not violate any provision of the Company's Restated
Certificate or Bylaws, and do not constitute a material default under the
provisions of any material agreement known to us to which the Company is a party
or by which it is bound, and do not violate or contravene (a) any governmental
statute, rule or regulation applicable to the Company or (b) any order, writ,
judgment, injunction, decree, determination or award which has been entered
against the Company and of which we are aware, the default, violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreement, the
Registration Agreement and the Stockholders Agreement or might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition, or operations of the Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Agreement, have been made or obtained, except
for the filing of a Notice of Transaction pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968.
9. Based in part upon the representations of the Purchasers contained in the
Agreement, the offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933 and the qualification or registration
requirements (as the case may be) of the Colorado Securities Act, the Texas
Securities Act of 1957 and the California Corporate Securities Law of 1968, each
as amended to date.
<PAGE>
To the Purchasers of Series A Preferred
June 27, 1996
Page Five
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By _________________________
James C.T. Linfield
<PAGE>
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employees Schedule
Compliance Schedule
Affiliated Transactions Schedule
List of Disclosure Schedules
Page 1
<PAGE>
CAPITALIZATION SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
OPTION HOLDERS* NUMBER OF SHARES EXERCISE PRICE PER SHARE EXPIRATION DATE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JEFF RHODES 10.00 $10,000 01/11/06
ROBERT MCKENZIE 2.00 $10,000 01/11/06
MARK FETCENKO 3.00 $10,000 03/14/06
ANNE HAAS 2.50 $10,000 03/14/06
DONALD DAVIDGE 2.50 $10,000 05/09/06
MATT ZUSCHLAG 2.00 $10,000 05/09/06
RAFAEL LUCES S. 1.50 $10,000 05/09/06
HUMAN RESOURCE SOLUTION .25 $25,000 06/06/06
------------------
TOTAL
23.75
==================
</TABLE>
* ALL HOLDERS ARE SUBJECT TO STOCK OPTION AGREEMENTS.
<PAGE>
SUBSIDIARY SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION STOCKHOLDERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
MOBILE LINE PERU, S.A. PERU CENTENNIAL COMMUNICATIONS
CORP. - 51%
JESUS ESCUDERO PRESA - 49%
</TABLE>
<PAGE>
RESTRICTIONS SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
FINANCIAL STATEMENTS SCHEDULE
TO PURCHASE AGREEMENT
1. Unaudited balance sheet of Centennial Communications Corp. (the "Company")
for the period ended December 31, 1995
2. Unaudited balance sheet of the Company for the period ended May 31, 1996
3. Tax Return of Mobil Line Peru, S.A. ("Mobil Line") for the period ended
December 31, 1995
4 Unaudited balance sheet of Mobil Line for the period ended May 31, 1996
5. Unaudited consolidated balance sheet of the Company and Mobil Line for the
period ended May 31, 1996
<PAGE>
LIABILITIES SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has agreed to pay the balance of the down payment of
approximately $275,000 due to E.F. Johnson by June 28, 1996, pursuant to a
capital leasing agreement. $450,000 of the $725,000 down payment has
already been paid by the Company.
2. The Company entered into a letter of intent with Jesus Escudero Presa to
pay $600,000 for all of his shares of Common Stock of Mobil Line Peru S.A.
which amound would be due upon closing of that certain purchase agreement.
(This transaction is still being negotiated.)
3. The Company is obligated to pay one-half (1/2) of its down payment of
approximately $250,000 to the FCC (customarily 5% of the aggregate net high
winning bid amount) for the 900 MHz SMR MTA licenses which amount could be
due by the first week of August, 1996.
4. Pursuant to a Purchase Order dated March 14, 1996, the Company has agreed
to pay approximately $2,490,000 to Maxon America Inc. for the purchase of
equipment from August 1996 through December 1996.
<PAGE>
ADVERSE CHANGE SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
DEVELOPMENT SCHEDULE
TO PURCHASE AGREEMENT
1. The Company paid $450,000 as a partial down payment to E.F. Johnson to
lease and acquire infrastructure equipment pursuant to a certain capital
leasing agreement for a total purchase price of $2,400,000, in which E.F.
Johnson will hold a security interest in these assets as to the unpaid
purchase price.
<PAGE>
ASSETS SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
TAXES SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has filed an extension for its 1995 Federal tax return and has
until September 15, 1996 in which to file said return. However, the
Company does not anticipate any tax liability.
<PAGE>
CONTRACT SCHEDULE TO
PURCHASE AGREEMENT
EMPLOYEE BENEFITS:
1. 1996 Stock Option Plan, attached as Attachment F to the Employee Schedule to
this Purchase Agreement.
2. Employers Health Insurance Indemnity, PPO, EPO Basic and Standard Health
Benefit Plan for Colorado.
EMPLOYEE COMPENSATION:
1. Jeff E. Rhodes, President
2. Anne E. Haas, Vice President of Finance
3. Donald Davidge, Director of Sales and Marketing
LEASES:
1. Lease, dated May 2, 1996, by and between Sixteen Hundred Wynkoop, Ltd. and
the Company, for lease space located at 1600 Wynkoop Street, Denver,
Colorado.
2. Lease Agreement, dated May 4, 1996, by and between The Banco Continental and
Mobile Line Peru, S.A. for lease space located at Av. Republica de Panama
No. 3005, 19th Floor, San Isidro, Peru.
3. Lease arrangement with Hialeah in Lima, Peru, for rental space on Morro
Solar for $900 per month. No document is available at this time which
memorializes this arrangement.
PURCHASE AGREEMENTS OF COMPANY SECURITIES:
1. Stock Subscription Agreement, dated October 26, 1995, by and between the
Company and Centennial Rural Wireless, Inc.
2. Stock Subscription Agreement, dated October 26, 1995, by and between the
Company and Telecom Partners, L.P.
3. Purchase Agreement, dated December 8, 1995, by and between the Company and
the Purchasers (Telecom, Centennial Holdings and Centennial Funds)
4. Registration Rights Agreement, dated December 8, 1995, by and among the
Company and the Purchasers named therein
<PAGE>
5. Stockholders Agreement, dated December 8, 1995, by and among the Company and
the Stockholders named therein
6. First Amendment to Purchase Agreement, dated January 31, 1996, by and among
the Company and Jeff Rhodes and Robert McKenzie, as Purchasers
7. Second Amendment to Purchase Agreement, dated February 1, 1996, by and among
the Company and Bill Elsner, as Purchaser
8. Purchase Agreement, dated December 15, 1995, by and among Mobil Line Peru
S.A., the Company and Jesus Escudero Presa
9. First Amendment to Purchase Agreement, dated February 28, 1996, by and among
Mobil Line Peru S.A., the Company and Jesus Escudero Presa
10. Second Amendment to Purchase Agreement, dated February 28, 1996, by and
among Mobil Line Peru S.A., the Company and Jesus Escudero Presa
11. Letter Agreement to Purchase Agreement, dated February 29, 1996, by and
among Mobil Line Peru S.A., the Company and Jesus Escudero Presa
12. Shareholders Agreement, dated February 29, 1996, by and among the Company,
Jesus Escudero Presa and Mobil Line Peru S.A.
MATERIAL AGREEMENTS (IN EXCESS OF $150,000):
1. Agreement, dated May 2, 1996, by and between the Company and SBA, Inc.
2. Services Agreement, by and between the Company and E.F. Johnson, together
with letters dated April 1, 1996 and June 14, 1996, and a confirmation of
order
3. Purchase Order, dated March 14, 1996, between the Company and Maxon America
Inc.
LETTERS OF INTENT (IN EXCESS OF $150,000):
1. Letter of Intent, dated June 21, 1996, as to the sale of stock of Mobil Line
Peru, S.A. from Jesus Escudero to the Company
2. Letter of Intent, dated June 11, 1996, as to the sale of all of the
outstanding capital stock of Sisterna Troncalizado S.A. from the
stockholders to the Company
<PAGE>
PROPRIETARY RIGHTS SCHEDULE
TO PURCHASE AGREEMENT
1. The Board of Directors of the Company has approved the process to begin the
registration of the trademark "SMR Direct."
2. Mobile Line Peru, S.A. has approved the trademark name of "Mobile TRUNKING"
for registration but the process of registration has not yet begun.
3. The FCC is currently processing the Company's applications for forty-three
(43) MHz spectrum MTA licenses for issuance to the Company.
<PAGE>
LITIGATION SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
BROKERAGE SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
CONSENTS SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
INSURANCE SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
INSURANCE COMPANY COVERAGE*
- ------------------------------------------------------------------------------------
<S> <C>
ASSOCIATED INDEMNITY CORP. COMMERCIAL GENERAL LIABILITY
ASSOCIATED INDEMNITY CORP. SIMPLIFIED COMMERCIAL PROPERTY
ASSOCIATED INDEMNITY CORP. HIRED/BORROWED AUTO
NATIONAL SURETY CORPORATION WORKERS COMPENSATION
FIREMAN'S FUND INSURANCE COMPANY COMMERCIAL UMBRELLA
GREAT NORTHERN INSURANCE COMPANY FOREIGN LIABILITY (SIMPLE)
GREAT NORTHERN INSURANCE COMPANY FOREIGN EMPLOYEES LIABILITY
GREAT NORTHERN INSURANCE COMPANY FOREIGN PROPERTY (SIMPLE)
GREAT NORTHERN INSURANCE COMPANY FOREIGN AUTO
</TABLE>
* ALL COVERAGE EXPIRES ON MAY 1, 1997.
<PAGE>
EMPLOYMENT SCHEDULE
TO PURCHASE AGREEMENT
Attachment F to this Schedule contains a copy of the Company's 1996 Stock
Option Plan and forms of Notice of Exercise and Early Exercise Stock Purchase
Agreement.
<PAGE>
COMPLIANCE SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
AFFILIATED TRANSACTION SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
EXHIBIT 10.4
PURCHASE AGREEMENT
Dated: November 22, 1996
BETWEEN
CENTENNIAL COMMUNICATIONS CORP.
AND
CENTENNIAL FUND V, L.P.
CENTENNIAL FUND IV, L.P.
CENTENNIAL ENTREPRENEURS FUND V, L.P.
CREST FUNDING PARTNERS, L.P.
CREST SMR, L.L.C.
TELECOM PARTNERS, L.P.
CENTENNIAL HOLDINGS, INC.
TRAILHEAD VENTURES, L.P.
BOULDER VENTURES, L.P.
MGVF II, LTD.
BILL ELSNER
ROBERT MCKENZIE
JEFF E. RHODES
BANCBOSTON VENTURES INCORPORATED
KYLE LEFKOFF AS ATTORNEY IN FACT
<PAGE>
TABLE OF CONTENTS
1. Authorization and Closing............................................. 1
A. Authorization of the Preferred Stock................................. 1
B. Purchase and Sale of the Preferred Stock............................. 1
C. The Closing.......................................................... 1
D. Subsequent Closings.................................................. 1
2. Conditions of Each Purchaser's Obligations at the Closing............ 2
-----------------------------------------------------------
A. Representations and Warranties....................................... 2
B. Amended and Restated Certificate of Incorporation................... 2
C. Registration Agreement............................................... 2
D. Stockholders Agreement............................................... 2
E. Sale of Preferred Stock to Each Purchaser............................ 2
F. Blue Sky Clearances.................................................. 2
G. Disqualified Persons................................................. 3
H. Opinion of the Company's Counsel..................................... 3
I. Closing Documents.................................................... 3
J. Proceedings.......................................................... 3
K. Waiver............................................................... 3
L. Expenses............................................................. 4
3. Covenants............................................................. 4
----------
A. Financial Statements and Other Information........................... 4
B. Inspection of Property............................................... 7
C. Attendance at Board Meetings......................................... 7
i
<PAGE>
D. Designation of Directors............................................. 8
E. Restrictions......................................................... 8
F. Affirmative Covenants................................................ 10
G. Compliance with Agreements........................................... 11
H. Current Public Information........................................... 11
I. Reservation of Common Stock.......................................... 12
J. Enforcement of Other Agreements...................................... 12
K. Proprietary Rights................................................... 12
L. Limited First Refusal Rights......................................... 12
M. Qualified Small Business............................................. 13
N. Unrelated Taxable Income............................................. 13
O. Investments in United States Real Property Interests................. 14
4. Transfer of Restricted Securities..................................... 14
----------------------------------
5. Representations and Warranties of the Company......................... 14
----------------------------------------------
A. Organization and Corporate Power..................................... 14
B. Capital Stock and Related Matters.................................... 15
C. Subsidiaries; Investments............................................ 16
D. Authorization; No Breach............................................. 16
E. Financial Statements................................................. 17
F. Absence of Undisclosed Liabilities................................... 17
G. No Material Adverse Change........................................... 17
H. Absence of Certain Developments...................................... 17
I. Assets............................................................... 19
J. Tax Matters.......................................................... 19
K. Contracts and Commitments............................................ 19
ii
<PAGE>
L. Proprietary Rights................................................... 21
M. Litigation, etc...................................................... 22
N. Brokers.............................................................. 22
O. Governmental Consent, etc............................................ 22
P. Insurance............................................................ 23
Q. Employees and ERISA.................................................. 23
R. Compliance with Laws................................................. 23
S. Affiliated Transactions.............................................. 24
T. Disclosure........................................................... 24
U. Disqualified Persons................................................. 24
V. Closing Date......................................................... 24
6. Definitions........................................................... 24
------------
7. Miscellaneous......................................................... 26
--------------
A. Expenses............................................................. 26
B. Remedies............................................................. 27
C. Purchaser's Investment Representations............................... 27
D. Treatment of the Preferred Stock..................................... 28
E. Consent to Amendments................................................ 28
F. Survival of Representations and Warranties........................... 29
G. Successors and Assigns............................................... 29
H. Capital and Surplus; Special Reserves................................ 29
I. Severability......................................................... 29
J. Counterparts......................................................... 30
K. Descriptive Headings; Interpretation................................. 30
L. Governing Law........................................................ 30
iii
<PAGE>
M. Notices.............................................................. 30
N. Understanding Among the Purchasers................................... 30
iv
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT is made as of November 22, 1996, between Centennial
Communications Corp., a Delaware corporation (the "Company"), and the Persons
listed on the Schedule of Purchasers attached hereto (collectively referred to
herein as the "Purchasers" and individually as a "Purchaser"). Except as
otherwise indicated herein, capitalized terms used herein are defined in Section
6 hereof.
The parties hereto agree as follows:
1. Authorization and Closing.
a. Authorization of the Preferred Stock. The Company shall authorize
the issuance and sale to the Purchasers of 5,670,851 shares of its Series B
Preferred Stock, par value $.01 per share (the "Preferred Stock"), having the
rights and preferences set forth in Exhibit A attached hereto. The Preferred
---------
Stock is convertible into shares of the Company's Common Stock, par value $.01
per share (the "Common Stock").
b. Purchase and Sale of the Preferred Stock. At each Closing (as
defined below) the Company shall sell to each Purchaser and, subject to the
terms and conditions set forth herein, each Purchaser shall purchase from the
Company the number of shares of Preferred Stock set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto at a price of
$3.65 per share. The sale of Preferred Stock to each Purchaser shall constitute
a separate sale hereunder.
c. The Closing. Any closing of the separate purchase and sales of the
Preferred Stock shall take place at such place and on such date as may be
mutually agreeable to the Company and each Purchaser making a purchase of
Preferred Stock. The initial closing (the "Initial Closing") shall take place
at the offices of Holland & Hart LLP at 9:00 a.m. on November 22, 1996 or at
such other place and on such other date as may be mutually agreeable to the
Company and each Purchaser. Additional purchases may be made at a subsequent
closing (the "Subsequent Closing," whether there are one or more such closings).
(The Initial Closing and each Subsequent Closing are referred to as a
"Closing.") At each Closing, the Company shall deliver to each Purchaser stock
certificates evidencing the Preferred Stock to be purchased by such Purchaser,
registered in such Purchaser's or its nominees name, upon payment of the
purchase price thereof by a cashier's or certified check, or by wire transfer of
immediately available funds to an account to be designated by the Company.
d. Subsequent Closings. At any time or times after the Initial Closing
until December 20, 1996 (the "Final Closing Date"), the Company may sell
additional shares of Preferred Stock to additional purchasers (the "Additional
Purchasers") on the same terms and conditions as such Preferred Stock is being
sold to the Purchasers. If such additional sales are made, (i) a Supplementary
Schedule of Purchasers listing the
<PAGE>
Additional Purchasers and the number of shares of Preferred Stock being
purchased by each will be prepared and (ii) the Additional Purchasers will sign
counterpart signature pages to this Agreement, the Registration Agreement (as
defined below) and the Stockholders Agreement (as defined below). The parties to
this Agreement also agree to execute such documents and take all other actions
necessary to permit the Additional Purchasers to become parties to this
Agreement, the Registration Agreement and the Stockholders Agreement. At any
Subsequent Closing the Company will deliver to the Additional Purchasers copies
of all documents delivered at the Initial Closing.
2. Conditions of Each Purchaser's Obligations at the Closing. The
- -- ----------------------------------------------------------
obligation of each Purchaser to purchase and pay for the Preferred Stock at each
Closing is subject to the satisfaction as of the Closing of the following
conditions:
a. Representations and Warranties. The representations and warranties
contained in Section 5 hereof shall be true and correct in all material respects
at and as of the Closing as though then made, except to the extent of changes
caused by the transactions expressly contemplated herein.
b. Amended and Restated Certificate of Incorporation. The Company shall
have duly adopted, executed and filed with the Secretary of State of Delaware an
amended and restated Certificate of Incorporation establishing the terms and the
relative rights and preferences of the Preferred Stock in the form set forth in
Exhibit A hereto (the "Certificate of Incorporation"), and the Company shall not
- ---------
have adopted or filed any other document designating terms, relative rights or
preferences of its preferred stock. The Certificate of Incorporation shall be
in full force and effect as of the Closing under the laws of Delaware and shall
not have been amended or modified.
c. Registration Agreement. The Company, the Purchasers and the holders
of the Common Stock shall have entered into an amended and restated registration
agreement in form and substance as set forth in Exhibit B attached hereto (the
---------
"Registration Agreement"), and the Registration Agreement shall be in full force
and effect as of the Closing.
d. Stockholders Agreement. The Company, the Purchasers and each major
holder of Common Stock shall have entered into an amended and restated
stockholders agreement in form and substance set forth in Exhibit C attached
---------
hereto (the "Stockholders Agreement"), and the Stockholders Agreement shall be
in full force and effect as of the Closing.
e. Sale of Preferred Stock to Each Purchaser. The Company shall have
sold to each Purchaser the Preferred Stock to be purchased by it hereunder at
the Closing and shall have received payment therefor.
f. Blue Sky Clearances. The Company shall have made all filings under
applicable state securities laws necessary to consummate the issuance of the
Preferred Stock pursuant to this Agreement in compliance with such laws.
2
<PAGE>
g. Disqualified Persons. The Company shall have provided Centennial
Fund IV, L.P. ("Centennial IV") and Centennial Fund V, L.P. ("Centennial V") a
certification of the direct and indirect holdings of securities of the Company
by certain persons designated by Centennial IV and Centennial V as required by
their respective governing documents.
h. Opinion of the Company's Counsel. Each Purchaser shall have received
from Cooley Godward LLP, counsel for the Company, an opinion with respect to the
matters set forth in Exhibit D attached hereto, which shall be addressed to each
---------
Purchaser, dated the date of the Initial Closing and in form and substance
reasonably satisfactory to each Purchaser.
i. Closing Documents. The Company shall have delivered to each
Purchaser all of the following documents:
i. an Officer's Certificate, dated the date of the Closing, stating that
the conditions specified in Section 1 and paragraphs 2.A through 2.G.,
inclusive, have been fully satisfied;
ii. certified copies of (a) the resolutions duly adopted by the Company's
board of directors authorizing the execution, delivery and performance of this
Agreement, the Registration Agreement and each of the other agreements
contemplated hereby, the filing of the amendment to the Certificate of
Incorporation referred to in paragraph 2.B., the issuance and sale of the
Preferred Stock, the reservation of a sufficient number of shares of Common
Stock for issuance upon conversion of all of the outstanding shares of the
Preferred Stock and the consummation of all other transactions contemplated by
this Agreement, and (b) the resolutions duly adopted by the Company's
stockholders adopting the amendment to the Certificate of Incorporation referred
to in paragraph 2.B.;
iii. certified copies of the Certificate of Incorporation and the Company's
bylaws, each as in effect at the Closing;
iv. copies of all third party and governmental consents, approvals and
filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky filings and waivers of
all preemptive rights and rights of first refusal);
j. Proceedings. All corporate and other proceedings taken or required
to be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to each Purchaser and its
special counsel.
k. Waiver. Any condition specified in this Section 2 may be waived if
consented to by each Purchaser; provided that no such waiver shall be effective
against any Purchaser unless it is set forth in a writing executed by each
Purchaser.
3
<PAGE>
l. Expenses. The Company shall have reimbursed the Purchasers for the
fees and expenses of their special counsel as provided in paragraph 7.A. hereof.
3. Covenants.
- -- ---------
a. Financial Statements and Other Information . The Company shall
deliver to each Purchaser (so long as such Purchaser holds any Underlying Common
Stock) and to each holder of at least 10% of the Underlying Common Stock:
i. as soon as available but in any event within 30 days after the end of
each monthly accounting period in each fiscal year, unaudited consolidating and
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such monthly
period, setting forth in each case comparisons to the annual budget and to the
corresponding period in the preceding fiscal year, and all such statements shall
be prepared in accordance with generally accepted accounting principles,
consistently applied, subject to the exclusion of footnote disclosure and normal
year-end audit adjustments;
ii. as soon as available but in any event within 45 days after the end of
each quarterly accounting period in each fiscal year, unaudited consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the beginning of
the fiscal year to the end of such quarter, and consolidating and consolidated
balance sheets of the Company and its subsidiaries as of the end of such
quarterly period, setting forth in each case comparisons to the annual budget
and to the corresponding period in the preceding fiscal year, and all such
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the exclusion of footnote
disclosure and normal year-end audit adjustments;
iii. within 90 days after the end of each fiscal year, audited consolidated
and consolidating statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by (a) with respect to the
consolidated portions of such statements, an opinion of an independent
accounting firm of recognized national standing, (b) a certificate from such
accounting firm, addressed to the Company's board of directors, stating that in
the course of its examination nothing came to its attention that caused it to
believe that there was an Event of Noncompliance in existence or that there was
any other default by the Company or any Subsidiaries in the fulfillment of or
compliance with any of the terms, covenants, provisions or conditions of any
other material agreement to which the Company or any Subsidiaries is a party or,
if such accountants have reason to believe any Event of Noncompliance or other
default by the
4
<PAGE>
Company or any Subsidiaries exists, a certificate specifying the nature and
period of existence thereof, and (c) a copy of such firm's annual management
letter to the board of directors;
iv. promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
v. at least 30 days (but not more than 90 days) prior to the beginning of
each fiscal year, (a) an annual budget prepared on a monthly basis for the
Company and its Subsidiaries for such fiscal year (displaying anticipated
statements of income and cash flows and balance sheets), (b) a five year
strategic plan for the subsequent five fiscal years of the Company, and promptly
upon preparation thereof any other significant budgets or plans prepared by the
Company and any revisions of such annual or other budgets or five year strategic
plan or other plans, and within 30 days after any monthly period in which there
is a material adverse deviation from the annual budget, an Officer's Certificate
explaining the deviation and what actions the Company has taken and proposes to
take with respect thereto;
vi. promptly (but in any event within five business days) after the
discovery or receipt of notice of any default under any material agreement to
which it or any of its Subsidiaries is a party or any other material adverse
event or circumstance affecting the Company or any Subsidiaries (including the
filing of any material litigation against the Company or any Subsidiaries or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
vii. within ten days after transmission thereof, copies of all financial
statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or (to its knowledge) any of its officers or directors file with respect
to the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's
businesses; and
viii. with reasonable promptness, such other information and financial data
concerning the Company and its Subsidiaries as any Person entitled to receive
information under this paragraph 3.A. may reasonably request.
Each of the financial statements referred to in subparagraph (i), (ii) and (iii)
shall fairly present the financial condition and results of operation as of the
dates and for the
5
<PAGE>
periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end audit adjustments (none of
which would, alone or in the aggregate, be materially adverse to the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole).
Notwithstanding the foregoing, the provisions of this paragraph 3.A. (other
than 3.A(vii) shall cease to be effective so long as the Company (a) is subject
to the periodic reporting requirements of the Securities Exchange Act and
continues to comply with such requirements and (b) promptly provides to each
Person otherwise entitled to receive information pursuant to this paragraph 3.A.
all reports and other materials filed by the Company with the Securities and
Exchange Commission pursuant to the periodic reporting requirements of the
Securities Exchange Act; provided that so long as any Preferred Stock remains
outstanding, the Company shall continue to deliver to each Purchaser (so long as
such Purchaser holds any Underlying Common Stock) and to each holder of at least
10% of the outstanding Preferred Stock the information specified in
subparagraphs 3.A.(iii)(b) and 3.A.(vi).
Except as otherwise required by law or judicial order or decree or by any
governmental agency or authority, each Person entitled to receive information
regarding the Company and its Subsidiaries under paragraph 3.A., 3.B. or 3.C.
shall use its best efforts to maintain the confidentiality of all nonpublic
information obtained by it hereunder which the Company has reasonably designated
as proprietary or confidential in nature; provided that each such Person (i)
may, to the extent required by law, disclose such information in connection with
the sale or transfer or proposed sale or transfer of any Preferred Stock or
Underlying Common Stock if such Person's transferee agrees in writing to be
bound by the provisions hereof, and (ii) may disclose such information to any
partner, subsidiary, Affiliate (as defined below) or parent of such Person or to
officers, directors or employees of the foregoing (provided that such persons
are bound by a confidentiality provisions similar to those described herein) for
the purpose of evaluating its investment in the Company so long as such partner,
subsidiary, Affiliate or parent or such officer, director or employee is advised
of the confidential nature of the information.
If a Purchaser is requested to disclose any of the confidential
information, and that Purchaser is advised by counsel that it must disclose such
information or else stand liable for contempt or other penalty or censure, that
Purchaser will promptly notify the Company of such request so that the Company
may seek a protective order or other appropriate remedy. Each Purchaser agrees
to cooperate with the Company, at the Company's expense, in its efforts to
obtain such remedies, but this provision will not be construed to require a
Purchaser to undertake litigation or other legal proceedings. If such
protective order or other remedy is not promptly obtained, such information as,
pursuant to the advice of counsel, is required to be disclosed may be disclosed.
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For purposes of paragraphs 3.A., 3.B. and 3.C. hereof, the term "Purchaser"
shall include any partner of a Purchaser who received shares of Preferred Stock
or Underlying Common Stock pursuant to a distribution from or a liquidation of
such Purchaser.
For purposes of this Agreement and the Registration Agreement, all holdings
of Preferred Stock and Underlying Common Stock by Persons who are Affiliates of
each other shall be aggregated for purposes of meeting any threshold tests under
this Agreement and Registration Agreement. "Affiliate" shall have the meaning
set forth in Section 6 hereof and for purposes of meeting such threshold tests
shall include Persons which have received distributions of securities from a
partnership holding such securities.
b. Inspection of Property . The Company shall permit any representatives
designated by any Purchaser (so long as such Purchaser holds any Underlying
Common Stock) or any holder of at least 10% of the Underlying Common Stock, upon
reasonable notice and during normal business hours, to (i) visit and inspect any
of the properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries; provided,
however, the Company shall not be obligated to comply with the provisions of
this Section 3.B with respect to a competitor of the Company or with respect to
information which the board of directors determines in good faith is
confidential and disclosure of which to the person requesting such information
would be materially detrimental to the Company and should not, therefore, be
disclosed. The presentation of an executed copy of this Agreement by any
Purchaser to the Company's independent accountants shall constitute the
Company's permission to its independent accountants to participate in
discussions with such Persons.
c. Attendance at Board Meetings . The Company shall give each Purchaser
(so long as such Purchaser holds any Underlying Common Stock) and each holder of
at least 10% of the Underlying Common Stock written notice of each meeting of
its board of directors and each committee thereof at the same time and in the
same manner as notice is given to the directors (which notice shall be confirmed
in writing to each such Person) and the Company shall permit a representative of
each such Person to attend as an observer all meetings of its board of directors
and all committees thereof; provided that in the case of telephonic meetings
conducted in accordance with the Company's bylaws and applicable law, each such
Person's representative shall be given the opportunity to listen to such
telephonic meetings; and provided further that the Company have the right to
exclude the representatives from the entire meeting or portion thereof if
attendance by the representative at such meeting or portion thereof or
dissemination of such information would, in the reasonable determination of the
board of directors compromise or adversely affect the attorney-client privilege
(on the basis of an opinion of counsel to the Company) or result in a conflict
of interest situation. Each representative shall be entitled to receive all
written materials and other information (including, without limitation, copies
of meeting minutes) given to directors in
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connection with such meetings at the same time such materials and information
are given to the directors. If the Company proposes to take any action by
written consent in lieu of a meeting of its board of directors or of any
committee thereof, the Company shall give written notice thereof to each such
Person prior to the effective date of such consent describing in reasonable
detail the nature and substance of such action.
d. Designation of Directors. The Company shall use its best efforts to
cause the directors designated in the Stockholder Agreement to be elected to the
board of directors.
e. Restrictions. (1) So long as any of the Preferred Stock remains
outstanding, the Company shall not, without the consent of the holders of a
majority of the Preferred Stock:
i. directly or indirectly declare or pay any dividends or make any
distributions upon any of its equity securities other than the Preferred Stock
pursuant to the terms of the Certificate of Incorporation, except for dividends
payable in shares of Common Stock issued upon the outstanding shares of Common
Stock;
ii. directly or indirectly redeem, purchase or otherwise acquire, or
permit any Subsidiaries to redeem, purchase or otherwise acquire, any of the
Company's equity securities (including, without limitation, warrants, options
and other rights to acquire equity securities) other than the Preferred Stock
and the Company's Series A Preferred Stock (the "Series A Preferred Stock")
pursuant to terms of the Certificate of Incorporation and except for repurchases
of Common Stock from employees of the Company and its Subsidiaries upon
termination of employment pursuant to arrangements approved by the Company's
board of directors.
iii. enter into, or permit any Subsidiary to enter into, the ownership,
active management or operation of any business other than wireless
communications and ancillary activities;
iv. become subject to, or permit any of its Subsidiaries to become subject
to, any agreement or instrument which by its terms would (under any
circumstances) restrict the Company's right to perform the provisions of this
Agreement, the Stockholders Agreement, the Registration Agreement, the
Certificate of Incorporation or the Company's bylaws (including, without
limitation, provisions relating to payment of dividends on and making
redemptions of the Preferred Stock and conversions of the Preferred Stock);
v. except as expressly contemplated by this Agreement, make any amendment
to the Certificate of Incorporation or the Company's bylaws, or file any
resolution of the board of directors with the Delaware Secretary of State
containing any provisions, which would increase the number of authorized shares
of the Preferred Stock or adversely affect or otherwise impair the rights or
relative priority of the holders of the
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Preferred Stock or the Underlying Common Stock under this Agreement, the
Certificate of Incorporation, the Company's bylaws or the Registration
Agreement;
vi. change the authorized size of its board of directors;
vii. increase the number of shares of Common Stock issuable pursuant to
stock option plans or stock ownership plans above 10% of the number of shares of
Common Stock outstanding on or before the Final Closing Date (as such number is
proportionately adjusted for stock splits, combinations and dividends affecting
the Common Stock and including all such employee stock options, other purchase
rights and conversion rights outstanding on or before the Final Closing Date
(the "Authorized Management Stock"), otherwise amend or modify any stock option
plan or employee stock ownership plan as in existence as of the Closing (the
"Stock Option Agreements"), adopt any new stock option plan or employee stock
ownership plan or issue any shares of Common Stock to its or its Subsidiaries'
employees other than pursuant to the Company's existing stock option and
employee stock ownership plans;
viii. use the proceeds from the sale of the Preferred Stock other than for
wireless communication activities or such other activities as may be approved by
the board of directors.
ix. except as expressly contemplated by this Agreement, authorize, issue
or enter into any agreement providing for the issuance (contingent or otherwise)
of, (a) any notes or debt securities containing equity features (including,
without limitation, any notes or debt securities convertible into or
exchangeable for equity securities, issued in connection with the issuance of
equity securities or containing profit participation features, (b) any equity
securities (or any securities convertible into or exchangeable for any equity
securities) which are senior to or on a parity with the Preferred Stock with
respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise or (c) any additional shares of Preferred Stock;
(2) So long as any of the Preferred stock remains outstanding the Company
shall not, without the consent of the holders of at least 70% (except as
otherwise set forth below) of the Preferred Stock:
(i) merge or consolidate with any Person or, permit any Subsidiary to
merge or consolidate with any Person (other than a wholly-owned Subsidiary);
(ii) sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of substantial assets or substantially all of
its assets outside of the scope of the Company's business plan as approved by
the board of directors in any transaction or series of related transactions, or
sell or permanently dispose of any of its or any Subsidiary's Proprietary
Rights;
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(iii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation) any
reorganization into partnership form); provided that any reorganization in
partnership form shall require the consent of the holders of at least 75% of the
Preferred Stock;
(iv) make or permit any Subsidiary to make an assignment for the
benefit of creditors or admit in writing its inability to pay its debts
generally as they become due; or petition or apply to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the Company or
any Subsidiary or of any substantial part of the assets of the Company or any
Subsidiary, or commence any proceeding (other than a proceeding for the
voluntary liquidation and dissolution of a Subsidiary) relating to the Company
or any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction;
(v) enter into, or permit any Subsidiary to enter into, any
transaction with any of its or any Subsidiary's Affiliates, except for normal
arrangements on reasonable terms in the ordinary course of business;
(vi) take any action which would adversely alter or change any of the
rights, preferences or privileges of the Preferred Stock without the consent of
the holders of at least 75% of the Preferred Stock.
f. Affirmative Covenants. So long as any Preferred Stock remains
outstanding, the Company shall, and shall cause each Subsidiary to (unless
waived by the holders of a majority of the Preferred Stock):
i. at all times cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses;
ii. maintain and keep its properties in good repair, working order and
condition, and from time to time make all necessary and desirable repairs,
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
iii. pay and discharge when payable all taxes, assessments and governmental
charges imposed upon its properties or upon the income or profits therefrom (in
each case before the same becomes delinquent and before penalties accrue
thereon) and all claims for labor, materials or supplies to the extent to which
the failure to pay or discharge such obligations would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and adequate reserves (as determined
in accordance with generally accepted accounting principles, consistently
applied) have been established on its books with respect thereto;
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iv. comply with all other material obligations which it incurs pursuant to
any contract or agreement, whether oral or written, express or implied, as such
obligations become due unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect thereto;
v. comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole;
(1) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in such
amounts as are customary for corporations of similar size engaged in similar
lines of business;
(2) maintain proper books of record and account which fairly present
its financial condition and results of operations and make provisions on its
financial statements for all such proper reserves as in each case are required
in accordance with generally accepted accounting principles, consistently
applied; and
(3) enter into and maintain nondisclosure and noncompete agreements
with its key employees in the form approved by the board of directors.
g. Compliance with Agreements. The Company shall perform and observe
(i) all of its obligations to each holder of the Preferred Stock and all of its
obligations to each holder of the Underlying Common Stock set forth in the
Certificate of Incorporation and the Company's bylaws, and (ii) all of its
obligations to each holder of Registrable Securities set forth in the
Registration Agreement.
h. Current Public Information. At all times after the Company has filed
a registration statement with the Securities and Exchange Commission pursuant to
the requirements of either the Securities Act or the Securities Exchange Act,
the Company shall file all reports required to be filed by it under the
Securities Act, the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder and shall take such
further action as any holder or holders of Restricted Securities may reasonably
request, all to the extent required to enable such holders to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulations hereunder adopted by the Securities and
Exchange Commission, or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Restricted
Securities a written statement as to whether it has complied with such
requirements.
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i. Reservation of Common Stock. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the Preferred Stock,
such number of shares of Common Stock issuable upon the conversion of all
outstanding Preferred Stock. All shares of Common Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable laws or governmental regulation or
any requirements of any domestic securities exchange upon which shares of Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
j. Enforcement of Other Agreements. The Company shall enforce the
provisions of the Stock Option Agreements.
k. Proprietary Rights. The Company shall, and shall cause each
Subsidiary to, possess and maintain all material Proprietary Rights necessary to
the conduct of their respective businesses and own all right, title and interest
in and to, or have a valid license for, all material Proprietary Rights used by
the Company and each Subsidiary in the conduct of their respective businesses.
Neither the Company nor any Subsidiary shall take any action, or fail to take
any action, which would result in the invalidity, abuse, misuse or
unenforceability of such Proprietary Rights or which would infringe upon any
rights of other Persons.
l. Limited First Refusal Rights.
i. Except for the issuance of Common Stock (a) to the Company's employees
as contemplated by paragraph 3.E.(1)(vii) hereof, (b) upon the conversion of the
Preferred Stock and/or the Series A Preferred Stock, (c) in connection with
issuance to non-Affiliates of the Company for consideration other than cash, (d)
pursuant to a public offering registered under the Securities Act, (e) in
connection with the acquisition of another business entity by the Company, (f)
in connection with any stock split, stock dividend, or recapitalization or (g)
to a lender or equipment lessor in connection with any loan or lease financing
transaction, if the Company authorizes the issuance or sale of any shares of
Common Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each of the holders of
Underlying Common Stock its "pro rata portion" of 75% of such stock or
securities. A holder's "pro rata portion" shall equal the quotient determined
by dividing (1) the number of shares of Common Stock and Underlying Common Stock
held by each such holder by the (2) sum of the total number of shares of
Underlying Common Stock and Common Stock held by all holders of Underlying
Common Stock. Each holder of Underlying Common Stock shall be entitled to
purchase such stock or securities at the most favorable price and on the most
favorable terms as such stock or securities are to be offered to any other
Persons. The purchase price for all stock and securities offered
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<PAGE>
to the holders of the Underlying Common Stock shall be payable in cash or, to
the extent otherwise required hereunder, notes issued by such holders.
(1) In order to exercise its purchase rights hereunder, a holder of
Underlying Common Stock must within 15 days after receipt of written notice from
the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms and such holder's
percentage allotment deliver a written notice to the Company describing its
election hereunder. If all of the stock and securities offered to the holders
of Underlying Common Stock is not fully subscribed by such holders, the
remaining stock and securities shall be reoffered by the Company to the holders
purchasing their full allotment upon the terms set forth in this paragraph,
except that such holders must exercise their purchase rights within five days
after receipt of such reoffer.
(2) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Underlying Common Stock have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any stock or securities
offered or sold by the Company after such 90-day period must be reoffered to the
holders of Underlying Common Stock pursuant to the terms of this paragraph.
(3) The rights under this paragraph shall terminate upon the
effectiveness of a registration statement filed by the Company with the
Securities and Exchange Commission under the Securities Act with respect to an
offering of Common Stock by the Company with an aggregate selling price of at
least $20,000,000 and a price per share of at least $10.00 (as adjusted for
stock splits, reverse stock splits, and similar recapitalizations); provided
that if the registration statement is withdrawn or abandoned before any shares
of Common Stock are sold thereunder, the provisions of this paragraph shall
remain in effect.
m. Qualified Small Business. The Company qualifies as a "Qualified
Small Business" as defined in Section 1202(c) of the Internal Revenue Code of
1986, as amended (the "Code") and covenants that, so long as any of the Shares
of Underlying Common Stock are held by a Purchaser in whose hands shares of
Underlying Common Stock are eligible to qualify as Qualified Small Business
Stock as defined in Section 1202(c) of the Code, it will use its best efforts to
cause the shares of Underlying Common Stock to qualify as Qualified Small
Business Stock.
n. Unrelated Taxable Income. Any gross income derived by the Purchasers
from the Company shall be in the form of dividends, interest, capital gains and
losses from the disposition of property, and rents and royalties, but only such
rents and royalties as are excluded pursuant to Code Sections 512(b)(2) and
512(b)(3), respectively, in calculating unrelated business taxable income and
only such dividends,
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interest, capital gains and losses, and rents and royalties that are not
included under Section 512(b)(4) of the Code in calculating unrelated business
taxable income.
o. Investments in United States Real Property Interests. The Company's
capital stock does not constitute a United States real property interest as that
term is defined in Section 897(c)(1)(A)(ii) of the Code. The preceding
representation is based on a determination by the Company that the Company is
not and has not been a United States real property holding corporation (as that
term is defined in Section 897(c)(2) of the Code) since the date of its
incorporation. The Company shall use its best efforts to ensure that it does
not at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such status.
4. Transfer of Restricted Securities.
- -- ---------------------------------
(1) Restricted Securities are transferable pursuant to (a) public
offerings registered under the Securities Act, (b) Rule 144 of the Securities
and Exchange Commission (or any similar rule then in force) if such rule is
available and (c) subject to the conditions specified in subparagraph (ii)
below, any other legally available means of transfer.
(2) In connection with the transfer of any Restricted Securities
(other than a transfer described in subparagraph 4(i)(a) or (b) above), the
holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities
delivers to the Company an opinion of counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities Act,
the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the securities Act
legend set forth in paragraph 7.C. If the Company is not required to deliver
new certificates for such Restricted Securities not bearing such legend, the
holder thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7.C.
5. Representations and Warranties of the Company. As a material
- -- ---------------------------------------------
inducement to the Purchasers to enter into this Agreement and purchase the
Preferred Stock, the Company hereby represents and warrants that:
a. Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on the
financial condition,
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operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole. The Company has all requisite corporate power
and authority and all material licenses, permits and authorizations necessary to
own and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's and each
Subsidiary's charter documents and bylaws which have been furnished to the
Purchasers' special counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
b. Capital Stock and Related Matters.
i. As of the Initial Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 6,400,000 shares of preferred
stock, of which 352 shares shall be designated as Series A Preferred Stock (all
of which shall be issued and outstanding) and 6,399,648 shares will be
designated as Series B Preferred Stock (626,743 of which will be issued and
outstanding) and (b) 16,000,000 shares of Common Stock, of which 3,502,500
shares shall be issued and outstanding and 6,400,352 shares shall be reserved
for issuance upon conversion of the Preferred Stock. As of the Closing, neither
the Company nor any Subsidiary shall have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or containing
any profit participation features, nor shall it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock, except for
the Preferred Stock and except as set forth on the attached "Capitalization
Schedule." The Capitalization Schedule accurately sets forth the following with
respect to all outstanding options and rights to acquire the Company's capital
stock: the holder, the number of shares covered, the exercise price and the
expiration date. As of the Closing neither the Company nor any Subsidiary shall
be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock, except as set forth on the
Capitalization Schedule and except pursuant to the Certificate of Incorporation.
As of the Closing, all of the outstanding shares of the Company's capital stock
shall be validly issued, fully paid and nonassessable.
ii. There are no statutory or contractual stockholders preemptive rights
or rights of refusal with respect to the issuance of the Preferred Stock
hereunder or the issuance of the Common Stock upon conversion of the Preferred
Stock. The Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its capital stock,
and the offer, sale and issuance of the Preferred Stock hereunder do not require
registration under the Securities Act or any applicable state securities laws.
To the best of the Company's knowledge, there are no agreements between the
Company's stockholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's affairs,
except for the Stockholders Agreement, an Amended and
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Restated Initial Stockholders Agreement dated June 27, 1996, and the stock
option agreements set forth on the Capitalization Schedule.
c. Subsidiaries; Investments. The attached "Subsidiary Schedule"
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of each
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole. All of the outstanding shares of
capital stock of each Subsidiary are validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any lien, charge or encumbrance. Except as set
forth on the Subsidiary Schedule, neither the Company nor any Subsidiary owns or
holds the right to acquire any shares of stock or any other security or interest
in any other Person.
d. Authorization; No Breach. The execution, delivery and performance of
this Agreement, the Registration Agreement and all other agreements
contemplated hereby to which the Company is a party and the filing of the
amendment and restatement of the Certificate of Incorporation have been duly
authorized by the Company. This Agreement, the Registration Agreement, the
amended and restated Certificate of Incorporation (containing the Certificate of
Designation) and all other agreements contemplated hereby each constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms. The execution and delivery by the Company of this Agreement, the
Registration Agreement, and all other agreements contemplated hereby to which
the Company is a party, the offering, sale and issuance of the Preferred Stock
hereunder, the issuance of the Common Stock upon conversion of the Preferred
Stock, the filing of the amendment and restatement of the Certificate of
Incorporation and the fulfillment of and compliance with the respective terms
hereof and thereof by the Company, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any lien, security interest,
charge or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to accelerate any
obligations under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body pursuant to, the amended and
restated Certificate of Incorporation or the bylaws of the Company or any
Subsidiary, or any law, statute, rule or regulation to which the Company or any
Subsidiary is subject, or any agreement, instrument, order, judgment or decree
to which the Company or any Subsidiary is subject. Except as set forth on the
Restrictions Schedule, none of the Subsidiaries is subject to any restrictions
upon making loans or advances or paying dividends to,
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transferring property to, or repaying any Indebtedness owed to, the Company or
another Subsidiary.
e. Financial Statements. Attached hereto as the "Financial Statements
Schedule" are the following financial statements:
i. the unaudited balance sheets of the Company as of December 31, 1995,
for the twelve-month period then ended; and
ii. the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of October 31, 1996 (the "Latest Balance Sheet) for the ten-
month period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) fairly presents the financial condition and results of
operations at the dates and for the periods indicated, is consistent with the
books and records of the Company (which, in turn, are accurate and complete in
all material respects) and has been prepared in accordance with generally
accepted accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the lack of footnote disclosure and changes
resulting from normal year-end audit adjustments (none of which would, alone or
in the aggregate, be materially adverse to the financial condition, operating
results, assets, operations or business prospects of the Company).
f. Absence of Undisclosed Liabilities. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not have
any material obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts existing at
or prior to the Closing other than: (i) liabilities set forth on the Latest
Balance Sheet (including any notes thereto), (ii) liabilities and obligations
which have arisen after the date of the Latest Balance Sheet in the ordinary
course of business which are not material individually or in the aggregate (none
of which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) (iii) other liabilities and obligations
(including liabilities and obligations under executory contracts) expressly
disclosed in the other Schedules to this Agreement and (iv) liabilities under
executory contracts not required to be disclosed on the Contracts Schedule.
g. No Material Adverse Change. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, business prospects, employee relations or
customer or supplier relations of the Company and its Subsidiaries taken as a
whole, except as set forth on the attached "Adverse Change Schedule."
h. Absence of Certain Developments.
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i. Except as expressly contemplated by this Agreement or as set forth on
the attached "Development Schedule," since the date of the Latest Balance Sheet,
neither the Company nor any Subsidiary has:
(1) issued any notes, bonds or other debt securities or any equity securities
or any securities convertible, exchangeable or exercisable into any equity
securities;
(2) borrowed any amount or incurred or become subject to any material
liabilities, except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary
course of business;
(3) discharged or satisfied any material lien or encumbrance or paid any
material obligation or liability, other than current liabilities paid in
the ordinary course of business;
(4) declared or made any payment or distribution of cash or other property to
its stockholders with respect to its stock or purchased or redeemed any
shares of its stock or any warrants, options or other rights to acquire its
stock;
(5) mortgaged or pledged any of its properties or assets or subjected them to
any material lien, security interest, charge or other encumbrance, except
liens for current property taxes not yet due and payable;
(6) sold, assigned or transferred any of its tangible assets, except in the
ordinary course of business, or cancelled any material debts or claims;
(7) sold, assigned or transferred any patents or patent applications,
trademarks, service marks, trade names, corporate names, copyrights or
copyright registrations, trade secrets or other intangible assets, or
disclosed any proprietary confidential information to any Person;
(8) suffered any extraordinary losses or waived any right of material value,
whether or not in the ordinary course of business or consistent with past
practice;
(9) made capital expenditures or commitments therefor that aggregate in excess
of $250,000;
(10) entered into any other material transaction, whether or not in the ordinary
course of business;
(11) made any loans or advances to, guarantees for the benefit of, or any
Investments in, any Persons in excess of $250,000 in the aggregate;
(12) made any charitable contributions or pledges;
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<PAGE>
(13) suffered any damage, destruction or casualty loss exceeding in the
aggregate $250,000, whether or not covered by insurance; or
(14) made any Investment in or taken steps to incorporate any Subsidiary.
ii. Neither the Company nor any Subsidiary has at any time made any
payments for political contributions or made any bribes, kickback payments or
other illegal payments.
i. Assets. Except as set forth on the "Assets Schedule," the Company
and each Subsidiary have good and marketable title to, or a valid leasehold
interest in, the properties and assets used by them, located on their premises
or shown on the Latest Balance Sheet or acquired thereafter, free and clear of
all liens, security interests, charges and encumbrances, except for properties
and assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for liens disclosed on the Latest Balance Sheet
(including any notes thereto) and liens for current property taxes not yet due
and payable. Except as described on the Assets Schedule, the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition in all materials respects and are fit for use in the
ordinary course of business.
j. Tax Matters. Except as set forth in the attached "Taxes Schedule":
the Company and each Subsidiary have filed all tax returns which they are
required to file; all such returns are true and correct in all material
respects; the Company and each Subsidiary have in all material respects paid all
taxes owed by them and withheld and paid over all taxes which they are obligated
to withhold from amounts owing to any employee, creditor or third party; neither
the Company nor any Subsidiary has waived any statute of limitations with
respect to taxes or agreed to any extension of time with respect to a tax
assessment or deficiency; the assessment of any additional taxes for periods for
which returns have been filed is not expected; the federal income tax returns of
the Company and its Subsidiaries have not been audited; and there are no pending
questions or claims concerning the Company's or any Subsidiary's tax liability.
k. Contracts and Commitments.
i. Except as expressly contemplated by this Agreement or as set forth on
the attached "Contracts Schedule," as of the Closing, neither the Company nor
any Subsidiary is a party to any written or oral:
(1) pension, profit sharing, stock option, employee stock purchase or other
plan or arrangement providing for deferred or other compensation to
employees or any other employee benefit plan or arrangement, or any
contract with any labor union, or any severance agreements;
(2) contract for the employment of any officer, individual employee or other
Person on a full-time, part-time, consulting or other basis providing
19
<PAGE>
annual compensation in excess of $100,000 or contract relating to loans to
officers, directors or affiliates;
(3) contract under which the Company or a Subsidiary has advanced or loaned any
other Person amounts in the aggregate exceeding $100,000;
(4) agreement or indenture relating to the borrowing of money or the
mortgaging, pledging or otherwise placing a lien on any material asset or
material group of assets of the Company and its Subsidiaries;
(5) guarantee of any obligation;
(6) lease or agreement under which the Company or any Subsidiary is lessee of
or holds or operates any property, real or personal, owned by any other
party, except for any lease of real or personal property under which the
aggregate annual rental payments do not exceed $25,000;
(7) lease or agreement under which the Company or any Subsidiary is lessor of
or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company or any Subsidiary;
(8) contract or group of related contracts with the same party or group of
affiliated parties the performance of which involves a consideration in
excess of $150,000;
(9) assignment, license, indemnification or agreement with respect to any
intangible property (including, without limitation, any patent, trademark,
trade name, copyright, know-how, trade secret or confidential information;
(10) warranty agreement with respect to its services rendered or its products
sold or leased;
(11) agreements under which it has granted any Person any registration rights
(including piggyback rights);
(12) contract, agreement or other arrangement with any officer, director,
employee or Affiliate, or any Affiliate of any officer, director or
employee except employment agreements terminable at will;
(13) contract or agreement prohibiting it from freely engaging in any business
or competing anywhere in the world; and
(14) any other agreement which is material to its operations and business
prospects or involves a consideration in excess of $150,000 annually.
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ii. The Company and each Subsidiary have performed all material
obligations required to be performed by them and are not in default under or in
breach of nor in receipt of any claim of default or breach under any material
contract, agreement or instrument to which the Company or any Subsidiary is
subject; no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance under
any material contract, agreement or instrument to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; neither
the Company nor any Subsidiary has knowledge of any breach or anticipated breach
by the other parties to any material contract or commitment to which it is a
party; and neither the Company nor any Subsidiary is a party to any materially
adverse contract or commitment.
iii. The Purchasers' special counsel has been supplied with a true and
correct copy of each of the written contracts and an accurate description of the
oral contracts which are referred to on the Contracts Schedule, together with
all amendments, waivers or other changes thereto.
l. Proprietary Rights. The attached "Proprietary Rights Schedule"
contains a complete and accurate list of (i) all patented and registered
Proprietary Rights owned by the Company or any Subsidiary, (ii) all pending
patent applications and applications for registrations of other Proprietary
Rights filed by the Company or any Subsidiary, (iii) all unregistered trade
names and corporate names owned or used by the Company and its Subsidiaries and
(iv) all unregistered trademarks, service marks and copyrights and computer
software which are material to the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole. The Proprietary Rights Schedule also contains a complete and
accurate list of all licenses and other rights granted by the Company or any
Subsidiary to any third party with respect to any Proprietary Rights and all
licenses and other rights granted by any third party to the Company or any
Subsidiary with respect to any Proprietary Rights. The Company or one of its
Subsidiaries owns or has the right to use pursuant to a valid license all
Proprietary Rights necessary for the operation of the businesses of the Company
and its Subsidiaries as presently conducted and as presently proposed to be
conducted. The loss or expiration of any Proprietary Right or related group of
Proprietary Rights would not have a material adverse effect on the conduct of
the Company's and its Subsidiaries' respective businesses, and no such loss or
expiration is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
necessary actions to maintain and protect the Proprietary Rights which they own
and use. To the best of the Company's knowledge, the owners of any Proprietary
Rights licensed to the Company or any Subsidiary have taken all necessary
actions to maintain and protect the Proprietary Rights which are subject to such
licenses. Except as indicated on the Proprietary Rights Schedule, (i) the
Company and its Subsidiaries own all right, title, and interest in and to all of
the Proprietary Rights listed on such schedule and all other Proprietary Rights
material to the operation of the businesses of the Company and its Subsidiaries,
(ii) there have been no claims made against the Company or any Subsidiary
asserting the
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<PAGE>
invalidity, misuse or unenforceability of any of such rights, and, to the best
of the Company's knowledge, there are no grounds for the same, (iii) neither the
Company nor any Subsidiary has received a notice of conflict with the asserted
rights of others, and (iv) the conduct of the Company's and each Subsidiary's
business has not infringed or misappropriated and does not infringe or
misappropriate any Proprietary Rights of other Persons, nor would any future
conduct as presently contemplated infringe any Proprietary Rights of other
Persons and, to the best of the Company's knowledge, the Proprietary Rights
owned by the Company or any Subsidiary have not been infringed or
misappropriated by other Persons.
m. Litigation, etc. Except as set forth on the attached "Litigation
Schedule," there are no actions, suits, proceedings, orders, investigations or
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Company and its Subsidiaries with respect to their
businesses or proposed business activities) at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitations, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); neither the Company nor any Subsidiary is subject to any arbitration
proceedings under collective bargaining agreements or otherwise or, to the best
of the Company's knowledge, any governmental investigations or inquiries
(including inquiry as to the qualification to hold or receive any license or
permit); and, to the best of the Company's knowledge, there is no basis for any
of the foregoing. Neither the Company nor any Subsidiary is subject to any
judgment, order or decree of any court or other governmental agency. Neither
the Company nor any Subsidiary has received any opinion or memorandum or legal
advice from legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business.
n. Brokers. Except as set forth on the attached "Brokerage Schedule,"
there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold each Purchaser harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
o. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as expressly contemplated herein or in the attached "Consents
Schedule."
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<PAGE>
p. Insurance. The attached "Insurance Schedule" contains a description
of each insurance policy maintained by the Company and its Subsidiaries with
respect to its properties, assets and businesses, and each such policy is in
full force and effect as of the Closing. Neither the Company nor any Subsidiary
is in default with respect to its obligations under any insurance policy
maintained by it. The insurance coverage of the Company and its Subsidiaries is
customary for corporations of similar size engaged in similar lines of business.
q. Employees and ERISA.
i. The Company is not aware that any executive or key employee of the
Company or any Subsidiary or any group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and the Company is not aware
that it or any Subsidiary has any material labor relations problems (including
any union organization activities, threatened or actual strikes or work
stoppages or material grievances).
ii. Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge after due inquiry, any of their employees is subject to any
noncompete, nondisclosure, confidentiality, employment, consulting or similar
agreements relating to, affecting or in conflict with the present or proposed
business activities of the Company and its Subsidiaries, except for agreements
between the Company and its present and former employees, copies of which have
been provided to special counsel for the Purchasers.
iii. Neither the Company nor any Subsidiary presently maintains or
contributes to, or ever has maintained or contributed to, any "employee benefit
plan," as such term is defined in Section 3 of the Employee Retirement Income
Security act of 1974, as amended ("ERISA"), with respect to which the Company is
required to file Internal Revenue Service ("IRS") Form 5500, and neither the
Company nor any Subsidiary presently contributes to or ever has contributed
to any "multiemployer plan," as such term is defined in Section 3 of ERISA.
iv. Attached as Exhibit E is a copy of the Company's 1996 Stock Option
Plan, and forms of Notice of Exercise and Early Exercise Stock Purchase
Agreement (the "Stock Option Agreements"). The Stock Option Agreements contain
vesting provisions and give the Company a repurchase right and a right of first
refusal to purchase shares of an optionee's Common Stock on the terms set forth
therein. The repurchase right and right of first refusal can be assigned to the
Investors.
r. Compliance with Laws. Except as set forth on the attached
"Compliance Schedule," neither the Company nor any Subsidiary has violated any
law or any governmental regulation or requirement which violation would
reasonably be
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<PAGE>
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary
has received notice of any such violation. Neither the Company nor the
Subsidiary is subject to any clean up liability, or has reason to believe it may
become subject to any clean up liability, under any federal, state or local
environmental law, rule or regulation.
s. Affiliated Transactions. Except as set forth on the attached
"Affiliated Transactions Schedule," no officer, director or stockholder of the
Company or any Subsidiary or any person related by blood or marriage to any such
person or any entity in which any such person owns any beneficial interest, is a
party to any agreement, contract, commitment or transaction with the Company or
any Subsidiary or has any material interest in any material property used by the
Company or any Subsidiary.
t. Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates or other items prepared
or supplied to any Purchaser by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading.
u. Disqualified Persons. The Company has reviewed the attached "List of
Disqualified Persons" dated as of October 1, 1996. None of the persons listed on
the "List of Disqualified Persons" attached as Exhibit G has any direct or
indirect holdings (included expected holdings after the sale of the Preferred
Stock) in the Company.
v. Closing Date. The representations and warranties of the Company
contained in this Section 5 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to any Purchaser shall be true and
correct in all material respects on the date of each Closing as though then
made, except as affected by the transactions expressly contemplated by this
Agreement.
6. Definitions. For purposes of this Agreement, the following terms have
- -- -----------
the meanings set forth below:
"Affiliate" of any particular person or entity means any other person or
---------
entity controlling, controlled by or under common control with such particular
person or entity.
"Indebtedness" means all indebtedness for borrowed money (including
------------
purchase money obligations) maturing one year or more from the date of creation
or incurrence thereof or renewable or extendible at the option of the debtor to
a date one year or more from the date of creation or incurrence thereof, all
indebtedness under revolving credit
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<PAGE>
arrangements extending over a year or more, all capitalized lease obligations
and all guarantees of any of the foregoing.
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Proprietary Rights" means all (i) patents, patent applications, patent
------------------
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights, and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"Restricted Securities" means (i) the Preferred Stock issued hereunder,
---------------------
(ii) the Common Stock issued upon conversion of Preferred Stock and (iii) any
securities issued with respect to the securities referred to in clauses (i) or
(ii) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7.C. have been delivered by the
Company in accordance with paragraph 4.(ii). Whenever any particular securities
cease to be
25
<PAGE>
Restricted Securities, the holder thereof shall be entitled to like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7.C.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended, or any similar federal law the in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
-----------------------
upon conversion of the Preferred Stock and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
of this Agreement, any Person who holds Preferred Stock shall be deemed to be
the holder of the Underlying Common Stock obtainable upon conversion of the
Preferred Stock in connection with the transfer thereof or otherwise, regardless
of any restriction or limitation on the conversion of the Preferred Stock. As
to any particular shares of Underlying Common Stock, such shares shall cease to
be Underlying Common Stock when they have been (a) effectively registered under
the Securities Act and disposed of in accordance with the registration statement
covering them or (b) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 under the Securities Act (or any similar
provision then in force).
7. Miscellaneous.
- -- -------------
a. Expenses. The Company agrees to pay, and hold each Purchaser and all
holders of Preferred Stock and Underlying Common Stock harmless against
liability for the payment of, (i) the reasonable out-of-pocket expenses of the
Investors
26
<PAGE>
incurred in connection with the transactions contemplated hereby, including due
diligence, and preparation and negotiation of the terms, (ii) the fees (not to
exceed $30,000, provided that no material unforeseen issues or conditions arise)
and expenses of (a) Holland & Hart, special counsel to the Investors, and (b)
Crest International Holdings, LLC (not to exceed $10,000 of such $30,000)
arising in connection with the negotiation and execution of this Agreement and
the consummation of the transactions contemplated by this Agreement which shall
be payable at the Closing, (iii) the reasonable fees and expenses incurred with
respect to any amendments or waivers (whether or not the same become effective)
under or in respect of this Agreement, the agreements contemplated hereby or the
Certificate of Incorporation (including, without limitation, in connection with
any proposed merger, sale or recapitalization of the Company), (iv) stamp and
other taxes which may be payable in respect of the execution and delivery of
this Agreement or the issuance, delivery or acquisition of any shares of
Preferred Stock or any shares of Common Stock issuable upon conversion of
Preferred Stock, (v) the enforcement of the rights granted under this Agreement,
the agreements contemplated hereby and the Certificate of Incorporation, and
(vi) the reasonable fees and expenses incurred at the request of the Company by
each such Person in any filing with any governmental agency with respect to its
investment in the Company or in any other filing with any governmental agency
with respect to the Company which mentions such Person.
b. Remedies.
i. Each holder of Preferred Stock and Underlying Common Stock shall have
all rights and remedies set forth in this Agreement and the Certificate of
Incorporation and all rights and remedies which such holders have been granted
at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
ii. The Company agrees to indemnify and hold the Purchasers harmless
against any loss, liability, damage or expense (including reasonable legal fees
and costs) which such Purchasers may suffer, sustain or become subject to as a
result of or in connection with the breach by the Company of any representation,
warranty, covenant or agreement of the Company contained in this Agreement, the
Certificate of Incorporation or the other agreements contemplated hereby.
c. Purchaser's Investment Representations. Each Purchaser, as to itself
only, hereby represents that:
i. it is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act;
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<PAGE>
ii. it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no intention
of selling such securities in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided that nothing
contained herein shall prevent any Purchaser and subsequent holders of
Restricted Securities from transferring such securities in compliance with the
provisions of Section 4 hereof. Each certificate for Restricted Securities
shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on _____________, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented
to the conditions specified in the Purchase Agreement, dated as of
_____________, between the issuer (the "Company") and certain
investors, and the Company reserves the right to refuse the transfer
of such securities until such conditions have been fulfilled with
respect to such transfer. A copy of such conditions shall be
furnished by the Company to the holder hereof upon written request and
without charge."
iii. it understands that it must bear the economic risk of the investment
in the Restricted Securities for an indefinite period of time because the
Restricted Securities have not been registered under the Securities Act and
applicable state securities laws and therefore cannot be sold unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available; and
iv. the execution, delivery and performance by such Purchaser of this
Agreement and all other agreements to which such Purchaser is a party have been
duly authorized by such Purchaser and each constitutes a valid and binding
obligation of such Purchaser, enforceable in accordance with its terms.
d. Treatment of the Preferred Stock. The Company covenants and agrees
that so long as federal income tax laws prohibit a deduction for distributions
made by the Company with respect to preferred stock (i) it shall treat all
distributions paid by it on the Preferred Stock as non-deductible dividends on
all of its tax returns and (ii) it shall treat the Preferred Stock as preferred
stock in all of its financial statements and other reports and shall treat all
distributions paid by it on the Preferred Stock as dividends on preferred stock
in such statements and reports.
e. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of a majority
28
<PAGE>
of the outstanding Preferred Stock; provided that if there is no Preferred Stock
outstanding, the provisions of this Agreement may be amended and the Company may
take any action herein prohibited, only if the Company has obtained the written
consent of the holders of a majority of the Underlying Common Stock. No other
course of dealing between the Company and the holder of any Preferred Stock or
Underlying Common Stock or any delay in exercising any rights hereunder or under
the Certificate of Incorporation shall operate as a waiver of any rights of any
such holders. For purposes of this Agreement, shares of Preferred Stock, or
Underlying Common Stock held by the Company or any Subsidiaries shall not be
deemed to be outstanding. If the Company pays any consideration to any holder of
Preferred Stock or Underlying Common Stock for such holder's consent to any
amendment, modification or waiver hereunder, the Company shall also pay each
other holder of Preferred Stock or Underlying Common Stock granting its consent
hereunder equivalent consideration computed on a pro rata basis.
f. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
g. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock or Underlying Common Stock are also for
the benefit of, and enforceable by, any subsequent holder of such Preferred
Stock or such Underlying Common Stock.
h. Capital and Surplus; Special Reserves. The Company agrees that the
capital of the Company (as such term is used in Section 154 of the General
Corporation Law of Delaware) in respect of the Preferred Stock issued pursuant
to this Agreement shall be equal to the aggregate par value of such shares and
that it shall not increase the capital of the Company with respect to any shares
of the Company's capital stock at any time on or after the date of this
Agreement. The Company also agrees that it shall not create any special
reserves under Section 171 of the General Corporation Law of Delaware without
the prior written consent of the holders of a majority of the outstanding
Preferred Stock.
i. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
29
<PAGE>
j. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
k. Descriptive Headings; Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be
by way of example rather than by limitation.
l. Governing Law. The corporate laws of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of Colorado.
m. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address listed below:
Centennial Communications Corp.
1600 Wynkoop, Suite 300
Denver, CO 80202
Attention: President
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
n. Understanding Among the Purchasers. The determination of each
Purchaser to purchase the Preferred Stock pursuant to this Agreement has been
made by such Purchaser independent of any other Purchaser and independent of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser. In addition, it
is acknowledged by each of the other Purchasers that neither Centennial IV nor
Centennial V has not acted as an agent of such Purchaser in connection with
making its investment hereunder and that neither Centennial IV nor Centennial V
shall be acting as an agent of such Purchaser in connection with monitoring its
investment hereunder.
30
<PAGE>
* * * * *
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Jeff E. Rhodes
-------------------------------
Title:____________________________
CENTENNIAL FUND IV, L.P. TELECOM PARTNERS, L.P.
By: Centennial Holdings, IV, L.P.
Its: General Partner
By: /s/ Stephen W. Schovee
-------------------------------
Title: Managing Member of the General
By: /s/ Adam Goldman Partner
-------------------------------
Title: General Partner
CENTENNIAL FUND V, L.P. CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P. By: Centennial Holdings V, L.P.
Its: General Partner Its: General Partner
By: /s/ Adam Goldman By: /s/ Adam Goldman
------------------------------- -------------------------------
Title: General Partner Its: General Partner
CREST FUNDING PARTNERS, L.P. BOULDER VENTURES, L.P.
By: /s/ Crest Partners (I) L.C.C.
-------------------------------
Its: General Partner
------------------------------
By: [illegible signature] By: /s/ Kyle Lefkoff
------------------------------- -------------------------------
Title: Partner
----------------------------
32
<PAGE>
TRAILHEAD VENTURES, L.P.
By: Wind River Partners
By: /s/ William D. Stanfill /s/ Bill Elsner
-------------------------------- -----------------------------------
Title: General Partner Bill Elsner
GC&H INVESTMENTS
By:________________________________
Title:_____________________________
/s/ Robert McKenzie /s/ Jeff E. Rhodes
- ----------------------------------- -----------------------------------
Robert McKenzie Jeff E. Rhodes
CENTENNIAL HOLDINGS, INC.
By:/s/ Adam Goldman
--------------------------------
Name: Adam Goldman
Title: Senior Vice President
MGVF II, Ltd.
By:/s/ [illegible signature]
--------------------------------
General Partner
BANCBOSTON VENTURES INCORPORATED
By:/s/ [illegible signature]
--------------------------------
Assistant Vice President
Title:
CREST SMR, L.L.C.
By:/s/ Crest Partners (I) LLC
--------------------------------
Its:Managing Member
--------------------------------
By: [illegible signature]
--------------------------------
33
<PAGE>
KYLE LEFKOFF*
By:/s/ Kyle Lefkoff
*as attorney in fact for the following Purchasers:
Larry Macks
Jurassic Ltd.
Josh Fidler
Morty Macks
Will's Wei Corp.
Robert Lemle
Caruthers Family LLC
Tim Snipes
Ramer 1990 Living Trust
Groupe Schneider Securities
JLS LLC
Doug Ramer
Trisun Financial, LLC
Eric Becker
Slade, Inc.
250 Venture Capital Associates
34
<PAGE>
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Name and Address No of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
<S> <C> <C>
Telecom Partners, L.P. 68,493 $ 250,000.00
1428 15th Street
Denver, Colorado 80202
Centennial Fund IV, L.P. 274,000 1,000,100.00
1428 15th Street
Denver, Colorado 80202
Centennial Fund V, L.P. 2,422,600 8,842,490.00
1428 15th Street
Denver, Colorado 80202
Centennial Entrepreneurs Fund V, 43,160 157,534.00
L.P.
1428 15th Street
Denver, Colorado 80202
Centennial Holdings, Inc. 59,726 218,000.00
1428 15th Street
Denver, CO 80202
Crest Funding Partners, L.P. 700,000 2,555,000.00
320 Park Avenue, 17th Floor
New York, NY 10022
CREST SMR, L.L.C. 669,863 2,445,000.00
320 Park Avenue, 17th Floor
New York, NY 10022
Larry Macks 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
</TABLE>
Schedule of Purchasers
Page 1
<PAGE>
Name and Address No of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
Jurassic Ltd. 9,863 36,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Josh Fidler 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Morty Macks 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Will's Wei Corp. 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Robert Lemle 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Caruthers Family LLC 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Tim Snipes 6,849 25,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Ramer 1990 Living Trust 13,698 50,000.00
c/o Kyle Lefkoff
Schedule of Purchasers
Page 2
<PAGE>
Name and Address No of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
1634 Walnut St., Suite 301
Boulder, CO 80302
Groupe Schneider Securities 10,958 40,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
JLS LLC 8,219 30,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Doug Ramer 6,849 25,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Trisun Financial, LLC 13,698 50,000.00
(Sarah Bank Trust)
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Eric Becker 13,698 50,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Slade, Inc. 6,849 25,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
250 Venture Capital Assoc. 8,219 30,000.00
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Schedule of Purchasers
Page 3
<PAGE>
Name and Address No of Shares of Total Purchase Price
Preferred Stock for Preferred Stock
Boulder, CO 80302
Jeff E. Rhodes 16,438 60,000.00
1600 Wynkoop, Suite 300
Denver, CO 80202
Robert McKenzie 10,000 36,500.00
60 Kearney Street
Denver, Colorado 80220
William Elsner 20,000 73,000.00
83 Glenmoor Place
Englewood, Colorado 80110
Trailhead Ventures, L.P. 136,986 500,000.00
730 17th Street, Suite 690
Denver, CO 80202
MGVF II, Ltd. 205,479 750,000.00
1200 Smith St., Suite 3400
Houston, TX 77002
Boulder Ventures, L.P. 41,100 150,015.00
1634 Walnut Street
Boulder, Colorado 80202
BancBoston Ventures Incorporated 821,918 3,000,000.00
100 Federal St., 32nd Floor
Boston, MA 02110
TOTAL: 5,670,851 $20,698,639.00
Schedule of Purchasers
Page 4
<PAGE>
LIST OF EXHIBITS
Exhibit A Certificate of Incorporation
Exhibit B Registration Agreement
Exhibit C Stockholders Agreement
Exhibit E Opinion of Counsel
Exhibit F Stock Option Agreements
Exhibit G List of Disqualified Persons
List of Exhibits
Page 1
<PAGE>
[LETTERHEAD OF JAMES C.T. LINFIELD APPEARS HERE]
November 22, 1996
To the Purchasers
of Series B Preferred Stock
of Centennial Communications Corp.
listed on Schedule A hereto
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the issuance and sale of 626,743
shares of the Company's Series B Preferred Stock (the "Shares") to you under the
Purchase Agreement dated as of November 22, 1996 (the "Agreement"). We are
rendering this opinion pursuant to Section 2.H of the Agreement. Except as
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters (but not legal conclusions)
contained in and made pursuant to the Agreement, the Amended and Restated
Registration Agreement and the Amended and Restated Stockholders Agreement
(together with the Amended and Restated Registration Agreement, the "Related
Agreements") by and among the various parties, and originals or copies certified
to our satisfaction, of such records, documents, certificates, opinions,
memoranda and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below. Where we render an opinion
"to the best of our knowledge" or concerning an item "known to us" or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Related Agreements), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to so execute and deliver; that you
have received all
<PAGE>
To the Purchasers of Series B Preferred
November 22, 1996
Page Two
documents you were to receive under the Agreement; that the Agreement and the
Related Agreements are obligations binding upon you; and that there are no
extrinsic agreements or understandings among the parties to the Agreement and
the Related Agreements that would modify or interpret the terms of the Agreement
or the Related Agreements or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Colorado and the General Corporation
Law of the State of Delaware. We express no opinion as to whether the laws of
any particular jurisdiction apply, and no opinion to the extent that the laws of
any jurisdiction other than those identified above are applicable to the subject
matter hereof. We are not rendering any opinion as to compliance with any
antifraud law, rule or regulation relating to securities, or to the sale or
issuance thereof.
With regard to our opinion in paragraph 5 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
With regard to our opinion in paragraph 6 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) inquiries of officers of the Company, (ii) a list supplied to us by the
Company of material agreements to which the Company is a party, or by which it
is bound, and (iii) an examination of the items on the aforementioned list; we
have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own its property and assets
and to conduct its business, is qualified to do business in the State of
Colorado, and to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any other jurisdiction in the United
States.
<PAGE>
To the Purchasers of Series B Preferred
November 22, 1996
Page Three
3. The Agreement and the Related Agreements have been duly and validly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as rights to indemnity under Section 6 of the
Registration Agreement may be limited by applicable laws and public policy and
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
4. The Amended and Restated Certificate of Incorporation (the "Restated
Certificate") has been duly and validly authorized, executed and filed with the
Delaware Secretary of State and does not violate or conflict with the provisions
of the General Corporation Law of the State of Delaware.
5. The Company's authorized capital stock consists of (a) sixteen million
(16,000,000) shares of Common Stock, of which three million five hundred two
thousand five hundred (3,502,500) shares are issued and outstanding, and (b) six
million four hundred thousand (6,400,000) shares of Preferred Stock, of which
three hundred fifty-two (352) shares have been designated Series A Preferred
Stock, all of which are issued and outstanding, and six million three hundred
ninety-nine thousand six hundred forty-eight (6,399,648) shares have been
designated Series B Preferred Stock, none of which were outstanding prior to the
Closing. All issued and outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
The rights, preferences and privileges of the Series B Preferred Stock are as
stated in the Restated Certificate. The Shares have been duly authorized, and
upon issuance and delivery against payment therefor in accordance with the terms
of the Agreement, the Shares will be validly issued, outstanding, fully paid and
nonassessable. The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance, and upon conversion
of the Shares in accordance with the Restated Certificate, will be validly
issued, outstanding, fully paid and nonassessable. To the best of our
knowledge, except as disclosed in the Agreement or the Disclosure Schedules
thereto, there are no options, warrants, conversion privileges, preemptive
rights or other rights presently outstanding to purchase any of the authorized
<PAGE>
To the Purchasers of Series B Preferred
November 22, 1996
Page Four
but unissued capital stock of the Company, other than (i) the conversion
privileges of the Series A Preferred Stock and Series B Preferred Stock and (ii)
rights created in connection with the transactions contemplated by the Agreement
and the Related Agreements.
6. The execution and delivery of the Agreement and the Related Agreements by
the Company and the offer and sale of the Shares pursuant thereto do not violate
any provision of the Company's Restated Certificate or Bylaws, and do not
constitute a material default under the provisions of any material agreement
known to us to which the Company is a party or by which it is bound, and do not
violate or contravene (a) any governmental statute, rule or regulation
applicable to the Company or (b) any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Company and of which
we are aware, the default, violation or contravention of which would materially
and adversely affect the Company, its assets, financial condition or operations.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreement and the
Related Agreements or might result, either individually or in the aggregate, in
any material adverse change in the assets, financial condition, or operations of
the Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Agreement, have been made or obtained, except
for the filing of a Form D with the U.S. Securities and Exchange Commission.
9. Based in part upon the representations of the Purchasers contained in the
Agreement, the offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933 and the qualification requirements of
the Colorado Securities Act, each as amended to date.
<PAGE>
To the Purchasers of Series B Preferred
November 22, 1996
Page Five
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
By _________________________
James C.T. Linfield
<PAGE>
[LETTERHEAD OF JAMES C.T. LINFIELD APPEARS HERE]
December 16, 1996
To the Purchasers
of Series B Preferred Stock
of Centennial Communications Corp.
listed on Schedule A hereto
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the issuance and sale of
5,044,108 shares of the Company's Series B Preferred Stock (the "Shares") to you
under the Purchase Agreement dated as of November 22, 1996 (the "Agreement").
We are rendering this opinion pursuant to Section 2.H of the Agreement. Except
as otherwise defined herein, capitalized terms used but not defined herein have
the respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters (but not legal conclusions)
contained in and made pursuant to the Agreement, the Amended and Restated
Registration Agreement and the Amended and Restated Stockholders Agreement
(together with the Amended and Restated Registration Agreement, the "Related
Agreements") by and among the various parties, and originals or copies certified
to our satisfaction, of such records, documents, certificates, opinions,
memoranda and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below. Where we render an opinion
"to the best of our knowledge" or concerning an item "known to us" or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement and the Related Agreements), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents. We have also assumed: that all individuals executing and
delivering documents had the legal capacity to so execute and deliver; that you
have received all
<PAGE>
To the Purchasers of Series B Preferred
December 16, 1996
Page Two
documents you were to receive under the Agreement; that the Agreement and the
Related Agreements are obligations binding upon you; and that there are no
extrinsic agreements or understandings among the parties to the Agreement and
the Related Agreements that would modify or interpret the terms of the Agreement
or the Related Agreements or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of Colorado, the General Corporation
Law of the State of Delaware and the securities laws of the State of
Massachusetts, the State of Texas and the State of New York. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. With respect to
the securities laws of the State of Massachusetts, the State of Texas and the
State of New York, we have based our opinion solely upon our examination of such
laws and the rules and regulations of the authorities administering such laws,
all as reported in unofficial compilations. Neither a special ruling of such
authority nor an opinion of counsel in such jurisdiction has been obtained. We
are not rendering any opinion as to compliance with any antifraud law, rule or
regulation relating to securities, or to the sale or issuance thereof.
With regard to our opinion in paragraph 5 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
With regard to our opinion in paragraph 6 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) inquiries of officers of the Company, (ii) a list supplied to us by the
Company of material agreements to which the Company is a party, or by which it
is bound, and (iii) an examination of the items on the aforementioned list; we
have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing corporation
in good standing under the laws of the State of Delaware.
<PAGE>
To the Purchasers of Series B Preferred
December 16, 1996
Page Three
2. The Company has the requisite corporate power to own its property and assets
and to conduct its business, is qualified to do business in the State of
Colorado, and to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any other jurisdiction in the United
States.
3. The Agreement and the Related Agreements have been duly and validly
authorized, executed and delivered by the Company and constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as rights to indemnity under Section 6 of the
Registration Agreement may be limited by applicable laws and public policy and
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
4. The Amended and Restated Certificate of Incorporation (the "Restated
Certificate") has been duly and validly authorized, executed and filed with the
Delaware Secretary of State and does not violate or conflict with the provisions
of the General Corporation Law of the State of Delaware.
5. The Company's authorized capital stock consists of (a) sixteen million
(16,000,000) shares of Common Stock, of which three million five hundred two
thousand five hundred (3,502,500) shares are issued and outstanding, and (b) six
million four hundred thousand (6,400,000) shares of Preferred Stock, of which
three hundred fifty-two (352) shares have been designated Series A Preferred
Stock, all of which are issued and outstanding, and six million three hundred
ninety-nine thousand six hundred forty-eight (6,399,648) shares have been
designated Series B Preferred Stock, six hundred twenty-six thousand seven
hundred forty-three (626,743) of which were outstanding prior to the Second
Closing. All issued and outstanding shares of the Company's Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
The rights, preferences and privileges of the Series B Preferred Stock are as
stated in the Restated Certificate. The Shares have been duly authorized, and
upon issuance and delivery against payment therefor in accordance with the terms
of the Agreement, the Shares will be validly issued, outstanding, fully paid and
nonassessable. The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved for issuance, and upon conversion
of the Shares in accordance with the Restated Certificate, will be validly
issued, outstanding, fully paid and nonassessable. To the best of our
knowledge, except as disclosed in the Agreement or the Disclosure Schedules
thereto, there are no options, warrants, conversion privileges, preemptive
rights or other
<PAGE>
To the Purchasers of Series B Preferred
December 16, 1996
Page Four
rights presently outstanding to purchase any of the authorized but unissued
capital stock of the Company, other than (i) the conversion privileges of the
Series A Preferred Stock and Series B Preferred Stock and (ii) rights created in
connection with the transactions contemplated by the Agreement and the Related
Agreements.
6. The execution and delivery of the Agreement and the Related Agreements by
the Company and the offer and sale of the Shares pursuant thereto do not violate
any provision of the Company's Restated Certificate or Bylaws, and do not
constitute a material default under the provisions of any material agreement
known to us to which the Company is a party or by which it is bound, and do not
violate or contravene (a) any governmental statute, rule or regulation
applicable to the Company or (b) any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Company and of which
we are aware, the default, violation or contravention of which would materially
and adversely affect the Company, its assets, financial condition or operations.
7. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreement and the
Related Agreements or might result, either individually or in the aggregate, in
any material adverse change in the assets, financial condition, or operations of
the Company.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Agreement, have been made or obtained, except
for the filing of a Form D with the United States Securities and Exchange
Commission.
9. Based in part upon the representations of the Purchasers contained in the
Agreement, the offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933 and the qualification or registration
requirements of the Colorado Securities Act, the Texas Securities Act of 1957,
the Massachusetts Uniform Securities Act and the New York Blue Sky Law, each as
amended to date.
<PAGE>
To the Purchasers of Series B Preferred
December 16, 1996
Page Five
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
COOLEY GODWARD LLP
By _________________________
James C.T. Linfield
<PAGE>
As of October 1, 1996
LIST OF DISQUALIFIED PERSONS
----------------------------
Foundation Trustees
- -------------------
Susan V. Berresford
Jeremy Vail Stein
Frances D. Fergusson
Michael Moohr (spouse)
Kathryn S. Fuller
Stephen Paul Doyle (spouse)
Sarah Elizabeth Taylor
Michael Stephen Doyle
Matthew Scott Doyle
Robert D. Haas
Colleen Gershon Haas (spouse)
Elise Kimberly Haas
Sir Christopher Hogg
Lady Anne Hogg (spouse)
Catherine Hogg
Cressida Hogg
Wilmot G. James
Gabreile Eva James (spouse)
Vernon E. Jordan, Jr.
Ann Jordan (spouse)
Vickee Jordan Adams
Barry Monroe Adams
David T. Kearns
Shirley Virginia Kearns (spouse)
D. Todd Kearns, Jr.
Susan Kearns Alderman
Michael Alderman
Elizabeth Kearns Krame
Scott Krame
Anne Kearns Fields
Jack Fields
Andrew Cox Kearns
Elizabeth Kearns Young
Van Young
<PAGE>
Wilma P. Mankiller
Charlie Soap (spouse)
Gina Olaya
Felicia Swake
Yolanda T. Moses
James Bawek (spouse)
Antonia Bawek
Shana Bawek
Luis G. Nogales
Rosita Nogales (spouse)
Alicia Fipp Nogales
Maria Christina Nogales
Olusegun Obasanjo
Stella Obasanjo (spouse)
Henry B. Schacht
Nancy Godfrey Schacht (spouse)
James G. Schacht
Laura B. Schacht Bilieie
George William Bilieie, Jr.
Jane S. Schacht Moray
David Moray
Benjamin Brewer Moray
Mary B. Schacht
M.S. Swaminathan
Mina Swaminathan (spouse)
Soumya Swaminathan
Madhura Swaminathan
V.K. Ramachandran
Nitya Swaminathan
Ratan Naval Tata
Carl Weisbrod
Jody Adams (spouse)
Billy Weisbrod
<PAGE>
Foundation Officers
- -------------------
Alison Bernstein
Beverly Bernstein (parent)
Emma Brown-Bernstein
Julia Brown-Bernstein
Robert Curvin
Patricia Curvin (spouse)
Frank Curvin
Nicole Curvin
Nancy Feller
Michael Feller (spouse)
Jason Feller
Benjamin Feller
Katherine Feller
Barry D. Gaberman
Macky Gaberman (parent)
Barbara Gordon (parent)
Joan Gaberman (spouse)
Brynn Gaberman
Denise Gaberman
Nicholas Gabriel
Lillian Gabriel (spouse)
James Gabriel
Michele Gabriel
Evan Gabriel
Melvin Oliver
Suzanne Loth Oliver (spouse)
Bradford Smith
Virginia Botelho (spouse)
Linda B. Strumpf
Jonathan A. Strumpf (spouse)
Barron M. Tenny
Ursula Tenny (spouse)
Daniel Bentele Tenny
Susanna Tenny
<PAGE>
The Ford Family
- ---------------
(Henry Ford) m. (Clara Bryant Ford)
(Edsel Ford) m. (Eleanor Clay Ford)
(Henry Ford II) m. Kathleen Ford
Charlotte Ford
Elena Ford
Charlotte Anne Ford-Olender
Anne Ford
Alessandro Uzielli
Allegra Uzielli
Edsel Bryant Ford m. Cynthia Layne Neskow Ford
Henry Ford III
Calvin Robert Ford
Stewart Spencer Ford
Albert Bishop Ford
(Benson M. Ford) m. (Edith M. Ford)
Benson Ford, Jr. m Lisa Adams Ford
Lynn McNaughton Ford Alandt m. Paul Alandt
Josephine Ford m.(Walter B. Ford II)
Walter B. Ford III
Bridget Monroe Ford
Lindsey Zedar Ford
Wendy Bryant Ford
Barbara Buhl Ford
Eleanor Ford Bourke m. Frederic A. Bourke, Jr.
Frederic A. Bourke III m.
Allison K. Bourke
Frederic A. Bourke IV
Leses K. Bourke
Eleanor F. Bourke
Denis Michael Bourke
Josephine Ford Ingle m. John Ingle, Jr.
Jason W. Ingle
Julie Caroline Ingle
John W. Ingle III
Josephine Clay Ingle
Albert Brush Ford m. Shamila Ford
Amrita Virginia Ford
Anisha B. Ford
William Clay Ford m. Martha Firestone Ford
Martha Ford Morse m. Peter c. Morse
Peter Clay Morse
Lisa Dillon Morse
Sheila Ford Hemp m. Steven Hamp
Michael Ford Hamp
Christopher Firestone Hamp
Peter Kautz Hamp
William Clay Ford, Jr. m. Lisa V. Ford
Eleanor Clay Ford
Alexandra Bryant Ford
William Clay Ford III
Elizabeth Hudson Ford m. Charles P. Konmlis II
Eliza Hudson Konmlis
Jeffrey Ford Konmlis
(deceased)
<PAGE>
- 5 -
FORD MOTOR COMPANY
FORD MOTOR COMPANY FUND
================================================================================
INDEX of DOMESTIC SUBSIDIARIES
- --------------------------------------------------------------------------------
1st Nationwide Network, Inc., (DE)
3000 Schaefer Road Company, (MI)
5850 Corporation, (CO)
6805 Corporation, (CO)
AFC Securities Inc., (DE)
AFSC Agency, Inc., (AR)
AFSC Agency, Inc., (AZ)
AFSC Agency, Inc., (CA)
AFSC Agency, Inc., (DE)
AFSC Agency, Inc., (HI)
AFSC Agency, Inc., (ID)
AFSC Agency, Inc., (KY)
AFSC Agency, Inc., (LA)
AFSC Agency, Inc., (MS)
AFSC Agency, Inc., (MT)
AFSC Agency, Inc., (NC)
AFSC Agency, Inc., (NM)
AFSC Agency, Inc., (NV)
AFSC Agency, Inc., (SD)
AFSC Agency, Inc., (VA)
AFSC Agency, Inc., (WA)
AFSC Agency, Inc., (WY)
AFSC Insurance Company, Inc., (IN)
Airlease Ltd (Partnership), (CA)
Airlease Management Services, Incorporated, (DE)
Alinco Life Insurance Company, (IN)
Allied Financial Services Insurance Agency, Inc., (MA)
American Renaissance Insurance Company, (AZ)
American Road Services Company, (DE)
Aries Technology, (DE)
Aspen Hills, Inc., (TX)
Assembly Plant Material Services, Inc., (DE)
Associates Auto Club Services, Inc., (IN)
Associates Bancorp, Inc., (DE)
Associates Capital Services Corporation of New Jersey
Associates Capital Services Corporation, (IN)
Associates Commercial Corporation of Delaware
Associates Commercial Corporation, (AL)
Associates Commercial Corporation, (DE)
Associates Commercial Finance Corporation, (DE)
Associates Commerical Leasing Company, Inc., (DE)
Associates Consumer Discount Company, (PA)
Associates Consumer Money Order, Inc., (DE)
Associates Corporation of North America (A Texas Corporation)
Associates Corporation of North America, (DE)
Associates Credit Card Services of Delaware, Inc.
Associates Credit Card Services, Inc., (CA)
Associates Discount Corporation of Delaware, Inc.
Associates Diversified Insurance Services, Inc., (CA)
Associates Diversified Services, Inc., (TX)
Associates Diversified Services, Inc., (DE)
<PAGE>
Associates Express Company, Inc., (IN)
Associates Finance, Inc., (IA)
Associates Finance, Inc., (IL)
Associates Financial Life Insurance Company of Nevada
Associates Financial Life Insurance Company of Texas
Associates Financial Life Insurance Company, (TN)
Associates Financial Services Company of Alabama, Inc.
Associates Financial Services Company of America Inc., (KS)
Associates Financial Services Company of Arizona, Inc.
Associates Financial Services Company of California, Inc.
Associates Financial Services Company of Colorado, Inc.
Associates Financial Services Company of Connecticut, Inc.
Associates Financial Services Company of Delaware, Inc.
Associates Financial Services Company of Dover, Inc.
Associates Financial Services Company of Florida, Inc.
Associates Financial Services Company of Hawaii, Inc.
Associates Financial Services Company of Idaho, Inc.
Associates Financial Services Company of Indiana, Inc.
Associates Financial Services Company of Iowa, Inc.
Associates Financial Services Company of Kansas, Inc.
Associates Financial Services Company of Kentucky, Inc.
Associates Financial Services Company of Maryland, Inc.
Associates Financial Services Company of Massachusetts, Inc.
Associates Financial Services Company of Michigan, Inc.
Associates Financial Services Company of Mississippi, Inc.
Associates Financial Services Company of Missouri, Inc.
Associates Financial Services Company of Montana, Inc.
Associates Financial Services Company of Nebraska, Inc.
Associates Financial Services Company of Nevada, Inc.
Associates Financial Services Company of New Castle Inc., (DE)
Associates Financial Services Company of New Hampshire, Inc.
Associates Financial Services Company of New Jersey, Inc.
Associates Financial Services Company of New Mexico, Inc.
Associates Financial Services Company of New York, Inc.
Associates Financial Services Company of North Carolina, Inc.
Associates Financial Services Company of North Dakota, Inc.
Associates Financial Services Company of North Wilmington, Inc. (DE)
Associates Financial Services Company of Ogden, Inc., (UT)
Associates Financial Services Company of Ohio, Inc.
Associates Financial Services Company of Oklahoma, Inc.
Associates Financial Services Company of Oregon, Inc.
Associates Financial Services Company of Rhode Island, Inc.
Associates Financial Services Company of South Carolina, Inc.
Associates Financial Services Company of South Dakota, Inc.
Associates Financial Services Company of Tennessee, Inc., (IN)
Associates Financial Services Company of Texas, Inc.
Associates Financial Services Company of Utah, Inc.
Associates Financial Services Company of Virginia, Inc.
Associates Financial Services Company of Washington, Inc.
Associates Financial Services Company of West Virginia, Inc.
Associates Financial Services Company of Wisconsin, Inc.
Associates Financial Services Company of Wyoming, Inc.
<PAGE>
- 7 -
Associates Financial Services Company, Inc., (AL)
Associates Financial Services Company, Inc., (DE)
Associates Financial Services Corporation of Boone County., (KY)
Associates Financial Services Corporation of Bowling Green, (KY)
Associates Financial Services Corporation of Lexington., (KY)
Associates Financial Services Corporation, (GA)
Associates Financial Services Corporation, (IN)
Associates Financial Services Corporation, (KY)
Associates Financial Services Corporation, (NJ)
Associates Financial Services Corporation, (OH)
Associates Financial Services Corporation, (RI)
Associates Financial Services of America, Inc., (AZ)
Associates Financial Services of America, Inc., (CT)
Associates Financial Services of America, Inc., (DE)
Associates Financial Services of America, Inc., (FL)
Associates Financial Services of America, Inc., (GA)
Associates Financial Services of America, Inc., (LA)
Associates Financial Services of America, Inc., (MA)
Associates Financial Services of America, Inc., (MO)
Associates Financial Services of America, Inc., (NC)
Associates Financial Services of America, Inc., (NH)
Associates Financial Services of America, Inc., (VA)
Associates Financial Services of America, Inc., (WA)
Associates Financial Services of America, Inc., (WV)
Associates Financial Services, Inc., (AZ)
Associates First Capital Corporation, (DE)
Associates First Capital Mortgage Corporation, (FL)
Associates First National Corporation, (DE)
Associates Industrial Loan Company, (MN)
Associates Insurance Company, (IN)
Associates Insurance Group, Inc., (DE)
Associates International Holdings Corporation, (NY)
Associates International Management Company, (DE)
Associates Investment Company, (DE)
Associates Investment Corporation, (UT)
Associates Leasing Corporation of Indiana
Associates Leasing, Inc., (IN)
Associates Life Insurance Group, Inc., (DE)
Associates Lloyds Insurance Company, (TX)
Associates Management Corporation, (DE)
Associates Mortgage Company, (KY)
Associates Mortgage Corporation, (NV)
Associates National Bank, (DE)
Associates National Mortgage Corporation, (DE)
Associates Real Estate Financial Services Company Inc., (DE)
Associates Relocation Management Company of Delaware
Associates Relocation Management Company of New Jersey
Associates Relocation Management Company of Texas
Associates Relocation Management Company, Inc., (CO)
Associates World Capital Corporation, (DE)
Associates/Trans-National Leasing, Inc., (DE)
AT&T Automotive Services, Inc., (DE)
<PAGE>
AT&T Fleet Services, (DE)
Atlantic Automotive Components, A Michigan Partnership
AutoAlliance International, Inc.
Autolatina America, Inc., (DE)
Automotive Polymer Based Composites Joint Research and Development, (MI)
Bancinsure Corporation of Wyoming
Bancinsure Corporation, (CA)
Beech Holdings, (DE)
Best Impression Copy Services, Inc., (CA)
Bloomfield Mortgage Corporation, (MI)
Capco Claim Service, Inc., (IL)
Capco General Agency, Inc., (IL)
Capco General Agency, Inc., (IN)
Capco General Agency, Inc., (MI)
Capco General Agency, Inc., (NY)
Capco General Agency, Inc., (VA)
Capital Insurance Agency, Inc., (KY)
Capricorn Investors Limited Partnership, (DE)
Cardinal Mortgage Corporation, (OH)
Cardinal Redevelopment Corporation, (MO)
Carlex Glass Company, (DE) Partnership
Carnegie Group, Inc., (DE)
Ceradyne, Inc., (DE)
Chase Manhattan Leasing Company (Michigan) Inc.
Cimflex Teknowledge Corporation, (PA)
Clark Credit Corporation, (MI)
Clark Rental Systems, Inc., (MI)
Colrad Development Corporation, (CO)
Columbia Fairfield, Inc., (FL)
Columbia Investment Services, Inc., (CO)
Columbia Savings, A Federal Savings and Loan Association
Commercial Guaranty Insurance Company, (DE)
Conix Corporation, (DE)
Cummins Engine Company, Inc., (IN)
Dearborn Capital Corporation, (DE)
Detroit Downtown Development Corporation, (DE)
Dobco Life Insurance Company, (AZ)
Dove Appraisal Service, Inc., (CA)
Dove Appraisal Service, Inc., (CO)
Dove Escrow Co., (CA)
Dove Escrow of Arizona, Inc.
Dove Escrow of Hawaii, Inc.
Dove Escrow of New Mexico, Inc.
Dove Escrow of Oregon, Inc.
Dove Escrow of Washington, Inc.
Dunlop Automotive Composites Inc., (DE)
E.N. One, Inc., (LA)
E.P.M. 83-10, Inc., (CO)
East Coast Transportation, Incorporated, (SC)
Edelson Technology Partners II, (DE)
Enviromental Science Research and Development Partnership, (MI)
Environ, Inc., (DE)
<PAGE>
- 9 -
Equity Plaza, Inc., (NJ)
Estates at Gleneagle, Inc., (CO)
Evergreen Valley Development Corp., (OH)
Excel Industries Inc., (IN)
Executive Ventures, Ltd., (DE)
E.V.F., Inc., (FL)
Fairlane Golf, Inc., (DE)
Fairlane Life Insurance Company, (AZ)
Fairtel Associates, (MI)
Family Financial Services, Inc., (AL)
Family Financial Services, Inc., (FL)
FC Holdings, Inc., (DE)
First Family Financial Services Inc., (FL)
First Family Financial Services Management Corp., (GA)
First Family Financial Services of Georgia, Inc., (GA)
First Family Financial Services, Inc., (AL)
First Family Financial Services, Inc., (GA)
First Family Financial Services, Inc., (IN)
First Family Financial Services, Inc., (LA)
First Family Financial Services, Inc., (MS)
First Family Financial Services, Inc., (NC)
First Family Financial Services, Inc., (SC)
First Family Financial Services, Inc., (TN)
First Family Home Equity, Inc., (FL)
First Family Home Equity, Inc., (NC)
First Insurance Agency, Inc., (KY)
First Nationwide Bank, A Federal Savings Bank
First Nationwide Building Owners Association, (CA)
First Nationwide Financial Corporation, (DE)
First Ohio Service Corporation
First Prudential Corporation, (MO)
First Western Mortgage Corporation of Illinois
FN Investment Center of New York, Inc.
FN Investment Center, Inc., (CA)
FN Projects, Inc., (CA)
FNB Mortgage Corp. (CA)
FNS Corporate Funding, Inc., (CA)
FNS Mortgage Corp., (CA)
Ford Asia-Pacific, Inc., (DE)
Ford Auto Club, Inc., (DE)
Ford Automotive Components Operations, Inc. (DE)
Ford Colorado Properties, Inc., (DE)
Ford Communications, Inc., (DE)
Ford Consumer Discount Company, (PA)
Ford Consumer Finance Company, Inc., (NY)
Ford Consumer Finance Industrial Loan Company, (MN)
Ford Consumer Loan Corporation, (DE)
Ford Credit Auto Receivables Corporation, (DE)
Ford Direct Markets, Inc., (DE)
Ford Electronics and Refrigeration Corporation, (DE)
Ford Equipment Leasing Company, (DE)
Ford Financial Services, Inc., (DE)
<PAGE>
-10-
Ford Glass and Metal, Inc., (DE)
Ford Holdings, Inc., (DE)
Ford International Business Development, Inc., (DE)
Ford International Capital Corporation, (DE)
Ford International Export Sales (Asia-Pacific Region) Inc., (DE)
Ford International Finance Corporation, (DE)
Ford International Services, Inc., (DE)
Ford Investment Partnership, A Michigan Partnership
Ford Leasing Development Company, (DE)
Ford Life Insurance Company, (MI)
Ford Microelectronics, Inc., (DE)
Ford Mortgage Investment Corporation, (OH)
Ford Motor Credit Company, (DE)
Ford Motor Dealership Facilities Company, (DE)
Ford Motor Land Development Corporation, (DE)
Ford Motor Land Services Corporation, (DE)
Ford Motor Properties, Inc., (DE)
Ford New Holland Credit Company, (DE) (Partnership)
Ford of Europe Incorporated, (DE)
Ford Overseas Services Corporation, (DE)
Ford Plastic and Trim Products International, Incorporated, (DE)
Ford Supercomputers, Inc., (DE)
Fordson Coal Company, (DE)
Fruehauf Finance Company, (MI)
Geometric Results Incorporated, (DE)
Ghia, Inc., (DE)
Great Dane Finance Company, (DE)
Greenfield Properties, Inc., (DE)
HCM Claim Investigations, Inc., (CA)
HCM Marketing Corporation, (DE)
Henry Ford Village, Inc., (MI)
Hertz Claim Management Corporation, (DE)
Hertz Equipment Rental Corporation, (DE)
Hertz Equipment Rental International, Ltd., (DE)
Hertz Executive Marketing Services, Incorporated, (DE)
Hertz International, Limited, (DE)
Hertz Realty Corporation, (DE)
Hertz System, Incorporated, (DE)
Hertz Technologies, Inc., (DE)
Hertz Transporting, Incorporated, (DE)
Hertz Van Pool Leasing, Incorporated, (DE)
Hertz Vehicle Sales Corporation, (DE)
High Speed Serial Data Communications Research and Development, (MI)
Hotel Rosemont Service Corporation, Inc., (IL)
Humbolt Mining Company, (MI)
Inference Corporation, (CA)
International Marine Insurance Agency, Inc., (IL)
International Marine Underwriters, Inc., (FL)
Jaguar Cars Incorporated, (DE)
Jaguar Credit Corporation, (DE)
Jaguar Motors, Inc., (DE)
James River Holdings, Inc., (VA)
<PAGE>
- 11 -
Kayser Leasing Corporation, (WI)
Kentucky Finance Co., Inc. AL
Kentucky Finance Co., Inc., (KY)
Kentucky Finance Co., Inc., Bristol, VA (KY)
Kentucky Finance Co., Inc., MO, (KY)
Kentucky Finance Equity Services, Inc., (KY)
Kentucky Finance Co., Inc., (KY)
KFC Mortgage Loans, Inc., (VA)
LFS Capital Corp., (NJ)
Lincoln Motor Company Inc., (MI)
Lincoln Ventures Corp., (NJ)
Lisle Center, Inc., (IL)
Manheim Auctions, Inc., (DE)
Marlo Properties Company, (DE)
Master Mortgage Company, (CA)
Mellon Consumer Discount Company, (PA)
Mellon Financial Services Corporation, (DE)
Metropolitan Realty Corporation, (MI)
Morco General Agency, Inc., (OH)
MTP Enterprises, Inc., (DE)
Nascote Industries, Inc., (DE)
New River Castings Company, (DE)
Niles Investment Company, (IL)
Northern Credit Co., Inc., (WI)
Northern Insurance Agency of Wisconsin, Inc., (WI)
Northern Insurance Agency, Inc., (IL)
Omicron Exploration Corporation, (DE)
Orange Blossom Capital Corp., (NJ)
P.O.C. Realty Inc., (CO)
Park Ridge Corporation, (DE)
Parker Center Inc., (CO)
Parklane Insurance Company, (MI)
Pathway Capital Corporation, (DE)
Pathway Credit Corporation, (DE)
Pathway Insurance Agency, Inc., (IL)
Pathway Investment Center, Inc., (IL)
Pathway Lands Incorporated, (OH)
Penstone, Incorporated, (MI)
Philco Finance Corporation, (DE)
Pine Creek at Briargate, Inc., (CO)
Points of Colorado, Inc.
Prairie Development, Ltd., (IL)
Predelivery Service Corporation, (DE)
Primus Automotive Financial Services, Inc., (NY)
Realty Sales, Inc., (MO)
Regain, (CA)
Renaissance Center Venture, (MI)
Retained Risk Management, Inc., (CA)
Riverdale International Sales, Incorporated, (VI)
RWPI Inc., (IL)
Seating Systems Technology Incorporated, (DE)
Seating Systems Technology U.S., Inc., (DE)
<PAGE>
- 12 -
Second Insurance Agency, Inc., (MO)
Shoppers Mart, Inc., (TX)
Signal Credit Corporation, (DE)
Signal Finance Consumer Discount Company, (PA)
Signal Finance Mortgage Company, Inc., (DE)
Smartz Vehicle Rental Corporation, (DE)
Software Productivity Consortium, (CA)
Specialty Claims Service, Inc., (IN)
Spectrum Holdings, Inc., (IL)
St. Louis Fedservice Corporation, (MO)
Supercomputer Systems Limited Partnership, (WI)
TAC of Alabama, Inc., (DE)
TAC of Florida, Inc., (DE)
TAC of Tennessee, Inc., (DE)
Taft Haus, Inc., (TX)
TG-Ford Associates, (MI)
The American Road Insurance Company, (MI)
The Associates Corporation, (DE)
The Associates Payroll Management Service Company, Inc., (DE)
The Dearborn Inn Company, (DE)
The Hertz Corporation, (DE)
Third Insurance Agency, Inc., (KY)
Transnetwork Insurance Services, (CA)
TranSouth Financial Corporation, (SC)
TranSouth Mortgage Corporation, (SC)
Transport Acceptance Corporation, (DE)
Trust Company for USL, Inc., (IL)
U.S. Advanced Battery Consortium
United States Airlease Holding, Incorporated, (CA)
United States Airlease, Incorporated, (CA)
United States Auto Club, Motoring Division, Inc., (IN)
United States Equipment Management Services, Incorporated, (CA)
United States Fleet Leasing, Incorporated, (CA)
United States Investment Management Services, Incorporated, (TX)
United States Leasing International, Incorporated, (DE)
United States Leasing Pipeline Leasing, Incorporated, (TX)
United States Portfolio Management Services, Incorporated, (CA)
United Truck Leasing, Incorporated, (DE)
United Truck Leasing, Incorporated, (MN)
USEIF-I Equipment Leasing Corporation, (NY)
USEIF-II Equipment Management Corporation (Partnership), (NY)
USL Securities Corporation, (CA)
USLI Fleet Financing, Inc., (DE)
Vandenberg Leasing, Inc., (MI)
View Engineering Inc., (DE)
Vista Insurance Company, (MI)
Vista Life Insurance Company of Texas
Vista Life Insurance Company, (MI)
Vocational Technology, Inc., (CA)
VT Finance, Inc., (DE)
Watchguard Registration Services, Inc., (IN)
<PAGE>
Willowbend Holdings, Inc., (FL)
WSFC Development Inc., (OH)
09/10/93
<PAGE>
FORD MOTOR COMPANY
FORD MOTOR COMPANY FUND
================================================================================
FOREIGN SUBSIDIARIES
BY COUNTRY
- --------------------------------------------------------------------------------
Transportation Reinsurance Limited (British Virgin Islands)
Argentina
Autolatina Argentina S.A.
Autolatina Argentina S.A. de Ahorro Para Fines Determinados
Hertz Argentina S.A.C.
Invercred Compania Financiera S.A.
Matalurgica Constritucion S.A.
Transax Socieded Anonima, Comercial, Industrial y Financiera
Volkswagen Inversiones S.A.
Volkswagen Sociedad Anonima de Ahorro Para Fines Determinado
Australia
Australian Road Credit Limited
Australian Road Insurance Limited
Foral Service Proprietary Limited
Ford Credit Australia Limited
Ford Credit Australia Wholesale Limited
Ford Motor Company of Australia Limited
Ford Sales Company of Australia Limited
Hertz Asia Pacific Pty. Ltd.
Hertz Australia Pty, Limited
Hertz Car Sales Pty, Ltd.
Hertz Investment (Holdings) Pty. Limited
JRA Holdings Limited
National Acceptance Corporation PTY Ltd.
PLA Holdings Ltd (PLA)
Portfolio Leasing Australia Management
Tickford Vehicle Engineering Pty. Ltd.
Austria
Ford Bank Aktiengesellschaft (Austria)
Ford Factoring Gmbh
Ford Motor Company (Austria) K.G.
Barbados
Transportation Reinsurance (Barbados) Limited
Belgium
Acelease S.A.
Axus, S.A.
Criee Automobile S.A.
Ford Credit N.V.
Ford Motor Company (Belgium) N.V.
Hertz Coordination Centre S.A.
Transports Servais et Fils S.A.
Bermuda
Associates Diversified Investment Ltd.
Financial Reassurance Company, Ltd.
FM FSC Ltd.
Interlocutary Limited
Transcon Insurance Limited
<PAGE>
Brazil
Apolo Administradora de Sens S/C Ltda.
Autolatina Brasil S.A.
Autolatina Comercio Negocios e Participacoes Ltda.
Autolatina Distribuidora de Titulos e Valores Mobiliaros Ltd
Autolatina Financiadora S.A. - Credito, Financiamento e Inves
Autolatina Leasing S/A - Arrandamento Mercantil
Autolatina Previdencia Privadz
Autolatina S.A.
Banco Autolatina S.A.
Consorcio Nacional Ford Ltda.
Consorcio Nacional Volkswagen Ltda.
FB Empreandimentos S.A.
Ford Distribuidora de Productos de Petroleo Ltda.
Ford Industria e Comercio Ltda.
Ford Participacoes, Empreendimentos e Negocios Ltda.
Fundacao Autolatina
Inter-Locadora S/A
Promocoes Universals S.C. Ltda.
Sao Bernardo Administradors de Consorcios Ltda.
Sociedade Paulista de Aparelhos Domesticos "SPAD" Ltda.
Transglobal Corretgem de Seguros Ltda.
Volkswagan Factoring Fomento Comercial S/A
Canada
Associates Capital Corporation of Canada
Associates Commercial Corporation of Canada Ltd.
Canadian Road Credit Company, Limited
Conix Canada, Inc.
Essex Manufacturing (A Partnership)
Ford Credit Canada Limited
Ford Electronics Manufacturing Corporation
Ford Ensite International Inc. (Canada)
Ford Motor Company of Canada, Limited
Ford New Holland (Canada) Credit Company (Partnership)
Ford Transportation Services Limited
Hertz Canada Limited
IRC Equipment Leasing, Incorporated
Jaguar Canada Inc.
TCG, International
Czechoslovakia
Autopal s.r.o.
Ford Czechoslovakia
Ford Czechoslovakia Limited
Denmark
Ford Credit A/S
Ford Motor Company A/S
Hertz Biludlejning A/S
Egypt
Alexandria Automotive Company SAE
<PAGE>
England
A. M. Lagonda North America, Inc.
Associates Capital (Guernsey) Limited
Associates Capital (Jersey) Limited
Associates Capital Corporation Limited
Associates Financial Corporation Limited
Associates Mortgage Corporation Limited
Aston Martin (RDP) Limited
Aston Martin Finance Limited
Aston Martin Lagonda Design Limited
Aston Martin Lagonda Group Limited
Aston Martin Lagonda Limited
Aston Martin Oxford Limited
Aston Martin Sales Limited
Auto Club International Limited
Automotive Finance Limited
Axus (U.K.) Limited
Cheshire Commercial Finance Limited
Cumberland Insurance Company Limited
Daimler Hire Limited
Daimler Transport Vehicles Limited
Dunlop Automotive Composites (UK) Limited
Ford Automotive Leasing Limited
Ford Capital plc
Ford Contract Motoring Management Limited
Ford Credit Europe plc
Ford Credit Funding plc
Ford Financial Trust Limited
Ford Fleet Financing Limited
Ford Lease Financing Limited
Ford Motor Company Limited
Ford Personal Import Export Limited
Hawtin & Partners (Nominees) Limited
Hertz (U.K.) Limited
Hertz Car Sales Limited
Hertz Equipment Rental (Europe) Limited
Hertz Equipment Rental (U.K.) Limited
Hertz Europe Limited
Hertz Jersey Limited
Hertz Rent A Car Limited (Britain)
IR (Transfer) Limited
Iveco Ford Trust Limited
Jaguar 1984 Limited
Jaguar Cars Exports Limited
Jaguar Cars Finance Limited
Jaguar Cars Holdings Limited
Jaguar Cars Limited
Jaguar Cars Overseas Holdings Limited
Jaguar Daimler Heritage Trust Limited
Jaguar Finance Limited
Jaguar Group Limited
Jaguar Holdings Limited
<PAGE>
England (cont.)
Jaguar Insurance Limited
Jaguar International Finance Limited
Jaguar Limited
Jaguarsport Limited
JDHT Limited
Lagonda Properties Limited
LUL Asia Limited
Madens (Guernsey) Limited
Madens (Jersey) Limited
Madens Limited
Madens Trust Limited
Prestige Properties Co. Limited
Project XJ220 Limited
SS Cars Limited
The Diamler Company Limited
The Jaguar Collection Limited
The Lanchester Motor Company Limited
United States Leasing Limited
USL Holdings Limited (USL Holdings)
Venture Pressings (Holdings) Limited
Venture Pressings Limited
Wessex Finance Limited
Finland
Oy Ford Ab
Oy Ford Rahoitus Ab
France
Credit Ford S.A.
Ford France S.A.
Hertz Equipment Rental (France) S.A.
Hertz France S.A.
Intrumax Sarl
Locaplan S. A.
Germany
Ford Bank Aktiengesellschaft (Germany)
Ford Handels und Beteiligungs GmbH
Ford Investitions GmbH & Co oHG
Ford Investitions GmbH
Ford Versicherungs-Vermittlungs GmbH
Ford Versorgungs-Und Unterstutzungseinrichtung GmbH
Ford Werke Aktiengesellschaft
Ford Werke Aktiengesellschaft & Co. Leasing KG
Ford Werke Aktiengesellschaft und Co. KG.
Geometric Results (Deutchland) Gmbh
Hertz Autovermietung G.m.b.h
Hertz Baumaschinenvermietung Gmbh
Jaguar Deutschland GmbH
Jaguar Leasing Gmbh
Saar-Industrie, GmbH
<PAGE>
Holland
Ford Capital B.V.
Ford Holding B.V. (Holland)
Ford Nederland B.V.
Jaguar Nederland BV
Hungary
Ford Hungaria Kft
India
Climate Control (India) Limited
Ireland
Dan Ryan Car Rentals Limited
FCE Reinsurance Company Limited
Henry Ford & Son (Finance) Limited
Henry Ford & Son (Sales) Limited
Henry Ford & Son, Limited
Hertz International RE Limited
Hertz Rent A Car Limited (Ireland)
Y.K.P. Limited
Italy
Acomindus, s.r.l.
Axus Italiana s.r.l.
Ford Credit SpA
Ford Italiana S.p.A.
Ford Leasing SpA
Ghia S.p.A.
Hertz Italiana S.p.A.
Jaguar Italia Spa
Japan
AIC Corporation
AIC Credit Card Services, Inc.
Autorama, Inc.
Ford Finance Company of Japan, Limited
Ford Motor Company (Japan) Ltd.
Hertz Far East, Ltd.
Hertz Japan, Limited
Jaguar Japan KK
Japan Climate Systems Corporation
Mazda Motor Corporation
Korea
Halla Climate Control Corporation
Kia Motors Corporation, (Korea)
Korea Automobile Components Corporation
Luxembourg
Axus Luxembourg S.A.
Hertz Luxembourg, S.A.
Malaysia
AMIM Holdings Sdn. Bhd.
Associated Motor Industries Malaysia SDN. BHD.
FMS Audio Sdn. Bhd.
<PAGE>
Mexico
Altac Electronics Chihuahua, S.A. de C.V.
Autovidrio S.A. de C.V.
Carplastic S.A. de C.V.
Climate Systems Mexicana, S.A. de C.V.
Coclisa S.A. de C.V.
Favesa, S.A. de C.V., (Mexico)
Ford Latin America, S.A. de C.V., (Mexico)
Ford Motor Compania Comercial, S.A. de C.V.
Ford Motor Company, S.A. de C.V., (Mexico)
Hertz Latin America, S.A. de C.V.
Lamosa S.A. de C.V., (Mexico)
Mi Techo, S.C. (Partnership)
Nemak S.A.
Vitro Flex, S.A. de C.V.
Monaco
Hertz Monaco, S.A.
Neth. Antilles
Ford Credit Overseas Finance N.V.
Netherlands
ACONA B.V.
Axus Nederland B.V.
Ford Credit B.V.
Ford Export Services B.V.
Geotech
Hertz Automobielen Nederland B.V.
Hertz Leasing B.V.
Stuurgroep Holland B.V.
Van Wijk Autoverhurr Rotterdam B.V.
Van Wijk Beheer B.V.
Van Wijk European Car Rental Service B.V.
New Zealand
Brocon Enterprises Limited
Ford Motor Company of New Zealand Limited
Ford Motor Credit Company of New Zealand Limited
Granthall Holdings Limited
Lydon Industries Limited
Portfolio Leasing (New Zealand) Limited
Vehicle Assemblers New Zealand Limited
New Zealand
Hertz New Zealand Limited
Norway
Ford Motor Norge A.S.
Hertz Bilutleie A/S
Poland
Ford Poland Limited Company
Portugal
AutoEuropa Automotive Limitada
Ford Credit Portugal-Sociedade Financeira Para Aquisicoes
Ford Electronica Portuguesa, Ltd.
Ford Lusitana S.A.
Hertz Limitada
<PAGE>
Portugal (cont.)
Hertz Portuguesa Automoveis de Aluguer, Lda.
Puerto Rico
Associates Financial Services Company of Puerto Rico, Inc.
Associates Time Plan, Inc.
Ford Motor Company Caribbean, Inc., (Puerto Rican)
Ford Motor Credit Company of Puerto Rico, Inc.
Puerto Ricancars Transporting, Inc.
Puerto Ricancars, Incorporated
Scotland
Cumberland Life Assurance Co. Limited
Singapore
Ford Motor Company Private Limited
Hertz Asia Pacific Pts. Ltd.
Spain
Cadiz Electronica, S. A.
Ford Credit Entidad de Financiacion, S.A.
Ford Credit S.A.
Ford Espana S.A.
Ford Leasing S.A.
Ford Leasing Sociedad de Arrendamiento Financiero, S.A.
Hertz de Espana, S.A.
Hertz Equipment Rental de Espana, S.A.
Leascar S.A.
Sweden
First Rent A Car AB
Ford Credit AB
Ford Motor Company Aktiebolag
Ford Vagnskadegaranti AB
Switzerland
Ford Credit S.A.
Ford Motor Company (Switzerland) S.A.
Hertz AG
Hertz Motor A.G.
S. I. Fair Play S.A.
Zuri-Lau Garage AG
Taiwan
FLH Marketing Services Ltd.
FLH Sales Limited
Ford Enterprise Company Taiwan, Ltd.
Ford Lio Ho Motor Company Ltd.
Ford Taiwan Services, Limited
Jaguar Cars Taiwan Limited
Thailand
Ford Motor Company (Thailand) Limited
Turkey
Otosan Otomobile Sansyii A.S.
Uruguay
Ford Uruguay S.A.
<PAGE>
Venezuela
Aerospace y Comunicaciones de Venezuela C.A.
Ford Motor Credit S.A.
Ford Motor de Venezuela, S.A.
Productos Industriales, C.A.
09/10/93
<PAGE>
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employment Schedule
Compliance Schedule
Affiliated Transaction Schedule
List of Disclosure Schedules
Page 1
<PAGE>
CAPITALIZATION SCHEDULE
TO PURCHASE AGREEMENT*
<TABLE>
<CAPTION>
OPTION HOLDERS** GRANT DATE NUMBER OF SHARES EXERCISE PRICE EXPIRATION
PER SHARE DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOANNE ABEL 09/13/96 2,500 $2.50 09/12/06
DUNCAN CRAIGHEAD 11/15/96 2,000 $2.50 11/14/06
DONALD DAVIDGE 05/10/96 25,000 $1.00 05/09/06
07/08/96 12,500 $2.50 07/07/06
JEFF DUNNING 07/08/96 7,500 $2.50 07/07/06
ROBERT EASTON 07/08/96 15,000 $2.50 07/07/06
WILLIAM ELSNER 06/07/96 20,000 $1.00 04/11/06
11/15/96 80,000 $3.65 11/14/06
MARK FETCENKO 03/15/96 30,000 $1.00 03/14/06
07/08/96 10,000 $2.50 07/07/06
ELBA GALEN 09/13/96 750 $2.50 09/12/06
FRED GALLART 09/13/96 38,000 $2.50 09/12/06
ANNE HAAS 03/15/96 25,000 $1.00 03/14/06
07/08/96 15,000 $2.50 07/07/06
ROB JAMES 09/13/96 500 $2.50 09/12/06
RAFAEL LUCES S. 05/10/96 15,000 $1.00 05/09/06
07/08/96 7,500 $2.50 07/07/06
KARL MAIER 09/13/96 20,000 $2.50 09/12/06
JOHN MARCOLINA 07/08/96 3,000 $2.50 07/07/06
ROBERT MCKENZIE 01/12/96 20,000 $1.00 01/11/06
JOHN MILLER 11/15/96 2,000 $2.50 11/14/06
KIM MILLER 07/08/96 3,500 $2.50 07/07/06
LISA PASQUALE 09/13/96 1,000 $2.50 09/12/06
JEFF RHODES 01/12/96 100,000 $1.00 01/11/06
07/08/96 50,000 $2.50 07/07/06
MATT RILEY 07/08/96 1,000 $2.50 07/07/06
LYNN SANDIFER 07/08/96 750 $2.50 07/07/06
DEBRA SCHNEIDER 09/13/96 5,000 $2.50 09/12/06
DAVID STARKWEATHER 07/08/96 500 $2.50 07/07/06
BRYAN UHL 11/15/96 500 $2.50 11/14/06
BARBARA VONDERHEID 07/08/96 20,000 $1.00 06/06/06
07/08/96 10,000 $2.50 07/07/06
MATT ZUSCHLAG 05/10/96 20,000 $1.00 05/09/06
07/08/96 10,000 $2.50 07/07/06
-------------
TOTAL 578,000
=============
</TABLE>
* REFLECTS A 10,000 FOR ONE FORWARD STOCK SPLIT EXECUTED IN OCTOBER 1996.
** ALL HOLDERS ARE SUBJECT TO STOCK OPTION AGREEMENTS.
<PAGE>
SUBSIDIARY SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION STOCKHOLDERS
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
SMR DIRECT CAYMAN CAYMAN ISLANDS CENTENNIAL COMMUNICATIONS CORP.: 100%
CENTENNIAL CAYMAN CORP. CAYMAN ISLANDS CENTENNIAL COMMUNICATIONS CORP.: 100%
CCC HOLDINGS PERU, S.R.L. PERU CENTENNIAL CAYMAN CORP.: 99%
SMR DIRECT CAYMAN: 1%
CENTENNIAL CAYMAN CHILE, LTDA. CHILE CENTENNIAL CAYMAN CORP.: 99%
SMR DIRECT CAYMAN: 1%
CENTENNIAL ECUADOR S.A. ECUADOR CENTENNIAL CAYMAN CORP.: 50%
SMR DIRECT CAYMAN: 50%
CENTENNIAL TELECOMUNICACIONES VENEZUELA CENTENNIAL CAYMAN CORP.: 100%
DE VENEZUELA, S.A.
MOBIL LINE PERU, S.A. PERU CCC HOLDINGS PERU: 99%
(THE COMPANY IS IN THE PROCESS CENTENNIAL CAYMAN CORP.: 1%
OF CHANGING THE NAME OF THIS
ENTITY TO "SMR DIRECT PERU,
S.R.L")
BRUNACCI S.A. ECUADOR CENTENNIAL ECUADOR S.A.: 100%
MULTISISTEMAS ELECTRoNICOS ECUADOR BRUNACCI S.A.: 100%
M.S.E., S.A
POMPANO, S.A. PERU CCC HOLDINGS PERU, S.R.L.: 99.9%
CENTENNIAL CAYMAN CORP.: .05%
SMR DIRECT CAYMAN: .05%
TELECOM SUPPLY S.A. PERU CCC HOLDINGS PERU, S.R.L.: 99.8%
CENTENNIAL CAYMAN CORP.: .1%
SMR DIRECT CAYMAN: .1%
</TABLE>
<PAGE>
RESTRICTIONS SCHEDULE
TO PURCHASE AGREEMENT
With respect to Section E.2(ii) of the Purchase Agreement, the Company has
several subsidiaries organized in the form of partnerships ("limitadas") and is
in the process of reorganizing Brunacci, S.A., Multisistemas ElectrOnicos
M.S.E., S.A., Pompano, S.A. and Telecom Supply S.A. into limitadas.
<PAGE>
FINANCIAL STATEMENTS SCHEDULE
TO PURCHASE AGREEMENT
1. Unaudited balance sheet of Centennial Communications Corp. (the "Company")
for the period ended December 31, 1995
2. Unaudited balance sheet of the Company for the period ended October 31,
1996
3. Tax Return of Mobil Line Peru, S.A. for the period ended December 31, 1995
4. Tax Return of the Company for the period ended December 31, 1995
5. Unaudited balance sheet of Mobil Line Peru, S.A. for the period ended
October 31, 1996
6. Unaudited consolidated balance sheet of the Company and Mobil Line Peru,
S.A. for the period ended October 31, 1996
<PAGE>
LIABILITIES SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has entered into a capital leasing agreement with E.F. Johnson
Company to lease and acquire infrastructure equipment. The Company has
paid down payments of $450,000, $273,993, $201,174.60, $57,909 and $219,780
and the remaining balance outstanding under this agreement is $1,760,573.
E.F. Johnson holds a security interest in this equipment to the extent of
the unpaid purchase price.
2. The Company has made an intercompany loan of $100,000 to its wholly-owned
subsidiary, Mobil Line Peru S.A. The outstanding balance on this loan is
$100,000.
3. Pursuant to a Purchase Order dated March 14, 1996, the Company has agreed
to pay approximately $2,490,000 to Maxon America Inc. for the purchase of
equipment from August 1996 through December 1996. The Company has discussed
with Maxon and has reached an agreement in principle that until certain
quality control issues are resolved with respect to the equipment covered
by the Purchase Order, the Company will not be required to make any
payments to Maxon under the Purchase Order.
4. The Company has executed Installment Payment Plan Notes payable to the FCC
totaling $4,559,247.00 with respect to the 43 SMR licenses it has acquired,
a schedule of which has been provided to counsel for the Purchasers. Each
of these Notes is secured by a security interest held by the FCC in the
respective SMR license.
5. Pursuant to a Purchase Order, the Company has agreed to pay $340,000 to
Motorola Inc. for the purchase of equipment. The Company has paid $51,000
against this Purchase Order to date.
<PAGE>
ADVERSE CHANGE SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
DEVELOPMENT SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
ASSETS SCHEDULE
TO PURCHASE AGREEMENT
See Liabilities Schedule for a description of security interests held by E.F.
Johnson and the FCC with respect to certain assets of the Company.
<PAGE>
TAXES SCHEDULE
TO PURCHASE AGREEMENT
1. The Company filed its 1995 federal income tax return on September 13, 1996.
The Company's 1995 tax liability was $516.00, which has been paid in full.
<PAGE>
CONTRACT SCHEDULE TO
TO PURCHASE AGREEMENT
EMPLOYEE BENEFITS:
1. 1996 Stock Option Plan, attached as Attachment F to the Employee Schedule to
this Purchase Agreement.
2. Employers Health Insurance Indemnity, PPO, EPO Basic and Standard Health
Benefit Plan for Colorado.
EMPLOYEE COMPENSATION:
1. Jeff E. Rhodes, President
2. Anne E. Haas, Vice President of Finance
3. Donald Davidge, Director of Sales and Marketing
4. Fred Gallart, Vice President/General Manager Latin America
5. Jorge Bado, General Manager Mobil Line Peru, S.A.
LEASES:
1. Lease, dated May 2, 1996, by and between Sixteen Hundred Wynkoop, Ltd. and
the Company, for lease space located at 1600 Wynkoop Street, Denver,
Colorado.
2. Lease Agreement, dated May 4, 1996, by and between Banco Continental and
Mobil Line Peru, S.A. for lease space located at Av. Republica de Panama
No. 3005, 19th Floor, San Isidro, Peru.
PURCHASE AGREEMENTS OF COMPANY SECURITIES:
1. Stock Subscription Agreement, dated October 26, 1995, by and between the
Company and Telecom Partners, L.P.
2. Purchase Agreement, dated December 8, 1995, by and between the Company and
the Purchasers (Telecom Partners, Centennial Holdings and Centennial Funds)
3. Registration Rights Agreement, dated December 8, 1995, by and among the
Company and the Purchasers named therein, as amended
<PAGE>
4. Stockholders Agreement, dated December 8, 1995, by and among the Company and
the Stockholders named therein, as amended
5. First Amendment to Purchase Agreement, dated January 31, 1996, by and among
the Company and Jeff Rhodes and Robert McKenzie, as Purchasers
6. Second Amendment to Purchase Agreement, dated February 1, 1996, by and among
the Company and Bill Elsner, as Purchaser
7. Purchase Agreement, dated December 15, 1995, by and among Mobil Line Peru
S.A., the Company and Jesus Escudero Presa
8. First Amendment to Purchase Agreement, dated February 28, 1996, by and among
Mobil Line Peru S.A., the Company and Jesus Escudero Presa
9. Second Amendment to Purchase Agreement, dated February 28, 1996, by and
among Mobil Line Peru S.A., the Company and Jesus Escudero Presa
10. Letter Agreement to Purchase Agreement, dated February 29, 1996, by and
among Mobil Line Peru S.A., the Company and Jesus Escudero Presa
11. Shareholders Agreement, dated February 29, 1996, by and among the Company,
Jesus Escudero Presa and Mobil Line Peru S.A.
12. Purchase Agreement, dated as of June 27, 1996, by and among the Company and
the Purchasers listed on the Schedule of Purchasers thereto
13. Amended and Restated Stockholders Agreement, dated as of June 27, 1996, by
and among the Company, Centennial Fund IV, L.P., Telecom Partners, L.P.,
Centennial Holdings Inc., Jeff Rhodes, Bob McKenzie and Bill Elsner.
14. Stock Purchase Agreement, dated as of July 8, 1996, by and between the
Company and Jesus Escudero Presa
15. Stability Contract, dated as of March 6, 1996, by and between Mobil Line
Peru, S.A. and the Peruvian State
MATERIAL AGREEMENTS (IN EXCESS OF $150,000):
1. Agreement, dated May 2, 1996, by and between the Company and SBA, Inc.
2. Services Agreement, by and between the Company and E.F. Johnson Company,
together with letters dated April 1, 1996 and June 14, 1996, and a
confirmation of order
3. Purchase Order, dated March 14, 1996, between the Company and Maxon America
Inc.
<PAGE>
4. Purchase Agreement, dated as of June 28, 1996, by and between the Company
and E.F. Johnson Company
5. Purchase Order, dated October 18, 1996, between the Company and Motorola,
Inc.
6. Stock Purchase Agreement, dated as of September 6, 1996, by and among
Centennial Cayman Corp., SMR Direct Cayman and certain selling stockholders
with respect to the purchase and sale of all of the outstanding capital
stock of Beacon Supply Comunicaciones, S.A.
7. Stock Purchase Agreement, dated November 21, 1996, which the Company closed
as of November 22, 1996, by and between the Company and Carlos Gil Loor
with respect to the purchase and sale of all of the outstanding capital
stock of Brunacci S.A. and Multisistemas Electronicos M.S.E., S.A.
8. Stock Purchase Agreement, dated as of November 18, 1996, which the Company
closed as of November 22, 1996, by and among the Company and L.A.
Technologies Corp. with respect to the purchase and sale of all of the
outstanding capital stock of Pompano, S.A.
9. Stock Purchase Agreement, dated as of September 6, 1996, which the Company
has closed as of December 6, 1996, by and between the Company and Telecom
Supply S.A. with respect to the purchase and sale of all of the outstanding
capital stock of Beacon Supply Comunicaciones S.A./Telecom Supply S.A.
LETTERS OF INTENT (IN EXCESS OF $150,000):
1. Letter of Intent, dated September 10, 1996, by and between the Company and
Hector Martinez with respect to the purchase and sale of all of the
outstanding capital stock of Team Comunicaciones
2. Letter of Intent, dated September 24, 1996, by and between the Company and
L.A. Technologies Corp. with respect to the sale and purchase of all of the
outstanding capital stock of Corporacion Fleet Call, S.A.
3. Letter of Intent, dated November 26, 1996, by and among the Company and
Michael S. Bettsak, Jose Bettsak and Jonathan Bettsak with respect to the
purchase and sale of all of the outstanding capital stock of Ca Comunica,
S.A.
<PAGE>
PROPRIETARY RIGHTS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has begun the process to register the trademark "SMR Direct" in
the United States.
2. Mobile Line Peru, S.A. has approved the trademark name of "Radio TRUNKING"
for registration in Peru and the process of registration has begun.
3. See Liabilities Schedule for a description of the forty-three (43) 900 MHz
MTA licenses issued by the FCC to the Company.
<PAGE>
LITIGATION SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
BROKERAGE SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has entered into an Engagement Letter, dated September 7, 1996,
with Daniels & Associates pursuant to which Daniels will act as placement
agent for the Company's sale of Series B Preferred Stock. Upon
consummation of the financing, Daniels will receive a fee equal to 5% of
the aggregate consideration received by the Company from the sale of the
Series B Preferred Stock to outside investors.
<PAGE>
CONSENTS SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
INSURANCE SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
INSURANCE COMPANY COVERAGE*
- ------------------------------------------------------------------------------------
<S> <C>
ASSOCIATED INDEMNITY CORP. COMMERCIAL GENERAL LIABILITY
ASSOCIATED INDEMNITY CORP. SIMPLIFIED COMMERCIAL PROPERTY
ASSOCIATED INDEMNITY CORP. HIRED/BORROWED AUTO
NATIONAL SURETY CORPORATION WORKERS COMPENSATION
FIREMAN'S FUND INSURANCE COMPANY COMMERCIAL UMBRELLA
FIREMAN'S FUND INSURANCE COMPANY MARINE CARGO
AMERICAN INTERNATIONAL ASSISTANCE SERVICES FOREIGN TRAVEL
GREAT NORTHERN INSURANCE COMPANY FOREIGN LIABILITY (SIMPLE)
GREAT NORTHERN INSURANCE COMPANY FOREIGN EMPLOYEES LIABILITY
GREAT NORTHERN INSURANCE COMPANY FOREIGN PROPERTY (SIMPLE)
GREAT NORTHERN INSURANCE COMPANY FOREIGN AUTO
</TABLE>
* All coverage expires on May 1, 1997 except for the Marine Cargo Policy, which
expires on July 24, 1997.
<PAGE>
EMPLOYMENT SCHEDULE
TO PURCHASE AGREEMENT
Attachment F to this Schedule contains a copy of the COMPANY'S 1996 Stock Option
Plan and forms of Notice of Exercise and Early Exercise Stock Purchase
Agreement.
<PAGE>
COMPLIANCE SCHEDULE
TO PURCHASE AGREEMENT
NONE.
<PAGE>
AFFILIATED TRANSACTION SCHEDULE
TO PURCHASE AGREEMENT
NONE, except for agreements otherwise referred to in the Contracts Schedule.
<PAGE>
EXHIBIT 10.5
EXECUTION COPY
PURCHASE AGREEMENT
DATED: OCTOBER 3, 1997
BETWEEN
CENTENNIAL COMMUNICATIONS CORP.
AND
THE PURCHASERS SET FORTH HEREIN
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of October 3, 1997, between
Centennial Communications Corp., a Delaware corporation (the "Company"), and the
Persons listed on the Schedule of Purchasers attached hereto (collectively
referred to herein as the "Purchasers" and individually as a "Purchaser").
Except as otherwise indicated in this Agreement, capitalized terms used herein
are defined in Section 6.1 hereof.
The parties hereto agree as follows:
AGREEMENTS
ARTICLE I.
PURCHASE AND SALE
Section 1.1 Authorization and Closing.
----------- -------------------------
A. Authorization of the Notes. The Company shall authorize the issuance
-- --------------------------
and sale to the Purchasers of an aggregate principal amount of $11,095,648 (the
"Offering Amount") in Senior Secured Convertible Notes due 2002 of the Company
(the "Notes") having the rights and preferences set forth in Exhibit A attached
hereto. As more fully set forth on Exhibit A attached hereto, in certain
circumstances, the Notes are convertible into shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), or convertible into shares
of the Company's Series C Preferred Stock, par value $.01 per share (the "Series
C Preferred"), having the rights and preferences set forth in Exhibit B attached
hereto. The Series C Preferred is convertible into shares of Common Stock .
B. Purchase and Sale of the Notes. At each Closing (as defined below),
-- ------------------------------
the Company shall sell to each Purchaser and, subject to the terms set forth
herein, each Purchaser shall purchase from the Company, a Note having an
aggregate principal amount as set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto. The sale of the Notes to each Purchaser
shall constitute a separate sale under this Agreement. The Company acknowledges
that pursuant to the Loan Agreement dated July 1997 (the "Loan Agreement")
between the Company and certain Purchasers, such Purchasers have advanced funds
to the Company in the amounts set forth on the Schedule of Purchasers attached
hereto (the "Outstanding Amounts"). Such Purchasers shall apply the Outstanding
Amounts owed to them against payment for the Notes to be purchased pursuant to
this Agreement.
C. The Closing. Any Closing of the separate purchase and sale of the
-- -----------
Notes shall take place at such place and on such date as may be mutually
agreeable to the Company and each Purchaser making a purchase of the Notes. Each
closing (a "Closing") shall take place at the offices of Holland & Hart LLP at
9:00 a.m. between October 3, 1997 and October 15, 1997, or at such other place
and on such other date not
1
<PAGE>
to extend beyond October 15, 1997, as may be mutually agreeable to the Company
and each Purchaser. At each Closing, the Company shall deliver to each Purchaser
the Note to be purchased by such Purchaser, registered in such Purchaser's or
its nominees name, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds to an
account to be designated by the Company or by application of the Outstanding
Amount.
ARTICLE II.
CONDITIONS TO CLOSING
Section 2.1 Conditions of Each Purchaser's Obligations at the Closing. The
----------- ---------------------------------------------------------
obligation of each Purchaser to purchase and pay for the Notes at each Closing
is subject to the satisfaction as of the Closing of the following conditions:
A. Representations and Warranties. The representations and warranties
-- ------------------------------
of the Company contained in Section 5.1 shall be true and correct in all
respects at and as of the Closing as though then made, except to the extent of
changes caused by the transactions expressly contemplated by this Agreement.
B. Amended and Restated Certificate of Incorporation. The Company shall
-- -------------------------------------------------
have duly adopted, executed and filed with the Secretary of State of Delaware an
amended and restated Certificate of Incorporation establishing the terms and the
relative rights and preferences of the Series C Preferred and making certain
modifications to the rights and preferences of the Company's Series A Preferred
Stock, par value $.01 per share (the "Series A Preferred"), and the Company's
Series B Preferred Stock, par value $.01 per share (the "Series B Preferred"),
in the form set forth in Exhibit B hereto (the "Certificate of Incorporation"),
and the Company shall not have adopted or filed any other document designating
terms, relative rights or preferences of its preferred stock. The Certificate of
Incorporation shall be in full force and effect as of the Closing under the laws
of the state of Delaware and shall not have been amended or modified.
C. Registration Agreement. The Company, the Purchasers and the holders
-- ----------------------
of the Common Stock, the Series A Preferred and the Series B Preferred shall
have entered into a second amended and restated registration agreement in form
and substance as set forth in Exhibit C attached hereto (the "Registration
Agreement"), and the Registration Agreement shall be in full force and effect as
of the Closing.
D. Stockholders Agreement. The Company, the Purchasers and each major
-- ----------------------
holder of Common Stock, the Series A Preferred and the Series B Preferred shall
have entered into a second amended and restated stockholders agreement in form
and substance as set forth in Exhibit D attached hereto (the "Stockholders
Agreement"), and the Stockholders Agreement shall be in full force and effect as
of the Closing.
E. Sale of the Notes to Each Purchaser. The Company shall have sold to
-- -----------------------------------
each Purchaser the Notes to be purchased by it under this Agreement at the
Closing and shall have received payment therefor.
2
<PAGE>
F. Blue Sky Clearances. The Company shall have made all filings under
-- -------------------
applicable state securities laws necessary to consummate the issuance of the
Notes pursuant to this Agreement in compliance with such laws.
G. Disqualified Persons. The Company shall have provided Centennial
-- --------------------
Fund IV, L.P. ("Centennial IV") and Centennial Fund V, L.P. ("Centennial V") a
certification of the direct and indirect holdings of securities of the Company
by certain persons designated by Centennial IV and Centennial V as required by
their respective governing documents.
H. Opinion of the Company's Counsels. Each Purchaser shall have
-- ---------------------------------
received from each of (i) Holland & Hart LLP, counsel for the Company, and (ii)
Estudio Fernandez Portocarrero, special Peruvian counsel for the Company, an
opinion with respect to the matters set forth in Exhibit E-1 and E-2 attached
hereto, which shall be addressed to each Purchaser, dated the date of the
Closing, and in form and substance reasonably satisfactory to each Purchaser.
I. Deed of Charge. The Company and Prudential Securities Incorporated
-- --------------
("PSI"), as collateral agent for the Purchasers, shall have entered into a Deed
of Charge (the "Deed of Charge") in respect of the pledge by the Company of 66%
of the outstanding capital stock of Centennial Cayman Corp. and SMR Direct
Cayman Corp. in form and substance as set forth in Exhibit F attached hereto,
and the Deed of Charge shall be in full force and effect as of the Closing. By
execution of this Agreement, each Purchaser hereby appoints PSI as collateral
agent to act on behalf of the holders of the Notes pursuant to the Notes and the
Deed of Charge.
J. Board Appointment. The Purchasers' designee to the Company's Board
-- -----------------
of Directors shall be elected simultaneously with the Closing.
K. Closing Documents. The Company shall have delivered to each
-- -----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1.1 and Sections 2.1.A. through
2.1.G., inclusive, and Section 2.1.I., have been fully satisfied;
(ii) certified copies of (a) the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and performance
of this Agreement, the Registration Agreement, the Stockholders Agreement, the
Deed of Charge and each of the other agreements contemplated hereby, the filing
of the amendment to the Certificate of Incorporation referred to in Section
2.1.B., the issuance and sale of the Notes, the reservation of a sufficient
number of shares of Series C Preferred for issuance upon conversion of all of
the outstanding Notes and a sufficient number of shares of Common Stock for
issuance upon conversion of all of the outstanding Notes or all of the
outstanding shares of Series C Preferred and the consummation of all other
transactions contemplated by this Agreement, and (b) the
3
<PAGE>
resolutions duly adopted by the Company's stockholders adopting the amendments
to the Certificate of Incorporation referred to in Section 2.1.B.;
(iii) certified copies of the Certificate of Incorporation and the
Company's bylaws, each as in effect at the Closing;
(iv) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky filings and waivers of
all preemptive rights and rights of first refusal);
L. Proceedings. All corporate and other proceedings taken or required
-- -----------
to be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto shall
be reasonably satisfactory in form and substance to each Purchaser and its
special counsel.
M. Amendment to Existing Purchase Agreements. The right of first
-- -----------------------------------------
refusal provisions in each of the Series A Purchase Agreement (as defined
below), the Series B Purchase Agreement (as defined below) and the Purchase
Agreement between the Company and the Persons listed on the Schedule of
Purchasers attached thereto dated as of December 8, 1995, shall have been
amended to be made consistent with the provisions contained in the this
Agreement.
N. Expenses. The Company shall have reimbursed the Purchasers for the
-- --------
fees and expenses of their special counsel as provided in Section 7.1.A. hereof.
Section 2.2 Waiver of Conditions. Any condition specified in Section 2.1
----------- --------------------
may be waived if consented to by each Purchaser; provided that no such waiver
shall be effective against any Purchaser unless it is set forth in a writing
executed by each Purchaser.
ARTICLE III.
COVENANTS
Section 3.1 Covenants.
- ----------- ---------
A. Financial Statements and Other Information. The Company shall
-- ------------------------------------------
deliver to each Purchaser (so long as such Purchaser holds any Underlying Common
Stock) and to each holder of at least 5% of the Underlying Common Stock:
(i) as soon as available but in any event within 30 days after the
end of each monthly accounting period in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such monthly period and for the period from the beginning of
the fiscal year to the end of such month, and consolidated balance sheets of the
Company and its Subsidiaries as of the end of such monthly period, setting forth
in each case comparisons to the annual budget and to the corresponding period in
the preceding fiscal year, and all such
4
<PAGE>
statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, subject to the exclusion of footnote
disclosure and normal year-end audit adjustments;
(ii) as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each fiscal year, unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and for the period from the beginning of
the fiscal year to the end of such quarter, and consolidated balance sheets of
the Company and its subsidiaries as of the end of such quarterly period, setting
forth in each case comparisons to the annual budget and to the corresponding
period in the preceding fiscal year, and all such statements shall be prepared
in accordance with generally accepted accounting principles, consistently
applied, subject to the exclusion of footnote disclosure and normal year-end
audit adjustments;
(iii) within 90 days after the end of each fiscal year, audited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year, setting forth in
each case comparisons to the annual budget and to the preceding fiscal year, all
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by (a) with respect to the consolidated
portions of such statements, an opinion of an independent accounting firm of
recognized national standing, (b) a certificate from such accounting firm,
addressed to the Company's board of directors, stating that in the course of its
examination nothing came to its attention that caused it to believe that there
was an Event of Noncompliance (as defined below) in existence or that there was
any other default by the Company or any Subsidiaries in the fulfillment of or
compliance with any of the terms, covenants, provisions or conditions of any
other material agreement to which the Company or any Subsidiaries is a party or,
if such accountants have reason to believe any Event of Noncompliance or other
default by the Company or any Subsidiaries exists, a certificate specifying the
nature and period of existence thereof, and (c) a copy of such firm's annual
management letter to the board of directors;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant aspects
of the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
(v) at least 30 days (but not more than 90 days) prior to the
beginning of each fiscal year, (a) an annual budget prepared on a monthly basis
for the Company and its Subsidiaries for such fiscal year (displaying
anticipated statements of income and cash flows and balance sheets), (b) a five
year strategic plan for the subsequent five fiscal years of the Company, and
promptly upon preparation thereof any other significant budgets or plans
prepared by the Company and any revisions of such annual or other budgets or
five year strategic plan or other plans, and within 30 days
5
<PAGE>
after any monthly period in which there is a material adverse deviation from the
annual budget, an Officer's Certificate explaining the deviation and what
actions the Company has taken and proposes to take with respect thereto;
(vi) promptly (but in any event within five business days) after the
discovery or receipt of notice of any default under any material agreement to
which it or any of its Subsidiaries is a party or any other material adverse
event or circumstance affecting the Company or any Subsidiaries (including the
filing of any material litigation against the Company or any Subsidiaries or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
(vii) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or (to its knowledge) any of its officers or directors file with respect
to the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's
businesses; and
(viii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this Section 3.1.A. may reasonably
request.
Each of the financial statements referred to in subparagraphs (i), (ii) and
(iii) shall fairly present the financial condition and results of operation as
of the dates and for the periods stated therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end audit
adjustments (none of which would, alone or in the aggregate, be materially
adverse to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries, taken as a whole).
Notwithstanding the foregoing, the provisions of this Section 3.1.A. (other
than subparagraph (vii)) shall cease to be effective so long as the Company (a)
is subject to the periodic reporting requirements of the Securities Exchange Act
and continues to comply with such requirements and (b) promptly provides to each
Person otherwise entitled to receive information pursuant to this Section
3.1.A., all reports and other materials filed by the Company with the Securities
and Exchange Commission pursuant to the periodic reporting requirements of the
Securities Exchange Act; provided that, notwithstanding the foregoing, so long
as any Notes or shares of Series C Preferred remains outstanding, the Company
shall continue to deliver to each Purchaser (so long as such Purchaser holds any
Underlying Common Stock) and to each holder of at least
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<PAGE>
5% of the Underlying Common Stock, the information specified in Section
3.1.A.(iii)(b) and Section 3.1.A.(vi).
Except as otherwise required by law or judicial order or decree or by any
governmental agency or authority, each Person entitled to receive information
regarding the Company and its Subsidiaries under Sections 3.1.A., 3.1.B., or
3.1.C. shall use its best efforts to maintain the confidentiality of all
nonpublic information obtained by it hereunder which the Company has reasonably
designated as proprietary or confidential in nature; provided that each such
Person (i) may, to the extent required by law, disclose such information in
connection with the sale or transfer or proposed sale or transfer of any Notes,
Series C Preferred or Underlying Common Stock if such Person's transferee agrees
in writing to be bound by the provisions hereof, and (ii) may disclose such
information to any partner, subsidiary, Affiliate (as defined below) or parent
of such Person or to officers, directors or employees of the foregoing (provided
that such persons are bound by confidentiality provisions similar to those
described herein) for the purpose of evaluating its investment in the Company so
long as such partner, subsidiary, Affiliate or parent or such officer, director
or employee is advised of the confidential nature of the information.
If a Purchaser is requested to disclose any of the confidential
information, and that Purchaser is advised by counsel that it must disclose such
information or else stand liable for contempt or other penalty or censure, that
Purchaser will promptly notify the Company of such request so that the Company
may seek a protective order or other appropriate remedy. Each Purchaser agrees
to cooperate with the Company, at the Company's expense, in its efforts to
obtain such remedies, but this provision will not be construed to require a
Purchaser to undertake litigation or other legal proceedings. If such protective
order or other remedy is not promptly obtained, any information that is required
to be disclosed may be disclosed by such Purchaser pursuant to the advice of
counsel.
For purposes of this Agreement, "confidential information" shall not
include (i) information that becomes publicly available (other than as result of
a breach of this Section 3.1.), (ii) any information which a Purchaser is
required to disclose under applicable law or regulation, including any
regulation applying to any stock exchange in which it or its Affiliates' shares
are listed, or as a result of an order or request of any competent judicial,
governmental or other authority, or (iii) any information that a Purchaser can
demonstrate was legally already in its possession prior to such Purchaser's
receipt of such information from another party or the Company.
For purposes of Sections 3.1.A., 3.1.B. and 3.1.C., the term "Purchaser"
shall include any partner of a Purchaser who received Notes, shares of Series C
Preferred or shares of Underlying Common Stock pursuant to a distribution from
or a liquidation of such Purchaser.
For purposes of this Agreement and the Registration Agreement, all holdings
of Series C Preferred and Underlying Common Stock by Persons who are Affiliates
of each
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<PAGE>
other shall be aggregated for purposes of meeting any threshold tests
under this Agreement and the Registration Agreement. "Affiliate" shall have the
meaning set forth in Section 6.1 hereof and for purposes of meeting such
threshold tests shall include Persons which have received distributions of
securities from a partnership holding such securities.
B. Inspection of Property . The Company shall permit any representatives
----------------------
designated by any Purchaser (so long as such Purchaser holds any Underlying
Common Stock) or any holder of at least 5% of the Underlying Common Stock, upon
reasonable notice and during normal business hours, to (i) visit and inspect any
of the properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers, key employees
and independent accountants of the Company and its Subsidiaries. The
presentation of an executed copy of this Agreement by any Purchaser to the
Company's independent accountants shall constitute the Company's permission to
its independent accountants to participate in discussions with such Persons.
C. Attendance at Board Meetings . The Company shall give each Purchaser (so
----------------------------
long as such Purchaser holds any Underlying Common Stock) and each holder of at
least 5% of the Underlying Common Stock written notice of each meeting of its
board of directors and each committee thereof at the same time and in the same
manner as notice is given to the directors (which notice shall be confirmed in
writing to each such Person) and the Company shall permit a representative of
each such Person to attend, as an observer, all meetings of its board of
directors and all committees thereof; provided that in the case of telephonic
meetings conducted in accordance with the Company's bylaws and applicable law,
each such Person's representative shall be given the opportunity to listen to
such telephonic meetings; and provided, further, that the Company has the right
to exclude such representatives from the entire meeting or portion thereof if
attendance by the representative at such meeting or portion thereof or
dissemination of such information would, in the reasonable determination of the
board of directors, compromise or adversely affect the attorney-client privilege
(on the basis of an opinion of counsel to the Company) or result in a conflict
of interest situation. Each representative shall be entitled to receive all
written materials and other information (including, without limitation, copies
of meeting minutes) given to directors in connection with such meetings at the
same time such materials and information are given to the directors. If the
Company proposes to take any action by written consent in lieu of a meeting of
its board of directors or of any committee thereof, the Company shall use its
best efforts to give written notice thereof to each such Person at least two
days prior to the effective date of such consent describing in reasonable detail
the nature and substance of such action.
D. Designation of Directors . The Company shall use its best efforts to cause
------------------------
the directors designated in the Stockholder Agreement to be elected to the board
of directors of the Company.
8
<PAGE>
E. Restrictions. So long as any of the Notes (or shares of Series C
------------
Preferred, as the case may be) remain outstanding, the Company shall not,
without the consent of the holders of 75% of the Underlying Common Stock:
(i) directly or indirectly make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the Notes except for a payment of
interest, principal or premium, if any, at Stated Maturity; provided that
if an Event of Default on the Notes (as defined therein) has occurred and
is continuing, no such payment shall be made until such time as the Event
of Default has been cured or waived by the holders of the Notes in
accordance with their terms;
(ii) directly or indirectly declare or pay any dividends or make any
distributions upon any of its equity securities other than the Series C
Preferred, the Series A Preferred or the Series B Preferred pursuant to
the terms of the Certificate of Incorporation, except for dividends
payable in shares of Common Stock issued upon the outstanding shares of
Series A Preferred, Series B Preferred or Common Stock;
(iii) directly or indirectly redeem, purchase or otherwise acquire, or permit
any Subsidiaries to redeem, purchase or otherwise acquire, any of the
Company's equity securities (including, without limitation, warrants,
options and other rights to acquire equity securities) other than the
Series C Preferred, the Series A Preferred or the Series B Preferred
pursuant to terms of the Certificate of Incorporation and except for
repurchases of Common Stock from employees of the Company and its
Subsidiaries upon termination of employment pursuant to arrangements
approved by the Company's board of directors.
(iv) enter into, or permit any Subsidiary to enter into, the ownership, active
management or operation of any business other than wireless communications
and ancillary activities or, for the period commencing on the date hereof
and ending nine months from the date hereof, enter into, or permit any
Subsidiary to enter into, the ownership, active management or operation of
any business other than wireless communications and ancillary activities
in Latin America;
(v) become subject to, or permit any of its Subsidiaries to become subject to,
any agreement or instrument which by its terms would restrict the
Company's ability to perform the provisions of this Agreement, the
Stockholders Agreement, the Registration Agreement, the Deed of Charge,
the Certificate of Incorporation or the Company's bylaws (including,
without limitation, provisions relating to payment of dividends on and
making redemptions of the Series C Preferred and provisions relating to
the conversion of the Notes or Series C Preferred);
(vi) except as expressly contemplated by this Agreement, make any amendment to
the Certificate of Incorporation or the Company's bylaws;
<PAGE>
(vii) except as contemplated by this Agreement and the Stockholders Agreement,
change the authorized size of its board of directors;
(viii) increase the number of shares of Common Stock issuable pursuant to stock
option plans or stock ownership plans above 9% of the aggregate number of shares
of Common Stock, Underlying Common Stock and Common Stock issuable on conversion
of the Series A Preferred and the Series B Preferred outstanding immediately
after the Closing Date (as such number is proportionately adjusted for stock
splits, combinations and dividends affecting the Common Stock and including all
such employee stock options, other purchase rights and conversion rights
outstanding on or before the Closing Date) (the "Authorized Management Stock"),
otherwise amend or modify any stock option plan or employee stock ownership plan
as in existence as of the Closing (the "Stock Option Agreements"), adopt any new
stock option plan or employee stock ownership plan or issue any shares of Common
Stock to its or its Subsidiaries' employees other than pursuant to the Company's
existing stock option and employee stock ownership plans and other than the
repricing of options granted to certain executives of the Company prior to the
date hereof as determined by the Board of Directors, which repricing shall not
be below the Conversion Price for the Notes (as defined in the Notes);
(ix) use the proceeds from the sale of the Notes other than for general
working capital purposes and for wireless communication activities or such other
activities as may be approved by the board of directors; provided that no more
than $500,000 of the proceeds from the sale of the Notes may be used by the
Company, after the Closing, directly or indirectly in support of its existing
United States operations;
(x) except as expressly contemplated by this Agreement and except for a
Qualified Debt Offering (as defined in the Notes), authorize, issue or enter
into any agreement providing for the issuance (contingent or otherwise) of, (a)
any Indebtedness which is senior to or on parity with the Notes with respect to
the payment of interest, principal or distributions upon liquidation or
otherwise, (b) any notes or debt securities containing equity features
(including, without limitation, any notes or debt securities convertible into or
exchangeable for equity securities, issued in connection with the issuance of
equity securities or containing profit participation features), (c) any equity
securities (or any securities convertible into or exchangeable for any equity
securities) which are senior to or on a parity with the Series C Preferred with
respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise or (d) any additional shares of Series C Preferred.
F. Additional Negative Covenants . So long as any of the Notes (or shares of
- -- -----------------------------
Series C Preferred, as the case may be) remain outstanding the Company shall
not, without the consent of the holders of at least 75% of the Underlying Common
Stock:
10
<PAGE>
(i) merge or consolidate with any Person or permit any Subsidiary to merge or
consolidate with any Person (other than a wholly-owned Subsidiary of the
Company or its Subsidiaries);
(ii) (A) sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of a material portion of its assets or
substantially all of its assets in any transaction or series of related
transactions, (B) sell or permanently dispose of any of its or any Subsidiary's
Proprietary Rights, or (C) create, incur or assume or permit any Subsidiary to
create, incur or assume, any Liens other than Permitted Liens on any material
assets of the Company and its Subsidiaries; provided that (x) the covenants in
subclause (A) above shall not restrict the sale or disposition of the Company's
and its Subsidiary's U.S. wireless communications operations so long as such
sale or disposition is approved by the Company's board of directors and (y) the
covenant contained in this subclause (C) shall terminate on the occurrence of a
Qualified Debt Offering (as defined in the Notes);
(iii) liquidate, dissolve or effect a recapitalization or reorganization in any
form of transaction (including, without limitation, any reorganization into
partnership form);
(iv) make or permit any Subsidiary to make an assignment for the benefit of
creditors or admit in writing its inability to pay its debts generally as they
become due; or petition or apply to any tribunal for the appointment of a
custodian, trustee, receiver or liquidator of the Company or any Subsidiary or
of any substantial part of the assets of the Company or any Subsidiary, or
commence any proceeding (other than a proceeding for the voluntary liquidation
and dissolution of a Subsidiary) relating to the Company or any Subsidiary under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction;
(v) enter into, or permit any Subsidiary to enter into, any transaction with
any of its or any Subsidiary's Affiliates, except for arm's length arrangements
on reasonable terms in the ordinary course of business; or
(vi) take any action which would adversely alter or change any of the rights,
preferences or privileges of the Series C Preferred.
G. Affirmative Covenants . So long as any Notes or shares of Series C Preferred
---------------------
remain outstanding, the Company shall, and shall cause each Subsidiary to
(unless waived by the holders of 75% of the Underlying Common Stock);
(i) at all times cause to be done all things necessary to maintain, preserve
and renew its corporate existence and all material licenses, authorizations
and permits necessary to the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working order and
condition, and from time to time make all necessary and desirable repairs,
11
<PAGE>
renewals and replacements, so that its businesses may be properly and
advantageously conducted at all times;
(iii) pay and discharge when due and payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or profits
therefrom (in each case before the same becomes delinquent and before penalties
accrue thereon) and all claims for labor, materials or supplies to the extent to
which the failure to pay or discharge such obligations would reasonably be
expected to have a material adverse effect upon the financial condition,
operating results, assets, operations or business prospects of the Company and
its Subsidiaries, taken as a whole, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with generally accepted accounting
principles, consistently applied) have been established on its books with
respect thereto;
(iv) comply with all other material obligations which it incurs pursuant to
any contract or agreement, whether oral or written, express or implied, as such
obligations become due unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect thereto;
(v) comply in all material respects with all applicable laws, rules and
regulations of all governmental authorities;
(vi) apply for and continue in force with good and responsible insurance
companies adequate insurance covering risks of such types and in such amounts as
are customary for corporations of similar size engaged in similar lines of
business;
(vii) maintain proper books of record and account which fairly present its
financial condition and results of operations and make provisions on its
financial statements for all such proper reserves as in each case are required
in accordance with generally accepted accounting principles, consistently
applied; and
(viii) enter into and maintain nondisclosure and noncompete agreements with its
key employees in the form approved by the board of directors.
H. Compliance with Agreements. The Company shall perform and observe (i) all
--------------------------
of its obligations to each holder of the Notes and shares of Series C Preferred
and all of its obligations to each holder of the Underlying Common Stock set
forth in the Notes, the Certificate of Incorporation and the Company's bylaws,
and (ii) all of its obligations to each holder of Registrable Securities (as
defined in the Registration Agreement) set forth in the Registration Agreement.
12
<PAGE>
I. Current Public Information. At all times after the Company has filed a
--------------------------
registration statement with the Securities and Exchange Commission pursuant to
the requirements of either the Securities Act or the Securities Exchange Act,
the Company shall file all reports required to be filed by it under the
Securities Act, the Securities Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder and shall take such
further action as any holder or holders of Restricted Securities may reasonably
request, all to the extent required to enable such holders to sell Restricted
Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange
Commission under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulations hereunder adopted by the Securities and
Exchange Commission, or (ii) a registration statement on Form S-2 or S-3 or any
similar registration form hereafter adopted by the Securities and Exchange
Commission. Upon request, the Company shall deliver to any holder of Restricted
Securities a written statement as to whether it has complied with such
requirements.
J. Reservation of Common Stock. The Company shall at all times reserve and
---------------------------
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon the conversion of the Notes and the Series C
Preferred, such number of shares of Common Stock issuable upon the conversion of
all outstanding Notes and all outstanding shares of Series C Preferred. All
shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable laws or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which shall be immediately transmitted by the
Company upon issuance).
K. Enforcement of Other Agreements. The Company shall enforce the provisions
-------------------------------
of the Stock Option Agreements.
L. Proprietary Rights. The Company shall, and shall cause each Subsidiary to,
------------------
possess and maintain all material Proprietary Rights necessary to the conduct of
their respective businesses and own all right, title and interest in and to, or
have a valid license for, all material Proprietary Rights used by the Company
and each Subsidiary in the conduct of their respective businesses. Neither the
Company nor any Subsidiary shall take any action, or fail to take any action,
which would result in the invalidity, abuse, misuse or unenforceability of such
Proprietary Rights or which would infringe upon any rights of other Persons.
M. Limited First Refusal Rights.
----------------------------
(i) Except for the issuance of Common Stock (a) to the Company's employees as
contemplated by Section 3.1.E.(viii) hereof, (b) upon the conversion of the
Notes, the Series C Preferred, the Series A Preferred and the Series B
Preferred, (c) in connection with issuance to non-Affiliates of the Company
performing
13
<PAGE>
services for the Company in exchange for consideration other than cash, (d)
pursuant to a public offering registered under the Securities Act, (e) in
connection with the acquisition of another business entity by the Company, (f)
in connection with any stock split, stock dividend, or recapitalization or (g)
to a lender or equipment lessor in connection with any loan or lease financing
transaction, if the Company authorizes the issuance or sale of any shares of
Common Stock or any securities containing options or rights to acquire any
shares of Common Stock (other than as a dividend on the outstanding Common
Stock), the Company shall first offer to sell to each of the holders of
Underlying Common Stock its "pro rata portion" of 75% of such stock or
securities. A holder's "pro rata portion" shall equal the quotient determined by
dividing (1) the number of shares of Common Stock and Underlying Common Stock
held by each such holder by (2) the sum of the total number of shares of
Underlying Common Stock and Common Stock held by all holders of Underlying
Common Stock. Each holder of Underlying Common Stock shall be entitled to
purchase such stock or securities at the most favorable price and on the most
favorable terms as such stock or securities are to be offered to any other
Persons. The purchase price for all stock and securities offered to the holders
of the Underlying Common Stock shall be payable in cash or, to the extent
otherwise required hereunder, notes issued by such holders.
(ii) In order to exercise its purchase rights hereunder, a holder of
Underlying Common Stock must within 15 days after receipt of written notice from
the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms and such holder's
percentage allotment deliver a written notice to the Company describing its
election hereunder. If all of the stock and securities offered to the holders of
Underlying Common Stock is not fully subscribed by such holders, the remaining
stock and securities shall be reoffered by the Company to the holders purchasing
their full allotment upon the terms set forth in this paragraph, except that
such holders must exercise their purchase rights within five days after receipt
of such reoffer.
(iii) Upon the expiration of the offering periods described above, the Company
shall be entitled to sell such stock or securities which the holders of
Underlying Common Stock have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any stock or securities
offered or sold by the Company after such 90-day period must be reoffered to the
holders of Underlying Common Stock pursuant to the terms of this subparagraph.
(iv) The rights under this Section 3.1.M. shall terminate upon the
effectiveness of a registration statement filed by the Company with the
Securities and Exchange Commission under the Securities Act with respect to an
offering of Common Stock by the Company with aggregate proceeds to the Company
(less underwriting discounts and commissions) of at least $20,000,000 and a
price per share of at least $6.00 (as adjusted for stock splits, reverse stock
splits, and similar recapitalizations); provided that if the registration
statement is withdrawn or abandoned before any shares
14
<PAGE>
of Common Stock are sold thereunder, the provisions of this paragraph shall
remain in effect.
(v) For purposes of this Section 3.1.M., the definition of "Underlying
Common Stock" shall also include the Common Stock issued or issuable upon
conversion of the Series A Preferred and the Series B Preferred.
N. Unrelated Taxable Income . Any gross income derived by the Purchasers from
------------------------
the Company shall be in the form of dividends, interest, capital gains and
losses from the disposition of property, and rents and royalties, but only such
rents and royalties as are excluded pursuant to Code Sections 512(b)(2) and
512(b)(3), respectively, in calculating unrelated business taxable income and
only such dividends, interest, capital gains and losses, and rents and royalties
that are not included under Section 512(b)(4) of the Code in calculating
unrelated business taxable income.
O. Investments in United States Real Property Interests . The Company's capital
----------------------------------------------------
stock does not constitute a United States real property interest as that term is
defined in Section 897(c)(1)(A)(ii) of the Code. The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) since the date of its incorporation. The Company
shall use its best efforts to ensure that it does not at any time in the future
become a United States real property holding corporation. If at any time in the
future the Company should become a United States real property holding
corporation, the Company shall, as promptly as possible, notify each Purchaser
of such status.
P. Stockholder Meetings . The holders of 51% of the Underlying Common Stock
--------------------
shall have the right to request that the Company call a special meeting of the
stockholders of the Company. Promptly (and, in any event, within 15 days) upon
receipt by the Company of such a request from the requisite number of holders of
Underlying Common Stock, the Company shall send notice of such special meeting
of stockholders to all stockholders of the Company, specifying the purpose of
the special meeting of stockholders. Any such special meeting of stockholders
of the Company shall be held within 30 days of the mailing of such notice of
meeting.
Q. Return of Interest and Dividends . Each Purchaser covenants and agrees
--------------------------------
that, if the Company effects a Qualified Public Offering (as defined in the
Company's Certificate of Incorporation) prior to the third anniversary of the
date of this Agreement (the "Effective Period"), it will promptly (and within 7
days of the receipt by the Purchaser of notice from the Company) return all
interest paid by the Company in respect of the Notes (whether paid in cash or in
Additional Notes (as defined in the Notes)) and all dividends paid by the
Company in respect of the Series C Preferred (whether paid in cash or in shares
of Series C Preferred) on receipt of such notice.
R. Transfer of Notes and Series C Preferred . Each Purchaser covenants and
----------------------------------------
agrees that during the Effective Period, no transfer of any Note or shares
15
<PAGE>
of Series C Preferred may be made by such holder unless such holder also
transfers any Additional Notes (as defined in the Notes) issued as interest on
the Notes or any shares of Series C Preferred issued as dividends on shares of
Series C Preferred held by such holder.
ARTICLE IV.
TRANSFER RESTRICTIONS
Section 4.1 Transfer of Restricted Securities.
---------------------------------
A. Exceptions to Transfer Restrictions. Restricted Securities are transferable
-----------------------------------
pursuant to (a) public offerings registered under the Securities Act, (b) Rule
144 of the Securities and Exchange Commission (or any similar rule then in
force) if such rule is available and (c) subject to the conditions specified in
Section 4.1.B. below, any other legally available means of transfer.
B. Legend Removal. In connection with the transfer of any Restricted
--------------
Securities (other than a transfer described in Section 4.1.A.(a) or (b) above),
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities delivers
to the Company an opinion of counsel that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new notes or
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in Section 7.1.C.(ii). If the Company is not required to
deliver new Notes or certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Article IV and Section 7.1.C.
ARTICLE V.
REPRESENTATION AND WARRANTIES
Section 5.1 Representations and Warranties of the Company. As a material
---------------------------------------------
inducement to the Purchasers to enter into this Agreement and to purchase the
Notes, the Company hereby represents and warrants that:
A. Organization and Corporate Power. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on the
financial condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole. The Company has all
requisite corporate power and
16
<PAGE>
authority and all material licenses, permits and authorizations necessary to own
and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's and each
Subsidiary's constituent documents and bylaws which have been furnished to the
Purchasers' special counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized capital stock
of the Company shall consist of (a) seventeen million four hundred thousand
(17,400,000) shares of preferred stock, of which three hundred and fifty two
(352) shares shall be designated as Series A Preferred (all of which shall be
issued and outstanding), six million three hundred ninety-nine thousand six
hundred forty eight (6,399,648) shares will be designated as Series B Preferred
(five million seven hundred and seventy six thousand eight hundred and nineteen
(5,776,819) of which will be issued and outstanding) and eleven million
(11,000,000) shares shall be designated as Series C Preferred (none of which
will be issued and outstanding) and (b) twenty nine million one hundred thousand
(29,100,000) shares of Common Stock, of which three million five hundred and two
thousand five hundred (3,502,500) shares shall be issued and outstanding, twenty
three million two hundred and forty seven thousand four hundred and sixty four
(23,247,464) shares shall be reserved for issuance upon conversion of the Notes,
the Series C Preferred, the Series A Preferred and the Series B Preferred, and
two million three hundred and seven thousand nine hundred and seventy two
(2,307,972) shares shall be reserved for issuance pursuant to stock option
plans. As of the Closing, neither the Company nor any Subsidiary shall have
outstanding any stock or securities convertible or exchangeable for any shares
of its capital stock or containing any profit participation features, nor shall
it have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock, except for the Notes, the Series C Preferred, Series A
Preferred, the Series B Preferred, and except as set forth on the attached
"Capitalization Schedule." The Capitalization Schedule accurately sets forth the
following with respect to all outstanding options and rights to acquire the
Company's capital stock: the holder, the number of shares covered, the exercise
price and the expiration date. As of the Closing, neither the Company nor any
Subsidiary shall be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except as set
forth on the Capitalization Schedule, except in respect of the Notes and except
pursuant to the Certificate of Incorporation. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly issued, fully
paid and nonassessable.
(ii) Except as set forth in (a) the Purchase Agreement dated November 22, 1996
between the Company and the holders of the Series B Preferred (as amended to the
date hereof, the "Series B Purchase Agreement"), (b) the Registration
17
<PAGE>
Agreement, (c) the Stockholders Agreement, (d) the Purchase Agreement dated June
27, 1996 between the Company and the holders of the Series A Preferred (as
amended to the date hereof, the "Series A Purchase Agreement") and (e) the
Company's existing certificate of incorporation, all of which have been waived,
there are no statutory or contractual stockholders preemptive rights or rights
of refusal with respect to the issuance of the Notes hereunder, the issuance of
the Series C Preferred or the issuance of any series of capital stock of the
Company. The Company has not violated any applicable federal or state securities
laws in connection with the offer, sale or issuance of any of its capital stock,
and the offer, sale and issuance of the Notes hereunder does not require
registration under the Securities Act or any applicable state securities laws.
To the best of the Company's knowledge, there are no agreements between the
Company's stockholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's affairs,
except for the Stockholders Agreement, the Amended and Restated Initial
Stockholders Agreement dated June 27, 1996 between the Company and certain of
its stockholders, and the stock option agreements set forth on the
Capitalization Schedule.
(iii) Except as set forth in the Amended and Restated
Registration Agreement dated November 22, 1996 between the Company and certain
of the Purchasers, which will be superseded by the Registration Agreement, the
Company is not under any obligation to register any of its currently outstanding
securities or any of its securities which may hereafter be issued.
C. Subsidiaries; Investments. The attached "Subsidiary Schedule" correctly
-------------------------
sets forth the name of each Subsidiary of the Company, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of each
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which the failure to so qualify would
reasonably be expected to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries, taken as a whole. Except as set forth on the
Subsidiary Schedule, all of the outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable, and all such shares
are owned by the Company or another Subsidiary free and clear of any lien,
charge or encumbrance. Except as set forth on the Subsidiary Schedule, neither
the Company nor any Subsidiary owns or holds the right to acquire any shares of
stock or any other security or interest in any other Person.
D. Authorization; No Breach. The execution, delivery and performance of this
------------------------
Agreement, the Registration Agreement, the Stockholders Agreement, the Notes,
the Deed of Charge and all other agreements contemplated by this Agreement to
which the Company is a party and the filing of the amendment and restatement of
the Certificate of Incorporation have been duly authorized by the Company. This
Agreement, the Registration Agreement, the Stockholders Agreement, the Deed of
18
<PAGE>
Charge, the Notes, the Certificate of Incorporation and all other agreements
contemplated by this Agreement each constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms. Except as set forth
on the attached "Restriction Schedule," the execution and delivery by the
Company of this Agreement, the Registration Agreement, the Stockholders
Agreement, the Deed of Charge, and all other agreements contemplated by this
Agreement to which the Company is a party, the offering, sale and issuance of
the Notes hereunder, the issuance of the Series C Preferred or the Common Stock
upon conversion of the Notes or the Series C Preferred, as the case may be, the
filing of the amendment and restatement of the Certificate of Incorporation and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Company, do not and shall not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in the creation of any lien, security interest, charge or encumbrance
upon the Company's or any Subsidiary's capital stock or assets pursuant to, (iv)
give any third party the right to accelerate any obligations under, (v) result
in a violation of, or (vi) require any authorization, consent, approval,
exemption or other action by or notice to any court or administrative or
governmental body pursuant to, the Certificate of Incorporation or the bylaws of
the Company or any Subsidiary, or any law, statute, rule or regulation to which
the Company or any Subsidiary is subject, or any material agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the Restrictions Schedule, none of the Subsidiaries is
subject to any restrictions upon making loans or advances or paying dividends
to, transferring property to, or repaying any Indebtedness owed to, the Company
or another Subsidiary.
E. Financial Statements . Attached hereto as the "Financial Statements
--------------------
Schedule" are the following financial statements:
(i) the audited consolidated balance sheet, statement of operations,
statement of mandatorily redeemable, convertible preferred stock and
stockholders equity and cash flows of the Company and its Subsidiaries for the
period from inception (October 6, 1995) to December 31, 1995 and as of December
31, 1996, for the twelve-month period then ended; and
(ii) the unaudited consolidated balance sheet and statement of operations of
the Company and its Subsidiaries as of July 31, 1997 (the "Latest Balance
Sheet") and for the seven-month period then ended.
Each of the foregoing financial statements (including in all cases the
notes thereto, if any) fairly presents the financial condition and results of
operations at the dates and for the periods indicated, is consistent with the
books and records of the Company (which, in turn, are accurate and complete in
all material respects) and has been prepared in accordance with generally
accepted accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the lack of footnote disclosure and changes
resulting from normal year-end audit adjustments (none of which would, alone or
in the aggregate, be materially adverse to the financial condition,
19
<PAGE>
operating results, assets, operations or business prospects of the Company and
its subsidiaries, taken as a whole).
F. Absence of Undisclosed Liabilities. Except as set forth on the attached
----------------------------------
"Liabilities Schedule," the Company and its Subsidiaries do not have any
obligation or liability (whether accrued, absolute, contingent, unliquidated or
otherwise, whether or not known to the Company or any Subsidiary, whether due or
to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the Closing, or any action or inaction at or prior
to the Closing, or any state of facts existing at or prior to the Closing other
than: (i) liabilities set forth on the Latest Balance Sheet (including any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business which are not
material individually or in the aggregate (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit), (iii) other liabilities and obligations (including liabilities and
obligations under executory contracts) expressly disclosed in the other
Schedules to this Agreement and (iv) liabilities under executory contracts not
required to be disclosed on the Contracts Schedule, which are not material
individually or in the aggregate.
G. No Material Adverse Change. Since the date of the Latest Balance Sheet,
--------------------------
there has been no material adverse change in the financial condition, operating
results, assets, operations, business prospects, employee relations or customer
or supplier relations of the Company and its Subsidiaries, taken as a whole,
except as set forth on the attached "Adverse Change Schedule."
H. Absence of Certain Developments.
-------------------------------
(i) Except as expressly contemplated by this Agreement or as set forth
on the attached "Development Schedule," since the date of the Latest Balance
Sheet, neither the Company nor any Subsidiary has:
(a) issued any notes, bonds or other debt securities or any
equity securities or any securities convertible, exchangeable or exercisable
into any equity securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the ordinary course
of business and liabilities under contracts entered into in the ordinary course
of business;
(c) discharged or satisfied any material lien or encumbrance or
paid any material obligation or liability, other than current liabilities paid
in the ordinary course of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its stock or purchased or
redeemed any shares of its stock or any warrants, options or other rights to
acquire its stock;
20
<PAGE>
(e) mortgaged or pledged any of its properties or assets or subjected
them to any material lien, security interest, charge or other encumbrance,
except liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible assets, except in
the ordinary course of business, or canceled any material debts or claims;
(g) sold, assigned or transferred any Proprietary Rights or other
intangible assets, or disclosed any proprietary confidential information to any
Person;
(h) suffered any extraordinary losses or waived any right of material
value, whether or not in the ordinary course of business or consistent with past
practice;
(i) made capital expenditures or commitments therefor that aggregate in
excess of $250,000;
(j) entered into any other material transaction, whether or not in the
ordinary course of business;
(k) made any loans or advances to, guarantees for the benefit of, or
any Investments in, any Persons in excess of $250,000 in the aggregate;
(l) made any charitable contributions or pledges;
(m) suffered any damage, destruction or casualty loss exceeding in the
aggregate $250,000, whether or not covered by insurance; or
(n) made any Investment in or taken steps to incorporate any
Subsidiary;
(o) received any notice of the loss of a material service order in
excess of $100,000 or the loss of a major customer with service orders in excess
of $100,000 annually; or
(p) entered into an agreement or commitment to do any of the foregoing.
(ii) Neither the Company nor any Subsidiary has at any time made any payments
for political contributions or made any bribes, kickback payments or other
illegal payments.
I. Assets. Except as set forth on the "Assets Schedule," the Company and each
------
Subsidiary have good and marketable title to, or a valid leasehold interest in,
the properties and assets used by them, located on their premises or shown on
the Latest Balance Sheet or acquired thereafter, free and clear of all Liens,
except for properties
21
<PAGE>
and assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto) and Liens for current property taxes not yet due
and payable. Except as described on the Assets Schedule, the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition in all materials respects and are fit for use in the
ordinary course of business.
J. Tax Matters. Except as set forth in the attached "Taxes Schedule," the
-----------
Company and each Subsidiary have filed all tax returns which they are required
to file; all such returns are true and correct in all material respects; the
Company and each Subsidiary have in all respects paid all taxes owed by them and
withheld and paid over all taxes which they are obligated to withhold from
amounts owing to any employee, creditor or third party; neither the Company nor
any Subsidiary has waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to a tax assessment or deficiency;
the assessment of any additional taxes for periods for which returns have been
filed is not expected; and the federal income tax returns of the Company and its
Subsidiaries have not been audited.
K. Contracts and Commitments.
-------------------------
(i) Except as expressly contemplated by this Agreement or as set forth
on the attached "Contracts Schedule," as of the Closing, neither the Company nor
any Subsidiary is a party to any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or arrangement, or
any contract with any labor union, or any severance agreements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other basis
providing annual compensation in excess of $100,000 or contract relating to
loans to officers, directors or affiliates;
(c) contract under which the Company or a Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding $100,000;
(d) agreement or indenture relating to the borrowing of money
or the mortgaging, pledging or otherwise placing a lien on any material asset or
material group of assets of the Company and its Subsidiaries;
(e) guarantee of any obligation;
(f) lease or agreement under which the Company or any
Subsidiary is lessee of or holds or operates any property, real or personal,
owned by any other party, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed $25,000;
22
<PAGE>
(g) lease or agreement under which the Company or any Subsidiary is
lessor of or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company or any Subsidiary;
(h) contract or group of related contracts with the same party or group
of affiliated parties the performance of which involves a consideration in
excess of $150,000;
(i) assignment, license, indemnification or agreement with respect to
any Proprietary Rights or other intangible property;
(j) warranty agreement with respect to its services rendered or its
products sold or leased;
(k) agreements under which it has granted any Person any registration
rights (including piggyback rights) other than the Registration Agreement;
(l) contract, agreement or other arrangement with any officer,
director, employee or Affiliate, or any Affiliate of any officer, director or
employee except employment agreements terminable at will;
(m) contract or agreement prohibiting it from freely engaging in any
business or competing anywhere in the world;
(n) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $150,000 annually;
and
(o) any loan agreement with or guarantee to any employee, officer or
director of the Company.
(ii) The Company and each Subsidiary have performed all material obligations
required to be performed by them and are not in default under or in breach of
nor in receipt of any claim of default or breach under any contract or
commitment required to be set forth on the "Contracts Schedule" (each, a
"Material Contract"); no event has occurred which with the passage of time or
the giving of notice or both would result in a default, breach or event of
noncompliance under any Material Contract, to which the Company or any
Subsidiary is subject; neither the Company nor any Subsidiary has any present
expectation or intention of not fully performing all such obligations; and
neither the Company nor any Subsidiary has knowledge of any breach or
anticipated breach by the other parties to any Material Contract or commitment
to which it is a party.
(iii) The Purchasers' special counsel has been supplied with a true and correct
copy of each of the written Material Contracts and an accurate description of
the oral Material Contracts which are referred to on the Contracts Schedule,
together with all amendments, waivers or other changes thereto.
23
<PAGE>
(iv) Except as set forth on the Contracts Schedule, since the Latest
Balance Sheet, there have been no material changes in any employment agreement
or compensation arrangement between the Company and its employees.
L. Proprietary Rights. The attached "Proprietary Rights Schedule" contains a
------------------
complete and accurate list of (i) all patented and registered Proprietary Rights
owned by the Company or any Subsidiary, (ii) all pending patent applications and
applications for registrations of other Proprietary Rights filed by the Company
or any Subsidiary, (iii) all unregistered trade names and corporate names owned
or used by the Company and its Subsidiaries and (iv) all unregistered
trademarks, service marks and copyrights and computer software which are
material to the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries, taken as a whole. The
Proprietary Rights Schedule also contains a complete and accurate list of all
licenses and other rights granted by the Company or any Subsidiary to any third
party with respect to any Proprietary Rights and all licenses and other rights
granted by any third party to the Company or any Subsidiary with respect to any
Proprietary Rights. The Company or one of its Subsidiaries owns or has the right
to use pursuant to a valid license all Proprietary Rights necessary for the
operation of the businesses of the Company and its Subsidiaries as presently
conducted and as presently proposed to be conducted. The loss or expiration of
any Proprietary Right or related group of Proprietary Rights would not have a
material adverse effect on the conduct of the Company's and its Subsidiaries'
respective businesses, and no such loss or expiration is, to the best of the
Company's knowledge, threatened, pending or reasonably foreseeable. The Company
and its Subsidiaries have taken all necessary actions to maintain and protect
the Proprietary Rights which they own and use. To the best of the Company's
knowledge, the owners of any Proprietary Rights licensed to the Company or any
Subsidiary have taken all necessary actions to maintain and protect the
Proprietary Rights which are subject to such licenses. Except as indicated on
the Proprietary Rights Schedule, (i) the Company and its Subsidiaries own all
right, title, and interest in and to all of the Proprietary Rights listed on
such schedule and all other Proprietary Rights material to the operation of the
businesses of the Company and its Subsidiaries, (ii) there have been no claims
made against the Company or any Subsidiary asserting the invalidity, misuse or
unenforceability of any of such rights, and, to the best of the Company's
knowledge, there are no grounds for the same, (iii) neither the Company nor any
Subsidiary has received a notice of conflict with the asserted rights of others,
and (iv) the conduct of the Company's and each Subsidiary's business has not
infringed or misappropriated and does not infringe or misappropriate any
Proprietary Rights of other Persons, nor would any future conduct as presently
contemplated infringe any Proprietary Rights of other Persons and, to the best
of the Company's knowledge, the Proprietary Rights owned by the Company or any
Subsidiary have not been infringed or misappropriated by other Persons.
M. Litigation, etc. Except as set forth on the attached "Litigation Schedule,"
---------------
there are no actions, suits, proceedings, orders, investigations or claims
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or
24
<PAGE>
threatened against or affecting any of the officers, directors or employees of
the Company and its Subsidiaries with respect to their businesses or proposed
business activities) at law or in equity, or before or by any governmental
department, commission, board, bureau, agency or instrumentality (including,
without limitation, any actions, suit, proceedings or investigations with
respect to the transactions contemplated by this Agreement); neither the Company
nor any Subsidiary is subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Company's knowledge,
any governmental investigations or inquiries (including inquiry as to the
qualification to hold or receive any license or permit); and, to the best of the
Company's knowledge, there is no basis for any of the foregoing. Neither the
Company nor any Subsidiary is subject to any judgment, order or decree of any
court or other governmental agency. Neither the Company nor any Subsidiary has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
N. Brokers . Except as set forth on the attached "Brokerage Schedule," there
-------
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Company or any Subsidiary. The Company
shall pay, and hold each Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and out-of-
pocket expenses) arising in connection with any such claim.
O. Governmental Consent, etc . Except as set forth on the attached "Consents
-------------------------
Schedule," no permit, consent, approval or authorization of, or declaration to
or filing with, any governmental authority is required in connection with the
execution, delivery and performance by the Company of this Agreement or the
other agreements contemplated hereby, or the consummation by the Company of any
other transactions contemplated hereby or thereby, except as expressly
contemplated herein or in the Consents Schedule.
P. Insurance . The attached "Insurance Schedule" contains a description of each
---------
insurance policy maintained by the Company and its Subsidiaries with respect to
its properties, assets and businesses, and each such policy is in full force and
effect as of the Closing. Neither the Company nor any Subsidiary is in default
with respect to its obligations under any insurance policy maintained by it. The
insurance coverage of the Company and its Subsidiaries is customary for
corporations of similar size engaged in similar lines of business.
Q. Employees and ERISA .
-------------------
(i) The Company is not aware that any executive or key employee of the
Company or any Subsidiary or any group of employees of the Company or any
Subsidiary has any plans to terminate employment with the Company or any
Subsidiary. The Company and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor, including provisions
thereof relating
25
<PAGE>
to wages, hours, equal opportunity, collective bargaining and the payment of
social security and other taxes, and the Company is not aware that it or any
Subsidiary has any material labor relations problems (including any union
organization activities, threatened or actual strikes or work stoppages or
material grievances).
(ii) Neither the Company, its Subsidiaries nor, to the best of
the Company's knowledge after due inquiry, any of their employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company and its Subsidiaries, except for
agreements between the Company and its present and former employees, copies of
which have been provided to special counsel for the Purchasers.
(iii) Neither the Company nor any Subsidiary presently
maintains or contributes to, or ever has maintained or contributed to, any
"employee benefit plan," as such term is defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), with respect to
which the Company is required to file Internal Revenue Service ("IRS") Form
5500, and neither the Company nor any Subsidiary presently contributes to or
ever has contributed to any "multiemployer plan," as such term is defined in
Section 3 of ERISA.
(iv) Attached as Exhibit G is a true and complete copy of the
Company's 1996 Stock Option Plan, and forms of Notice of Exercise and Early
Exercise Stock Purchase Agreement.
R. Compliance with Laws. Except as set forth on the attached
--------------------
"Compliance Schedule," neither the Company nor any Subsidiary has violated any
law or any governmental regulation or requirement which violation would
reasonably be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries, taken as a whole, and neither the Company nor any
Subsidiary has received notice of any such violation. Neither the Company nor
the Subsidiary is subject to any clean up liability, or has reason to believe it
may become subject to any clean up liability, under any federal, state or local
environmental law, rule or regulation.
S. Affiliated Transactions. Except as described in this Agreement or as
-----------------------
set forth on the attached "Affiliated Transactions Schedule," no officer,
director or stockholder of the Company or any Subsidiary or any Person related
by blood or marriage to any such Person or any entity in which any such Person
owns any beneficial interest, is a party to any agreement, contract, commitment
or transaction with the Company or any Subsidiary or has any material interest
in any material property used by the Company or any Subsidiary.
T. Disclosure. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items prepared
or supplied to any Purchaser by or on behalf of the Company with respect to the
26
<PAGE>
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading.
U. Disqualified Persons . The Company has reviewed the attached "List of
- -- --------------------
Disqualified Persons" dated as of October 1, 1996. None of the persons listed on
the "List of Disqualified Persons" attached as Exhibit H has any direct or
indirect holdings (included expected holdings after the sale of the Notes) in
the Company.
V. Securities Compliance . Assuming (i) that the representations and
- -- ---------------------
warranties of the Purchasers set forth in Section 7.1.C. are true, and (ii) that
the Purchasers comply with the covenants set forth in Section 7.1.C., the
purchase and sale of the Notes pursuant to this Agreement are exempt from the
registration requirements of the Securities Act.
W. Licenses . The "Licenses Schedule" sets forth a list of the licenses held
- -- --------
by the Company in connection with 800 and 900 MHZ spectrum for use in
connection with specialized mobile radio ("SMR") or paging, as the case may be
(the "Licenses"). Each of the Licenses is currently in full force and effect.
X. Closing Date . The representations and warranties of the Company contained
- -- ------------
in this Section 5.1 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any writing
delivered by, or on behalf of, the Company to any Purchaser shall be true and
correct in all material respects on the date of each Closing as though then
made, except as affected by the transactions expressly contemplated by this
Agreement.
ARTICLE VI.
DEFINITIONS
Section 6.1 Definitions . For purposes of this Agreement, the following terms
- ----------- ----------- -----
have the meanings set forth below:
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person.
"Event of Noncompliance" means an event that with notice or the passage of
time would cause an event of default under the Notes.
"Indebtedness" means all indebtedness for borrowed money (including
purchase money obligations), all indebtedness under revolving credit
arrangements, all capitalized lease obligations and all guarantees of any of the
foregoing.
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
<PAGE>
"Latin America" means the countries of South America, Central America, the
Caribbean and the Republic of Mexico.
"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).
"Officer's Certificate" means a certificate signed by the Company's chief
executive officer, president or its chief financial officer, stating that (i)
the officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy of
the information set forth in such certificate and (ii) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"Permitted Liens" means, without duplication, each of the following:
(i) Liens in favor of the Company or any of its Subsidiaries;
(ii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any
Subsidiary of the Company; provided that the fair market value
of such property is equal to or greater than the amount of such
Liens and that the Indebtedness relating to such Lien was not
created in contemplation of the transaction in question;
(iii) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company; provided that the
fair market value of such property is equal to or greater than
the amount of such Liens and that the Indebtedness relating to
such Lien was not created in contemplation of the transaction in
question;
(iv) Liens existing on the date of this Agreement;
(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 securing obligations under governmental licenses,
concessions or other authorizations;
(vii) 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
28
<PAGE>
any reserve or other appropriate provision as shall be required
in conformity with generally accepted accounting principles
shall have been made therefor;
(viii) Liens securing Indebtedness incurred pursuant to a Qualified
Debt Offering;
(ix) Liens securing Indebtedness of equipment vendors; and
(x) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations
that do not exceed $750,000 at any one time outstanding.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Proprietary Rights" means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (vii) other
intellectual property rights, and (viii) copies and tangible embodiments thereof
(in whatever form or medium).
"Restricted Securities" means (i) the Notes issued hereunder, (ii) the
Series C Preferred or the Common Stock issued upon conversion of the Notes;
(iii) the Common Stock issued upon conversion of the Series C Preferred and (iv)
any securities issued with respect to the securities referred to in clauses (i),
(ii) or (iii) above by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144(k) (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new notes or certificates for them not
bearing the Securities Act legend set forth in Section 7.1.C.(ii) have been
delivered by the Company in accordance with Section 4.1. Whenever any particular
securities cease to be
29
<PAGE>
Restricted Securities, the holder thereof shall be entitled to like tenor not
bearing a Securities Act legend of the character set forth in Section
7.1.C.(ii).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
upon conversion of the Notes or the Series C Preferred and (ii) any Common Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Notes or
shares of Series C Preferred shall be deemed to be the holder of the Underlying
Common Stock obtainable upon conversion of the Notes or the shares of Series C
Preferred in connection with the transfer thereof or otherwise, regardless of
any restriction or limitation on the conversion of the Notes or the shares of
Series C Preferred. As to any particular shares of Underlying Common Stock,
such shares shall cease to be Underlying Common Stock when they have been (a)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (b) distributed to the public
through a broker,
30
<PAGE>
dealer or market maker pursuant to Rule 144 under the Securities Act (or any
similar provision then in force).
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Miscellaneous.
-------------
A. Expenses. The Company agrees to pay, and hold each Purchaser and all
--------
holders of Notes, shares of Series C Preferred and shares of Underlying Common
Stock harmless against liability for the payment of (i) the reasonable out-of-
pocket expenses of the Purchasers incurred in connection with the transactions
contemplated hereby, including due diligence, (ii) the preparation and
negotiation of this Agreement and the agreements contemplated hereby, and the
fees and expenses of special counsel to the Purchaser (which shall not exceed
$45,000) arising in connection with negotiation and execution of this Agreement,
which shall be payable at the Closing, (iii) the reasonable fees and expenses
incurred with respect to any amendments or waivers (whether or not the same
become effective) under or in respect of this Agreement, the agreements
contemplated hereby or the Certificate of Incorporation (including, without
limitation, in connection with any proposed merger, sale or recapitalization of
the Company), (iv) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of any Notes or shares of Series C Preferred or any shares of Common
Stock issuable upon conversion of the Notes and the Series C Preferred, (v) the
enforcement of the rights granted under this Agreement, the agreements
contemplated hereby and the Certificate of Incorporation, and (vi) the
reasonable fees and expenses incurred at the request of the Company by each such
Person in any filing with any governmental agency with respect to its investment
in the Company or in any other filing with any governmental agency with respect
to the Company which mentions such Person.
B. Remedies.
--------
(i) Each holder of Notes, Series C Preferred and Underlying Common
Stock shall have all rights and remedies set forth in this Agreement, the Notes
and the Certificate of Incorporation and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
(ii) The Company agrees to indemnify and hold the Purchasers, their
officers, directors, and Affiliates harmless against any loss, liability, damage
or expense (including reasonable legal fees and costs) which such Purchasers may
suffer, sustain or become subject to as a result of or in connection with the
breach by the Company of any representation, warranty, covenant or agreement of
the Company
31
<PAGE>
contained in this Agreement, the Notes, the Certificate of Incorporation or the
other agreements contemplated hereby.
C. Purchaser's Investment Representations'. Each Purchaser, as to itself only,
--------------------------------------
hereby represents that:
(i) it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act;
(ii) it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws; provided
that nothing contained herein shall prevent any Purchaser and subsequent holders
of Restricted Securities from transferring such securities in compliance with
the provisions of Section 4.1 hereof. Each note or certificate for Restricted
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on October 3, 1997, and have not been registered under the Securities
Act of 1933, as amended. The transfer of the securities represented
are subject to the conditions specified in the Purchase Agreement,
dated as of October 3, 1997 between the issuer (the "Company") and
certain investors, and the Company reserves the right to refuse the
transfer of such securities until such conditions have been fulfilled
with respect to such transfer. A copy of such conditions shall be
furnished by the Company to the holder hereof upon written request and
without charge."
(iii) it understands that it must bear the economic risk of the
investment in the Restricted Securities for an indefinite period of time because
the Restricted Securities have not been registered under the Securities Act and
applicable state securities laws and therefore cannot be sold unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available; and
(iv) the execution, delivery and performance by such Purchaser
of this Agreement and all other agreements to which such Purchaser is a party
have been duly authorized by such Purchaser and each constitutes a valid and
binding obligation of such Purchaser, enforceable in accordance with its terms.
D. Treatment of the Series C Preferred. The Company covenants and agrees that
-----------------------------------
so long as federal income tax laws prohibit a deduction for distributions made
by the Company with respect to preferred stock (i) it shall treat all
distributions
32
<PAGE>
paid by it on the Series C Preferred as non-deductible dividends on all of its
tax returns and (ii) it shall treat the Series C Preferred as preferred stock in
all of its financial statements and other reports and shall treat all
distributions paid by it on the Series C Preferred as dividends on preferred
stock in such statements and reports.
E. Consent to Amendments. Except as otherwise expressly provided herein, the
---------------------
provisions of this Agreement may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of 75%
of the Underlying Common Stock; provided that if there is no Series C Preferred
outstanding, the provisions of this Agreement may be amended and the Company may
take any action herein prohibited, only if the Company has obtained the written
consent of the holders of 75% of the Underlying Common Stock. No other course
of dealing between the Company and the holder of any Notes, Series C Preferred
or Underlying Common Stock or any delay in exercising any rights hereunder or
under the Certificate of Incorporation shall operate as a waiver of any rights
of any such holders. For purposes of this Agreement, Notes, shares of Series C
Preferred or shares of Underlying Common Stock held by the Company or any
Subsidiaries shall not be deemed to be outstanding. If the Company pays any
consideration to any holder of Notes, Series C Preferred or Underlying Common
Stock for such holder's consent to any amendment, modification or waiver
hereunder, the Company shall also pay each other holder of Notes, Series C
Preferred or Underlying Common Stock granting its consent hereunder equivalent
consideration computed on a pro rata basis.
--------
F. Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf.
G. Successors and Assigns. Except as otherwise expressly provided herein, all
----------------------
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Notes, Series C Preferred or Underlying Common Stock are
also for the benefit of, and enforceable by, any subsequent holder of such Note,
Series C Preferred or such Underlying Common Stock.
H. Severability. Whenever possible, each provision of this Agreement shall be
------------
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
33
<PAGE>
I. Counterparts ; Facsimile. This Agreement may be executed simultaneously in
------------------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement. This Agreement may be executed by facsimile.
J. Descriptive Headings; Interpretation. The descriptive headings of this
------------------------------------
Agreement are inserted for convenience only and do not constitute a Section of
this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
K. Governing Law. The corporate laws of the State of Delaware shall govern all
-------------
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of the State of Colorado.
L. Notices. All notices, demands or other communications to be given or
-------
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address listed below:
Centennial Communications Corp.
1610 Wynkoop, Suite 300
Denver, CO 80202
Attention: Chief Executive Officer
with a copy to:
Holland & Hart LLP
555 Seventeenth Street
Suite 3200
Denver, CO 80202
Attention: Michael S. Quinn
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
M. Integration. This Agreement, together with the Stockholders Agreement, the
-----------
Registration Agreement, the Notes, the Certificate of Incorporation and the Deed
of Charge constitutes the entire agreement between the Company and the
Purchasers with respect to the subject matter covered hereby and thereby and
supersedes all prior or contemporaneous oral or written agreements, arrangements
or
34
<PAGE>
understandings. By execution of this Agreement, the Company and the
Purchasers who are parties to the Loan Agreement hereby acknowledge and agree
that the Loan Agreement is hereby terminated and of no further force and effect.
N. Understanding Among the Purchasers . The determination of each Purchaser to
----------------------------------
purchase the Notes pursuant to this Agreement has been made by such Purchaser
independent of any other Purchaser and independent of any statements or opinions
as to the advisability of such purchase or as to the properties, business,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries which may have been made or given by any other Purchaser or by any
agent or employee of any other Purchaser.
* * * * * * * * *
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement on the date set forth in the first paragraph hereof.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Michael Simkin
------------------
Name: Michael Simkin
------------------
Title: CEO
-----------------
THE ROMAN ARCH FUND, L.P.
By: /s/ Robert William
------------------
Name: Robert William
------------------
Title: MD
-----------------
THE ROMAN ARCH FUND II, L.P.
By: /s/ Robert William
------------------
Name: Robert William
------------------
Title: MD
-----------------
PRUDENTIAL BACHE CAPITAL
PARTNERS II, L.P.
By:
------------------
Name:
------------------
Title:
-----------------
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ George Alex
------------------
Name: George Alex
------------------
Title:Managing Director
-----------------
36
<PAGE>
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings, IV, L.P.
Its: General Partner
By: /s/ Adam Goldman
------------------
Name: Adam Goldman
------------------
Title: General Partner
-----------------
TELECOM PARTNERS, L.P.
By: /s/ Stephen W. Schovee
----------------------
Title: Managing Member of the General
Partner
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
------------------
Name: Adam Goldman
------------------
Title: General Partner
-----------------
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
-------------------
Name: Adam Goldman
-------------------
Title: General Partner
------------------
MGVF II, LTD.
By: /s/ [illegible signature]
-------------------------
General Partner
CREST FUNDING PARTNERS, L.P.
By: Crest Partners (I) LLC, Its: General Partner
By: /s/ William W. Sprague
----------------------
Name: William w. Sprague
----------------------
Title: Managing Member
---------------------
37
<PAGE>
TRAILHEAD VENTURES, L.P.
By: Wind River Partners
By: /s/ [illegible signature
------------------------
Name:
------------------------
Title: General Partner
BOULDER VENTURES, L.P.
By: /s/ Kyle Lefkoff
------------------------
Name: Kyle Lefkoff
------------------------
Title: Partner
-----------------------
/s/ William Elsner
-----------------------------
William Elsner
/s/ Robert McKenzie
-----------------------------
Robert McKenzie
CENTENNIAL HOLDINGS, INC.
By: /s/ Adam Goldman
------------------------
Name: Adam Goldman
------------------------
Title: Sr. Vice President
-----------------------
CENTENNIAL HOLDINGS I, LLC
By: /s/ Adam Goldman
------------------------
Name: Adam Goldman
------------------------
Title: Sr. Vice President of Centennial
-----------------------------------
Holdings, Inc., its Managing Member
-----------------------------------
CREST SMR, L.L.C.
By: CREST PARTNERS (I) LLC
Its: Managing Member
By: /s/ William W. Sprague
------------------------
Name: William W. Sprague
------------------------
Title: Managing Member
-----------------------
38
<PAGE>
KYLE LEFKOFF*
By: /s/ Kyle Lefkoff
-----------------------------------------
*as attorney in fact for the following
Purchasers:
Larry Macks
Jurassic Ltd.
Josh Fidler
Morty Macks
Will's Wei Corp.
Robert Lemle
Caruthers Family LLC
Tim Snipes
Ramer 1990 Living Trust
Groupe Schneider Securities
JLS LLC
Doug Ramer
Trisun Financial, LLC
Eric Becker
Slade, Inc.
250 Venture Capital Associates
39
<PAGE>
BANCBOSTON VENTURES INC.
By: /s/ Lars A. Swanson
------------------------
Name: Lars A Swanson
------------------------
Title: Vice President
-----------------------
/s/ Ed Flanders
-----------------------------
Ed Flanders
/s/ Barbara Vonderheid
-----------------------------
Barbara Vonderheid
/s/ Fred Gallart
-----------------------------
Fred Gallart
/s/ Karl Maier
-----------------------------
Karl Maier
/s/ Matt Zuschlag
-----------------------------
Matt Zuschlag
/s/ Anne Haas
-----------------------------
Anne Haas
/s/ Bernard Dvorak
-----------------------------
Bernard Dvorak
/s/ Michael Simkin
------------------------------
Michael Simkin
40
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Article I. PURCHASE AND SALE...........................................................................1
Section 1.1 Authorization and Closing................................................................1
A. Authorization of the Notes...............................................................1
B. Purchase and Sale of the Notes...........................................................1
C. The Closing..............................................................................1
Article II. CONDITIONS TO CLOSING......................................................................2
Section 2.1 Conditions of Each Purchaser's Obligations at the Closing................................2
A. Representations and Warranties...........................................................2
B. Amended and Restated Certificate of Incorporation........................................2
C. Registration Agreement...................................................................2
D. Stockholders Agreement...................................................................2
E. Sale of the Notes to Each Purchaser......................................................2
F. Blue Sky Clearances......................................................................3
G. Disqualified Persons.....................................................................3
H. Opinion of the Company's Counsels........................................................3
I. Deed of Charge...........................................................................3
J. Board Appointment........................................................................3
K. Closing Documents........................................................................3
L. Proceedings..............................................................................4
M. Amendment to Existing Purchase Agreements................................................4
N. Expenses.................................................................................4
Section 2.2 Waiver of Conditions.....................................................................4
Article III. COVENANTS.................................................................................4
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 3.1 Covenants............................................................................. 4
A. Financial Statements and Other Information......................................... 4
B. Inspection of Property............................................................. 8
C. Attendance at Board Meetings....................................................... 8
D. Designation of Directors........................................................... 8
E. Restrictions....................................................................... 9
F. Additional Negative Covenants......................................................10
G. Affirmative Covenants..............................................................11
H. Compliance with Agreements.........................................................12
I. Current Public Information.........................................................13
J. Reservation of Common Stock........................................................13
K. Enforcement of Other Agreements....................................................13
L. Proprietary Rights.................................................................13
M. Limited First Refusal Rights.......................................................13
N. Unrelated Taxable Income...........................................................15
O. Investments in United States Real Property Interests...............................15
P. Stockholder Meetings...............................................................15
Q. Return of Interest and Dividends...................................................15
R. Transfer of Notes and Series C Preferred...........................................15
Article IV. TRANSFER RESTRICTIONS.................................................................16
Section 4.1 Transfer of Restricted Securities.....................................................16
A. Exceptions to Transfer Restrictions................................................16
B. Legend Removal.....................................................................16
Article V. REPRESENTATION AND WARRANTIES.........................................................16
Section 5.1 Representations and Warranties of the Company.........................................16
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
A. Organization and Corporate Power..............................................16
B. Capital Stock and Related Matters.............................................17
C. Subsidiaries; Investments.....................................................18
D. Authorization; No Breach......................................................18
E. Financial Statements..........................................................19
F. Absence of Undisclosed Liabilities............................................20
G. No Material Adverse Change....................................................20
H. Absence of Certain Developments...............................................20
I. Assets........................................................................21
J. Tax Matters...................................................................22
K. Contracts and Commitments.....................................................22
L. Proprietary Rights............................................................24
M. Litigation, etc...............................................................24
N. Brokers.......................................................................25
O. Governmental Consent, etc.....................................................25
P. Insurance.....................................................................25
Q. Employees and ERISA...........................................................25
R. Compliance with Laws..........................................................26
S. Affiliated Transactions.......................................................26
T. Disclosure....................................................................26
U. Disqualified Persons..........................................................27
V. Securities Compliance.........................................................27
W. Licenses......................................................................27
X. Closing Date..................................................................27
Article VI. DEFINITIONS.....................................................................27
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 6.1 Definitions...............................................................27
Article VII. MISCELLANEOUS..............................................................31
Section 7.1 Miscellaneous.............................................................31
A. Expenses..................................................................31
B. Remedies..................................................................31
C. Purchaser's Investment Representations....................................32
D. Treatment of the Series C Preferred.......................................32
E. Consent to Amendments.....................................................33
F. Survival of Representations and Warranties................................33
G. Successors and Assigns....................................................33
H. Severability..............................................................33
I. Counterparts..............................................................34
J. Descriptive Headings; Interpretation......................................34
K. Governing Law.............................................................34
L. Notices...................................................................34
M. Integration...............................................................34
N. Understanding Among the Purchasers........................................35
</TABLE>
LIST OF EXHIBITS
Exhibit A Form of Senior Secured Note
Exhibit B Certificate of Incorporation
Exhibit C Registration Agreement
Exhibit D Stockholders Agreement
Exhibit E Opinions of Counsel
Exhibit F Deed of Charge
Exhibit G Stock Option Agreements
Exhibit H List of Disqualified Persons
iv
<PAGE>
SCHEDULE OF PURCHASERS
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Telecom Partners, L.P. 1,022,841 705,408
1428 15th Street
Denver, CO 80202
Centennial Holdings, Inc. 82,698 57,033
1428 15th Street
Denver, CO 80202
Centennial Entrepreneurs Fund V, 54,321 37,463
L.P.
1428 15th Street
Denver, CO 80202
Robert McKenzie 32,183 22,195
60 Kearney Street
Denver CO 80220
Trailhead Ventures, L.P. 429,343 296,099
730 17th Street, Suite 690
Denver, CO 80202
Boulder Ventures, L.P. 119,668 82,530
Suite 301
1634 Walnut Street
Boulder, CO 80202
Crest SMR, L.L.C. 339,335 234,024
320 Park Avenue, 17th Floor
New York, NY 10022
Jurassic Ltd. 4,954 3,416
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
i
<PAGE>
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Morton J. Macks 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Centennial Holdings I, LLC 59,139 40,786
1428 15th Street
Denver, CO 80202
Robert Lemle 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Tim Snipes 3,440 2,372
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Groupe Schneider Securities 5,504 3,796
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Doug Ramer 3,440 2,372
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Eric Becker 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
250 Venture Capital Assoc. 4,128 2,847
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
ii
<PAGE>
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Bernard Dvorak 6,838 4,716
1610 Wynkoop, Suite 300
Denver, CO 80202
Barbara Vonderheid 2,883 1,988
1610 Wynkoop, Suite 300
Denver, CO 80202
Matt Zuschlag 709 489
1600 Wynkoop, Suite 300
Denver, CO 80202
Karl Maier 602 415
1610 Wynkoop, Suite 300
Denver, CO 80202
Centennial Fund IV, L.P. 1,123,834 775,058
1428 15th Street
Denver, CO 80202
Centennial Fund V, L.P. 1,756,217 1,211,184
1428 15th Street
Denver, CO 80202
William Elsner 95,958 66,178
83 Glenmoor Place
Englewood, CO 80110
MGVF II, Ltd. 219,718 151,530
2400 Banc One Center
910 Travis Street
Houston, TX 77002
Crest Funding Partners, L.P. 354,601 244,552
320 Park Avenue, 17th Floor
New York, NY 10022
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
iii
<PAGE>
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Larry Macks 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Josh Fidler 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Will's Wei Corp. 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Caruthers Family LLC 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Ramer 1990 Living Trust 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
JLS LLC 4,128 2,847
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
Trisun Financial, LLC 6,880 4,745
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
iv
<PAGE>
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Slade, Inc. 3,440 2,372
c/o Kyle Lefkoff
1634 Walnut St., Suite 301
Boulder, CO 80302
BancBoston Ventures Incorporated 278,300 191,931
100 Federal St., 32nd Floor
Boston MA 02110
Ed Flanders 2,079 1,434
12150 E. Briarwood Ave., Suite
145
Englewood, CO 80112
Fred Gallart 798 550
1610 Wynkoop, Suite 300
Denver, CO 80202
Anne Haas 410 283
1610 Wynkoop, Suite 300
Denver, CO 80202
Prudential Securities 4,500,000 3,103,448
Incorporated
One New York Plaza
18th Floor
New York, NY 10292-2018
The Roman Arch Fund, L.P. 300,000 206,897
One New York Plaza
18th Floor
New York, NY 10292-2018
The Roman Arch Fund II, L.P. 200,000 137,931
One New York Plaza
18th Floor
New York, NY 10292-2018
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
v
<PAGE>
NAME AND ADDRESS AGGREGATE INITIAL UNDERLYING
- ---------------- --------- ------------------
PRINCIPAL AMOUNT NUMBER OF SHARES
---------------- ----------------
OF NOTES* OF SERIES C
--------- -----------
PREFERRED
---------
Michael Simkin 22,221 15,325
1610 Wynkoop
Suite 300
Denver, CO 80202
* Asterisk indicates that all or a portion of the purchase price is being made
through the application of Outstanding Amounts owed to such Purchaser by the
Company.
vi
<PAGE>
EXHIBIT A
FORM OF SENIOR SECURED NOTE
<PAGE>
The security represented hereby was originally issued on January 15,
1998, and has not been registered under the Securities Act of 1933, as
amended. The transfer of such security is subject to the conditions
specified in the Purchase Agreement dated as of January 15, 1998,
between the issuer (the "Company") and certain investors, and the
Company reserves the right to refuse the transfer of such security
until such conditions have been fulfilled with respect to such
transfer. Upon written request, a copy of such conditions shall be
furnished by the Company to the holder hereof without charge.
SUBORDINATED CONVERTIBLE NOTE
DUE 2006
January 15, 1998 $500,000
No.
Centennial Communications Corp., a Delaware corporation (the
"Company"), hereby promises to pay to the order of Merrill Lynch Global
Allocation Fund, Inc. the principal amount of $500,000, or such larger amount as
shall have accreted pursuant to Section 1 below, together with interest thereon
calculated in accordance with the provisions of this Subordinated Convertible
Note due 2006 (this "Note").
This Note is one of a number of Subordinated Convertible Notes due
2006 (the "Notes") issued by the Company pursuant to a Purchase Agreement dated
as of January 15, 1998 (the "Purchase Agreement") between the Company and
certain investors. The Purchase Agreement contains terms governing the rights
of the holder of this Note and all provisions of the Purchase Agreement are
hereby incorporated herein in full by reference. Unless otherwise indicated
herein, capitalized terms used in this Note have the meanings given to them in,
or by reference in, the Purchase Agreement.
1. Accretion and Payment of Interest. The Notes will accrete in
---------------------------------
value until January 1, 2000 at the rate of nine percent (9%) per annum
compounded semiannually on each January 1 and July 1 and calculated on the basis
of a 360-day year of twelve 30-day months and no cash interest will be payable
prior to such date. Thereafter, interest shall be payable in cash at the rate
of nine percent (9%) per annum on the basis of a 360-day year of twelve 30-day
months on the unpaid principal amount of this Note outstanding from time to
time. The
<PAGE>
2
Company shall pay to the holder of this Note all accrued interest on each
January 1 and July 1, (each, an "Interest Payment Date") beginning July 1, 2000.
Any accrued interest on this Note which, for any reason, has not theretofore
been paid shall be paid in full on the Maturity Date (as defined below).
2. Payment of Principal on Note.
----------------------------
(a) Scheduled Payments. The Company shall pay the principal amount of
------------------
$500,000, or such larger amount as shall have accreted pursuant to this Section
1 (or such lesser principal amount then outstanding) to the holder of this Note
on January 1, 2006 (the "Maturity Date").
(b) Conversion. Notwithstanding any provision contained in this
----------
paragraph 2, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note until such time as such amount has
been paid.
(c) Pro Rata Payment. The Company agrees that any payments to the
----------------
holders of the Notes (whether for principal, interest or otherwise) shall be
made pro rata among such holders based upon the aggregate unpaid principal
amount of the Notes held by each such holder. If any holder of a Note obtains
any payment (whether voluntary, involuntary, by application of offset or
otherwise) of principal of, or interest on, any Note in excess of such holder"s
pro rata share of payments obtained by all holders of the Notes, such holder
shall purchase from the other holders of the Notes such participation in the
Notes held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this paragraph 2(c).
3. Ranking; Subordinated Obligations.
---------------------------------
The payment of principal of, premium if any, and interest on the Notes
will be expressly subordinated in right of payment to the prior payment in full
in cash of all the Senior Indebtedness (as defined below) of the Company and
such subordination is for the benefit of the holders of Senior Indebtedness.
Until the occurrence of a Triggering Event (as defined), the Notes will rank
pari passu in right of payment with all other Indebtedness of the Company
existing as of the date hereof or incurred by the Company in the future and,
thereafter will be subordinated to all other Indebtedness of the Company that
may be incurred under the Indenture.
Notwithstanding the foregoing, with respect to the Pledged Collateral
(as defined below), and except as provided in the Pledge Agreement, the Notes
are senior in right of payment to all other Indebtedness of the Company (other
than the Senior Notes) existing as of the date hereof or incurred by the Company
in the future.
<PAGE>
3
Except as provided above and in the Pledge Agreement, the Company
covenants and agrees, and each holder of a Note, by his acceptance thereof,
likewise covenants and agrees, for the benefit of the holders, from time to
time, of Senior Indebtedness that, to the extent and in the manner hereinafter
set forth in this Section, the Indebtedness evidenced by the Notes and the
payment of the principal of and premium, if any, and interest on each and all of
the Notes are hereby expressly made subordinate and subject in right of payment
as provided in this Section to the prior payment in full in cash, cash
equivalents, rights, shares of common, preferred stock or other property (as
provided by the terms of the Senior Indebtedness) when due of the principal of,
and premium, if any, and accrued and unpaid interest on and all other amounts
owing in respect of, all existing and future Senior Indebtedness of the Company.
Upon the occurrence of any default beyond the applicable grace period
in the payment of any principal of or interest on or other amounts due on any
Senior Indebtedness of the Company (a "Payment Default"), and except for
payments made pursuant to the Pledge Agreement, no payment shall be made by the
Company with respect to the Notes unless and until (i) such Payment Default
shall have been cured or waived or shall have ceased to exist, (ii) such Senior
Indebtedness has been discharged or paid in full or (iii) the benefits of this
sentence have been waived by the holders of such Senior Indebtedness or their
representative, immediately after which the Company must resume making any and
all required payments, including missed payments, in respect of its obligations
under the Notes.
The obligations of the Company in respect of the Notes are secured by
a Collateral Pledge Agreement dated as of the date hereof between the Company
and State Street Bank and Trust Company acting as collateral agent for the
benefit of the holders of the Notes (the "Pledge Agreement"). Pursuant to the
Pledge Agreement, the Company has, for the benefit of the holders of the Notes
and the Senior Notes, pledged (the "Pledged Collateral") (i) 100% of the
outstanding Capital Stock of SMR Direct USA, Inc. and all future domestic direct
Restricted Subsidiaries of the Company and (ii) 100% of the outstanding Capital
Stock of each of Centennial Cayman Corp. and SMR Direct Cayman Corp. (other than
Excluded Stock) and 100% of the Capital Stock (other than Excluded Stock) of all
future foreign direct Restricted Subsidiary of the Company, to secure the
payment and the performance of all of the obligations of the Company under
Senior Notes and the Notes. The Pledge Agreement contains terms governing the
rights of the holder of this Note and all of the provisions of the Pledge
Agreement are incorporated herein in full by reference. Each holder of the
Notes hereby agrees to the appointment of State Street Bank and Trust Company as
collateral agent under the Pledge Agreement to act on behalf of the holders of
the Notes pursuant to the terms of this Note and the Pledge Agreement. The
rights of the holders of the Notes under the Pledge Agreement are only
subordinated to the rights of the holders of the Senior Notes and the holders
hereof expressly agree to such subordination. Notwithstanding the foregoing,
upon the occurrence of a Triggering Event, the Notes shall no longer be secured
by the Pledged
<PAGE>
4
Collateral and the holder of the Notes shall so advise the Collateral Agent.
4. Events of Default.
-----------------
(a) Definition. For purposes of this Note, an event of default (an
"Event of Default") shall be deemed to have occurred if:
(i) the Company defaults for 30 days in the payment when due of
interest on the Notes; or
(ii) the Company defaults in the payment when due of the
principal of or premium, if any, on the Notes; or
(iii) the Company fails to comply with clauses (i), (ii), (iii),
(viii), (ix) or (x) of Subsection 3.1.D of the Purchase Agreement or
with Section 5 hereof; or
(iv) the Company fails to observe or perform any other covenant,
representation, warranty or other agreement in the Notes or the
Purchase Agreement for 60 days after notice to the Company by the
holders of at least 25% in aggregate principal amount at maturity of
the Notes then outstanding; or
(v) a 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 (i) 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 (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of 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 million or more; or
(vi) 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 and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 90 days,
<PAGE>
5
provided that the aggregate of all such undischarged judgments exceeds
$5 million; or
(vii) the Company or any of its Significant Subsidiaries (as
defined in the Indenture) or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary pursuant to or
within the meaning of Bankruptcy Law:
(aa) commences a voluntary case,
(bb) consents to the entry of an order for relief against it
in an involuntary case,
(cc) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(dd) makes a general assignment for the benefit of its
creditors, or
(ee) generally is not paying its debts as they become due;
or
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(aa) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary in an
involuntary case,
(bb) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries 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 group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary, or
(cc) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 90
consecutive days; or
<PAGE>
6
(ix) the Company breaches any representation or warranty set
forth in the Registration Agreement or the Pledge Agreement, or
defaults in the performance of any covenant set forth in the
Registration Agreement, the Pledge Agreement or the Escrow Agreement,
or repudiates its obligations under the Registration Agreement, the
Pledge Agreement or the Escrow Agreement, or the Registration
Agreement, the Pledge Agreement or the Escrow Agreement is
unenforceable against the Company for any reason.
(b) Consequences of Events of Default. If any Event of Default (other
---------------------------------
than an Event of Default specified in clauses (vii) or (viii) of Section 4(a)
hereof) occurs and is continuing, the holder or holders of Notes representing at
least 25% of the aggregate principal amount of Notes then outstanding may
declare all or any portion of the outstanding principal amount of the Notes due
and payable and demand immediate payment of all or any portion of the
outstanding principal amount of the Notes owned by such holder or holders. The
Company shall give prompt written notice of any such demand to the other holders
of Notes, each of which may demand immediate payment of all or any portion of
such holder"s Note. If any holder or holders of the Notes demand immediate
payment of all or any portion of such holder"s Notes, the Company shall
immediately pay to such holder or holders the outstanding principal amount of
the Notes requested (including any accreted interest thereon) to be paid plus,
subject to the terms of the Notes, accrued interest thereon. If an Event of
Default specified in clause (vii) or (viii) of Section 4(a) hereof occurs, the
foregoing amount shall be due and payable immediately without further action or
notice.
Each holder of the Notes shall also have any other rights which such
holder may have been afforded under the Pledge Agreement and any other rights
which such holder may have pursuant to applicable law. No omission, failure or
delay by the holder of this Note in exercising any right, power, or privilege
hereunder shall impair such right, power, or privilege, shall operate as a
waiver thereof, or shall be construed to be a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies of the holder of this Note shall be
cumulative and not exclusive of any rights, remedies, warranties, or covenants
provided by applicable law.
If an Event of Default occurs on or after January 1, 2004 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 6 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by applicable law, anything in the Notes to the contrary
notwithstanding. If an Event of Default occurs prior to January 1, 2004 by
reason of any
<PAGE>
7
willful action (or inaction) taken (or not taken) by or on behalf of the Company
with the intention of avoiding the prohibition on redemption of the Notes prior
to such date, then, upon acceleration of the Notes, an additional premium shall
also become and be immediately due and payable, to the extent permitted by
applicable law, in an amount, for each of the years beginning on January 1 of
the years set forth below, as set forth below (expressed as a percentage of the
accreted value to the date of payment that would otherwise be due but for the
provisions of this sentence):
1998 ................................................................ 149.000%
1999 ................................................................ 142.000%
2000 ................................................................ 135.000%
2001 ................................................................ 128.000%
2002 ................................................................ 121.000%
2003 ................................................................ 121.000%
5. Change of Control.
-----------------
(a) Offer to Repurchase Upon Change of Control. Upon the occurrence
------------------------------------------
of a Change of Control, the holder of this Note shall have the right to require
the Company to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of this Note pursuant to the offer described below (the
"Change of Control Offer") at an offer price in cash (the "Change of Control
Payment") equal to 101% of the aggregate outstanding principal amount hereof
plus accrued and unpaid interest, if any, hereon, to the date of repurchase.
Within 20 days following any Change of Control, the Company shall mail a notice
to each holder stating: (i) that the Change of Control Offer is being made
pursuant to this paragraph 5 and that all Notes tendered will be accepted for
payment; (ii) the purchase price and the purchase date, which shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (iii) that any Note not tendered
will continue to accrue interest; (iv) that, unless the Company defaults in the
payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest, if any,
after the Change of Control Payment Date; (v) that holders electing to have any
of the Notes purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with a completed form entitled "Option of Holder to Elect
Purchase" mailed by the Company with the notice of Change of Control Offer, to
the Company 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;
(vi) that the holders will be entitled to withdraw their election if the Company
receives, not later than the close of business on the second business day
preceding the Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Notes
delivered for purchase, and a statement that such holder is withdrawing his
election to have the Notes purchased; and (vii) that holders whose Notes are
being purchased only in part will be
<PAGE>
8
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount at maturity or an integral multiple thereof.
(b) Payment. On the Change of Control Payment Date, the Company
-------
shall, to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer and (ii)
deposit in an account an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered. The Company shall
promptly mail to each holder of the Notes so tendered the Change of Control
Payment for such Notes, and the Company shall promptly authenticate and mail to
each holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof. The
Company shall provide each holder of Notes the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
(c) Exceptions. The Company shall not be required to make a Change of
----------
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Note applicable to a Change of Control Offer made
by the Company and purchases this Note so long as it was validly tendered and
not withdrawn under such Change of Control Offer.
(d) Compliance With Law. 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 the Notes as a result of a
Change of Control.
6. Optional Redemption
-------------------
The Notes outstanding may be redeemed, at the option of the Company,
in whole or in part, at any time or from time to time, on or after January 1,
2004 and prior to maturity, upon giving not less than 30 nor more than 60 days'
notice given by mail to each holder (provided that such notice shall be not less
than 120 days in the event the purchasers have not repurchased the conversion
rights pursuant to the terms of the Conversion Rights Agreement dated the date
hereof), which notice will be irrevocable, at the redemption prices set forth
below (expressed in percentages of principal amount at maturity), which shall
apply during the years after issuance of the Notes on the date hereof set forth
under the heading "period" in such table, plus accrued and unpaid interest, if
any, to the redemption date.
Period Redemption Price
January 1- December 31, 2004 ......................................... 102.000%
January 1- December 31, 2005 ......................................... 101.000%,
<PAGE>
9
provided that, from January 1, 2003 until (but excluding) January 1, 2004, the
Company may redeem all but not less than all of the Notes, if the Closing Price
of the Common Stock is at least 150% of the Conversion Price then in effect for
10 consecutive trading days, at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon, if any.
If less than all of the Notes are to be redeemed at any time,
selection of the Notes for redemption will be made by the Company on a pro rata
basis, by lot or by such other method as the Company shall deem fair and
appropriate; provided, however, that no Notes of $1,000 in principal maturity or
less shall be redeemed in part.
7. Conversions.
-----------
(a) Optional Conversion. At any time and from time to time prior to
-------------------
the payment of this Note in full, the holder of this Note may convert all or any
portion of the outstanding principal amount of this Note plus accrued and unpaid
interest hereon into a number of shares of Conversion Stock (excluding any
fractional shares) determined by dividing the amount designated by such holder
to be converted by the Conversion Price then in effect.
Each such conversion of this Note shall be deemed to have been
effected as of the close of business on the date on which this Note has been
surrendered, in person or by courier, at the principal office of the Company
together with a letter from the holder hereof designating the amount of this
Note to be converted. At such time as such conversion has been effected, the
rights of the holder of this Note as such holder to the extent of the conversion
shall cease, and the Person or Persons in whose name or names any certificate or
certificates for shares of Conversion Stock are to be issued upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Conversion Stock represented thereby.
(b) Conversion Procedures. As soon as possible after a conversion has
---------------------
been effected, the Company shall deliver to the converting holder: a
certificate or certificates representing the number of shares of Conversion
Stock (excluding any fractional share), as the case may be, issuable by reason
of such conversion in such name or names and such denomination or denominations
as the converting holder has reasonably specified; if required by the terms of
this Note, payment in an amount equal to the sum of all accrued interest with
respect to the principal amount converted, which has not been paid prior
thereto, plus the amount payable under subparagraph (d) below; a new Note
representing any portion of the principal amount which was represented by this
Note surrendered to the Company in connection with such conversion but which was
not converted; and if any fractional share of
<PAGE>
10
Conversion Stock would, except for the provisions hereof, be deliverable upon
conversion of this Note, the Company, in lieu of delivering such fractional
share, shall pay an amount equal to the Conversion Price of such fractional
share as of the date of such conversion.
The issuance of certificates for shares of Conversion Stock upon
conversion of this Note shall be made without charge to the holder hereof for
any issuance tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of shares of Conversion
Stock. Upon conversion of this Note, the Company shall take all such actions as
are necessary in order to insure that the Conversion Stock, issuable with
respect to such conversion shall be validly issued, fully paid and
nonassessable.
The Company shall not close its books against the transfer of
Conversion Stock, issued or issuable upon conversion of this Note in any manner
which interferes with the timely conversion of this Note.
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Conversion Stock, solely for the purpose of
issuance upon the conversion of the Notes, such number of shares of Conversion
Stock, issuable upon the conversion of all outstanding Notes. All shares of
Conversion Stock, which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
except those contemplated by the Purchase Agreement and the Registration
Agreement. The Company shall take all such actions as may be necessary to
assure that all such shares of Conversion Stock, may be so issued without
violation of any applicable law or governmental regulation.
8. Conversion Prices.
-----------------
(a) Conversion Price for Conversion Stock. The initial Conversion
-------------------------------------
Price for shares of Conversion Stock (the "Conversion Price") shall be $2.25.
Subject to paragraph 8(c), if and whenever on or after the original date of
issuance of this Note, the Company issues (including by way of dividend on its
Common Stock) or sells, or in accordance with paragraph 8(b) is deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price in effect immediately prior to such time, the
Conversion Price shall be reduced to a new Conversion Price determined by
dividing (A) an amount equal to the sum of (x) the product derived by
multiplying the Conversion Price in effect immediately prior to such issue or
sale by the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (y) (i) the consideration, if any, received by
the Company upon such issue or sale and (ii) the consideration, if any, payable
to the Company upon the exercise of any Options (as defined in paragraph
8(b)(i)) or upon the conversion or exchange of any Convertible Securities (as
defined in paragraph 8(b)(ii)), by (B) the number of shares of Common Stock
Deemed Outstanding immediately
<PAGE>
11
after such issue or sale; provided that no adjustment shall be made in the
Conversion Price as a result of (i) any issuance or sale (or deemed issuance or
sale) of 2,307,972 shares of Common Stock to directors, officers, employees and
consultants of the Company pursuant to stock option plans or stock ownership
plans so long as the price of such Options is not less than $1.45 (including any
change in the issue price of any options issued under such plans so long as the
issue price is not less than $1.45 then in effect) (as adjusted for stock
splits, stock dividends and similar recapitalizations), (ii) the issuance of
shares of Convertible Securities or Common Stock as dividends in respect of any
shares of Preferred Stock or the Notes, respectively or (iii) the issuance of
shares of Common Stock on exercise of Warrants (including any Contingent
Warrants) issued in connection with the issuance of the Senior Notes or (iv) the
issuance of shares of Common Stock on the conversion of the Company's Series A
Preferred, Series B Preferred or Series C Preferred.
(b) Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under paragraph 8(a), the following
shall be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
-----------------------------
grants any rights or options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities")
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting of such Options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" is determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
<PAGE>
12
(ii) Issuance of Convertible Securities. If the Company in any manner
----------------------------------
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange is less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" is
determined by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (B) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant to other
provisions of this paragraph 8(b), no further adjustment of the Conversion Price
shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase
-----------------------------------------
price provided for in any Option, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Security, or the rate
at which any Convertible Securities is convertible into or exchangeable for
Common Stock change at any time, the Conversion Price in effect at the time of
such change shall be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold; provided that if such adjustment of the Conversion Price would result in
an increase in the Conversion Price then in effect, such adjustment shall not be
effective until 30 days after written notice thereof has been given by the
Company to all holders of the Notes.
(iv) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any right
- ----------
to convert or exchange any Convertible Securities without the exercise of such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
to the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued; provided that if such expiration or termination would result in an
increase in the Conversion Price then in effect, such increase shall not be
effective until 30 days after written notice thereof has been given by the
Company to all holders of the Notes.
<PAGE>
13
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company shall be the Market Price thereof as of the date of
receipt. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash and securities shall be determined jointly by the
Company and the holders of at least a majority of the aggregate principal amount
of the Notes then outstanding. If such parties are unable to reach agreement
within a reasonable period of time, the fair value of such consideration shall
be determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Company and the holders of a majority of
the aggregate principal amount of the Notes then outstanding. The determination
of such appraiser shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Company.
(vi) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed to
have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(c) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
<PAGE>
14
time subdivides (by any stock split, stock dividend or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(d) Reorganization, Reclassification, Consolidation, Merger or Sale.
---------------------------------------------------------------
Any recapitalization, reorganization, reclassification, consolidation, merger,
any sale of all or substantially all of the Company"s assets to another Person
or other transaction effected in such a manner so that holders of Common Stock
are entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Prior to the consummation of such Organic
Change, the Company shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the aggregate principal amount of
the Notes then outstanding) to insure that each of the holders of the Notes
shall thereafter have the right to acquire and receive in lieu of or in addition
to (as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder"s Note, such shares
of stock, securities or assets as such holder would have received in connection
with such Organic Change if such holder had converted the Note immediately prior
to such Organic Change. In each such case, the Company shall also make
appropriate provision (in form and substance satisfactory to the holders of a
majority of the aggregate principal amount of the Notes then outstanding) to
insure that the provisions of this paragraph 8 and paragraph 9 shall thereafter
be applicable in relation to any shares of stock, securities or assets
thereafter deliverable upon the conversion of the Notes (including, in the case
of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Conversion Stock acquirable and receivable upon
conversion of the Notes, if the value so reflected is less than the Conversion
Price in effect immediately prior to such consolidation, merger or sale). The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof, the successor corporation (if other than the Company)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form reasonably satisfactory to the holders of
a majority of the aggregate principal amount of the Notes then outstanding), the
obligation to deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire.
(e) Certain Events. If any event occurs of the type contemplated by
--------------
the provisions of this paragraph 8 but not expressly provided for by such
provisions (including,
<PAGE>
15
without limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's board of
directors shall make an appropriate adjustment in the Conversion Price so as to
protect the rights of the holders of the Notes; provided that no such adjustment
shall increase the Conversion Price as otherwise determined pursuant to this
paragraph 8 or decrease the number of shares of Conversion Stock issuable upon
conversion of the Notes then outstanding.
(f) Notices. Immediately upon any adjustment of the Conversion Price,
-------
the Company shall send written notice thereof to the holder of this Note,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
The Company shall also give at least 20 days prior written notice of
the date on which any Organic Change, dissolution or liquidation shall take
place.
(g) Liquidating Dividends. If the Company declares a dividend upon
---------------------
the Common Stock payable otherwise than in cash out of earnings or earned
surplus (determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Company shall pay to the holders of
the Notes at the time of payment thereof, in addition to the principal amount
and any accrued interest hereon, the Liquidating Dividend which would have been
paid to the holder of this Note on the Conversion Stock had this Note been fully
converted immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
(h) Adjustment for Certain Cash Distributions. If the Company, by
-----------------------------------------
dividend or otherwise, at any time distributes to all holders of Common Stock
cash (excluding any cash that it distributed as part of a distribution referred
to in Section 8(g) or in connection with a transaction to which Section 8(d)
applies) in an aggregate amount that, together with (A) the aggregate amount of
any other distributions to all holders of Common Stock made exclusively in cash
within the 12 months preceding the date fixed for the determination of
shareholders entitled to such distribution and in respect of which no
adjustment pursuant to Section 8(g) or the number of shares pursuant to this
clause (ii) has been made previously and (B) the aggregate of any cash plus the
fair market value (as determined pursuant to Section 8(b)(v)) as of such date of
determination of the consideration payable in respect of any tender offer by
the Company or any of its subsidiaries for all or any portion of the Common
Stock and any purchase by the Company of Common Stock in the open market,
consummated within the 12 months preceding such date of determination and in
respect of which no adjustment in the number of shares pursuant clause (i) below
has been made previously, exceeds 12.5% of the product of the current Market
Price on such date of determination times the number of shares of Common Stock
outstanding on such date, the Conversion Price shall be adjusted in
<PAGE>
16
accordance with the following formula:
C' = C x M
-----
M - D
where:
C' = the adjusted Conversion Price
C = the then current Conversion Price
M = the current Market Price per share on the date of such distribution
D = the amount of cash to be distributed in respect of one share of Common
Stock.
The adjustment shall become effective immediately prior to the opening
of business on the date of determination.
(i) Adjustment for Tender/Exchange Offer. If the Company or any
------------------------------------
subsidiary of the Company makes a tender or exchange offer for all or any
portion of the Common Stock, or if the Company purchases Common Stock in the
open market, the Conversion Price shall be adjusted in accordance with the
following formula:
C' = C x (F x A) + M x (O - A)
---------------------
M x O
where:
C' = the adjusted Conversion Price
C = the then current Conversion Price
F = the fair market value (as determined pursuant to Section 8(b)(v)) of
the aggregate consideration payable to shareholders upon consummation
of such tender or exchange offer, or upon such purchase.
M = the current Market Price per share of Common Stock.
O = the number of shares of Common Stock outstanding at the Expiration
Time (including the share tendered).
A = the number of shares of Common Stock accepted for payment in such
tender or
<PAGE>
17
exchange offer, or so purchased.
For the purpose of this clause (i), "Expiration Time" means either the
last time that tenders may be made pursuant to a tender offer or exchanges may
be made pursuant to an exchange offer, or the time of an agreement to purchase
shares in the open market as the case may be.
The adjustment shall become effective immediately following the close
of business on the last trading day used to compute the current Market Price,
provided, however, that such increase shall be deemed to have become effective
immediately prior to the opening of business on the day following the Expiration
Time. To the extent that a holder exercises its conversion rights under the
Note prior to the conclusion of the period for which the current Market Price is
to be calculated, any adjustment in the number of shares of Common Stock
issuable upon conversion of the Notes shall inure to the benefit of the holder
of record of such Note at the close of business on the first trading day
following the Expiration Time. In no event shall the Conversion Price be
reduced as a result of the consummation of any of the transactions contemplated
by this subsection (i).
9. Amendment and Waiver. Except as otherwise expressly provided
--------------------
herein, the provisions of the Notes may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of at least a majority of the outstanding principal amount of the Notes;
provided that no such action shall change (i) the rate at which or the manner in
which interest accrues on the Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on the Notes, (iii) the Conversion Price of the Notes or the number of
shares or the class of stock into which the Notes are convertible, or (iv) the
provisions set forth in paragraph 4(b), without the written consent of all the
holders of outstanding Notes, provided further that Notes held by the Company or
any Subsidiaries shall not be deemed to be outstanding.
10. Registration of Transfer; Transfers.
-----------------------------------
The Company shall keep at its principal office a register for the
registration of the Notes. Upon the surrender of any Note at such place, the
Company shall, at the request of the record holder of such Note, execute and
deliver (at the Company's expense) a new Note in exchange therefor representing
the aggregate outstanding principal amount represented by the surrendered Note.
Each such new Note shall be registered in such name and shall represent the then
outstanding principal amount as is requested by the holder of the surrendered
Note and shall be substantially identical in form to the surrendered Note.
<PAGE>
18
11. Replacement. Upon receipt of evidence reasonably satisfactory to
-----------
the Company (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any Note, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the holder is a
financial institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
Note, the Company shall (at its expense) execute and deliver in lieu of such
Note, a new Note of like kind representing the then outstanding aggregate
principal amount of the Note represented by such lost, stolen, destroyed or
mutilated Note and dated the date of such lost, stolen, destroyed or mutilated
Note.
12. Definitions. For purposes of the Notes, the following
-----------
capitalized terms have the following meaning.
"Bankruptcy Law" means Title II, U.S. Code or any similar federal or
--------------
state law for the relief of debtors.
"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 or limited
liability company, partnership or membership 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.
"Change of Control" shall have the meaning given to such term in the
-----------------
Indenture.
"Closing Price" means, on any business day with respect to the Common
-------------
Stock of the Company, the last published closing price for such Common Stock at
the end of such business day on the main stock exchange on which such Common
Stock is listed provided that if no such closing price is available, Closing
Price shall mean the Market Price.
"Common Stock" means, collectively, the Company"s Common Stock, par
------------
value $.01 per share and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Common Stock Deemed Outstanding" means, at any given time, the number
-------------------------------
of shares of Common Stock actually outstanding at such time, plus (i) the number
of shares of Common Stock which would be issued upon exercise of all of the
Company"s outstanding Options and (ii) the number of shares of Common Stock
which would be issued upon
<PAGE>
19
conversion or exchange of all of the Company"s outstanding Convertible
Securities (including Convertible Securities issuable upon exercise of Options).
"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 hereof, (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 or (iii) became a member of the Board of Directors as a
result of being designated by a stockholder pursuant to, and in accordance with,
the terms of Section 1 of the Second Amended and Restated Stockholders Agreement
dated as of October 3, 1997 between the Company and certain investors.
"Conversion Stock" means shares of the Company"s Common Stock;
----------------
provided that if there is a change such that the securities issuable upon
conversion of the Notes are issued by an entity other than the Company or there
is a change in the class of securities so issuable, then the term "Conversion
Stock" shall mean one share of the security issuable upon conversion of this
Note if such security is issuable in shares, or shall mean the smallest unit in
which such security is issuable if such security is not issuable in shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time.
"Excluded Stock" means all of the outstanding shares of Capital Stock
--------------
of each foreign Subsidiary that, if pledged, would cause the undistributed
earnings of such foreign Subsidiary (if such foreign Subsidiary had any such
undistributed earnings) as determined for U.S. Federal income tax purposes to be
treated as a deemed dividend to any parent company of such foreign Subsidiary
for U.S. Federal income tax purposes; provided, however, that if any shares of
-------- -------
Capital Stock of a foreign Subsidiary may subsequently be pledged without
resulting in such a deemed dividend, such shares shall no longer be Excluded
Stock and shall be pledged pursuant to the Pledge Agreement.
"Initial Public Offering" shall have the meaning given to such term in
-----------------------
the Indenture.
"Market Price" of any security means the average of the closing prices
------------
of such security's sales on all securities exchanges on which such security may
at the time be listed or, if there have been no sales on any such exchange on
any day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation
<PAGE>
20
Bureau, Incorporated, or any similar successor organization, in each such case,
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day. If at any time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
shall be the fair value thereof determined jointly by the Company and the
holders of at least a majority of the outstanding principal amount of the Notes.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected by
the Company and the holders of at least a majority of the outstanding principal
amount of the Notes. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Company.
"Person" means an individual, a partnership, a corporation, an
------
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Preferred Stock" means the Series A Preferred, the Series B Preferred
---------------
and the Series C Preferred.
"Principals" means any of (a) William J. Elsner, Jeff E. Rhodes,
----------
Bernard G. Dvorak, Stephen W. Schovee, Robert F. McKenzie, Adam Goldman, William
Sprague, Michael N. Simkin, William Stanfill, The Centennial Funds, Prudential
Securities Incorporated, The Roman Arch Fund, L.P., and the Roman Arch Fund, II,
L.P. and Merrill Lynch Global Allocation Fund, Inc.
"Qualified Public Offering" means the sale, in an underwritten Initial
-------------------------
Public Offering registered under the Securities Act, of shares of the Company"s
Common Stock in which (i) the aggregate gross proceeds received by the Company
for the shares is at least $25,000,000 and (ii) the price per share paid by the
public is at least $6.00 (as adjusted for stock splits, reverse stock splits,
stock dividends and similar recapitalizations).
"Related Party" with respect to any Principal means (i) any
-------------
controlling stockholder, 50% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) a trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding a 50% or more controlling
interest of which consists of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time.
<PAGE>
21
"Senior Indebtedness" means (i) the Company's Senior Discount Notes
-------------------
due 2005 (including any additional Senior Notes) (the "Senior Notes") issued
pursuant to the Indenture and (ii) after the occurrence of the Triggering Event,
all present and future Indebtedness of the Company that is permitted to be
incurred pursuant to the Indenture.
"Series A Preferred" means the Company"s Series A Preferred Stock, par
------------------
value $.01 per share.
"Series B Preferred" means the Company"s Series B Preferred Stock, par
------------------
value $.01 per share.
"Series C Preferred" means the Company"s Series C Preferred Stock, par
------------------
value $.01 per share.
"Significant Subsidiary" means any Subsidiary that would be a
----------------------
"significant subsidiary" as defined in Article 1, Rule 1-02 of Registration S-X,
promulgated pursuant to the Securities Act of 1933, as amended, as such
regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
"Voting Stock" of any Person as of any date means the capital stock or
------------
other securities of such Person that is at the time entitled to vote in the
election of the board of directors, managers or trustees of such Person.
13. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
14. Cancellation. After all principal and accrued interest at any
------------
time owed on this Note has been paid in full or after conversion of this Note as
set forth herein, this Note
<PAGE>
22
shall be surrendered to the Company for cancellation and shall not be reissued.
15. Place of Payment. Payments of principal of, and interest on,
----------------
this Note are to be delivered to the registered holder hereof at the address set
forth in the register of Notes maintained by the Company.
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this Note
on January __, 1998.
CENTENNIAL COMMUNICATIONS CORP.
Attest: By:
Name:
Title:
DENVER:
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
<PAGE>
EXHIBIT C
REGISTRATION AGREEMENT
<PAGE>
EXHIBIT D
STOCKHOLDERS AGREEMENT
<PAGE>
EXHIBIT E
OPINIONS OF COUNSEL
<PAGE>
October 7, 1997
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the sale to you of approximately
Eleven Million, One Hundred Thousand Dollars ($11,100,000) in Senior Secured
Convertible Notes due 2002 (the "Notes") pursuant to the Purchase Agreement
dated October 3, 1997, between the Company and you (the "Purchase Agreement").
We are rendering this opinion pursuant to Section 2.1.H. of the Purchase
Agreement. Except as otherwise defined herein, capitalized terms used herein
have the respective meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined originals or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records or other instruments as we have deemed necessary or
appropriate for purposes of this opinion, including:
(a) the Purchase Agreement;
(b) the Amended and Restated Certificate of Incorporation of the Company
(the "Restated Certificate");
(c) the Second Amended and Restated Registration Agreement (the
"Registration Agreement");
(d) the Second Amended and Restated Stockholders Agreement (the
"Stockholders Agreement");
(e) the Notes; and
(f) the Deed of Charge.
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 2
The Registration Agreement, the Stockholders Agreement, the Deed of Charge and
the Notes are referred to collectively as the "Operative Agreements."
We have assumed for purposes of this opinion the genuineness of signatures
and the authority of persons signing agreements on behalf of parties thereto
other than the Company, the authenticity of all documents submitted to us as
originals, the conformity to authentic original documents submitted to us as
certified, conformed or photostatic copies, the due authorization, execution and
delivery of all documents by all parties thereto other than the Company and that
all such documents constitute legal, valid and binding agreements of such
parties, enforceable against such parties in accordance with their terms.
We have further assumed the accuracy, completeness and authenticity of
certificates of public officials, that all individuals executing and delivering
documents in their individual capacities have the legal capacity to so execute
and deliver; that each of the Purchase Agreement and the Operative Agreements
are an obligation binding upon you; and that there are no extrinsic agreements
or understandings among the parties to the Purchase Agreement and the Operative
Agreements that would modify or interpret the terms of the Purchase Agreement or
the Operative Agreements or the respective rights or obligations of the parties
thereunder.
As to certain factual matters, we have relied upon the certificate of the
Chief Financial Officer of the Company attached hereto (the "Certificate") and
have not sought independently to verify such matters. With respect to our
opinions expressed in paragraphs 3 and 4 below, we have relied solely upon the
Certificate (i) with respect to the number of issued and outstanding shares of
capital stock of the Company, and (ii) to the effect that the consideration for
all outstanding shares of capital stock of the Company was received by the
Company in accordance with the provisions of the applicable resolutions of the
Board of Directors and any plan or agreement relating to the issuance of such
shares, and we have not undertaken any independent verification with respect
thereto.
As used herein, the phrases "to our knowledge" or "known to us" mean that
in rendering the opinion so qualified, we are relying upon the Certificate with
respect to the factual basis for such opinion, and that in the course of our
representation of the Company, no information that would give us current actual
knowledge of the inaccuracy of such statement has come to the attention of the
attorneys in the firm who had significant
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 3
responsibility for rendering legal services in connection with this transaction.
We have not made any independent investigation to determine the accuracy of such
statement.
We do not express any opinion herein as to any matters governed by laws
other than the laws of the State of Colorado, the General Corporation Law of the
State of Delaware and the Federal laws of the United States of America
(excluding the Communications Act of 1934, as amended by the Telecommunications
Act of 1996 or the rules, regulations and written policies of the FCC,
collectively referred to herein as "U.S. Telecommunications Law"). We express
no opinion as to whether the laws of a particular jurisdiction apply, and no
opinion as to the extent that laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof. We are not
rendering any opinion as to compliance with any anti-fraud law, rule or
regulation relating to securities or to the sale or issuance thereof.
Based upon and subject to the foregoing, and the qualifications and
limitations set forth below, we are of the opinion that:
1. Each of the Company and SMR Direct USA, Inc. ("USA") is a corporation
duly incorporated and validly existing in good standing under the laws of the
State of Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business. The Company is qualified to
do business and is in good standing under the laws of the State of Colorado.
With the exception of USA, the Company has no subsidiaries incorporated under
any law of any State of the United States of America.
2. All of the outstanding shares of capital stock of USA have been duly
authorized, validly issued, and are fully paid and nonassessable and, to our
knowledge in reliance upon the Certificate and the stock transfer records and
the minutes of the Board of Directors of USA, are wholly-owned by the Company
directly, free and clear of any security interest, lien, adverse claim, equity
or other encumbrance.
3. Following the filing of the Restated Certificate effective as of the
date hereof, the Company's authorized capital stock consists of (a) twenty nine
million one hundred thousand (29,100,000) shares of Common Stock and (b)
seventeen million four hundred thousand (17,400,000) shares of Preferred Stock
of which (i) three hundred fifty-two (352) shares have been designated as Series
A Preferred Stock, (ii) six million three hundred ninety-nine thousand six
hundred forty-eight (6,399,648) shares have been designated as Series B
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 4
Preferred Stock and (iii) eleven million (11,000,000) shares have been
designated as Series C Preferred Stock. Based on the Certificate, as of the
date hereof, the issued and outstanding capital stock of the Company is (i)
three million five hundred and two thousand five hundred (3,502,500) shares of
Common Stock, (ii) three hundred fifty-two (352) shares of Series A Preferred
Stock and (iii) five million seven hundred and seventy six thousand eight
hundred nineteen (5,776,819) shares of Series B Preferred Stock.
4. All the shares of capital stock of the Company outstanding prior to the
issuance of the Notes have been duly authorized, validly issued and are fully
paid and nonassessable and, to our knowledge in reliance upon the Certificate,
are not subject to any preemptive rights except as set forth in the Stockholders
Agreement and the Restated Certificate.
5. The Company has full corporate power and authority to execute, deliver
and perform its obligations under the Purchase Agreement and the Operative
Agreements and to consummate the transactions contemplated by the Purchase
Agreement and the Operative Agreements and to issue, sell and deliver the Notes
pursuant to the Purchase Agreement.
6. The Restated Certificate has been (a)(i) duly and validly authorized by
all necessary action on the part of the Board of Directors of the Company and
the Stockholders of the Company, and (ii) executed and filed with the Delaware
Secretary of State and (b) does not violate or conflict with the provisions of
the General Corporation Law of the State of Delaware.
7. Each of the Purchase Agreement, the Registration Agreement and the
Stockholders Agreement has been duly authorized, validly executed and delivered
by the Company and is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights generally and, subject as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law); provided that we
express no opinion as to the enforceability of Paragraph 7 of the Registration
Agreement.
8. The Notes have been duly authorized by the Company and when executed in
accordance with the terms of the Purchase Agreement and, upon delivery to the
Purchasers against payment therefor in accordance with the Purchase Agreement
and the terms of the
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 5
Notes, the Notes will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally and subject as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
9. The Deed of Charge has been duly authorized and validly executed and
delivered by the Company.
10. The shares of Series C Preferred to be issued on conversion of the
Notes have been duly authorized and reserved for issuance by the Company and,
when issued and delivered upon conversion of the Notes in accordance with the
terms of the Notes, the Series C Preferred will have been validly issued and
will be fully paid and nonassessable and the issuance of the Series C Preferred
will not be subject to any preemptive rights which have not been previously
waived.
11. The shares of Common Stock to be issued on conversion of the Notes and
the Series C Preferred, as the case may be, have been duly authorized and
reserved for issuance by the Company and when issued and delivered upon
conversion of the Notes or the Series C Preferred, in accordance with the Notes
and the Restated Certificate, as the case may be, such Common Stock will have
been validly issued and will be fully paid and nonassessable and the issuance of
such Common Stock will not be subject to any preemptive rights which have not
been previously waived.
12. Except as set forth in the Schedules to the Purchase Agreement, the
execution and delivery of the Purchase Agreement and the Operative Agreements by
the Company and the offer and sale of the Notes pursuant to the Purchase
Agreement (a) do not violate any provision of the Company's Restated Certificate
or Bylaws, and do not constitute a default by the Company under the provisions
of any agreement which is set forth on Schedule B attached hereto, except for
the agreements referred to in items 11, 14, 15, 19, 20, 21, 22 and 23 of
Schedule B which have previously been waived, and (b) do not violate or
contravene (i) the General Corporation Law of the State of Delaware, any Federal
law of the United States of America (other than U.S. Telecommunications Law, as
to which we express no opinion) or any Colorado statute, rule or regulation
applicable to the Company or (ii) any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Company and of which
we have knowledge.
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 6
13. Except as set forth in the Schedules to the Purchase Agreement, to our
knowledge, there is no action, proceeding or investigation pending or overtly
threatened against the Company before any state court or state administrative
agency in the State of Colorado or the State of Delaware or any United States
Federal court or agency.
14. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any Federal, State of Colorado, or State
of Delaware governmental body required for the consummation by the Company of
the transactions contemplated by the Purchase Agreement (except as may be
required under the securities or Blue Sky laws of various jurisdictions or
except as may be required under U.S. Telecommunications Law, as to which we
express no opinion), have been made or obtained, except as set forth in the
Schedules to the Purchase Agreement and except for the filing of a Form D with
the U.S. Securities and Exchange Commission and the Colorado Division of
Securities.
15. Based in part on the representations of the Purchasers contained in the
Purchase Agreement, the offer and sale of the Notes is exempt from the
registration requirements of the Securities Act of 1933 and the registration
requirements of the Colorado Securities Act, each as amended to the date hereof.
Our opinions are based upon the Federal laws of the United States
(excluding U.S. Telecommunications Law), the General Corporation Law of the
State of Delaware, the laws of the State of Colorado and case decisions as of
this date and upon facts known to us as of this date; we expressly disavow any
obligation to advise you with respect to future changes in law or in our
knowledge or in any event or change of condition occurring subsequent to the
date of this opinion.
The opinions expressed herein are strictly limited to the matters stated
herein, and no other opinions may be implied. This opinion is provided as a
legal opinion only, effective as of the date hereof, and not as a guaranty or
warranty of the matters discussed herein.
<PAGE>
To the Purchasers of
Senior Secured Convertible Notes
of Centennial Communications Corp.
listed on Schedule A attached hereto
October 7, 1997
Page 7
This opinion is furnished to you solely for your benefit and may not be
made available to or relied upon by any other person, firm or entity without our
prior written consent.
Very truly yours,
HOLLAND & HART LLP
<PAGE>
[LETTERHEAD OF FERNANDEZ, PORTOCARRERO, CANELO & ASSOCIADOS APPEARS HERE]
To the Purchasers of Senior Secured
Notes Due 2002 of Centennial Communications Corp.
Listed on Schedule A. Attached Hereto
Ladies and Gentlemen:
We act as Peruvian counsel to CCC Holdings Peru S.R.Ltda. SMR Direct Peru
S.R.Ltda, Pompano S.R.Ltda, Telecom Supply S.R.Ltda, C-Communica S.R.Ltda,
Transnet del Peru S.A. (collectively, the "Peru Corporations"), Centennial
Communications Corp. ("the Company"), SMR Direct Cayman Corp. and Centennial
Cayman Corp. This opinion is being given pursuant to Section 2.1. of the
Purchase Agreement by and between the Company and you, dated October 3rd, 1997
(the "Agreement"). Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Agreement.
A. Basis of Opinion
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
1. The Agreement.
2. The originals or photocopies, certified or otherwise, of the corporate
records of each of the Peru Corporations.
3. The Escritura de Constiucion and Estatutos of each of the Peru Corporations.
4. The concessions held by each of the Peru Corporations set forth on Schedule A
to this opinion (the "Peru Licenses")
5. Such matters of law as we have considered necessary or appropriate for the
expression of opinions herein.
B. Assumptions
In rendering the opinions expressed below we have assumed and not verified the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to all documents submitted to us as photocopies,
certified or otherwise, and the authenticity of the originals of such latter
documents.
<PAGE>
FERNANDEZ, PORTOCARRERO, CANELO & ASOCIADOS
C. Opinion
Based upon the foregoing it is our opinion that:
1. Each of the Peru Corporations is a corporation or limitada duly incorporated
and validly existing under the laws of Peru with full corporate power and
authority to own, lease and operate its properties and to conduct its
business.
2. All of the outstanding shares of capital stock of, or other ownership
interest in, each of the Peru Corporations have been duly authorized and
validly issued, are fully paid and nonassessable, and are wholly owned by the
Company indirectly through one or more of the Subsidiaries, free and clear of
any lien, adverse claim, security interest, equity or other encumbrance.
3. The Peru Corporations hold the Peru Licenses authorizing the use of an
aggregate of 112 800 MHz channels for the provision of SMR service.
4. The Peru Licenses have been validly issued and are in full force and effect.
To our knowledge, except as set forth in the Agreement, the Peru Corporations
are in material compliance with the Peru Licenses.
5. None of the Peru Corporations is subject to any proceeding, or to our
knowledge, any pending or threatened complaint or investigation by or before
(a) the Organization for Supervision of Private Investments in
Telecommunications or (b) the Ministry of Transportation, Communications,
Housing and Construction.
6. To our knowledge, none of the Peru Corporations is in violation in respect of
its respective Escritura de Constitucion, Estatutos or other organizational
documents.
7. To our knowledge, there are no legal or governmental proceedings, domestic or
foreign, pending against or affecting the Peru Corporations or to which any
of their respective properties is subject.
8. None of (a) the issuance, offer, sale or delivery of the Notes, (b) the
execution, delivery or performance of the Agreement, or (c) the consummation
by the Company of the transactions contemplated thereby, (i) requires any
consent, approval, authorization or other order of, or registration or filing
with, any Peruvian court, regulatory body, administrative agency or other
governmental body, agency or official, (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, the
Escritura de Constitucion, Estatutos or other organizational documents of any
of the Peru Corporations, (iii) violates or will violate any Peruvian
statute, law, regulation or filing applicable to Peru Corporations or any of
their respective properties, (iv) violates or will violate any judgment,
injunction, order or decree applicable to the Peru Corporations or any of
their respective properties, or (v) violates or will violate the terms of any
Peru Licenses.
<PAGE>
FERNANDEZ, PORTOCARRERO, CANELO & ASSOCIATES
In giving the foregoing opinions, we express no opinion other than as to the
laws of the Republic of Peru.
Very truly yours,
/s/ EDUARDO BENAVIDES
- ---------------------
Eduardo Benavides
Date: October 3, 1997
<PAGE>
SCHEDULE A
----------
A) Concession granted to SMR DIRECT PERU S.R.Ltda. (formerly MOBIL LINE PERU
S.A.) for trunking services by means of concession contract executed with
date August 25, 1995, approved by RM No. 318-95-MTC/15.17, for operating 40
channels.
B) Concession granted to POMPANO S.R.Ltda. (formerly POMPANO S.A.) for trunking
services by means of concession contract executed with date December 7, 1995,
approved by RM No. 447-95-MTC/15.17, for operating 20 channels.
C) Concession granted to TELECOM SUPPLY S.R.Ltda. (formerly BEACON SUPPLY) for
trunking services by means of concession contract executed with date November
7, 1995, approved by RM No. 418-95-MTC/15.17, for operating 12 channels.
D) Concession granted to C-COMUNICA S.R.Ltda. (formerly C-COMUNICA S.A.) for
trunking services by means of concession contract executed with date April 4,
1995, approved by RM No. 131-95-MTC/15.04, for operating 40 channels.
E) Concession granted to TRANSNET DEL PERU S.A. for trunking services by means
of concession contract executed with date March 6, 1996, approved by RM No.
043-96-MTC/15.17, for operating 32 channels.
<PAGE>
EXHIBIT F
DEED OF CHARGE
<PAGE>
EXECUTION COPY
================================================================================
DEED OF CHARGE
BETWEEN
CENTENNIAL COMMUNICATIONS CORP.
AS CHARGOR
AND
PRUDENTIAL SECURITIES INCOPORATED,
AS COLLATERAL AGENT AND CHARGEE
DATED AS OF OCTOBER 3, 1997
================================================================================
<PAGE>
DEED OF CHARGE
This Deed of Charge dated as of October 3, 1997 made between Centennial
Communications Corp. (the "Chargor"), and Prudential Securities Incorporated, a
corporation organized under the laws of Delaware (the "Chargee"), as collateral
agent for the benefit of the holders of the Senior Secured Convertible Notes due
2002 (the "Notes") offered pursuant to the Purchase Agreement dated as of the
date hereof between the Chargor and the persons listed on the Schedule of
Purchasers attached thereto (as amended, supplemented or otherwise modified from
time to time, the "Purchase Agreement").
RECITALS
1. The Chargor has entered into the Purchase Agreement with the persons listed
on the Schedule of Purchasers attached to the Purchase Agreement (the
"Noteholders").
2. The Chargor in order to secure, among other things, the payment of all
moneys due by the Chargor to the Noteholders pursuant to the Notes has agreed to
enter into this Agreement and to hereby pledge a portion of the shares of
Centennial Cayman Corp., a Cayman Islands company ("Centennial Cayman"), and SMR
Direct Cayman Corp., a Cayman Islands company ("SMR Direct Cayman," and together
with Centennial Cayman, the "Cayman Companies"), each, a wholly-owned subsidiary
of the Chargor, as collateral security.
3. The Chargor is the owner of the issued share capital (the "Charged Shares")
--------------
of the Cayman Companies described on Schedule One hereto, which constitutes
sixty-six percent (66%) of the issued and outstanding share capital of each of
the Cayman Companies.
4. It is a condition precedent to the obligations of the Noteholders under the
Purchase Agreement that the Chargor shall have executed and delivered this
Agreement to the Chargee.
Now this Deed Witnesseth as follows:
AGREEMENTS
1. Definitions: Construction.
--------------------------
(a) Unless otherwise specified, (i) all undefined capitalized terms used
herein shall have the respective meanings specified therefor in the Purchase
Agreement or the Notes and (ii) the principles of construction set forth in such
Purchase Agreement shall apply.
2
<PAGE>
(b) In addition, the following terms shall have the meanings specified
below:
"Agreement" shall mean this Deed of Charge, as amended, supplemented and
---------
modified from time to time.
"Collateral" shall mean the Charged Shares and all other shares, stocks,
----------
securities, grants and all rights, monies and properties whatsoever
including, without limitation, all dividends or other distributions or
interest paid or payable thereon, which may at any time be derived
from, accrue on or be offered in respect of the Charged Shares or
comprised in any security created pursuant hereto, whether by way of
redemption, exchange, conversion, option rights, bonus, preference,
capital reorganization or otherwise howsoever and any and all
references to "Collateral" shall include reference to any and all
existing and future certificates evidencing title or otherwise
relating thereto.
"Charged Shares" shall have the meaning specified in the third Recital to
--------------
this Agreement.
"Chargee" shall have the meaning specified in the introductory paragraph of
-------
this Agreement.
"Chargor" shall have the meaning specified in the introductory paragraph of
-------
this Agreement.
"Noteholders" shall mean the registered holders of Notes.
-----------
"Required Noteholders" shall mean the holders of forty percent (40%) of the
--------------------
aggregate principal amount of Notes then outstanding.
"Secured Obligations" shall have the meaning specified in Section 2(a).
-------------------
2. Security.
--------
(a) This Agreement is for the benefit of the Noteholders to secure (i) the
prompt and complete payment and performance when due by the Chargor of all
of its obligations pursuant to the Purchase Agreement and the Notes,
including, without limitation, the payment of all amounts payable or to
become payable to the Noteholders by the Chargor under the Notes, when and
as the same shall become due and payable (whether by acceleration or
otherwise) in accordance with the terms thereof and (ii) the due
performance and compliance by the Chargor with the terms of this Agreement
(collectively, the "Secured Obligations").
-------------------
(b) The Chargor understands, agrees and confirms that the Chargee may enforce
this Agreement against it without proceeding against any guarantor or any
other credit support or security for payment of the Secured Obligations.
3
<PAGE>
3. Charge of Collateral. As continuing security for the prompt and complete
--------------------
payment and performance when due of the Secured Obligations, the Chargor hereby
charges by way of a first fixed equitable charge, all of the right, title and
interest of the Chargor in, to and under the Collateral.
4. Appointment of Agents; Endorsements. The Chargee shall have the right to
-----------------------------------
appoint one or more agents for the purpose of retaining physical possession of
the Charged Share certificates together with share transfers executed in blank
or in favor of the Chargee or any nominee or nominees of the Chargee or an agent
appointed by the Chargee.
5. Representations, Warranties and Covenants. In order to induce each of the
-----------------------------------------
Noteholders to enter into the Purchase Agreement and to purchase the Notes
thereunder, the Chargor makes the following representations, warranties and
covenants, which representations, warranties and covenants shall survive the
execution and delivery of this Agreement:
5.1 Share Transfer Restrictions. The Chargor shall not sell, assign,
---------------------------
transfer or permit to be sold, assigned or transferred any of the
Charged Shares except pursuant to Section 3.1 of the Purchase
Agreement.
5.2 Charged Shares.
--------------
(a) The Charged Shares consist of the number and type of shares of the issued
share capital of each of the Cayman Companies as described in Schedule One
hereto.
(b) The Charged Shares are duly and validly issued, fully paid and
nonassessable and duly and validly charged hereunder in accordance with
applicable law, and the Chargor warrants, covenants and agrees to defend
the Chargor's right, title and interest in and to the Charged Shares and
all other Collateral charged by it hereunder against the claims and demands
of all Persons.
(c) The Chargor is the registered, legal and beneficial owner of, and has, as
of the date hereof, and will have as of the date the same is charged, good
title to, all of the Charged Shares, free and clear of all liens and other
claims, security interests, mortgages, pledges and other encumbrances of
every nature whatsoever, (collectively, "Liens") other than charges created
under this Agreement, the Notes and the Purchase Agreement, and it has the
right to charge the Charged Shares and all other Collateral charged by it
hereunder as herein provided.
(d) The Charged Shares constitute, and any securities charged in substitution
therefor, or in addition thereto, shall at all times constitute 66% of the
issued share capital in each of the Cayman Companies. Neither of the
Cayman Companies has outstanding (i) any securities convertible into or
exchangeable for its
4
<PAGE>
capital stock or (ii) any rights to subscribe for or to purchase, or any options
for the purchase of its capital stock.
(e) The Chargor will not authorize the issue of any additional shares of either
of the Cayman Companies (whether ordinary or preferred and whether of a
class now or hereafter existing) unless the issuance of such shares is
permitted pursuant to the terms of the Purchase Agreement. If the Chargor
shall acquire (by purchase, share dividend or otherwise) any additional
shares in either of the Cayman Companies at any time or from time to time
after the date hereof, the Chargor will forthwith charge and deposit or
cause to be deposited that portion of those shares necessary to cause the
Charged Shares to continue to constitute 66% of the issued share capital in
each of the Cayman Companies with the Chargee and deliver or cause to be
delivered to the Chargee any share certificates therefor, accompanied by
undated blank transfer forms duly executed by the Chargor, and will
promptly thereafter deliver to the Chargee a certificate executed by any
authorized officer of the Chargor desiring such shares and certifying that
the same have been duly charged with the Chargee hereunder.
(f) Each certificate in respect of the Charged Shares charged by the Chargor
hereunder is, and any security charged in substitution therefor or in
addition thereto will be, issued in the name of the Chargor. Each such
certificate shall have endorsed thereon a legend to the effect that the
shares comprised therein have been charged to the Chargee pursuant to this
Agreement and shall have endorsed on the reverse thereof a share transfer
form, substantially in the form of Exhibit A hereto.
(g) The security interest described in this Agreement will represent a valid
first, fixed equitable charge over the Collateral in favor of the Chargee
for the benefit of the Noteholders.
(h) The Chargor has not executed and is not aware of any currently effective
financing statement, charging instrument or other instrument similar in
effect that is on file in any recording office covering all or any part of
the Chargor's interest in the Collateral, except such as may have been
filed pursuant to this Agreement, and, so long as any of the Secured
Obligations remain unpaid or unperformed, the Chargor will not execute or
authorize to be filed in any public office any financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to the Collateral, except financing
statements filed or to filed in respect of and covering the security
interests granted hereby by the Chargor.
(i) Without the prior written consent of the Noteholders holding 75% of the
aggregate principal amount of the Notes then outstanding, the Chargor will
not hereafter create or permit to exist any Lien upon or with respect to,
any of the Collateral charged by the Chargor hereunder (other than charges
created under this Agreement, the Notes and the Purchase Agreement), until
the termination of this Agreement pursuant to Section 23.
5
<PAGE>
(j) True and correct copies of the Certificate of Incorporation, the Memorandum
of Association and Articles of Association of each of the Cayman Companies
have been delivered to Cayman counsel to the Chargee.
(k) True and correct copies of the register of members, register of directors
and officers and register of mortgages and charges of each of the Cayman
Companies have been delivered to Cayman counsel to the Chargee.
(l) The Chargor shall, on the date of this Agreement, deliver or procure that
there is delivered, to the Chargee by way of security:
(i) the stock or share certificates representing the Charged Shares together
with executed and undated share transfer forms in respect of such shares in
which the identity of the transferee shall be left blank and each of which
shall be duly executed by the Chargor as transferor, and any other
documents of title to any part of the Collateral; and
(ii) irrevocable proxies from the Chargor in respect of the Charged Shares in
the form of Schedule Two.
(m) Within 10 days of the date hereof, the Chargor shall deliver to the Chargee
executed undated letters of resignation from each director and officer of
the Cayman Companies in the form of Schedule Three.
(n) The Chargor shall notify the Chargee immediately upon the appointment of
any further director or officer of either Cayman Company and promptly
deliver to the Chargee undated letters of resignation in the form of
Schedule Three signed by such persons.
6. Voting and Corporate Rights. Unless and until an Event of Default under the
---------------------------
Notes shall have occurred and be continuing and the Chargor shall have been
notified by the Required Noteholders of their intention pursuant to the terms of
the Notes to exercise remedies thereunder and hereunder, the Chargor shall be
entitled to exercise any voting and other corporate rights with respect to the
Charged Shares or any securities charged in substitution therefor or in addition
thereto for any purpose, and in any manner, not inconsistent with the terms
hereof. Upon the Chargor's receipt of a notice in accordance with the first
sentence of this Section 6, all such rights of the Chargor to vote and to give
consents, waivers and ratifications shall revert to the Chargee in accordance
with Section 8 in case an Event of Default shall occur and be continuing.
7. Dividends and Other Distributions. Unless and until an Event of Default
---------------------------------
shall have occurred and be continuing, the Chargor shall be entitled to receive
and retain any and all dividends paid in respect of the Charged Shares or any
thereof provided that any dividends or distributions payable in respect of the
Charged Shares which represent in whole or in part a distribution on liquidation
shall be paid by the Chargor to the Chargee.
6
<PAGE>
8. Remedies Upon Default. If an Event of Default shall have occurred and be
---------------------
continuing, the Chargee, acting pursuant to and in accordance with the terms and
conditions of the Notes and at the direction of the Required Noteholders
thereunder, shall be entitled to exercise all the rights, powers and remedies
vested in it (whether vested in it by this Agreement, the Notes or by applicable
law) for the protection and enforcement of the Chargee's and the Noteholders'
rights in respect of the Collateral and, without limitation of the foregoing,
may cause all or any of the Charged Shares or other Collateral to be transferred
into its name or that of a nominee or nominees, and the Chargor shall, upon the
request of the Chargee or the Required Noteholders, pursuant to the terms of the
Purchase Agreement and the Notes, execute such additional instruments and
documents as are necessary to effect such transfer.
(a) In addition, if an Event of Default shall have occurred and be continuing,
and without prejudice to any other right or remedy available hereunder or
under applicable law, the Chargee acting upon the direction of the Required
Noteholders pursuant to and in accordance with the Notes, without being
required to give any notice to the Chargor shall be entitled to exercise
the following rights, which the Chargor agrees to be commercially
reasonable:
(i) solely and exclusively to exercise all voting rights attached to the
Collateral or any portion thereof and shall exercise such rights in such
manner as the Chargee may in its absolute discretion determine;
(ii) solely and exclusively to exercise all other rights and/or powers and/or
discretions of the Chargor in, to and under the Collateral under the
Memorandum and Articles of Association of the Cayman Companies;
(iii) to receive and retain all dividends and other distributions made on or in
respect of the Collateral or any thereof and any such dividends or other
distributions received by the Chargor after such time shall be held in trust by
the Chargor for the Chargee and be paid and transferred to the Chargee on
demand;
(iv) at any time in its sole discretion to require the resignation of and/or to
dismiss the directors and officers of the Cayman Companies or either of
them by dating and presenting the undated, signed letters of resignation
delivered pursuant to this Agreement and to appoint new directors and
officers of the Cayman Companies or either of them;
(v) to prove in any liquidation or scheme of arrangement or any other
composition or arrangement with or for creditors whether secured or
unsecured and whether formed pursuant to the order of any court or
otherwise, and to give any consent on behalf of the Chargor in relation
thereto;
(vi) to attend meetings of creditors and vote in the name of the Chargor
thereat;
7
<PAGE>
(vii) to compromise claims in relation to or arising out of the Charged Shares
in the name of the Chargor;
(viii) to give sufficient receipts and discharges for all monies to which the
Chargor is or may become entitled in respect of the Charged Shares or any part
thereof or which shall come into the hands of the Chargee, which receipts and
discharges shall exonerate the Chargee from all liability to see to the
application thereof or from being answerable for the loss or misapplication
thereof;
(ix) to execute any documents which the Chargee or the Required Noteholders may
consider expedient in relation to the foregoing as the Chargee shall in its
absolute discretion determine and without any obligation to consult with
the Chargor in relation to any exercise of any such right, power or
privilege; and
(x) to institute, prosecute and defend in the name of the Chargor any
proceeding in any court or tribunal in respect of any act or transaction
referred to in this Section 8(a).
(b) Without obligation to resort to other security or marshal assets or
disposition in any particular order or priority whatsoever, the Chargee
shall have the right at any time and from time to time, following the
occurrence and during the continuance of an Event of Default under the
Notes, upon the request of the Required Noteholders and in accordance with
the terms of the Notes (including the provisions of paragraph 4 thereof
relating to the right of the Chargor to cure defaults) to sell, resell,
assign and deliver, all or any of the Charged Shares or other Collateral,
in one or more parcels at the same or different times, and all rights,
titles and interests, claims and demands therein and right of redemption
thereof, on any securities exchange of which the Charged Shares, any
security charged in substitution therefor or in addition thereto or any of
them may then be listed, or at public or private sale, for cash, upon
credit or for future delivery, and at such price or prices, on such terms
as the Chargee acting at the direction of the Required Noteholders (acting
pursuant to the Notes) may determine and in compliance with such conditions
as the Chargee acting at the direction of the Required Noteholders (acting
pursuant to the Notes) may in its absolute discretion deem advisable;
provided such sale is conducted in a commercially reasonable manner in
accordance with applicable law. The Chargor agrees that, upon such sale,
any and all equity or right of redemption, stay or approval of the Chargor
shall be automatically waived and released without any further action on
the part of the Chargor, all without either demand, advertisement or notice
(except as required by applicable law), all of which (to the extent
permitted by applicable law) are hereby expressly waived by the Chargor.
(i) In the event of any such sale, the Chargee shall, at least 10 days prior to
the proposed sale date, give the Chargor written notice of its intention to
sell any of the collateral.
(ii) The Chargee agrees that upon payment and performance in full of the Secured
Obligation prior to any such sale, such sale shall be canceled and this
8
<PAGE>
Agreement shall terminate and the Collateral shall be returned to the Chargor
free and clear of all Liens.
(iii) Upon each such sale, any Noteholder may purchase all or any of the
Charged Shares or other Collateral being sold, free from any equity or right of
redemption, which upon each such sale shall be waived and released by the
Chargor.
(iv) The proceeds of each such sale shall be applied by the Chargee as provided
in Section 11.
(v) The Chargee shall not be obligated to make any sale of the Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of
the Collateral may have been given to the Chargor.
(vi) The Chargee may, without notice, adjourn any public or private sale or
cause the same to be adjourned from time to time by notice to the Chargor
and by announcement at the time and place fixed for sale, and such sale
may, without further notice, be made at the time and place to which the
same was so adjourned.
(vii) If a sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Chargee until the
sale price is paid by the purchaser or purchasers thereof, but the Chargee shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice.
(viii) Neither the Chargee nor any Noteholder shall be liable for failure to
collect or realize upon any or all of the Collateral or for any delay in so
doing nor shall any of them be under any obligation to take any action
whatsoever with regard thereto.
(c) The Chargee shall have the right, for and in the name, place and stead of
the Chargor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Charged Shares and
other Collateral in connection with any sale thereof in accordance with
Section 8(a) or (b).
9. Remedies Cumulative: Indemnification of the Chargee and the Noteholders.
------------------------------------------------------------------------
(a) The rights, powers and remedies provided herein in favor of the Chargee
shall not be deemed exclusive, but shall be cumulative and shall be in
addition to all other rights in favor of the Chargee existing at law or in
equity.
(b) The Chargor hereby agrees to indemnify and hold harmless the Chargee and
the Noteholders from and against any loss, liability or expense (including
reasonable fees and disbursements of counsel for the Chargee and the
Noteholders)
9
<PAGE>
which may be incurred by the Chargee or any of the Noteholders as a result of or
in connection with:
(i) any failure by the Chargor to fulfill its obligations under this Agreement,
upon demand by the Chargee, including, without limitation, costs and
expenses of enforcement of any obligation of the Chargor to make any
payment hereunder and any other obligation, covenant or agreement of the
Chargor hereunder;
(ii) the enforcement in accordance with the terms of this Agreement, discharge,
improvement and protection of the interest of the Chargee hereby created;
(iii) the exercise or attempted exercise of any right, authority, power or
remedy conferred on the Chargee under or by virtue of this Agreement or by
applicable law; and
(iv) the assisting or defending of any right, title or interest of the Chargor,
the Chargee or the Noteholders in connection with the Collateral.
10. Obligations Absolute.
--------------------
(a) The obligations of the Chargor hereunder shall not be altered or affected
by the validity, regularity or enforceability of any provision of the
Purchase Agreement or the Notes, any compromise, alteration, amendment,
modification, extension, renewal, release or other change of, or any
waiver, consent or other action in respect of, any of the terms, covenants
or conditions of any of such agreements, the recovery of any judgment
against any Person or any action to enforce the same, any failure or delay
in the enforcement of the obligations of the Chargor under the Purchase
Agreement or the Notes or any other circumstances. The Chargor hereby
covenants that this Agreement shall not be discharged except as a result of
a termination event as set forth in Section 23.
(b) Without limiting the generality of the foregoing, the obligations of the
Chargor hereunder and the rights of the Chargee to enforce the same by
proceedings whether by action at law, equity or otherwise, shall not in any
way be affected by any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or other proceeding
involving or affecting the Chargor or any other Person. To the fullest
extent permitted by applicable law, the Chargor waives any legal or
equitable defenses to the enforceability of its obligations hereunder, and
the Chargor agrees that its obligations shall be absolute and unconditional
and shall not be affected or discharged by any circumstance, act or event
except as a result of a termination event as set forth in Section 23
including, without limitation, the following:
(i) the exchange, sale or release of any security for the Secured Obligations;
10
<PAGE>
(ii) the failure to enforce any guarantee or security given or promised by any
other Person or the waiver, compromise or release of such other guaranty or
security; and
(iii) the extension of time for the performance of any obligations in respect
of the Secured Obligations or the Chargor's obligations hereunder.
(c) The Chargor hereby expressly and irrevocably waives notice of acceptance of
this Agreement, notice of any liability to which it may apply, presentment,
demand, protest or notice of dishonor.
11. Application of Proceeds. All moneys collected by the Chargee upon any sale
-----------------------
or other disposition of the Collateral, together with all other moneys received
by the Chargee hereunder, first shall be applied to discharge any costs and
-----
expenses of the Chargee in enforcing its rights hereunder whether against the
Collateral or otherwise; second, shall be applied in payment of any amounts due
------
under the Notes, the Purchase Agreement or this Agreement; and third, if any
-----
such moneys shall remain after such applications, shall be paid to the Chargor.
12. Sale of Collateral. Upon any sale of the Collateral by the Chargee
------------------
hereunder (whether by virtue of the power of sale herein granted, or pursuant to
judicial process or otherwise), the receipt of the Chargee or the officer making
the sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Chargee or such officer or be answerable in any way for the misapplication or
nonapplication thereof.
13. Continuing Obligation.
---------------------
(a) The charge contained in this Agreement shall be:
(i) a continuing security remaining in full force and effect until performance
in full of each and every part of the Secured Obligations in whatever
currency or currencies the same may from time to time be denominated until
this Agreement terminates pursuant to Section 23.
(ii) in addition to and not in substitution for or in derogation of any other
security held by the Chargee from time to time in respect of the Secured
Obligations;
(b) Any release or discharge of the security constituted by this Agreement
shall be conditional upon no security, disposition or payment to the
Chargee or the Noteholders being void, avoided, set aside or ordered to be
refunded pursuant to any enactment or law relating to bankruptcy,
liquidation or insolvency or for any other reason whatsoever, and if such
condition shall not be fulfilled, the Chargee shall be entitled to enforce
the security constituted by this Agreement subsequently as if such release
or discharge had not occurred and any such payment had not been made.
11
<PAGE>
14. Chargee Appointed Attorney-in-Fact.
----------------------------------
(a) The Chargor hereby irrevocably and by way of security appoints the Chargee
to be its attorney (with power to appoint substitute attorneys and to
revoke the appointment thereof at any time) for and on the Chargor's behalf
and in the Chargor's name and as the Chargor's act and deed:
(i) to execute, seal and otherwise perfect any such document as is referred to
in Section 8;
(ii) to do all such acts and execute, deliver and perfect all such documents as
the Chargor could do or execute with reference to or in connection with any
of the matters dealt with in this Agreement or any documents contemplated
by or entered into pursuant hereto or thereto or which may be required or
deemed proper for any of the purposes of the security constituted by this
Agreement or any documents contemplated by or entered into pursuant hereto
or thereto and to use the Chargor's name in the exercise of all or any of
the powers conferred by this Agreement or any documents contemplated by or
entered into pursuant hereto or thereto upon the Chargee including, without
prejudice to the generality of the foregoing, the complete and date the
stock transfer forms referred to in Section 5;
(b) The power of attorney hereby granted is, as regards the Chargee and any
substitute attorney (and as the Chargor hereby acknowledges) granted
irrevocably and for value as part of the security granted by this Agreement
to secure proprietary interest and the performance of obligations owed to
the donee within the meaning of The Powers of Attorney Law (1996 Revision).
15. No Waiver. No delay on the part of the Chargee in exercising any of its
---------
rights, or partial or single exercise thereof, shall constitute a waiver
thereof.
16. Waiver of Subrogation. Without limiting the generality of the foregoing,
---------------------
while this Agreement is in effect, the Chargor hereby irrevocably waives (i) any
rights which it may acquire by way of subrogation under this Agreement, whether
such subrogation rights arise by any payment made hereunder or any set-off or
application of funds of the Chargor by the Chargee or otherwise, and (ii) any
right of reimbursement or contribution against any other security or guarantee
or right of offset held by the Chargee therefor. If, notwithstanding the
preceding sentence, any amount shall be paid to the Chargor on account of any
subrogation rights in connection with this Agreement at any time when all of the
Secured Obligations shall not have been paid in full, the amount shall be held
by the Chargor in trust for the Chargee for the benefit of the Noteholders,
segregated from other funds of the Chargor, and shall forthwith upon receipt by
the Chargor, be turned over to the Chargee in the exact form received by the
Chargor (duly endorsed by the Chargor to the Chargee, if required), to be
applied pro rata among the Noteholders on the basis of the outstanding principal
amount held by each Noteholder.
12
<PAGE>
17. Successors and Assigns. This Agreement shall be binding upon and inure to
----------------------
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto and shall inure to the benefit of the Noteholders and their
respective successors and assigns; provided, however, that the Chargor may not
-------- -------
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Chargee acting at the direction of Noteholders holding
75% of the aggregate principal amount of the Notes then outstanding.
18. Severability. If any term or provision hereof or the application thereof
------------
to any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidating or rendering unenforceable the remaining terms and provisions
hereof or the application of such term or provision to circumstances other than
those as to which it is held invalid or unenforceable. To the extent permitted
by applicable law, the parties hereto hereby waive any provision of applicable
law which renders any term or provision invalid or unenforceable in any respect.
19. Notices. All notices and other communications provided for hereunder shall
-------
be made and delivered hereunder in accordance with the terms of Section 7.1.L.
of the Purchase Agreement; provided that all such notices shall be sent to a
party hereto at its address and contact number set forth below, or at such other
address and contact number as is designated by such party in a written notice to
the other parties hereto:
If to Chargor to:
Centennial Communications Corp.
1610 Wynkoop, Suite 300
Denver, CO 80202
Attention: Chief Executive Officer
Fax: (303) 571-5333
with a copy to:
Holland & Hart LLP
555 Seventeenth Street
Suite 2700
Denver, CO 80202
Attention: Michael S. Quinn
Fax: (303) 295-8261
If to Chargee to:
Prudential Securities Incorporated
One New York Plaza
18th Floor
13
<PAGE>
New York, NY 10292
Attention: George Alex
Fax: (212) 778-3194
20. Governing Law: Submission to Jurisdiction. This Agreement shall be
------------------------------------------
governed by and construed in accordance with the laws of the Cayman Islands.
The Chargor and the Chargee submit to the non-exclusive jurisdiction of the
courts of the Cayman Islands. For the purposes of any suit, action, proceeding
or settlement of dispute in the Cayman Islands courts, the Chargor hereby
designates, appoints and empowers Maples & Calder of P.O. Box 309, Ugland House,
South Church Street, George Town, Grand Cayman to accept service of process in
respect of any such suit, action, proceeding or settlement of dispute. If, for
any reason, such agent no longer serves as agent of the Chargor to receive
service of process in the Cayman Islands, the Chargor shall promptly appoint
another such agent acceptable to the Chargee and advise the Chargee thereof.
21. Survival of Agreements. All representations and warranties made by the
----------------------
Chargor under this Agreement shall be considered to have been relied upon by the
Noteholders and shall survive the execution and delivery of this Agreement.
22. Headings. The section and subsection headings used in this Agreement are
--------
for convenience only and shall not affect the construction of this Agreement.
23. Termination. On the earlier of (i) the date of payment in full of the
-----------
Secured Obligations, (ii) the date on which greater than 75% of the Notes have
been converted, according to their terms, into Common Stock of the Chargor or
Shares of Series C Preferred Stock of the Chargor, or (iii) the date on which
the Notes have been repurchased pursuant to paragraph 5 of the Notes (except for
the provisions of Section 9(b)), this Agreement shall terminate, and the
Chargee, at the written request and expense of the Chargor, will promptly
execute and deliver to Chargor the proper instruments acknowledging the
satisfaction and termination of this Agreement, and will promptly duly assign,
transfer and deliver to the Chargor (without recourse and without any
representation or warranty) free from any charge granted hereunder and free and
clear of all Liens, all of the Charged Shares and other Collateral charged by it
hereunder which have been previously delivered to the Chargee except for any
which have been sold or otherwise applied or released pursuant to this
Agreement.
24. Execution of Counterparts; Execution by Facsimile. This Agreement may be
-------------------------------------------------
executed in any number of counterparts. All such counterparts shall be deemed
to be originals and shall together constitute but one and the same instrument.
This Agreement may be executed by Facsimile.
25. Amendments, etc. No waiver, amendment, modification or termination of any
---------------
provision of this Agreement, or consent to any departure by the Chargor
therefrom, shall in any event be effective unless such waiver, amendment,
modification, termination
14
<PAGE>
or consent is in writing and signed by the Chargee. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
26. Further Assurances. The Chargor hereby agrees, at its own expense, to
------------------
execute and deliver, from time to time, any and all further or other
instruments, and to perform such acts, as the Chargee or the Noteholders may
perfect and give full effect to the purposes of this Agreement and to secure to
the Chargee and the Noteholders the benefits of all rights, powers and remedies
conferred upon the Chargee by the terms of this Agreement, including, without
limitation, the payment of any necessary stamp taxes. In the event that at any
time hereafter, due to any change in circumstances, including without
limitation, any change in any applicable law, or any decision hereafter made by
a court construing any applicable law, it is, in the opinion of counsel for the
Chargee, necessary or desirable to file or record this Agreement or other
instrument or document in respect of this Agreement or the charge made
hereunder, the Chargor agrees to pay all fees, costs and expenses of such
recording or filing and to execute and deliver any instruments that may be
necessary or appropriate to make such filing or recording effective.
27. Concerning the Chargee. The Chargee is entering into this Agreement not in
----------------------
its individual capacity, but solely as collateral agent for the Noteholders
under the Notes and this Agreement, and solely pursuant to the express direction
of the Noteholders thereunder. In performing any acts hereunder, the collateral
agent shall take direction from the Noteholders, pursuant to the applicable
terms of the Notes and this Agreement.
28. Indemnification. The Chargor hereby agrees to indemnify and hold the
---------------
Chargee and its affiliates, officers and directors harmless for any damages,
losses, claims or expenses (including reasonable attorneys fees) ("Damages")
arising out of any action taken by the Chargee in its capacity as collateral
agent or Chargee acting at the direction of the Noteholders pursuant to the
Notes or this Agreement except for any Damages arising out of or due to the
gross negligence or willful misconduct of the Chargee.
* * * * * * *
15
<PAGE>
IN WITNESS WHEREOF, this Deed of Charge has been executed and delivered as
a deed the date and year above written.
CENTENNIAL COMMUNICATIONS CORP.,
as Chargor
By:
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED,
as Chargee
By:
Name:
Title
16
<PAGE>
SCHEDULE ONE
Deed of Charge
Charged Shares
<TABLE>
<CAPTION>
Name of Issuing Type of Number of Holder of
Company Shares Shares Record
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Centennial Cayman Ordinary 66 Centennial Communications Corp.
Corp.
SMR Direct Cayman Ordinary 66 Centennial Communications Corp.
Corp.
</TABLE>
17
<PAGE>
SCHEDULE TWO
Centennial Cayman Corp.
IRREVOCABLE PROXY
The undersigned being the owner of 66 ordinary shares ("Shares") of Centennial
Cayman Corp., a Cayman Islands company, hereby makes, constitutes and appoints
Prudential Securities Incorporated, as Collateral Agent (the "Chargee") as the
true and lawful attorney and proxy of the undersigned with full power to appoint
a nominee or nominees to act hereunder from time to time to after the occurrence
and during the continuance of any Event of Default vote all or any of the Shares
at all annual and extraordinary general meetings of shareholders of Centennial
Cayman Corp., with the same force and effect as the undersigned might or could
do and to requisition and convene a meeting or meetings of the Shareholders of
Centennial Cayman Corp. for the purpose of appointing or confirming the
appointment of new directors of Centennial Cayman Corp. and/or such other
matters as may in the opinion of the Chargee be necessary or desirable for the
purposes of implementing the charge referred to below, and the undersigned
hereby ratifies and confirms all that the said proxy or its nominee or nominees
shall do or cause to be done by virtue hereof.
The Shares have been charged to the Chargee pursuant to a Deed of Charge
("Charge") dated as of October 3, 1997. This proxy is coupled with an interest
and is irrevocably and shall remain irrevocable as long as the Charge is
outstanding and in effect.
IN WITNESS whereof this instrument has been duly executed as a deed this
_______day of October, 1997.
Signed and delivered by CENTENNIAL COMMUNICATIONS CORP.
in the presence of:
By:
_______________________ Name:
Witness Title:
18
<PAGE>
SCHEDULE TWO
SMR Direct Cayman Corp.
IRREVOCABLE PROXY
The undersigned being the owner of 66 ordinary shares ("Shares") of SMR Direct
Cayman Corp., a Cayman Islands company, hereby makes, constitutes and appoints
Prudential Securities Incorporated, as Collateral Agent (the "Chargee") as the
true and lawful attorney and proxy of the undersigned with full power to appoint
a nominee or nominees to act hereunder from time to time to after the occurrence
and during the continuance of any Event of Default vote all or any of the Shares
at all annual and extraordinary general meetings of shareholders of SMR Direct
Cayman Corp., with the same force and effect as the undersigned might or could
do and to requisition and convene a meeting or meetings of the Shareholders of
SMR Direct Cayman Corp. for the purpose of appointing or confirming the
appointment of new directors of SMR Direct Cayman Corp. and/or such other
matters as may in the opinion of the Chargee be necessary or desirable for the
purposes of implementing the charge referred to below, and the undersigned
hereby ratifies and confirms all that the said proxy or its nominee or nominees
shall do or cause to be done by virtue hereof.
The Shares have been charged to the Chargee pursuant to a Deed of Charge
("Charge") dated as of October 3, 1997. This proxy is coupled with an interest
and is irrevocably and shall remain irrevocable as long as the Charge is
outstanding and in effect.
IN WITNESS whereof this instrument has been duly executed as a deed this
_______day of October, 1997.
Signed and delivered by CENTENNIAL COMMUNICATIONS CORP.
in the presence of:
- ------------------------ By:
Witness Name:
Title:
19
<PAGE>
SCHEDULE THREE
Letter of Resignation
To: [ ] Dated:
[ ]
[ ]
[ ]
[ ]
Dear Sirs,
1. I hereby resign as a Director of the Company and confirm that I have no
claims against the Company for loss of office, arrears of pay or otherwise
howsoever.
2. This resignation is to be effective as to the date hereof. You are hereby
authorized to complete this letter by dating the same at any time after you
are notified by [ ] that an Event of Default or an Event of Termination
(as defined in the [ ] Agreement dated as of [ ]) has occurred.
Yours faithfully,
[ ]
20
<PAGE>
EXHIBIT A
---------
FORM OF SHARE TRANSFER FORM
Centennial Communications Corp., a Delaware corporation, (hereinafter called the
"Transferor") of 1610 Wynkoop, Suite 300, Denver, Colorado 80202 for good and
valuable consideration, the receipt of which is hereby acknowledged, HEREBY
TRANSFERS to ____________________ hereinafter called "the Transferee") of
________ the 66 ordinary shares of SMR Direct Cayman Corp. represented by
certificate number _____ registered in its name in the undertaking called
________ to hold the same unto the Transferee subject to the several conditions
on which it holds the same.
Dated this ________day of October, 1997.
CENTENNIAL COMMUNICATIONS CORP.
By:
Name:
Title:
Witness to the signature
to the Transferor
21
<PAGE>
EXHIBIT A
---------
FORM OF SHARE TRANSFER FORM
Centennial Communications Corp., a Delaware corporation, (hereinafter called the
"Transferor") of 1610 Wynkoop, Suite 300, Denver, Colorado 80202 for good and
valuable consideration, the receipt of which is hereby acknowledged, HEREBY
TRANSFERS to ____________________ hereinafter called "the Transferee") of
________ the 66 ordinary shares of Centennial Cayman Corp. represented by
certificate number _____ registered in its name in the undertaking called
________ to hold the same unto the Transferee subject to the several conditions
on which it holds the same.
Dated this ________day of October, 1997.
CENTENNIAL COMMUNICATIONS CORP.
By:
Name:
Title:
Witness to the signature
to the Transferor
22
<PAGE>
EXHIBIT G
STOCK OPTION AGREEMENTS
<PAGE>
EXHIBIT H
LIST OF DISQUALIFIED PERSONS
<PAGE>
As of October 1, 1996
LIST OF DISQUALIFIED PERSONS
----------------------------
Foundation Trustees
- -------------------
Susan V. Berresford
Jeremy Vail Stein
Frances D. Fergusson
Michael Moohr (spouse)
Kathryn S. Fuller
Stephen Paul Doyle (spouse)
Sarah Elizabeth Taylor
Michael Stephen Doyle
Matthew Scott Doyle
Robert D. Haas
Colleen Gershon Haas (spouse)
Elise Kimberly Haas
Sir Christopher Hogg
Lady Anne Hogg (spouse)
Catherine Hogg
Cressida Hogg
Wilmot G. James
Gabreile Eva James (spouse)
Vernon E. Jordan, Jr.
Ann Jordan (spouse)
Vickee Jordan Adams
Barry Monroe Adams
David T. Kearns
Shirley Virginia Kearns (spouse)
D. Todd Kearns, Jr.
Susan Kearns Alderman
Michael Alderman
Elizabeth Kearns Krame
Scott Krame
Anne Kearns Fields
Jack Fields
Andrew Cox Kearns
Elizabeth Kearns Young
Van Young
<PAGE>
Wilma P. Mankiller
Charlie Soap (spouse)
Gina Olaya
Felicia Swake
Yolanda T. Moses
James Bawek (spouse)
Antonia Bawek
Shana Bawek
Luis G. Nogales
Rosita Nogales (spouse)
Alicia Fipp Nogales
Maria Christina Nogales
Olusegun Obasanjo
Stella Obasanjo (spouse)
Henry B. Schacht
Nancy Godfrey Schacht (spouse)
James G. Schacht
Laura B. Schacht Bilieie
George William Bilieie, Jr.
Jane S. Schacht Moray
David Moray
Benjamin Brewer Moray
Mary B. Schacht
M.S. Swaminathan
Mina Swaminathan (spouse)
Soumya Swaminathan
Madhura Swaminathan
V.K. Ramachandran
Nitya Swaminathan
Ratan Naval Tata
Carl Weisbrod
Jody Adams (spouse)
Billy Weisbrod
<PAGE>
Foundation Officers
- -------------------
Alison Bernstein
Beverly Bernstein (parent)
Emma Brown-Bernstein
Julia Brown-Bernstein
Robert Curvin
Patricia Curvin (spouse)
Frank Curvin
Nicole Curvin
Nancy Feller
Michael Feller (spouse)
Jason Feller
Benjamin Feller
Katherine Feller
Barry D. Gaberman
Macky Gaberman (parent)
Barbara Gordon (parent)
Joan Gaberman (spouse)
Brynn Gaberman
Denise Gaberman
Nicholas Gabriel
Lillian Gabriel (spouse)
James Gabriel
Michele Gabriel
Evan Gabriel
Melvin Oliver
Suzanne Loth Oliver (spouse)
Bradford Smith
Virginia Botelho (spouse)
Linda B. Strumpf
Jonathan A. Strumpf (spouse)
Barron M. Tenny
Ursula Tenny (spouse)
Daniel Bentele Tenny
Susanna Tenny
<PAGE>
The Ford Family
- ---------------
(Henry Ford) m. (Clara Bryant Ford)
(Edsel Ford) m. (Eleanor Clay Ford)
(Henry Ford II) m. Kathleen Ford
Charlotte Ford
Elena Ford
Charlotte Anne Ford-Olender
Anne Ford
Alessandro Uzielli
Allegra Uzielli
Edsel Bryant Ford m. Cynthia Layne Neskow Ford
Henry Ford III
Calvin Robert Ford
Stewart Spencer Ford
Albert Bishop Ford
(Benson M. Ford) m. (Edith M. Ford)
Benson Ford, Jr. m Lisa Adams Ford
Lynn McNaughton Ford Alandt m. Paul Alandt
Josephine Ford m.(Walter B. Ford II)
Walter B. Ford III
Bridget Monroe Ford
Lindsey Zedar Ford
Wendy Bryant Ford
Barbara Buhl Ford
Eleanor Ford Bourke m. Frederic A. Bourke, Jr.
Frederic A. Bourke III m.
Allison K. Bourke
Frederic A. Bourke IV
Leses K. Bourke
Eleanor F. Bourke
Denis Michael Bourke
Josephine Ford Ingle m. John Ingle, Jr.
Jason W. Ingle
Julie Caroline Ingle
John W. Ingle III
Josephine Clay Ingle
Albert Brush Ford m. Shamila Ford
Amrita Virginia Ford
Anisha B. Ford
William Clay Ford m. Martha Firestone Ford
Martha Ford Morse m. Peter c. Morse
Peter Clay Morse
Lisa Dillon Morse
Sheila Ford Hemp m. Steven Hamp
Michael Ford Hamp
Christopher Firestone Hamp
Peter Kautz Hamp
William Clay Ford, Jr. m. Lisa V. Ford
Eleanor Clay Ford
Alexandra Bryant Ford
William Clay Ford III
Elizabeth Hudson Ford m. Charles P. Konmlis II
Eliza Hudson Konmlis
Jeffrey Ford Konmlis
(deceased)
<PAGE>
- 5 -
FORD MOTOR COMPANY
FORD MOTOR COMPANY FUND
================================================================================
INDEX of DOMESTIC SUBSIDIARIES
- --------------------------------------------------------------------------------
1st Nationwide Network, Inc., (DE)
3000 Schaefer Road Company, (MI)
5850 Corporation, (CO)
6805 Corporation, (CO)
AFC Securities Inc., (DE)
AFSC Agency, Inc., (AR)
AFSC Agency, Inc., (AZ)
AFSC Agency, Inc., (CA)
AFSC Agency, Inc., (DE)
AFSC Agency, Inc., (HI)
AFSC Agency, Inc., (ID)
AFSC Agency, Inc., (KY)
AFSC Agency, Inc., (LA)
AFSC Agency, Inc., (MS)
AFSC Agency, Inc., (MT)
AFSC Agency, Inc., (NC)
AFSC Agency, Inc., (NM)
AFSC Agency, Inc., (NV)
AFSC Agency, Inc., (SD)
AFSC Agency, Inc., (VA)
AFSC Agency, Inc., (WA)
AFSC Agency, Inc., (WY)
AFSC Insurance Company, Inc., (IN)
Airlease Ltd (Partnership), (CA)
Airlease Management Services, Incorporated, (DE)
Alinco Life Insurance Company, (IN)
Allied Financial Services Insurance Agency, Inc., (MA)
American Renaissance Insurance Company, (AZ)
American Road Services Company, (DE)
Aries Technology, (DE)
Aspen Hills, Inc., (TX)
Assembly Plant Material Services, Inc., (DE)
Associates Auto Club Services, Inc., (IN)
Associates Bancorp, Inc., (DE)
Associates Capital Services Corporation of New Jersey
Associates Capital Services Corporation, (IN)
Associates Commercial Corporation of Delaware
Associates Commercial Corporation, (AL)
Associates Commercial Corporation, (DE)
Associates Commercial Finance Corporation, (DE)
Associates Commerical Leasing Company, Inc., (DE)
Associates Consumer Discount Company, (PA)
Associates Consumer Money Order, Inc., (DE)
Associates Corporation of North America (A Texas Corporation)
Associates Corporation of North America, (DE)
Associates Credit Card Services of Delaware, Inc.
Associates Credit Card Services, Inc., (CA)
Associates Discount Corporation of Delaware, Inc.
Associates Diversified Insurance Services, Inc., (CA)
Associates Diversified Services, Inc., (TX)
Associates Diversified Services, Inc., (DE)
<PAGE>
Associates Express Company, Inc., (IN)
Associates Finance, Inc., (IA)
Associates Finance, Inc., (IL)
Associates Financial Life Insurance Company of Nevada
Associates Financial Life Insurance Company of Texas
Associates Financial Life Insurance Company, (TN)
Associates Financial Services Company of Alabama, Inc.
Associates Financial Services Company of America Inc., (KS)
Associates Financial Services Company of Arizona, Inc.
Associates Financial Services Company of California, Inc.
Associates Financial Services Company of Colorado, Inc.
Associates Financial Services Company of Connecticut, Inc.
Associates Financial Services Company of Delaware, Inc.
Associates Financial Services Company of Dover, Inc.
Associates Financial Services Company of Florida, Inc.
Associates Financial Services Company of Hawaii, Inc.
Associates Financial Services Company of Idaho, Inc.
Associates Financial Services Company of Indiana, Inc.
Associates Financial Services Company of Iowa, Inc.
Associates Financial Services Company of Kansas, Inc.
Associates Financial Services Company of Kentucky, Inc.
Associates Financial Services Company of Maryland, Inc.
Associates Financial Services Company of Massachusetts, Inc.
Associates Financial Services Company of Michigan, Inc.
Associates Financial Services Company of Mississippi, Inc.
Associates Financial Services Company of Missouri, Inc.
Associates Financial Services Company of Montana, Inc.
Associates Financial Services Company of Nebraska, Inc.
Associates Financial Services Company of Nevada, Inc.
Associates Financial Services Company of New Castle Inc., (DE)
Associates Financial Services Company of New Hampshire, Inc.
Associates Financial Services Company of New Jersey, Inc.
Associates Financial Services Company of New Mexico, Inc.
Associates Financial Services Company of New York, Inc.
Associates Financial Services Company of North Carolina, Inc.
Associates Financial Services Company of North Dakota, Inc.
Associates Financial Services Company of North Wilmington, Inc. (DE)
Associates Financial Services Company of Ogden, Inc., (UT)
Associates Financial Services Company of Ohio, Inc.
Associates Financial Services Company of Oklahoma, Inc.
Associates Financial Services Company of Oregon, Inc.
Associates Financial Services Company of Rhode Island, Inc.
Associates Financial Services Company of South Carolina, Inc.
Associates Financial Services Company of South Dakota, Inc.
Associates Financial Services Company of Tennessee, Inc., (IN)
Associates Financial Services Company of Texas, Inc.
Associates Financial Services Company of Utah, Inc.
Associates Financial Services Company of Virginia, Inc.
Associates Financial Services Company of Washington, Inc.
Associates Financial Services Company of West Virginia, Inc.
Associates Financial Services Company of Wisconsin, Inc.
Associates Financial Services Company of Wyoming, Inc.
<PAGE>
- 7 -
Associates Financial Services Company, Inc., (AL)
Associates Financial Services Company, Inc., (DE)
Associates Financial Services Corporation of Boone County., (KY)
Associates Financial Services Corporation of Bowling Green, (KY)
Associates Financial Services Corporation of Lexington., (KY)
Associates Financial Services Corporation, (GA)
Associates Financial Services Corporation, (IN)
Associates Financial Services Corporation, (KY)
Associates Financial Services Corporation, (NJ)
Associates Financial Services Corporation, (OH)
Associates Financial Services Corporation, (RI)
Associates Financial Services of America, Inc., (AZ)
Associates Financial Services of America, Inc., (CT)
Associates Financial Services of America, Inc., (DE)
Associates Financial Services of America, Inc., (FL)
Associates Financial Services of America, Inc., (GA)
Associates Financial Services of America, Inc., (LA)
Associates Financial Services of America, Inc., (MA)
Associates Financial Services of America, Inc., (MO)
Associates Financial Services of America, Inc., (NC)
Associates Financial Services of America, Inc., (NH)
Associates Financial Services of America, Inc., (VA)
Associates Financial Services of America, Inc., (WA)
Associates Financial Services of America, Inc., (WV)
Associates Financial Services, Inc., (AZ)
Associates First Capital Corporation, (DE)
Associates First Capital Mortgage Corporation, (FL)
Associates First National Corporation, (DE)
Associates Industrial Loan Company, (MN)
Associates Insurance Company, (IN)
Associates Insurance Group, Inc., (DE)
Associates International Holdings Corporation, (NY)
Associates International Management Company, (DE)
Associates Investment Company, (DE)
Associates Investment Corporation, (UT)
Associates Leasing Corporation of Indiana
Associates Leasing, Inc., (IN)
Associates Life Insurance Group, Inc., (DE)
Associates Lloyds Insurance Company, (TX)
Associates Management Corporation, (DE)
Associates Mortgage Company, (KY)
Associates Mortgage Corporation, (NV)
Associates National Bank, (DE)
Associates National Mortgage Corporation, (DE)
Associates Real Estate Financial Services Company Inc., (DE)
Associates Relocation Management Company of Delaware
Associates Relocation Management Company of New Jersey
Associates Relocation Management Company of Texas
Associates Relocation Management Company, Inc., (CO)
Associates World Capital Corporation, (DE)
Associates/Trans-National Leasing, Inc., (DE)
AT&T Automotive Services, Inc., (DE)
<PAGE>
AT&T Fleet Services, (DE)
Atlantic Automotive Components, A Michigan Partnership
AutoAlliance International, Inc.
Autolatina America, Inc., (DE)
Automotive Polymer Based Composites Joint Research and Development, (MI)
Bancinsure Corporation of Wyoming
Bancinsure Corporation, (CA)
Beech Holdings, (DE)
Best Impression Copy Services, Inc., (CA)
Bloomfield Mortgage Corporation, (MI)
Capco Claim Service, Inc., (IL)
Capco General Agency, Inc., (IL)
Capco General Agency, Inc., (IN)
Capco General Agency, Inc., (MI)
Capco General Agency, Inc., (NY)
Capco General Agency, Inc., (VA)
Capital Insurance Agency, Inc., (KY)
Capricorn Investors Limited Partnership, (DE)
Cardinal Mortgage Corporation, (OH)
Cardinal Redevelopment Corporation, (MO)
Carlex Glass Company, (DE) Partnership
Carnegie Group, Inc., (DE)
Ceradyne, Inc., (DE)
Chase Manhattan Leasing Company (Michigan) Inc.
Cimflex Teknowledge Corporation, (PA)
Clark Credit Corporation, (MI)
Clark Rental Systems, Inc., (MI)
Colrad Development Corporation, (CO)
Columbia Fairfield, Inc., (FL)
Columbia Investment Services, Inc., (CO)
Columbia Savings, A Federal Savings and Loan Association
Commercial Guaranty Insurance Company, (DE)
Conix Corporation, (DE)
Cummins Engine Company, Inc., (IN)
Dearborn Capital Corporation, (DE)
Detroit Downtown Development Corporation, (DE)
Dobco Life Insurance Company, (AZ)
Dove Appraisal Service, Inc., (CA)
Dove Appraisal Service, Inc., (CO)
Dove Escrow Co., (CA)
Dove Escrow of Arizona, Inc.
Dove Escrow of Hawaii, Inc.
Dove Escrow of New Mexico, Inc.
Dove Escrow of Oregon, Inc.
Dove Escrow of Washington, Inc.
Dunlop Automotive Composites Inc., (DE)
E.N. One, Inc., (LA)
E.P.M. 83-10, Inc., (CO)
East Coast Transportation, Incorporated, (SC)
Edelson Technology Partners II, (DE)
Enviromental Science Research and Development Partnership, (MI)
Environ, Inc., (DE)
<PAGE>
- 9 -
Equity Plaza, Inc., (NJ)
Estates at Gleneagle, Inc., (CO)
Evergreen Valley Development Corp., (OH)
Excel Industries Inc., (IN)
Executive Ventures, Ltd., (DE)
E.V.F., Inc., (FL)
Fairlane Golf, Inc., (DE)
Fairlane Life Insurance Company, (AZ)
Fairtel Associates, (MI)
Family Financial Services, Inc., (AL)
Family Financial Services, Inc., (FL)
FC Holdings, Inc., (DE)
First Family Financial Services Inc., (FL)
First Family Financial Services Management Corp., (GA)
First Family Financial Services of Georgia, Inc., (GA)
First Family Financial Services, Inc., (AL)
First Family Financial Services, Inc., (GA)
First Family Financial Services, Inc., (IN)
First Family Financial Services, Inc., (LA)
First Family Financial Services, Inc., (MS)
First Family Financial Services, Inc., (NC)
First Family Financial Services, Inc., (SC)
First Family Financial Services, Inc., (TN)
First Family Home Equity, Inc., (FL)
First Family Home Equity, Inc., (NC)
First Insurance Agency, Inc., (KY)
First Nationwide Bank, A Federal Savings Bank
First Nationwide Building Owners Association, (CA)
First Nationwide Financial Corporation, (DE)
First Ohio Service Corporation
First Prudential Corporation, (MO)
First Western Mortgage Corporation of Illinois
FN Investment Center of New York, Inc.
FN Investment Center, Inc., (CA)
FN Projects, Inc., (CA)
FNB Mortgage Corp. (CA)
FNS Corporate Funding, Inc., (CA)
FNS Mortgage Corp., (CA)
Ford Asia-Pacific, Inc., (DE)
Ford Auto Club, Inc., (DE)
Ford Automotive Components Operations, Inc. (DE)
Ford Colorado Properties, Inc., (DE)
Ford Communications, Inc., (DE)
Ford Consumer Discount Company, (PA)
Ford Consumer Finance Company, Inc., (NY)
Ford Consumer Finance Industrial Loan Company, (MN)
Ford Consumer Loan Corporation, (DE)
Ford Credit Auto Receivables Corporation, (DE)
Ford Direct Markets, Inc., (DE)
Ford Electronics and Refrigeration Corporation, (DE)
Ford Equipment Leasing Company, (DE)
Ford Financial Services, Inc., (DE)
<PAGE>
-10-
Ford Glass and Metal, Inc., (DE)
Ford Holdings, Inc., (DE)
Ford International Business Development, Inc., (DE)
Ford International Capital Corporation, (DE)
Ford International Export Sales (Asia-Pacific Region) Inc., (DE)
Ford International Finance Corporation, (DE)
Ford International Services, Inc., (DE)
Ford Investment Partnership, A Michigan Partnership
Ford Leasing Development Company, (DE)
Ford Life Insurance Company, (MI)
Ford Microelectronics, Inc., (DE)
Ford Mortgage Investment Corporation, (OH)
Ford Motor Credit Company, (DE)
Ford Motor Dealership Facilities Company, (DE)
Ford Motor Land Development Corporation, (DE)
Ford Motor Land Services Corporation, (DE)
Ford Motor Properties, Inc., (DE)
Ford New Holland Credit Company, (DE) (Partnership)
Ford of Europe Incorporated, (DE)
Ford Overseas Services Corporation, (DE)
Ford Plastic and Trim Products International, Incorporated, (DE)
Ford Supercomputers, Inc., (DE)
Fordson Coal Company, (DE)
Fruehauf Finance Company, (MI)
Geometric Results Incorporated, (DE)
Ghia, Inc., (DE)
Great Dane Finance Company, (DE)
Greenfield Properties, Inc., (DE)
HCM Claim Investigations, Inc., (CA)
HCM Marketing Corporation, (DE)
Henry Ford Village, Inc., (MI)
Hertz Claim Management Corporation, (DE)
Hertz Equipment Rental Corporation, (DE)
Hertz Equipment Rental International, Ltd., (DE)
Hertz Executive Marketing Services, Incorporated, (DE)
Hertz International, Limited, (DE)
Hertz Realty Corporation, (DE)
Hertz System, Incorporated, (DE)
Hertz Technologies, Inc., (DE)
Hertz Transporting, Incorporated, (DE)
Hertz Van Pool Leasing, Incorporated, (DE)
Hertz Vehicle Sales Corporation, (DE)
High Speed Serial Data Communications Research and Development, (MI)
Hotel Rosemont Service Corporation, Inc., (IL)
Humbolt Mining Company, (MI)
Inference Corporation, (CA)
International Marine Insurance Agency, Inc., (IL)
International Marine Underwriters, Inc., (FL)
Jaguar Cars Incorporated, (DE)
Jaguar Credit Corporation, (DE)
Jaguar Motors, Inc., (DE)
James River Holdings, Inc., (VA)
<PAGE>
- 11 -
Kayser Leasing Corporation, (WI)
Kentucky Finance Co., Inc. AL
Kentucky Finance Co., Inc., (KY)
Kentucky Finance Co., Inc., Bristol, VA (KY)
Kentucky Finance Co., Inc., MO, (KY)
Kentucky Finance Equity Services, Inc., (KY)
Kentucky Finance Co., Inc., (KY)
KFC Mortgage Loans, Inc., (VA)
LFS Capital Corp., (NJ)
Lincoln Motor Company Inc., (MI)
Lincoln Ventures Corp., (NJ)
Lisle Center, Inc., (IL)
Manheim Auctions, Inc., (DE)
Marlo Properties Company, (DE)
Master Mortgage Company, (CA)
Mellon Consumer Discount Company, (PA)
Mellon Financial Services Corporation, (DE)
Metropolitan Realty Corporation, (MI)
Morco General Agency, Inc., (OH)
MTP Enterprises, Inc., (DE)
Nascote Industries, Inc., (DE)
New River Castings Company, (DE)
Niles Investment Company, (IL)
Northern Credit Co., Inc., (WI)
Northern Insurance Agency of Wisconsin, Inc., (WI)
Northern Insurance Agency, Inc., (IL)
Omicron Exploration Corporation, (DE)
Orange Blossom Capital Corp., (NJ)
P.O.C. Realty Inc., (CO)
Park Ridge Corporation, (DE)
Parker Center Inc., (CO)
Parklane Insurance Company, (MI)
Pathway Capital Corporation, (DE)
Pathway Credit Corporation, (DE)
Pathway Insurance Agency, Inc., (IL)
Pathway Investment Center, Inc., (IL)
Pathway Lands Incorporated, (OH)
Penstone, Incorporated, (MI)
Philco Finance Corporation, (DE)
Pine Creek at Briargate, Inc., (CO)
Points of Colorado, Inc.
Prairie Development, Ltd., (IL)
Predelivery Service Corporation, (DE)
Primus Automotive Financial Services, Inc., (NY)
Realty Sales, Inc., (MO)
Regain, (CA)
Renaissance Center Venture, (MI)
Retained Risk Management, Inc., (CA)
Riverdale International Sales, Incorporated, (VI)
RWPI Inc., (IL)
Seating Systems Technology Incorporated, (DE)
Seating Systems Technology U.S., Inc., (DE)
<PAGE>
- 12 -
Second Insurance Agency, Inc., (MO)
Shoppers Mart, Inc., (TX)
Signal Credit Corporation, (DE)
Signal Finance Consumer Discount Company, (PA)
Signal Finance Mortgage Company, Inc., (DE)
Smartz Vehicle Rental Corporation, (DE)
Software Productivity Consortium, (CA)
Specialty Claims Service, Inc., (IN)
Spectrum Holdings, Inc., (IL)
St. Louis Fedservice Corporation, (MO)
Supercomputer Systems Limited Partnership, (WI)
TAC of Alabama, Inc., (DE)
TAC of Florida, Inc., (DE)
TAC of Tennessee, Inc., (DE)
Taft Haus, Inc., (TX)
TG-Ford Associates, (MI)
The American Road Insurance Company, (MI)
The Associates Corporation, (DE)
The Associates Payroll Management Service Company, Inc., (DE)
The Dearborn Inn Company, (DE)
The Hertz Corporation, (DE)
Third Insurance Agency, Inc., (KY)
Transnetwork Insurance Services, (CA)
TranSouth Financial Corporation, (SC)
TranSouth Mortgage Corporation, (SC)
Transport Acceptance Corporation, (DE)
Trust Company for USL, Inc., (IL)
U.S. Advanced Battery Consortium
United States Airlease Holding, Incorporated, (CA)
United States Airlease, Incorporated, (CA)
United States Auto Club, Motoring Division, Inc., (IN)
United States Equipment Management Services, Incorporated, (CA)
United States Fleet Leasing, Incorporated, (CA)
United States Investment Management Services, Incorporated, (TX)
United States Leasing International, Incorporated, (DE)
United States Leasing Pipeline Leasing, Incorporated, (TX)
United States Portfolio Management Services, Incorporated, (CA)
United Truck Leasing, Incorporated, (DE)
United Truck Leasing, Incorporated, (MN)
USEIF-I Equipment Leasing Corporation, (NY)
USEIF-II Equipment Management Corporation (Partnership), (NY)
USL Securities Corporation, (CA)
USLI Fleet Financing, Inc., (DE)
Vandenberg Leasing, Inc., (MI)
View Engineering Inc., (DE)
Vista Insurance Company, (MI)
Vista Life Insurance Company of Texas
Vista Life Insurance Company, (MI)
Vocational Technology, Inc., (CA)
VT Finance, Inc., (DE)
Watchguard Registration Services, Inc., (IN)
<PAGE>
Willowbend Holdings, Inc., (FL)
WSFC Development Inc., (OH)
09/10/93
<PAGE>
FORD MOTOR COMPANY
FORD MOTOR COMPANY FUND
================================================================================
FOREIGN SUBSIDIARIES
BY COUNTRY
- --------------------------------------------------------------------------------
Transportation Reinsurance Limited (British Virgin Islands)
Argentina
Autolatina Argentina S.A.
Autolatina Argentina S.A. de Ahorro Para Fines Determinados
Hertz Argentina S.A.C.
Invercred Compania Financiera S.A.
Matalurgica Constritucion S.A.
Transax Socieded Anonima, Comercial, Industrial y Financiera
Volkswagen Inversiones S.A.
Volkswagen Sociedad Anonima de Ahorro Para Fines Determinado
Australia
Australian Road Credit Limited
Australian Road Insurance Limited
Foral Service Proprietary Limited
Ford Credit Australia Limited
Ford Credit Australia Wholesale Limited
Ford Motor Company of Australia Limited
Ford Sales Company of Australia Limited
Hertz Asia Pacific Pty. Ltd.
Hertz Australia Pty, Limited
Hertz Car Sales Pty, Ltd.
Hertz Investment (Holdings) Pty. Limited
JRA Holdings Limited
National Acceptance Corporation PTY Ltd.
PLA Holdings Ltd (PLA)
Portfolio Leasing Australia Management
Tickford Vehicle Engineering Pty. Ltd.
Austria
Ford Bank Aktiengesellschaft (Austria)
Ford Factoring Gmbh
Ford Motor Company (Austria) K.G.
Barbados
Transportation Reinsurance (Barbados) Limited
Belgium
Acelease S.A.
Axus, S.A.
Criee Automobile S.A.
Ford Credit N.V.
Ford Motor Company (Belgium) N.V.
Hertz Coordination Centre S.A.
Transports Servais et Fils S.A.
Bermuda
Associates Diversified Investment Ltd.
Financial Reassurance Company, Ltd.
FM FSC Ltd.
Interlocutary Limited
Transcon Insurance Limited
<PAGE>
Brazil
Apolo Administradora de Sens S/C Ltda.
Autolatina Brasil S.A.
Autolatina Comercio Negocios e Participacoes Ltda.
Autolatina Distribuidora de Titulos e Valores Mobiliaros Ltd
Autolatina Financiadora S.A. - Credito, Financiamento e Inves
Autolatina Leasing S/A - Arrandamento Mercantil
Autolatina Previdencia Privadz
Autolatina S.A.
Banco Autolatina S.A.
Consorcio Nacional Ford Ltda.
Consorcio Nacional Volkswagen Ltda.
FB Empreandimentos S.A.
Ford Distribuidora de Productos de Petroleo Ltda.
Ford Industria e Comercio Ltda.
Ford Participacoes, Empreendimentos e Negocios Ltda.
Fundacao Autolatina
Inter-Locadora S/A
Promocoes Universals S.C. Ltda.
Sao Bernardo Administradors de Consorcios Ltda.
Sociedade Paulista de Aparelhos Domesticos "SPAD" Ltda.
Transglobal Corretgem de Seguros Ltda.
Volkswagan Factoring Fomento Comercial S/A
Canada
Associates Capital Corporation of Canada
Associates Commercial Corporation of Canada Ltd.
Canadian Road Credit Company, Limited
Conix Canada, Inc.
Essex Manufacturing (A Partnership)
Ford Credit Canada Limited
Ford Electronics Manufacturing Corporation
Ford Ensite International Inc. (Canada)
Ford Motor Company of Canada, Limited
Ford New Holland (Canada) Credit Company (Partnership)
Ford Transportation Services Limited
Hertz Canada Limited
IRC Equipment Leasing, Incorporated
Jaguar Canada Inc.
TCG, International
Czechoslovakia
Autopal s.r.o.
Ford Czechoslovakia
Ford Czechoslovakia Limited
Denmark
Ford Credit A/S
Ford Motor Company A/S
Hertz Biludlejning A/S
Egypt
Alexandria Automotive Company SAE
<PAGE>
England
A. M. Lagonda North America, Inc.
Associates Capital (Guernsey) Limited
Associates Capital (Jersey) Limited
Associates Capital Corporation Limited
Associates Financial Corporation Limited
Associates Mortgage Corporation Limited
Aston Martin (RDP) Limited
Aston Martin Finance Limited
Aston Martin Lagonda Design Limited
Aston Martin Lagonda Group Limited
Aston Martin Lagonda Limited
Aston Martin Oxford Limited
Aston Martin Sales Limited
Auto Club International Limited
Automotive Finance Limited
Axus (U.K.) Limited
Cheshire Commercial Finance Limited
Cumberland Insurance Company Limited
Daimler Hire Limited
Daimler Transport Vehicles Limited
Dunlop Automotive Composites (UK) Limited
Ford Automotive Leasing Limited
Ford Capital plc
Ford Contract Motoring Management Limited
Ford Credit Europe plc
Ford Credit Funding plc
Ford Financial Trust Limited
Ford Fleet Financing Limited
Ford Lease Financing Limited
Ford Motor Company Limited
Ford Personal Import Export Limited
Hawtin & Partners (Nominees) Limited
Hertz (U.K.) Limited
Hertz Car Sales Limited
Hertz Equipment Rental (Europe) Limited
Hertz Equipment Rental (U.K.) Limited
Hertz Europe Limited
Hertz Jersey Limited
Hertz Rent A Car Limited (Britain)
IR (Transfer) Limited
Iveco Ford Trust Limited
Jaguar 1984 Limited
Jaguar Cars Exports Limited
Jaguar Cars Finance Limited
Jaguar Cars Holdings Limited
Jaguar Cars Limited
Jaguar Cars Overseas Holdings Limited
Jaguar Daimler Heritage Trust Limited
Jaguar Finance Limited
Jaguar Group Limited
Jaguar Holdings Limited
<PAGE>
England (cont.)
Jaguar Insurance Limited
Jaguar International Finance Limited
Jaguar Limited
Jaguarsport Limited
JDHT Limited
Lagonda Properties Limited
LUL Asia Limited
Madens (Guernsey) Limited
Madens (Jersey) Limited
Madens Limited
Madens Trust Limited
Prestige Properties Co. Limited
Project XJ220 Limited
SS Cars Limited
The Diamler Company Limited
The Jaguar Collection Limited
The Lanchester Motor Company Limited
United States Leasing Limited
USL Holdings Limited (USL Holdings)
Venture Pressings (Holdings) Limited
Venture Pressings Limited
Wessex Finance Limited
Finland
Oy Ford Ab
Oy Ford Rahoitus Ab
France
Credit Ford S.A.
Ford France S.A.
Hertz Equipment Rental (France) S.A.
Hertz France S.A.
Intrumax Sarl
Locaplan S. A.
Germany
Ford Bank Aktiengesellschaft (Germany)
Ford Handels und Beteiligungs GmbH
Ford Investitions GmbH & Co oHG
Ford Investitions GmbH
Ford Versicherungs-Vermittlungs GmbH
Ford Versorgungs-Und Unterstutzungseinrichtung GmbH
Ford Werke Aktiengesellschaft
Ford Werke Aktiengesellschaft & Co. Leasing KG
Ford Werke Aktiengesellschaft und Co. KG.
Geometric Results (Deutchland) Gmbh
Hertz Autovermietung G.m.b.h
Hertz Baumaschinenvermietung Gmbh
Jaguar Deutschland GmbH
Jaguar Leasing Gmbh
Saar-Industrie, GmbH
<PAGE>
Holland
Ford Capital B.V.
Ford Holding B.V. (Holland)
Ford Nederland B.V.
Jaguar Nederland BV
Hungary
Ford Hungaria Kft
India
Climate Control (India) Limited
Ireland
Dan Ryan Car Rentals Limited
FCE Reinsurance Company Limited
Henry Ford & Son (Finance) Limited
Henry Ford & Son (Sales) Limited
Henry Ford & Son, Limited
Hertz International RE Limited
Hertz Rent A Car Limited (Ireland)
Y.K.P. Limited
Italy
Acomindus, s.r.l.
Axus Italiana s.r.l.
Ford Credit SpA
Ford Italiana S.p.A.
Ford Leasing SpA
Ghia S.p.A.
Hertz Italiana S.p.A.
Jaguar Italia Spa
Japan
AIC Corporation
AIC Credit Card Services, Inc.
Autorama, Inc.
Ford Finance Company of Japan, Limited
Ford Motor Company (Japan) Ltd.
Hertz Far East, Ltd.
Hertz Japan, Limited
Jaguar Japan KK
Japan Climate Systems Corporation
Mazda Motor Corporation
Korea
Halla Climate Control Corporation
Kia Motors Corporation, (Korea)
Korea Automobile Components Corporation
Luxembourg
Axus Luxembourg S.A.
Hertz Luxembourg, S.A.
Malaysia
AMIM Holdings Sdn. Bhd.
Associated Motor Industries Malaysia SDN. BHD.
FMS Audio Sdn. Bhd.
<PAGE>
Mexico
Altac Electronics Chihuahua, S.A. de C.V.
Autovidrio S.A. de C.V.
Carplastic S.A. de C.V.
Climate Systems Mexicana, S.A. de C.V.
Coclisa S.A. de C.V.
Favesa, S.A. de C.V., (Mexico)
Ford Latin America, S.A. de C.V., (Mexico)
Ford Motor Compania Comercial, S.A. de C.V.
Ford Motor Company, S.A. de C.V., (Mexico)
Hertz Latin America, S.A. de C.V.
Lamosa S.A. de C.V., (Mexico)
Mi Techo, S.C. (Partnership)
Nemak S.A.
Vitro Flex, S.A. de C.V.
Monaco
Hertz Monaco, S.A.
Neth. Antilles
Ford Credit Overseas Finance N.V.
Netherlands
ACONA B.V.
Axus Nederland B.V.
Ford Credit B.V.
Ford Export Services B.V.
Geotech
Hertz Automobielen Nederland B.V.
Hertz Leasing B.V.
Stuurgroep Holland B.V.
Van Wijk Autoverhurr Rotterdam B.V.
Van Wijk Beheer B.V.
Van Wijk European Car Rental Service B.V.
New Zealand
Brocon Enterprises Limited
Ford Motor Company of New Zealand Limited
Ford Motor Credit Company of New Zealand Limited
Granthall Holdings Limited
Lydon Industries Limited
Portfolio Leasing (New Zealand) Limited
Vehicle Assemblers New Zealand Limited
New Zealand
Hertz New Zealand Limited
Norway
Ford Motor Norge A.S.
Hertz Bilutleie A/S
Poland
Ford Poland Limited Company
Portugal
AutoEuropa Automotive Limitada
Ford Credit Portugal-Sociedade Financeira Para Aquisicoes
Ford Electronica Portuguesa, Ltd.
Ford Lusitana S.A.
Hertz Limitada
<PAGE>
Portugal (cont.)
Hertz Portuguesa Automoveis de Aluguer, Lda.
Puerto Rico
Associates Financial Services Company of Puerto Rico, Inc.
Associates Time Plan, Inc.
Ford Motor Company Caribbean, Inc., (Puerto Rican)
Ford Motor Credit Company of Puerto Rico, Inc.
Puerto Ricancars Transporting, Inc.
Puerto Ricancars, Incorporated
Scotland
Cumberland Life Assurance Co. Limited
Singapore
Ford Motor Company Private Limited
Hertz Asia Pacific Pts. Ltd.
Spain
Cadiz Electronica, S. A.
Ford Credit Entidad de Financiacion, S.A.
Ford Credit S.A.
Ford Espana S.A.
Ford Leasing S.A.
Ford Leasing Sociedad de Arrendamiento Financiero, S.A.
Hertz de Espana, S.A.
Hertz Equipment Rental de Espana, S.A.
Leascar S.A.
Sweden
First Rent A Car AB
Ford Credit AB
Ford Motor Company Aktiebolag
Ford Vagnskadegaranti AB
Switzerland
Ford Credit S.A.
Ford Motor Company (Switzerland) S.A.
Hertz AG
Hertz Motor A.G.
S. I. Fair Play S.A.
Zuri-Lau Garage AG
Taiwan
FLH Marketing Services Ltd.
FLH Sales Limited
Ford Enterprise Company Taiwan, Ltd.
Ford Lio Ho Motor Company Ltd.
Ford Taiwan Services, Limited
Jaguar Cars Taiwan Limited
Thailand
Ford Motor Company (Thailand) Limited
Turkey
Otosan Otomobile Sansyii A.S.
Uruguay
Ford Uruguay S.A.
<PAGE>
Venezuela
Aerospace y Comunicaciones de Venezuela C.A.
Ford Motor Credit S.A.
Ford Motor de Venezuela, S.A.
Productos Industriales, C.A.
09/10/93
<PAGE>
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employment Schedule
Compliance Schedule
Affiliated Transaction Schedule
Licenses Schedule
v
<PAGE>
SUBSIDIARY SCHEDULE
TO PURCHASE AGREEMENT
1. SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMR Direct USA, Inc. Delaware Centennial Communications Corp.: 100%
SMR Direct Cayman Corp. Cayman Islands Centennial Communications Corp.: 100%
Centennial Cayman Corp. Cayman Islands Centennial Communications Corp.: 100%
CCC Holdings Peru, S.R.L. Peru Centennial Cayman Corp.: 99%/1/
Centennial Cayman Corp. Chile Centennial Cayman Corp.: 99%/1/
Chile, Ltda.
Centennial Ecuador, S.A. Ecuador Centennial Cayman Corp.: 99%/1/
Centennial Telecomunicaciones Venezuela Centennial Cayman Corp.: 100%
de Venezuela, S.A.
SMR Direct Peru, S.R.L. Peru CCC Holdings Peru S.R.L.: 99%/2/
Brunacci Compania Ltda. Ecuador Centennial Ecuador S.A.: 100%
Fastcom, S.A. Argentina SMR Direct Cayman: 99%/2/
Pompano, S.R.L. Peru CCC Holdings Peru, S.R.L.: 99%/2/
Radioservicios Moviles, S.A. Argentina Centennial Cayman Corp.: 99%/1/
Telecom Supply, S.R.L. Peru CCC Holdings Peru, S.R.L.: 99%/2/
Transnet del Peru, S.A. Peru CCC Holdings Peru, S.R.L.: 99%/3/
C-Comunica, S.R.L. Peru CCC Holdings Peru, S.R.L: 99%/2/
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2. The Company also has 5 shell companies in Argentina which are currently held
in trust for the Company.
3. See "Contracts Schedule" for current Letters of Intent.
4. See "Development Schedule" for pledge of shares of Fastcom, S.A. and
Radioservicios Moviles, S.A.
- ---------------------
/1/ SMR Direct Cayman Corp. is a nominee shareholder in this company.
/2/ Centennial Cayman Corp. is a nominee shareholder in this company.
/3/ Centennial Cayman Corp. and SMR Direct Cayman Corp. are nominee shareholders
in this company.
<PAGE>
RESTRICTIONS SCHEDULE
TO PURCHASE AGREEMENT
* The Series A Purchase Agreement
* The Series B Purchase Agreement
* The Existing Registration Agreement
* The Existing Stockholders Agreement
* The Company's Amended and Restated Certificate of Incorporation
*All conflicts and restrictions contained in these documents will be waived
prior to the Closing.
<PAGE>
FINANCIAL STATEMENTS SCHEDULE
TO PURCHASE AGREEMENT
1. Audited consolidated balance sheets; statements of operations; statement of
mandatorily redeemable, convertible preferred stock and stockholders'
equity; and cash flows of Centennial Communications Corp. and its
subsidiaries (the "Company") for the period from inception (October 26,
1995) to December 31, 1995, and the year ended December 31, 1996.
2. Unaudited consolidated balance sheet and statement of operations of the
Company for the seven month period ended July 31, 1997.
<PAGE>
LIABILITIES SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has deposited $1.3 million in a restricted Certificate of
Deposit as a performance guarantee related to the Chilean SMR Concurso in
which the Company has participated but not yet been awarded any channels.
Approximately $36,000 of such deposit is nonrefundable. The balance of the
Certificate of Deposit will be released upon completion of various build-out
and subscriber loading requirements or upon the award of the Channels to
third parties.
2. Pursuant to a Purchase Order dated March 14, 1996, the Company has agreed to
pay approximately $2,490,000 to Maxon America Inc. for the purchase of
equipment from August 1996 through December 1996. The Company has since
negotiated an amendment to this agreement which allows the Company to take
delivery of such equipment in any quantity over any time period the Company
chooses. Approximately $1,100,000 remains outstanding under this agreement.
3. The Company has executed Installment Payment Plan Notes payable to the FCC
totaling $4,559,247 with respect to the 43 900 MHz MTA licenses it has
acquired. Each of these Notes is secured by a security interest held by the
FCC in the respective license. These licenses and the FCC loan have been
transferred by the Company to its wholly-owned subsidiary, SMR Direct USA,
Inc.
4. Pursuant to a Purchase Order, the Company has agreed to pay $340,000 to
Motorola, Inc. for the purchase of equipment. Approximately $105,000 remains
outstanding under this agreement.
5. Contingent upon the grant of an additional 15 channels of 800 MHz spectrum
in Lima, Peru, the Company is obligated to pay the previous shareholders of
Telecom Supply, S.R.L. $15,000 per channel finally awarded to Telecom
Supply, S.R.L.
6. Contingent upon the grant of an additional 40 channels of 800 MHz spectrum
in Lima, Peru, the Company is obligated to pay the previous shareholders of
C-Comunica, S.R.L. $1,380,000.
7. Contingent upon the grant of paging frequency in Lima, Peru, the Company is
obligated to pay the previous shareholders of C-Comunica, S.R.L. $250,000.
8. In connection with the acquisition of Fastcom, S.A., the Company is
obligated to replace performance bonds posted by Intepla, S.R.L. on the
Company's behalf in the amount of $70,000 within 90 days of the date of
execution of the Letter Agreement in respect of such bonds (September 8,
1997). In the event
<PAGE>
the Company does not post such bond, 100% of the stock of Radioservicios
Moviles, S.A. shall be returned to the former shareholders thereof. The
shares of Radioservicios Moviles, S.A. are subject to a Letter Agreement
guaranteeing this obligation.
9. In connection with the acquisition of Fastcom, S.A., the Company has entered
into a purchase agreement with the former shareholders of Fastcom, S.A.
under which Centennial Cayman Corp. and SMR Direct Cayman Corp., wholly-
owned subsidiaries of the Company, are obligated to pay said shareholders
$416,000, the remaining balance due of the total purchase price of $526,060.
In the event the $416,000 balance is not paid by December 1, 1997, the
former shareholders will be entitled to retain the $110,060 paid to them at
closing, and in addition, the shares of Fastcom, S.A. shall be transferred
back to them. The shares of Fastcom, S.A. are subject to a Pledge Agreement
guaranteeing this obligation.
10. In connection with the Asset Purchase Agreement with Colorado Communication
Services, Inc., the Company has assumed certain liabilities with respect to
operations and employee compensation.
11. See "Development Schedule" for description of obligations with respect to
certain current employees.
<PAGE>
ADVERSE CHANGE SCHEDULE
TO PURCHASE AGREEMENT
None.
<PAGE>
DEVELOPMENT SCHEDULE
TO PURCHASE AGREEMENT
1. On July 1, 1997, the Company entered into an Executive Stock Pledge
Agreement and received a Promissory Note from Michael Simkin, Chief
Executive Officer of the Company, for a loan of $162,056 made by the Company
to Mr. Simkin. Mr. Simkin has purchased 44,521 shares of the Company's
Series B Preferred Stock for an aggregate purchase price of $162,502. Mr.
Simkin has given a Promissory Note, due July 1, 1999, for $162,056. Interest
on the note accrues at an annual rate of 6.5% and is payable annually on
July 1. The stock is being held by the Company as security for the prompt
and complete payment of the principal and accrued interest on the note.
2. In July 1997, the Company received a Bridge Loan from existing stockholders
totaling $4 million. It is contemplated that the outstanding principal
amount of this loan, plus accrued interest thereunder, shall be applied to
the purchase of the Notes by such stockholders.
3. In September 1997, the Company signed a letter of intent with Wireless USA,
L.L.C. (d/b/a St. Louis Electronics) to sell the St. Louis and Kansas City
MTAs of its United States operations. The Company is actively pursuing
opportunities to sell the remainder of the United States operations.
4. Since June 30, 1997, the Company has granted options to purchase shares of
the Company's common stock to the following individuals: Michael Simkin
(250,000), Fred Gallart (20,000), Rafael Luces (17,500), and Mike Harris
(6,000).
5. On September 3, 1997, the Company purchased Fastcom, S.A., which holds a
nationwide paging license and certain bi-directional frequencies in
Argentina, for an aggregate purchase price of $526,060, payable in two
installments, the first, equal to $110,060, payable at Closing, and the
second, equal to $416,000 plus $15,000 in interest, payable on December 1,
1997. The obligation to make the second and final payment is secured by a
pledge of the shares of Fastcom, S.A. in favor of the former shareholders.
6. In connection with the acquisition of Fastcom, S.A., the Company is
obligated to replace performance bonds posted by Intepla, S.R.L. on the
Company's behalf in the amount of $70,000 within 90 days of the date of
execution of the Letter Agreement in respect of such bonds (September 8,
1997). In the event the Company does not post such bond, 100% of the stock
of Radioservicios Moviles, S.A. shall be returned to the former shareholders
thereof. The shares of Radioservicios Moviles are subject to a Letter
Agreement guaranteeing this obligation.
<PAGE>
7. On July 31, 1997, the Company purchased Transnet del Peru, S.A., which holds
32 channels of 800 MHz Spectrum in Lima, Peru, for an aggregate purchase
price of $1,500,000 payable in two installments, the first, equal to
$1,494,050, payable at closing, and the second, equal to $5,950, payable on
September 29, 1997.
8. In July 1997, the Company submitted a bid in the Chilean SMR Concurso to
acquire certain nationwide SMR channels. The award of the SMR channels
subject to this concurso is not yet final. See "Liabilities Schedule" for
description of the performance guarantee filed by the Company in connection
with this concurso.
9. On July 21, 1997, the Company transferred its 43 United States SMR licenses,
the accompanying debt (see "Assets Schedule") and all of the United States
operations to its wholly-owned subsidiary, SMR Direct USA, Inc.
10. On August 1, 1997, the Company executed an agreement with Colorado
Communication Services, Inc. to exchange certain equipment and Colorado
Communication Services, Inc.'s rights under a certain lease and to assume
certain liabilities for 1,350 radio units.
11. On September 25, 1997, the Company executed letters to David Starkweather,
Debbie Schneider, Matt Riley, Allen Nelson, Kim Miller, Chris Manfre, Mike
Harris and Gary Apostolou offering each of these employees (1) salary,
including accrued vacation, through December 31, 1997, (2) a "stay bonus"
of six weeks salary and (3) upon the signing of a Separation Agreement,
four weeks of severance at current rate of salary, in exchange for their
cooperation and commitment to stay with the Company through December 31,
1997.
12. On September 29, 1997, the Company executed letters to Jeff Dunning and
Mark Fetcenko offering each of these employees, if they are terminated
other than for cause before January 1, 1999, (1) three months severance on
the execution of a Separation Agreement, (2) annual bonus for 1997,
consistent with each individual's offer letter, and (3) the vesting of
their options on a pro rata basis in exchange for their cooperation and
commitment to remain through the sale of the U.S. business.
13. On September 29, 1997, the Company executed a letter to Matt Zuschlag
offering him, if he is terminated other than for cause after April 1, 1998
and before January 1, 1999, (1) three months severance on the execution of
a Separation Agreement, (2) annual bonus for 1997, consistent with his
offer letter, and (3) the vesting of his options on a pro rata basis in
exchange for his cooperation and commitment to remain through the sale of
the U.S. business. The above-mentioned compensation would be in addition to
Mr.
<PAGE>
Zuschlag's rights under his existing offer letter which include the right
to one year's salary if he is terminated prior to April 1, 1998.
14. See "Assets Schedule."
15. See "Contracts Schedule" for current Letters of Intent.
<PAGE>
ASSETS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company entered into a capital leasing agreement with E.F. Johnson
Company to lease and acquire infrastructure equipment. As of April 17, 1997,
E.F. Johnson Company assigned a portion of this lease agreement to Boston
Financial & Equity Corporation ("Boston Financial"). The remaining balance
payable to E.F. Johnson Company under this agreement is approximately
$426,364. The remaining balance payable to Boston Financial is approximately
$1,528,268. E.F. Johnson Company and Boston Financial hold security
interests in this equipment to the extent of the unpaid purchase price.
2. The Company has executed Installment Payment Plan Notes payable to the FCC
totaling $4,559,247 with respect to the 43 900 MHz MTA licenses it has
acquired. Each of these Notes is secured by a security interest held by the
FCC in the respective license. These licenses and the FCC loan have been
transferred by the Company to its wholly-owned subsidiary, SMR Direct USA,
Inc.
3. In connection with the acquisition of Fastcom, S.A., the Company is
obligated to replace performance bonds posted by Intepla, S.R.L. on the
Company's behalf in the amount of $70,000 within 90 days of the date of
execution of the Letter Agreement in respect of such bonds (September 8,
1997). In the event the Company does not post such bond, 100% of the stock
of Radioservicios Moviles, S.A. shall be returned to the former shareholders
thereof. The shares of Radioservicios Moviles, S.A. are subject to a Letter
Agreement guaranteeing this obligation.
4. In connection with the acquisition of Fastcom, S.A., the Company has entered
into a purchase agreement with the former shareholders of Fastcom, S.A.
under which Centennial Cayman Corp. and SMR Direct Cayman Corp., wholly-
owned subsidiaries of the Company, are obligated to pay said shareholders
$416,000, the remaining balance due of the total purchase price of $526,060.
In the event the $416,000 balance is not paid by December 1, 1997, the
former shareholders will be entitled to retain the $110,060 paid to them at
closing, and in addition, the shares of Fastcom, S.A. shall be transferred
back to them. The shares of Fastcom, S.A. are subject to a Pledge Agreement
guaranteeing this obligation.
<PAGE>
TAXES SCHEDULE
TO PURCHASE AGREEMENT
None.
<PAGE>
CONTRACT SCHEDULE
TO PURCHASE AGREEMENT
1. Employers Health Insurance Indemnity, PPO, EPO Basic and Standard Health
Benefit Plan for Colorado.
2. Agreement regarding Employment Termination between the Company and Jeff E.
Rhodes, President, dated May 16, 1997.
3. Leases for office space in Denver, Colorado, between the Company and Union
Square Partnership, dated March 1, 1997.
4. Indenture of Lease for office space in Denver, Colorado, between the Company
and Sixteen Hundred Wynkoop, Ltd., dated May 2, 1996.
5. Lease for office space in Miami, Florida, between the Company and New World
Partners Joint Venture, dated January 8, 1997.
6. Lease for office space in Guayaquil, Ecuador, between Brunacci Compania
Ltda. and Sra. Pilar Mantilla Rivadeneira (for Inmobiliaria Mancor S.A.),
dated December 15, 1996.
7. Lease for office space in Lima, Peru, between Mobil Line del Peru, S.A. (SMR
Direct Peru, S.R.L.) and Banco Continental (Office #'s 20 & 21, Centro
Comercial Continental), dated May 9, 1996.
8. Lease for office space in Lima, Peru, between Mobil Line del Peru, S.A. (SMR
Direct Peru, S.R.L.) and Banco Continental (Office # 19, Centro Comercial
Continental), dated February 20, 1997.
9. Sublease of Site for Communications Facilities between SBA and the Company
(Ruffner Mountain), dated July 26, 1996.
10. Sublease of Site for Communications Facilities between SBA and the Company
(Oak Mountain), dated February 5, 1997.
11. Sublease of Site for Communications Facilities between SBA and the Company
(Floyd Knobs, Indiana), dated August 2, 1996.
12. Sublease of Site for Communications Facilities between SBA and the Company
(Mitchell Hill), dated August 2, 1996.
13. Sublicense of Site for Communications Facilities between SBA and the
Company (Independence, Kentucky), dated March 5, 1997.
14. Antenna Site Sublicense between SBA and the Company (TCBY Building), dated
July 29, 1996.
<PAGE>
15. Antenna Site Sublicense between SBA and the Company (Ruan Center), dated
September 1, 1997.
16. Antenna Site Sublicense between SBA and the Company (AUL Building), dated
September 15, 1996.
17. Antenna Site Sublicense between SBA and the Company (Plaza Tower), dated
April 1, 1997.
18. Antenna Site Sublicense between SBA and the Company (High Ridge), dated
February 15, 1997.
19. Antenna Site Sublicense between SBA and the Company (Sevens Building),
dated March 1, 1997.
20. Antenna Site Sublicense between SBA and the Company (One Kansas City
Place), dated July 29, 1996.
21. Antenna Site Sublicense between SBA and the Company (Spencer's Mountain),
dated July 29, 1996.
22. Antenna Site Sublicense between SBA and the Company (Sugar Creek), dated
August 16, 1996.
23. Antenna Site Sublicense between SBA and the Company (WCMS), dated September
6, 1996.
24. Antenna Site Sublicense between SBA and the Company (Liberty Bank Tower),
dated September 10, 1996.
25. Antenna Site Sublicense between SBA and the Company (Bank Four Tulsa),
dated September 9, 1996.
26. Antenna Site Sublicense between SBA and the Company (Echo 003- Crane
Avenue, Allegheny County, Pennsylvania), dated June 27, 1996.
27. Antenna Site Sublicense between SBA and the Company (Echo 001 -
Monroeville, Pennsylvania), dated June 27, 1996.
28. Antenna Site Sublicense between SBA and the Company (Clark Tower), dated
August 15, 1996.
29. Antenna Site Sublicense between SBA and the Company (North Nashville
Tower), dated January 10, 1997.
30. Master Tower Site Sublease between SBA and the Company (Star Tower), dated
July 29, 1996.
<PAGE>
31. Master Tower Space Reservation and Sublicense Agreement between SBA and the
Company (Nashville South/I-65, Tennessee), dated January 8, 1997.
32. Woodmen Tower Rooftop Antenna Sublicense Agreement between SBA and the
Company, dated July 29, 1996.
33. Roof Antenna Agreement between SBA and the Company (Carew Tower), dated
August 15, 1996.
34. Sublease Agreement between SBA and the Company (WIMZ), dated August 1,
1996.
35. Telecommunications Terminal Site Access Agreement between Broadcast
Services, Inc. and the Company (IDS Center, Minneapolis, Minnesota), dated
June 20, 1996.
36. Telecommunications Terminal Site Access Agreement between Broadcast
Services Inc. and the Company (Mercantile Center, St. Louis, Missouri),
dated June 20, 1996.
37. License Agreement between the Company and Clear Channel Radio Inc., dated
November 1, 1996.
38. License Agreement between the Company and COM-ENT, LLC, dated October 1,
1996.
39. Antenna Site Sublease and Antenna Construction Contract between SMR Direct
Peru, S.R.L. and Hialeah Communications E.I.R.L. (Morro Solar, Chorrillos)
dated February 14, 1997.
40. Antenna Site Lease between Oficina de Normalizacion Previsional - O.N.P.
and C-Comunica S.R.L. (Torre de Oficinas del Centro Civico y Comercial de
Lima), March 1996.
41. Antenna Service Contract between SEDITEL R.S. S.R.L. and C-Comunica S.R.L.
(Morro Solar, Corrillos) dated March 20, 1996.
42. Antenna Site Sublease between Multisistemas Electronicos M.S.E. S.A. and
Consorcio Ecuatoriano de Telecomunicaciones CONECELL S.A. (Cerro Azul,
Guayaquil) dated June 24, 1994.
43. Land Sales Contract for Antenna Site between Multisistemas Electronicos
M.S.E. S.A. and Magdalena Leon de Serrano, Alfredo Serrano Pallares and
Carmen Leon de Monsalve (Chaupicruz, Quito) dated March 14, 1994.
<PAGE>
44. Purchase Agreement for Common Stock between the Company and Telecom
Partners, L.P., Centennial Holdings, Inc., and Centennial Fund IV, L.P.
(collectively the "Purchasers"), dated December 8, 1995.
45. Registration Rights Agreement between the Company and the Purchasers, dated
December 8, 1995.
46. Stockholders Agreement between the Company and the Purchasers, dated
December 8, 1995.
47. First Amendment to Purchase Agreement between the Company and the
Purchasers, dated January 31, 1996.
48. Centennial Communications Corp. 1996 Stock Option Plan.
49. Amendment to Centennial Communications Corp. 1996 Stock Option Plan.
50. Early Exercise Stock Purchase Agreement.
51. Series A Preferred Stock Purchase Agreement between the Company and the
Purchasers, Trailhead Ventures, L.P., Boulder Ventures, L.P., GC&H
Investments, William Elsner, MGVF II, Ltd., Robert McKenzie and Jeff Rhodes
(together with the Purchasers, the "Series A Purchasers"), dated June 27,
1996.
52. Amended and Restated Initial Stockholders Agreement between the Company and
the Purchasers, dated June 27, 1996.
53. Stockholders Agreement between the Company and the Series A Purchasers
dated June 27, 1996.
54. Registration Agreement between the Company and the Series A Purchasers,
dated June 27, 1996.
55. First Amendment to Series A Preferred Stock Purchase Agreement between the
Company and the Series A Purchasers, dated March 19, 1997.
56. Series B Preferred Stock Purchase Agreement between the Company and the
Series A Purchasers, Centennial Fund V, L.P., Centennial Entrepreneurs Fund
V, L.P., Crest Funding Partners, L.P., Crest SMR, L.L.C., BancBoston
Ventures Incorporated and Kyle Lefkoff (as attorney-in-fact for Larry
Macks, Jurassic Ltd., Josh Fidler, Morty Macks Will's Wei Corp., Robert
Lemle, Caruthers Family, L.L.C., Tim Snipes, Ramer 1990 Living Trust, Grope
Schneider Securities, JLS, L.L.C., Doug Ramer, Trisun Financial, L.L.C.,
Eric Becker, Slade, Inc. and 250 Venture Capital Association) (together
with the Series A Purchasers, the "Series B Purchasers"), dated November
22, 1996.
<PAGE>
57. Amended and Restated Stockholders Agreement between the Company and the
Series B Purchasers, dated November 22, 1996.
58. Amended and Restated Registration Agreement between the Company and the
Series B Purchasers, dated November 22, 1996.
59. First Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
60. Second Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
61. Third Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
62. First Amendment to Amended and Restated Registration Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
63. Second Amendment to Amended and Restated Registration Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
64. First Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
65. Second Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated May 16, 1997.
66. Third Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
67. Stock Purchase Agreement by and among SMR Direct Cayman Corp., Centennial
Cayman Corp., Ernesto Uribe Abad, Pedro Uribe Abad and Pedro Kovacic
Taramona, dated September 6, 1996 (acquisition of Telecom Supply, S.R.L.).
68. Stock Purchase Agreement by and among CCC Holdings Peru, S.R.L., SMR Direct
Cayman Corp., Centennial Cayman Corp., Michael Bettsack Muller, Joseph
Bettsack Muller and Daniel Bettsack Maduro, dated January 22, 1997
(acquisition of C-Comunica S.R.L.).
69. Stock Purchase Agreement by and among Centennial Ecuador, S.A., Carlos Gil
Loor and Maria Soledad Del Alcazar Granda, dated November 20, 1996
(acquisition of Brunacci Compania Ltda).
70. Purchase Agreement by and among Mobil Line Peru, S.A., the Company and
Jesus Escudero Presa, dated February 29, 1996 (acquisition of 51% of Mobil
Line Peru, S.A.).
<PAGE>
71. Stock Purchase Agreement between the Company and Jesus Escudero Presa,
dated July 8, 1996 (acquisition of 49% of Mobil Line Peru, S.A.).
72. Stock Purchase Agreement by and among L.A. Technologies Corp. (acting in
its own capacity and representing and acting on behalf of Eduardo Ibarra
Diaz Ufano, Felipe Bertorini Guibert and Jose Carlos Godoy Lacoste),
Centennial Cayman Corp., SMR Direct Cayman Corp. and CCC Holdings Peru,
S.R.L., dated November 18, 1996 (acquisition of Pompano, S.R.L.).
73. Stock Purchase Agreement by and among Alicia Raquel Alonso Bernard,
Santiago D'Onofrio, SMR Direct Cayman Corp., Centennial Cayman Corp. and
Arturo Manuel Alonso, dated March 24, 1997 (acquisition of Radioservicios
Moviles, S.A.).
74. Stock Purchase Agreement by and among Montecasino Investments Corporation,
CCC Holdings Peru, S.R.L., SMR Direct Cayman Corp. and Centennial Cayman
Corp., dated July 31, 1997 (acquisition of Transnet del Peru, S.A.).
75. Stock Purchase Agreement by and among Gustavo Guillermo Fernandez Supera,
Miguel Angel Cappa, SMR Direct Cayman Corp. and Centennial Cayman Corp.,
dated September 3, 1997 (acquisition of Fastcom, S.A.).
76. Equipment Lease Agreement, between the Company and E.F. Johnson Company,
dated June 28, 1996.
77. Amendment to Equipment Lease Agreement between the Company and E.F. Johnson
Company, dated August 1, 1996.
78. Purchase Agreement between the Company and E.F. Johnson Company, dated June
28, 1996.
79. Confidentiality Agreement between the Company and E.F. Johnson Company,
dated February 21, 1996.
80. Notice of Assignment and Highlights of Contract between the Company and
E.F. Johnson Company, dated April 17, 1997 (giving notice of the sale of
the Lease Agreement between the Company and E.F. Johnson Company to Boston
Financial & Equity Corporation on June 2, 1997).
81. Purchase Order between the Company and Maxon America, Inc., dated March 14,
1996, and amended April 23, 1997.
82. Letter of Intent, dated May 8, 1997, by and between the Company and Radio
Enlaces Ltda., Benjamin Bursztyn and Asecones Ltda. with respect to the
purchase and sale of all of the outstanding capital stock of Radionet
Ltda., Secom Ltda., Radiolink Ltda., Satelcom Ltda. and Asesoria en
<PAGE>
Comunicaciones-Asecones Cali
Ltda. Extension of Letter of Intent dated September 11, 1997.
83. Letter of Intent, dated May 23, 1997, by and between the Company and the
shareholders of Hialeah Beeper, S.R.L. with respect to the purchase and
sale of all of the outstanding capital stock of Hialeah Beeper, S.R.L.
Extension of Letter of Intent dated August 29, 1997.
84. Letter of Intent, dated June 26, 1997, by and between the Company and the
shareholders of Intepla, S.A. with respect to the purchase and sale of all
of the outstanding capital stock of Intepla, S.A. Extension of Letter of
Intent dated September 17, 1997.
85. Letter of Intent, dated September 8, 1997, by and between the Company and
Wireless USA, L.L.C. (d/b/a St. Louis Electronics) with respect to the
purchase and sale of the St. Louis and Kansas City MTAs.
86. Asset Purchase Agreement between Colorado Communication Services, Inc. and
the Company dated August 1, 1997.
87. Pledge Agreement by and between Centennial Cayman Corp., SMR Direct Cayman
Corp., Gustavo Guillermo Fernandez Supera and Miguel Angel Cappa, dated
September 3, 1997.
88. Letter Agreement between Arturo Alonso, Centennial Cayman Corp. and SMR
Direct Cayman Corp., dated September 8, 1997.
89. Loan Agreement, dated July 1997, between the Company and the lenders set
forth on the signature page of that agreement.
90. Executive Stock Pledge Agreement between Michael Simkin and the Company,
dated July 1, 1997.
91. Promissory Note executed by Michael Simkin on July 1, 1997, in favor of the
Company.
92. Purchase Order between the Company and Maxon America, Inc., dated March 14,
1996.
93. Purchase Order between Motorola, Inc. and the Company, September 26, 1996.
94. Letter regarding employment dated September 25, 1997 from the Company to
Gary Apostolu.
95. Letter regarding employment dated September 25, 1997 from the Company to
Jeff Dunning.
<PAGE>
96. Letter regarding employment dated September 25, 1997 from the Company to
Mike Harris.
97. Letter regarding employment dated September 25, 1997 from the Company to
Chris Manfre.
98. Letter regarding employment dated September 25, 1997 from the Company to
Kim Miller.
99. Letter regarding employment dated September 25, 1997 from the Company to
Allen Nelson.
100. Letter regarding employment dated September 25, 1997 from the Company to
Matt Riley.
101. Letter regarding employment dated September 25, 1997 from the Company to
Debbie Schneider.
102. Letter regarding employment dated September 25, 1997 from the Company to
David Starkweather.
103. Letter regarding employment dated September 29, 1997 from the Company to
Matt Zuschlag.
104. Letter regarding employment dated September 29, 1997 from the Company to
Mark Fetcenko.
105. Letter regarding employment dated September 29, 1997 from the Company to
Gary Apostolu.
<PAGE>
PROPRIETARY RIGHTS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company operates under the name "SMR Direct" in the United States and
has begun the process to register the trademark. The Company has received a
letter from Centennial Cellular Corporation demanding written assurances
that the Company will cease any use of Centennial Communications Corp. as a
trade name and threatening legal action if such assurances are not given.
The Company does not believe it has violated any rights Centennial Cellular
Corporation may have in "Centennial" as a service mark and is in the process
of responding to such letter.
2. The Company operates under the names "Radio Trunking del Peru," "SMR Direct
Peru, S.R.L." "Telecom Supply, S.R.L.," "Pompano, S.R.L.," "C-Comunica,
S.R.L." and "Transnet, S.A." in Peru. On April 22, 1997, Telefonica del
Peru, S.A. petitioned INDECOPI, the Peruvian trademark authority, to nullify
the trademark "Radio Trunking del Peru" previously granted to the Company's
subsidiary, SMR Direct Peru, S.R.L., by INDECOPI on the grounds that such
trademark is not distinctive. The Company is in the process of responding to
this petition.
3. The Company also holds the rights to the following trademarks and tradenames
in Peru: (a) NEXTEL; (B) Transnet del Peru; (c) MULTIZONE; (d) TRONKIN; (E)
C-COMUNICA; and (f) C-COMUNICA del Peru.
4. The Company operates under the names "Radio Trunking del Ecuador" and
"Brunacci Compania Ltda." in Ecuador. The Company has registered the name
"Radio Trunking" and has filed a complaint with the applicable Ecuadorian
authorities regarding the use of the name "International Radio Trunking
Communications of Ecuador" by a third party.
5. See "Licenses Schedule" for a description of the 900 MHz MTA licenses issued
by the FCC to the Company.
<PAGE>
LITIGATION SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has received a letter from Centennial Cellular Corporation
demanding written assurances that the Company will cease any use of
Centennial Communications Corp. as a trade name and threatening legal action
if such assurances are not given. The Company does not believe it has
violated any rights Centennial Cellular Corporation may have in "Centennial"
as a service mark and is in the process of responding to such letter.
2. In April 1997, Telefonica del Peru, S.A. petitioned INDECOPI, the Peruvian
trademark authority, to nullify the trademark "Radio Trunking del Peru"
previously granted to the Company's subsidiary, SMR Direct Peru, S.R.L., by
INDECOPI and to oppose the application by the Company for the trademarks
"RADIO TRUNKING + LOGO" on the grounds that such trademarks are not
distinctive. The Company is in the process of responding to this petition
and is considering appropriate modifications to this trademark in the event
this petition is successful. The Company does not believe that the outcome
of this petition will have a material adverse effect on the Company's
operations in Peru.
3. The municipality of San Isidro, Peru, has begun proceedings against SMR
Direct Peru, S.R.L. for operating without an occupancy permit. The Company
is in the process of curing this condition.
4. The Company has received a letter from a former employee of the Company
concerning the cessation of his employment with the Company which alleges
that he was treated unfairly in connection with the cessation of his
employment. The Company is in the process of responding to this letter.
<PAGE>
BROKERAGE SCHEDULE
TO PURCHASE AGREEMENT
None.
<PAGE>
CONSENTS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company must obtain the approval of the FCC of the change in control as
a result of the transactions contemplated by the Purchase Agreement. The
Company has filed for such approval and received Special Temporary Authority
from the FCC effective as of September 30, 1997.
<PAGE>
INSURANCE SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
INSURANCE COMPANY COVERAGE*
- ----------------- ---------
<S> <C>
Associated Indemnity Group Commercial General Liability
Associated Indemnity Group Simplified Commercial Property
Associated Indemnity Group Hired/Borrowed Auto
Associated Indemnity Group Workers Compensation
Fireman's Fund Insurance Company Commercial Umbrella
Fireman's Fund Insurance Company Marine Cargo
American International Assistance Foreign Travel
Services
Great Northern Insurance Company Foreign Liability
Great Northern Insurance Company Foreign Employees Liability
Great Northern Insurance Company Foreign Property
Great Northern Insurance Company Foreign Auto
</TABLE>
*All coverage expires on May 1, 1998, except for the Marine Cargo Policy, which
has no expiration date.
<PAGE>
EMPLOYMENT SCHEDULE
TO PURCHASE AGREEMENT
Attachment F to this Schedule contains a copy of the Company's 1996 Stock
Option Plan and forms of Notice of Exercise and Early Exercise Stock Purchase
Agreement.
<PAGE>
COMPLIANCE SCHEDULE
TO PURCHASE AGREEMENT
1. See "Litigation Schedule."
2. The Company currently is not in compliance with certain minimum subscriber
loading requirements with respect to a portion of its channels in Peru.
Requests for amendment of such loading requirements have been filed by the
Company with the Peruvian Ministry of Transportation, Communications,
Housing and Construction.
<PAGE>
AFFILIATED TRANSACTION SCHEDULE
TO PURCHASE AGREEMENT
1. On July 1, 1997, the Company entered into an Executive Stock Pledge
Agreement and received a Promissory Note from Michael Simkin, Chief
Executive Officer of the Company, for a loan of $162,056 made by the Company
to Mr. Simkin. Mr. Simkin has purchased 44,521 shares of the Company's
Series B Preferred Stock for an aggregate purchase price of $162,502. Mr.
Simkin has given a Promissory Note, due July 1, 1999, for $162,056. Interest
on the note accrues at an annual rate of 6.5% and is payable annually on
July 1. The stock is being held by the Company as security for the prompt
and complete payment of the principal and accrued interest on the note.
2. See "Development Schedule" for description of the Company's obligations to
Matt Zuschlag.
3. No others, except for agreements otherwise referred to in the "Contracts
Schedule."
<PAGE>
LICENSES SCHEDULE
TO PURCHASE AGREEMENT
1. UNITED STATES LICENSES. The Company and its Subsidiaries currently hold
licenses, each issued by the FCC, to operate on the 800 MHZ frequency band,
as set forth below:
MTA NUMBER OF CHANNELS
--- ------------------
Charlotte/Greensboro/Greensville/Raleigh 20
Minneapolis/St. Paul 20
NewOrleans/Baton Rouge 20
Cincinnati/Dayton 20
St. Louis 30
Pittsburgh 20
Richmond/Norfolk 20
Louisville/Lexington/Evansville 20
Memphis/Jackson 30
Birmingham 20
Indianapolis 20
Des Moines/Quad Cities 20
Kansas City 20
Columbus 10
Little Rock 30
Oklahoma City 30
Nashville 20
Knoxville 20
Omaha 20
Tulsa 20
Total 430
2. PERU LICENSES. The Company and its Subsidiaries currently hold licenses to
operate 144 900 MHZ SMR channels in Lima/Callao.
3. ECUADOR LICENSES. The Company and its Subsidiaries currently hold licenses
to operate 900 MHZ SMR channels as set forth below:
CITY NUMBER OF CHANNELS
---- ------------------
Guayaquil 90
Quito 90
Machala 5
Salinas 5
Santa Domingo de Los Colorados 5
Total 195
4. ARGENTINA LICENSES. The Company and its Subsidiaries currently hold the
licenses and frequency necessary to operate paging networks in Capital
Federal, Bahia Blanca, Rosario, Mendoza, Mar del Plata and Cordoba.
<PAGE>
EXHIBIT 10.6
EXECUTION COPY
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AGREEMENT ("This Agreement") is dated as of October 3, 1997, by and
between Centennial Communications Corp., a Delaware corporation, (the
"Company"), and each of the Investors listed on the Schedule of Investors
attached hereto (individually, an "Investor" and collectively, the "Investors").
Unless otherwise defined, capitalized terms used herein are defined in paragraph
6 hereof.
RECITALS
Certain of the Investors (the "June Investors") purchased shares of the
Company's Series A Preferred Stock, par value $.01 per share (the "Series A
Preferred"), pursuant to a Series A Purchase Agreement, dated June 27, 1996,
between the June Investors and the Company (as amended to the date hereof, the
"Series A Purchase Agreement").
In connection with the Series A Purchase Agreement, the June Investors and
the Company entered into a Stockholders Agreement, dated June 27, 1996, (the
"Stockholders Agreement").
Certain of the Investors (the "November Investors") purchased shares of the
Company's Series B Preferred Stock, par value $.01 per share (the "Series B
Preferred"), pursuant to a Series B Preferred Stock Purchase Agreement, dated
November 22, 1996, between the November Investors and the Company (as amended to
the date hereof, the "Series B Purchase Agreement").
In connection with the Series B Purchase Agreement, the November Investors
and the Company entered into an Amended and Restated Stockholders Agreement,
dated November 22, 1996 (as amended to the date hereof, the "Amended and
Restated Stockholders Agreement").
Certain of the Investors are purchasing Senior Secured Convertible Notes,
due 2002, of the Company (the "Notes") pursuant to the Purchase Agreement dated
as of the date hereof (the "Purchase Agreement").
One of the conditions to the purchase of the Notes pursuant to the Purchase
Agreement is that the Amended and Restated Stockholders Agreement be amended and
restated as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties to this Agreement hereby agree as follows:
<PAGE>
AGREEMENTS
1. Board of Directors.
------------------
(a) From and after the Closing (as defined in the Purchase Agreement) and
until the provisions of this paragraph 1 cease to be effective, each Investor
shall vote all of its Stockholder Shares (as defined in paragraph 6 hereof) and
any other voting securities of the Company over which such Investor has voting
control and shall take all other necessary or desirable actions within its
control (whether in its capacity as a stockholder, director, member of a board
committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the Company shall take all necessary and desirable actions within its control
(including, without limitation, calling special board and stockholder meetings),
so that:
(i) the authorized number of directors on the Board shall be
established at eleven directors;
(ii) the following persons shall be elected to the Board:
(A) one representative designated by Centennial Fund IV, L.P.
("CIV") and one representative designated by Centennial Fund V, L.P. ("CV"),
(CIV and CV collectively are referred to as the "Centennial Funds"); provided
that until the next annual meeting of the Company's stockholders, Adam Goldman
shall serve as the representative of CIV and Steve C. Halstedt shall serve as
the representative of CV;
(B) one representative designated by Telecom Partners, L.P.,
provided that until the next annual meeting of the Company's stockholders,
Stephen W. Schovee shall serve;
(C) one representative designated by Crest Funding Partners, L.P.
provided that until the next annual meeting of the Company's stockholders,
William W. Sprague shall serve;
(D) one representative designated by the June Investors holding at
least 66 2/3% of the Underlying Common Stock represented by the Series A
Preferred and the Series B Preferred held by such Investors; provided that until
the next annual meeting of the Company's Stockholders, William D. Stanfill shall
serve;
(E) one representative designated by the holders of a majority of
the Underlying Common Stock represented by the Notes or the Series C Preferred,
as the case may be; provided that so long as Prudential Securities Incorporated
and its Affiliates (collectively, "PSI") hold at least 15% of the Underlying
Common Stock represented by the Notes or the Series C Preferred, as the case may
be, such director shall be designated by PSI and its Affiliates; and provided,
further, that
-2-
<PAGE>
until the next annual meeting of the Company's Stockholders, Mark Leavitt shall
serve; and provided that after a Public Offering, so long as PSI holds at least
7.5% of the Underlying Common Stock, the Company shall use its best efforts to
have the PSI designee nominated to the Board; and
(F) five representatives designated by the Board; provided
that until the next annual meeting of the Company's stockholders, Jeff E.
Rhodes, Robert McKenzie, Bill Elsner, John Fullmer and Michael N. Simkin shall
serve;
(iii) the composition of the board of directors of any of the
Company's subsidiaries (a "Sub Board") shall be as determined by the Board;
(iv) any executive committee or committee performing a similar
function of the Board or a Sub Board must include each representative designated
under (ii)(A), (B), (C) and (E) above;
(v) any compensation committee or committee performing a similar
function of the Board or a Sub Board must include each representative designated
under (ii)(A), (B), (C) and (E) above;
(vi) the removal from the Board or a Sub Board (with or without
cause) of any representative designated hereunder by one or more of the
Investors shall be at the written request of the Investor or Investors entitled
to designate such representative for election as such Board or Sub Board member,
respectively, but only upon such written request and under no other
circumstances (in each case, determined on the basis of the same vote required
to designate such representative);
(vii) in the event that any representative designated hereunder by
the Investors for any reason ceases to serve as a member of the Board or a Sub
Board during his term of office, the resulting vacancy on the Board or the Sub
Board shall be filled by, and the Investors shall vote for the election of, the
representative designated by the Investor or Investors that designated the
member of the Board or Sub Board whose vacancy is being filled.
(b) The Board shall meet at least six times during each calendar year in
accordance with a schedule to be agreed upon by the Board.
(c) If the Board has not done so already, then promptly after the
Closing, the Board will establish audit and compensation committees and shall
delegate to such committees those duties and powers as are customarily performed
by committees of such type. The audit committee shall not include any
representative's of the Company's management.
(d) The reasonable travel expenses of each director designated by an
Investor (an "Investor Director") incurred in attending or observing Board or
committee meetings shall be reimbursed by the Company. After a Public Offering
by the Company, if the Company adopts any plan or arrangement to compensate its
"outside" or
-3-
<PAGE>
"independent" directors generally for service as a director either with cash or
with stock options, then the Company will also extend the same compensation to
the Investor Directors and, in the case of stock options, such options shall be
freely transferable by the Investor Directors to their respective firms, subject
to applicable laws.
(e) The rights (but not the obligations) of each Investor under
paragraph 1(a) shall terminate at such time as such Investor and its Permitted
Transferees (as defined in paragraph 2(d) hereof) hold in the aggregate less
than 5% of the number of shares of Underlying Common Stock held by such Investor
and its Permitted Transferees on the date hereof.
(f) The provisions of this paragraph 1 shall terminate
automatically and be of no further force and effect upon the closing of a
Qualified Public Offering (as defined in paragraph 6 hereof).
(g) Each Investor represents that it has not granted and is not a
party to any proxy, voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement, and no holder of Stockholder
Shares shall grant any proxy or become party to any voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement.
(h) The Company shall use its best efforts to obtain and keep in
place directors' and officers' liability insurance.
2. Restrictions on Transfer of Stockholder Shares.
----------------------------------------------
(a) Transfer of Stockholder Shares. No Investor shall sell,
------------------------------
transfer, assign, pledge or otherwise dispose of (collectively, "Transfer") any
interest in any Preferred Stock, Underlying Common Stock or the Notes except
pursuant to (i) a Public Sale, a Sale of the Company or any redemption or
conversion provisions of the Certificate of Incorporation or the Notes (each, an
"Exempt Transfer") or (ii) the provisions of this paragraph 2. Each Investor
agrees not to consummate any Transfer (other than an Exempt Transfer) until 30
days after the delivery by the Investor to the Company and the other Investors
of such Investor's Offer Notice (as defined below), unless the parties to the
Transfer have been finally determined pursuant to this paragraph 2 prior to the
expiration of such 30-day period (the "Election Period").
(b) First Offer Right. At least 30 days prior to making any
-----------------
Transfer of any Preferred Stock, Underlying Common Stock or the Notes (other
than an Exempt Transfer) the transferring Investor (the "Transferring Investor")
shall deliver a written notice (the "Offer Notice") to the Company and the other
Investors (the "Other Investors"). The Offer Notice shall disclose in reasonable
detail the proposed terms and conditions of the Transfer. First, the Company may
elect to purchase all (but not less than all) of the Preferred Stock, Underlying
Common Stock or the Notes specified in the Offer Notice at the price and on the
terms specified therein by delivering written notice of such election to the
Transferring Investor and the Other Investors as soon as practical
-4-
<PAGE>
but in any event within ten days after the delivery of the Offer Notice. If the
Company has not elected to purchase all of the Preferred Stock, Underlying
Common Stock and the Notes within such ten-day period, each Other Investor may
elect to purchase all (but not less than all) of its Pro Rata Share (as defined
below) of the Preferred Stock, Underlying Common Stock and the Notes specified
in the Offer Notice at the price and on the terms specified therein by
delivering written notice of such election to the Transferring Investor as soon
as practical but in any event within 20 days after delivery of the Offer Notice.
Any Preferred Stock, Underlying Common Stock or Notes not elected to be
purchased by the end of such 20-day period shall be reoffered for the ten-day
period prior to the expiration of the Election Period by the Transferring
Investor on a pro rata basis to the Other Investors who have elected to purchase
their Pro Rata Share. If the Company or any Other Investors have elected to
purchase Preferred Stock, Underlying Common Stock or Notes from the Transferring
Investor, the transfer of such interests shall be consummated as soon as
practical after the delivery of the election notices, but in any event within 15
days after the expiration of the Election Period. To the extent that the Company
and the Other Investors have not elected to purchase all of the Preferred Stock,
Underlying Common Stock and the Notes being offered, the Transferring Investor
may, within 90 days after the expiration of the Election Period, transfer such
Preferred Stock, Underlying Common Stock and Notes to one or more third parties
at a price no less than the price per share (or price, in respect of the Notes)
specified in the Offer Notice and on other terms no more favorable to the
transferees than offered to the Company and the Other Investors in the Offer
Notice. The purchase price specified in any Offer Notice shall be payable solely
in cash at the closing of the transaction or in installments over time. If the
Transferring Investor does not dispose of its Preferred Stock, Underlying Common
Stock and Notes within the 90-day period after the expiration of the Election
Period, it shall not subsequently dispose of its Preferred Stock, Underlying
Common Stock and Notes except in accordance with the provisions of this
paragraph 2. Each Investor's "Pro Rata Share" shall be based upon such
Investor's proportionate ownership of all Underlying Common Stock held by all
Investors (exclusive of the Underlying Common Stock held by the Transferring
Investor) on a fully-diluted basis.
(c) Participation Rights.
--------------------
(i) At least 30 days prior to any Transfer by the Centennial
Funds (or any Affiliate) of 25% or more (in the aggregate) of (A) the Series A
Preferred or Underlying Common Stock acquired pursuant to the Series A Purchase
Agreement, (B) the Series B Preferred or Underlying Common Stock acquired
pursuant to the Series B Purchase Agreement, (C) Common Stock acquired pursuant
to that certain Purchase Agreement dated December 8, 1996, or (D) any Series C
Preferred or Underlying Common Stock acquired pursuant to the Purchase Agreement
(collectively, the "Centennial Stockholder Shares") (other than a Public Sale or
a Transfer to the Company or the other Investors pursuant to paragraph 2(b)),
the Centennial Funds shall deliver a written notice (the "Centennial Sale
Notice") to the Company and the other Investors, specifying in reasonable detail
the identity of the prospective transferee(s) and the terms and conditions of
the Transfer. The other Investors may elect to
-5-
<PAGE>
participate in the contemplated Transfer by delivering written notice to the
Centennial Funds within 30 days after delivery of the Centennial Sale Notice. If
any other Investors have elected to participate in such Transfer, the Centennial
Funds (and any selling Affiliates) and such other Investors shall be entitled to
sell in the contemplated Transfer, at the same price and on the same terms, the
same percentage of total Stockholder Shares owned by each such Investor which is
being or has been sold by the Centennial Funds.
For example, if after selling 24% of their Centennial Stockholder
Shares, the Centennial Funds proposed to sell a number of additional
Centennial Stockholder Shares so that following such sale the
Centennial Funds would have sold more than 25% of the Centennial
Stockholder Shares, then each Investor electing to participate would
be entitled to sell a like percentage of its holdings; provided that
if the prospective transferee were not willing to purchase all of the
offered Stockholder Shares, then the Centennial Funds and each
participating Investor would reduce its number of Stockholder Shares
so that the percentages being sold were substantially the same.
To the extent the terms of this Section 2(c)(i) conflict with Section 1(c)
of the Amended and Restated Initial Stockholder Agreement, dated June 27,
1996, between the Company and certain of the Investors (the "Initial
Stockholders Agreement"), the term of this Section 2(c) shall control.
(ii) At least 30 days prior to any Transfer by one or more of the
Investors, other than PSI and its Affiliates, of 25% or more (in the aggregate)
in a single transaction or series of related transactions of any Series C
Preferred or Underlying Common Stock acquired pursuant to the Purchase Agreement
(the "Transferring Investors") (other than a Public Sale or a Transfer to the
Company or the other Investors pursuant to paragraph 2(b)), the Transferring
Investors shall deliver a written notice (the "Prudential Sale Notice") to the
Company and Prudential Securities Incorporated, specifying in reasonable detail
the identity of the prospective transferee(s) and the terms and conditions of
the Transfer. PSI and its Affiliates who are Investors may elect to participate
in the contemplated Transfer by delivering written notice to the Transferring
Investors within 30 days after delivery of the Prudential Sale Notice. If PSI
and/or such Affiliates, as the case may be, have elected to participate in such
Transfer, the Transferring Investors and PSI and/or such Affiliates, as the case
may be, shall be entitled to sell in the contemplated Transfer, at the same
price and on the same terms, the same percentage of total Stockholder Shares
owned by Prudential Securities Incorporated and/or such Affiliates, as the case
may be, which is being or has been sold by the Transferring Investors.
-6-
<PAGE>
(d) Permitted Transfers.
-------------------
(i) The restrictions contained in this paragraph 2 shall not
apply with respect to any Transfer of Preferred Stock, Underlying Common Stock
or Notes by (i) any Investor among its Affiliates, Family Group or pursuant to
applicable laws of descent and distribution (collectively referred to herein as
"Permitted Transferees"); provided that the restrictions contained in this
paragraph 2 shall continue to be applicable to the Preferred Stock, Underlying
Common Stock and the Notes after any such Transfer and provided further that, as
a condition to completing the transfer, the transferees of such Preferred Stock,
Underlying Common Stock or Notes shall agree in writing to be bound by the
provisions of this Agreement affecting the Preferred Stock, Underlying Common
Stock and the Notes so transferred. "Affiliate" of an Investor means any other
person, entity or investment fund controlling, controlled by or under common
control with the Investor and any partner of an Investor which is a partnership.
"Family Group" means an Investor's spouse, and descendants (whether natural or
adopted) and any trust solely for the benefit of the Investor and/or the
Investor's spouse and/or descendants.
(ii) In the event that BancBoston Ventures Inc. ("BancBoston")
reasonably determines that it has a Regulatory Problem (as defined below),
BancBoston shall have the right to (A) transfer its Preferred Stock, Underlying
Common Stock and Notes to a party (also a "Permitted Transferee") other than the
Company and the other Investors, provided that the restrictions contained in
this paragraph 2 shall continue to be applicable to the Preferred Stock,
Underlying Common Stock and the Notes after any such Transfer and, provided,
further, that, as a condition to completing the Transfer, the of such Preferred
Stock, Underlying Common Stock or Notes shall agree in writing to be bound by
the provisions of this Agreement affecting the Preferred Stock, Underlying
Common Stock and Notes so transferred, or (B) exchange its Preferred Stock,
Underlying Common Stock and Notes for non-voting securities in the Company with
the same economic rights. The Company shall take all such actions as are
reasonably requested by BancBoston in order to (A) effectuate and facilitate any
such Transfer or (B) permit BancBoston to exchange for all or any portion of its
Preferred Stock, Underlying and Notes, on a share-for-share basis, for shares of
non-voting securities of the Company, which non-voting securities shall be
identical in all respects to the shares exchanged for them, except that such
exchanged securities shall be non-voting, shall be convertible into voting
securities on such terms as are reasonably requested by BancBoston in light of
regulatory considerations then prevailing, and shall not alter the economic
interests of the parties hereto. For purposes of this Agreement, a "Regulatory
Problem" means any set of facts or circumstances wherein it has been asserted by
any governmental authority, including the United States Small Business
Administration (the "SBA"), and any successor agency satisfactory to the Company
performing the functions thereof (or based on written advice of counsel
satisfactory to the Company and/or BancBoston that, based on its reasonable
belief, there is a substantial risk of such assertion), that, pursuant to the
Small Business Act of 1958, as amended, and the regulations issued by the SBA
thereunder, codified at Title 13 of the Code of Federal Regulations, Parts 107
and 121 (the "SBIC Regulations"), or pursuant
-7-
<PAGE>
to the Bank Holding Company Act, as amended, and the regulations issued
thereunder, BancBoston is not entitled to hold all or a portion of the Preferred
Stock, Underlying Common Stock or Notes held by it. Notwithstanding the above,
BancBoston will use reasonable efforts to transfer its Preferred Stock,
Underlying Common Stock and Notes to the Company and the Investors so long as
such Transfer does not adversely affect BancBoston's ability to maximize the
consideration it receives upon a transfer of its Preferred Stock, Underlying
Common Stock and Notes.
(e) Termination of Restrictions. The restrictions set forth in
---------------------------
this paragraph 2 shall continue with respect to each share of Preferred Stock,
Underlying Common Stock and to each Note until the earlier of (i) the date on
which such Preferred Stock, Underlying Common Stock or Note has been transferred
in a Public Sale, (ii) the date on which such Preferred Stock, Underlying Common
Stock or Note has been transferred pursuant to this paragraph 2 (other than
subparagraph 2(d), (iii) the consummation of a Qualified Public Offering or (iv)
the consummation of a Sale of the Company.
3. Legend. Each certificate evidencing Stockholder Shares, each Note,
------
and each certificate issued in exchange for or upon the transfer of any
Stockholder Shares (if such shares remain Stockholder Shares as defined herein
after such transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate are subject to a
Stockholders Agreement dated as of October 3, 1997, among the issuer
of such securities (the "Company") and certain of the Company's
stockholders. A copy of such Stockholders Agreement will be furnished
without charge by the Company to the holder hereof upon written
request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares or on each Note outstanding prior to the date hereof. The legend set
forth above shall be removed from the certificates evidencing any shares which
cease to be Stockholder Shares or any Note in accordance with paragraph 2
hereof.
4. Transfer. Prior to transferring any Stockholder Shares
--------
(other than in an Exempt Transfer) to any person or entity, the transferring
Stockholder shall cause the prospective transferee to execute and deliver to the
Company and the other Stockholders a counterpart of this Agreement.
5. Assignment of First Refusal Right. The Company has (a) adopted its
---------------------------------
1996 Stock Option Plan, (b) granted Incentive Stock Options to certain of its
employees (the "Optionees"), and (c) entered into Early Exercise Stock Purchase
Agreements with the Optionees (the documents referred to in (a), (b) and (c) are
collectively defined as the "Stock Option Agreements"). The Stock Option
Agreements contain provisions granting the Company certain repurchase rights and
rights of first refusal with respect to Common Stock held by the Optionees. In
the event the Company elects not to exercise
-8-
<PAGE>
such repurchase rights and rights of first refusal, the Company agrees to assign
such unexercised rights to the Investors. Any unexercised right shall be
assigned at least 10 days prior to its expiration. The Investors shall be
permitted to purchase their Pro Rata Share of any Common Stock being offered and
the offer shall be conducted in accordance with the procedures set forth in
paragraph 2 of this Agreement. For purposes of this paragraph 5, "Pro Rata
Share" shall be based upon each Investor's proportionate ownership of all Common
Stock and Underlying Common Stock held by all Investors.
6. Definitions.
-----------
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person.
"Certificate of Incorporation" means the Company's Amended and Restated
Certificate of Incorporation setting forth the rights and preferences of the
Preferred Stock.
"Common Stock" means the Company's Common Stock, par value $.01 per share.
"Independent Third Party" means any person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company's Common
Stock, on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other persons.
"Permitted Transferee" shall have the meaning set forth in paragraph 2(c)
hereof.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Preferred Stock" means the Company's (i) Series A Convertible Preferred
Stock, par value $.01 per share, (ii) Series B Convertible Preferred Stock, par
value $.01 per share and (iii) Series C Convertible Preferred Stock, par value
$.01 per share.
"Public Offering" means any offering by the Company of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act, or any comparable statement under any similar federal
statute then in force; provided that a Public Offering shall not include an
offering made in connection with a business acquisition or combination or an
employee benefit plan.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
-9-
<PAGE>
"Qualified Public Offering" means the sale, in an underwritten Public
Offering registered under the Securities Act, of shares of the Company's Common
Stock in which (i) the aggregate proceeds (after taking into account
underwriting discounts and commissions) received by the Company for the shares
is at least $20,000,000 and (ii) the price per share paid by the public is at
least $6.00 (as adjusted for stock splits, reverse stock splits, stock dividends
and similar recapitalizations).
"Sale of the Company" means the sale of the Company, in one transaction or
a series of related transactions, to an Independent Third Party or group of
Independent Third Parties pursuant to which such party or parties acquire (i)
capital stock of the Company possessing the voting power under normal
circumstances to elect a majority of the Company's board of directors (whether
by merger, consolidation or sale or transfer of the Company's capital stock) or
(ii) all or substantially all of the Company's assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
acquired by any Investor, (ii) any Preferred Stock purchased or otherwise
acquired by any Investor, (iii) any Notes which shall be entitled to vote with
the Common Stock and the Preferred Stock on an as-converted to Common Stock
basis until converted into shares of the Company's Series C Preferred or Common
Stock, (iv) any equity securities issued or issuable directly or indirectly with
respect to the Common Stock, Preferred Stock or Notes referred to in clause (i),
(ii) or (iii) above by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (v) any other shares of any class or series of capital stock
of the Company held by an Investor. As to any particular shares constituting
Stockholder Shares, such shares will cease to be Stockholder Shares when they
have been (x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 under the
Securities Act (or any similar provision then in force). In calculating the
number of Stockholder Shares, any Stockholder Shares represented by the
Preferred Stock shall equal the number of shares of Common Stock issuable upon
conversion of the Preferred Stock and any Stockholders Shares represented by the
Notes shall be equal to the number of shares of Common Stock issuable upon
conversion of the Notes.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
upon conversion of the Series A Preferred, Series B Preferred and the Series C
Preferred or the Notes, as the case may be, and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who holds Preferred Stock or Notes shall be deemed to
be the holder of the Underlying Common Stock obtainable upon conversion of
Preferred Stock or the Notes, as the case
-10-
<PAGE>
may be, in connection with the transfer thereof or otherwise regardless of any
restriction or limitation on the conversion of the Preferred Stock or the Notes,
as the case may be.
7. Transfers in Violation of Agreement. Any Transfer or
-----------------------------------
attempted Transfer of any Stockholder Shares in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer on
its books or treat any purported transferee of such Stockholder Shares as the
owner of such shares for any purpose.
8. Amendment and Waiver. Except as otherwise provided herein, no
--------------------
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Investors unless such modification,
amendment or waiver is approved in writing by the Company or the holders of a
majority of the Stockholder Shares, respectively; (i) provided that any
provision which requires a greater percentage for amendment or waiver may only
be amended or waived by the holders of such greater percentage and (ii)
provided, further, that any provision which is solely for the benefit of a
single Investor or group of Investors or imposes an obligation on a single
Investor or group of Investors may not be amended without the consent of that
Investor or the holders of a majority of the interests held by the group of
Investors, respectively. The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms. No
provision may be added to this Agreement to confer a benefit upon a single
Investor or group of Investors to the exclusion of the other Investors (the
"Other Investors"), without the consent of the holders of a majority of the
interests held by the Other Investors.
9. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
10. Integration. Except as otherwise expressly set forth herein,
-----------
this Agreement together with the Purchase Agreement and the other documents
referred to therein sets forth the entire agreement between the Company and the
Investors with respect to the subject matter covered hereby and supersedes all
prior or contemporaneous oral or written agreements, arrangements, or
understandings, including the Amended and Restated Stockholders Agreement and
the Initial Stockholders Agreement, except as set forth in Sections 2(c)(i) and
16.
11. Successors and Assigns. Except as otherwise provided herein,
----------------------
this Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Investors and any subsequent
holders of Stockholder
-11-
<PAGE>
Shares and the respective successors and assigns of each of them, so long as
they hold Stockholder Shares.
12. Counterparts; Facsimile. This Agreement may be executed in
-----------------------
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement. This Agreement may be
executed by facsimile.
13. Remedies. The Company and the Investors shall be entitled to
--------
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that the Company and any Investor may in its
sole discretion apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
14. Notices. Any notice provided for in this Agreement shall be
-------
in writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company at the address set forth below and to any other
recipient at the address indicated on the Schedule of Investors attached hereto
and to any subsequent holder of Stockholder Shares subject to this Agreement at
such address as indicated by the Company's records, or at such address or to the
attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
Centennial Communications Corp.
1610 Wynkoop, Suite 300
Denver Colorado 80202
Attn: Chief Executive Officer
with copies to:
Holland & Hart LLP
555 Seventeenth Street, Suite 2700
Denver, CO 80202
Attn: Michael S. Quinn
15. Governing Law. The corporate law of the State of Delaware
-------------
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Colorado.
-12-
<PAGE>
16. Termination of Amended and Restated Stockholders Agreement.
----------------------------------------------------------
The Investors hereby agree that (i) the Amended and Restated Stockholders
Agreement shall be superseded by this Agreement and be of no further force and
effect and (ii) the Initial Stockholders Agreement, with the exception of
Section 1(c) of that agreement, which shall survive, shall be superseded by this
Agreement and be of no further force and effect.
17. Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
18. Written Consent of Stockholders. The Investors, by their
-------------------------------
signature hereto, acting by written consent pursuant to Section 228 of the
Delaware General Corporation Law, hereby appoint Mark Leavitt to serve on the
Board until the next annual meeting of the Company's Stockholders.
* * * * *
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Michael Simkin
--------------------------------------
Name: Michael Simkin
------------------------------------
Title: CEO
------------------------------------
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ George Alex
--------------------------------------
Name: George Alex
------------------------------------
Title: Managing Director
------------------------------------
THE ROMAN ARCH FUND, L.P.
By: /s/ Robert William
--------------------------------------
Name: Robert William
------------------------------------
Title: MD
------------------------------------
THE ROMAN ARCH FUND II, L.P.
By: /s/ Robert William
--------------------------------------
Name: Robert William
------------------------------------
Title: MD
-----------------------------------
PRUDENTIAL BACHE CAPITAL PARTNERS II, L.P.
By:
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV, L.P.
Its: General Partner
By: /s/ Adam Goldman
--------------------------------------
Name: Adam Goldman
---------------------------------
Title: General Partner of Centennial Holdings
----------------------------------------
IV, L.P.
---------------------------------
-14-
<PAGE>
TELECOM PARTNERS, L.P.
By: /s/ Stephen W. Schovee
---------------------------------
Title: Managing Member of the General
Partner
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
---------------------------------
Name: Adam Goldman
---------------------------------
Title: General Partner of Centennial Holdings
--------------------------------------
V, L.P.
-------------------------------
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
---------------------------------
Name: Adam Goldman
---------------------------------
Title: General Partner of Centennial
--------------------------------
Holdings V, L.P.
--------------------------------
MGVF II, LTD.
By: /s/ [illegible signature]
---------------------------------
General Partner
CREST FUNDING PARTNERS, L.P.
By Crest Partner I, its General Partner
By: /s/ William Sprague
-----------------------------------
Name: William Sprague
---------------------------------
Title: Managing Member
--------------------------------
TRAILHEAD VENTURES, L.P.
By: Wind River Partners
By: /s/ [illegible signature]
---------------------------------
Name:
---------------------------------
Title: General Partner
BOULDER VENTURES, L.P.
-15-
<PAGE>
By: /s/ Kyle Lefkoff
---------------------------
Name: Kyle Lefkoff
---------------------------
Title: Partner
--------------------------
GC&H INVESTMENTS
By: /s/ John L. Cardoza
----------------------------
Name: John L. Cardoza
--------------------------
Title: Executive Partner
-------------------------
/s/ William Elsner
-------------------------------
William Elsner
/s/ Robert McKenzie
-------------------------------
Robert McKenzie
-------------------------------
Jeff E. Rhodes
CENTENNIAL HOLDINGS, INC.
By:/s/ Adam Goldman
----------------------------
Name: Adam Goldman
--------------------------
Title: Senior Vice President
-------------------------
CENTENNIAL HOLDINGS I, LLC
By:/s/ Adam Goldman
----------------------------
Name: Adam Goldman
--------------------------
Title: Senior Vice President
-------------------------
CREST SMR, L.L.C.
By: CREST PARTNERS (I) LLC
Its: Managing Member
By: /s/ William W. Sprague
----------------------------
Name: William W. Sprague
--------------------------
Title: Managing Director
-------------------------
-16-
<PAGE>
KYLE LEFKOFF*
By: /s/ Kyle Lefkoff
--------------------------------
*as attorney in fact for the following
Purchasers:
Larry Macks
Jurassic Ltd.
Josh Fidler
Morty Macks
Will's Wei Corp.
Robert Lemle
Caruthers Family LLC
Tim Snipes
Ramer 1990 Living Trust
Groupe Schneider Securities
JLS LLC
Doug Ramer
Trisun Financial, LLC
Eric Becker
Slade, Inc.
250 Venture Capital Associates
BANCBOSTON VENTURES INC.
By: /s/ Lars A. Swanson
--------------------------------
Name: Lars A. Swanson
-------------------------------
Title: Vice President
-------------------------------
/s/ Ed Flanders
-------------------------------------
Ed Flanders
/s/ Barbara Vonderheid
-------------------------------------
Barbara Vonderheid
/s/ Fred Gallart
-------------------------------------
Fred Gallart
/s/ Karl Maier
-------------------------------------
Karl Maier
/s/ Matt Zuschalg
-------------------------------------
Matt Zuschlag
/s/ Anne Haas
-------------------------------------
Anne Haas
-17-
<PAGE>
/s/ Bernard Dvorak
-------------------------------
Bernard Dvorak
/s/ Michael Simkin
-------------------------------
Michael Simkin
-18-
<PAGE>
SCHEDULE OF INVESTORS
---------------------
Telecom Partners, L.P. Centennial Fund IV, L.P.
1428 15th Street 1428 15th Street
Denver, CO 80202 Denver, CO 80202
Centennial Holdings, Inc. Centennial Fund V, L.P.
1428 15th Street 1428 15th Street
Denver, CO 80202 Denver, CO 80202
Centennial Entrepreneurs Fund V, L.P. Jeff E. Rhodes
1428 15th Street 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
Robert McKenzie William Elsner
60 Kearney Street 83 Glenmoor Place
Denver CO 80220 Englewood, CO 80110
Trailhead Ventures, L.P. MGVF II, Ltd.
730 17th Street, Suite 690 2400 Banc One Center
Denver, CO 80202 910 Travis Street
Houston, TX 77002
Boulder Ventures, L.P. Crest Funding Partners, L.P.
1634 Walnut Street, Suite 301 320 Park Avenue, 17th Floor
Boulder, CO 80202 New York, NY 10022
Crest SMR, L.L.C. Larry Macks
320 Park Avenue, 17th Floor c/o Kyle Lefkoff
New York, NY 10022 1634 Walnut St., Suite 301
Boulder, CO 80302
Jurassic Ltd. Josh Fidler
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Morty Macks Will's Wei Corp.
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Centennial Holdings I, LLC
1428 15th Street
Denver, CO 80202
<PAGE>
Robert Lemle Caruthers Family LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Tim Snipes Ramer 1990 Living Trust
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Groupe Schneider Securities JLS LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Doug Ramer Trisun Financial, LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Eric Becker Slade, Inc.
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
250 Venture Capital Assoc. BancBoston Ventures Incorporated
c/o Kyle Lefkoff 100 Federal St., 32nd Floor
1634 Walnut St., Suite 301 Boston MA 02110
Boulder, CO 80302
Ed Flanders Bernard Dvorak
12150 E. Briarwood Ave., Suite 145 1610 Wynkoop, Suite 300
Englewood, CO 80112 Denver, CO 80202
Barbara Vonderheid Fred Gallart
1610 Wynkoop, Suite 300 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
Matt Zuschlag Anne Haas
1600 Wynkoop, Suite 300 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
2
<PAGE>
Karl Maier
1610 Wynkoop, Suite 300
Denver, CO 80202
Michael Simkin Prudential Securities Incorporated
1610 Wynkoop, Suite 300 One New York Plaza, 18th Floor
Denver, CO 80202 New York, NY 10292-2018
The Roman Arch Fund, L.P. The Roman Arch Fund II, L.P.
Prudential Securities Incorporated Prudential Securities Incorporated
One New York Plaza, 18th Floor One New York Plaza, 18th Floor
New York, NY 10292-2018 New York, NY 10292-2018
GC&H Investments
1 Maritime Plaza
20th Floor
San Francisco, CA 94111-3580
3
<PAGE>
EXHIBIT 10.7
EXECUTION COPY
PURCHASE AGREEMENT
DATED: JANUARY 15, 1998
BETWEEN
CENTENNIAL COMMUNICATIONS CORP.
AND
THE PURCHASERS SET FORTH HEREIN
<PAGE>
PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of January 15, 1998,
between Centennial Communications Corp., a Delaware corporation (the "Company"),
and the Persons listed on the Schedule of Purchasers attached hereto
(collectively referred to herein as the "Purchasers" and individually as a
"Purchaser"). Except as otherwise indicated in this Agreement, capitalized
terms used but not defined herein have the meaning set forth in the 14% Senior
Discount Note Indenture dated as of January 15, 1998 between the Company and
State Street Bank and Trust Company, as Trustee and attached as Exhibit F hereto
(the "Indenture", it being understood that the meaning of such terms shall not
be modified or affected by any future amendment to the Indenture).
The parties hereto agree as follows:
AGREEMENTS
ARTICLE I
PURCHASE AND SALE
Section 1.1 Authorization and Closing.
-------------------------
A. Authorization of the Notes. The Company shall authorize the
--------------------------
issuance and sale to the Purchasers of an aggregate principal amount of
$10,000,000 (the "Offering Amount") in 9% Subordinated Convertible Notes due
2006 of the Company (the "Notes") having the rights and preferences set forth in
Exhibit A attached hereto. As more fully set forth on Exhibit A attached hereto,
in certain circumstances, the Notes are convertible into shares of the Company's
Common Stock, par value $.01 per share (the "Common Stock").
B. Purchase and Sale of the Notes. At Closing (as defined below), the
------------------------------
Company shall sell to each Purchaser and, subject to the terms set forth herein,
each Purchaser shall purchase from the Company, a Note having an aggregate
principal amount as set forth opposite such Purchaser's name on the Schedule of
Purchasers attached hereto (the "Private Placement").
C. The Closing. The closing (the "Closing") shall take place at the
-----------
offices of Latham & Watkins in New York City at 9:00 a.m. on January 15, 1998.
At Closing, the Company shall deliver to each Purchaser the Notes to be
purchased by such Purchaser, registered in such Purchaser's or its nominee's
name, upon payment of the purchase price thereof by a cashier's or certified
check, or by wire transfer of immediately available funds to an account to be
designated by the Company.
<PAGE>
2
ARTICLE II
CONDITIONS TO CLOSING
Section 2.1 Conditions of Each Purchaser's Obligations at the
-------------------------------------------------
Closing. The obligation of each Purchaser to purchase and pay for the Notes at
- -------
Closing is subject to the satisfaction as of the Closing of the following
conditions:
A. Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 5.1 shall be true and correct in all
respects at and as of the Closing as though then made, except to the extent
of changes caused by the transactions expressly contemplated by this
Agreement.
B. Registration Agreement. The Company, the Purchasers, the holders
----------------------
of the Senior Discount Notes due 2005 (the "Senior Notes") issued pursuant
to the Indenture and at least 75% of the holders of the Common Stock, the
Series A Preferred, the Series B Preferred, and the Series C Preferred,
shall have entered into a third amended and restated registration agreement
in form and substance as set forth in Exhibit B attached hereto (the
"Registration Agreement"), and the Registration Agreement shall be in full
force and effect as of the Closing.
C. Sale of the Notes to Each Purchaser. The Company shall have sold to
-----------------------------------
each Purchaser the Notes to be purchased by it under this Agreement at the
Closing and shall have received payment therefor.
D. Blue Sky Clearances. The Company shall have made all filings under
-------------------
applicable state securities laws necessary to consummate the issuance of
the Notes pursuant to this Agreement in compliance with such laws.
E. Opinion of Counsels. Each Purchaser shall have received from each
-------------------
of (i) Holland & Hart LLP, counsel for the Company and (ii) Estudio
Fernandez Portocarrero, Canelo & Asociados, special Peruvian counsel for
the Company, an opinion with respect to the matters set forth in Exhibit
C-1 and C-2 attached hereto, which shall be addressed to each Purchaser,
dated the date of the Closing, and in form and substance reasonably
satisfactory to each Purchaser.
F. Pledge Agreement. The Company and State Street Bank and Trust
----------------
Company, as Collateral Agent for the Purchasers and the holders of the
Senior Notes, shall have entered into a Collateral Pledge Agreement (the
"Pledge Agreement") in respect of the pledge by the Company of (i) 100% of
the outstanding Capital Stock of SMR Direct USA, Inc. and all future direct
Restricted Subsidiaries of the Company and
<PAGE>
3
(ii) 100% of the outstanding Capital Stock of Centennial Cayman Corp. and
SMR Direct Cayman Corp. (other than Excluded Stock) and 100% of the Capital
Stock (other than Excluded Stock) of all future foreign direct Restricted
Subsidiaries of the Company in form and substance as set forth in Exhibit D
attached hereto, and the Pledge Agreement shall be in full force and effect
as of the Closing. Such pledges will secure the payment and performance
when due of all the Obligations (as defined in the Pledge Agreement) of the
Company under the Indenture and the Senior Notes and under this Agreement
and the Notes. The rights of the holders of the Notes under the Pledge
Agreement are only subordinated to the rights of the holders of the Senior
Notes.
G. Escrow Agreeme. The Company and Morgan Stanley, Dean Witter,
--------------
Discover & Co. in its capacity as escrow agent (the "Escrow Agent"), shall
have entered into an escrow agreement (the "Escrow Agreement") in form and
substance as set forth in Exhibit E attached hereto, and the Escrow
Agreement shall be in full force and effect as of the Closing.
The net proceeds from the issuance by the Company of the Senior Notes
and the Notes (to be approximately $28,600,000) (the "Escrow Proceeds")
shall be deposited on the Closing date in an account to be established
pursuant to the Escrow Agreement for the benefit of the Company (the
"Escrow Fund") to be held in the custody of the Escrow Agent separate and
apart from all other funds and accounts of the holders of the Senior Notes,
the holders of the Notes, the Company or the Escrow Agent.
H. Closing Documents. The Company shall have delivered to each
-----------------
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1.1 and Sections
2.1.A. through 2.1.G. inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement, the Pledge
Agreement and each of the other agreements contemplated hereby, the
issuance and sale of the Notes, the reservation of a sufficient number
of Common Stock for issuance upon conversion of all of the outstanding
Notes and the consummation of all other transactions contemplated by
this Agreement;
(iii) certified copies of the Certificate of Incorporation and
the Company's bylaws, each as in effect at the Closing; and
(iv) copies of all third party and governmental consents,
approvals and
<PAGE>
filings required in connection with the consummation of the
transactions hereunder (including, without limitation, all blue sky
filings and waivers of all preemptive rights and rights of first
refusal).
I. Proceedings. All corporate and other proceedings taken or required
-----------
to be taken in connection with the transactions contemplated hereby to be
consummated at or prior to the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to each Purchaser
and its special counsel.
J. Amendment to Existing Purchase Agreements. The right of first
-----------------------------------------
refusal provisions in each of the Series A Purchase Agreement (as defined
below), the Series B Purchase Agreement (as defined below), the Series C
Purchase Agreement (as defined below) and the Purchase Agreement between
the Company and the Persons listed on the Schedule of Purchasers attached
thereto dated as of December 8, 1995, shall have been waived.
K. Expenses. The Company shall have reimbursed the Purchasers for the
--------
fees and expenses of their special counsel as provided in Section 7.1.A.
hereof.
L. Closing of Senior Notes Transaction. The closing of the Senior
-----------------------------------
Notes transaction shall have occurred simultaneously with the Closing
hereunder.
M. Waiver of Conditions. Any condition specified in Section 2.1 may
--------------------
be waived if consented to by each Purchaser; provided that no such waiver
shall be effective against any Purchaser unless it is set forth in a
writing executed by each Purchaser.
ARTICLE III
COVENANTS
Section 3.1 Covenants.
---------
A. Financial Statements and Other Information.
------------------------------------------
(i) Whether or not required by the rules and regulations of the SEC,
so long as any Notes are outstanding, the Company shall furnish to the
Purchasers (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" that describes
the financial condition and results of operations of the Company and its
Restricted
<PAGE>
5
Subsidiaries and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (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, in each case, within the time periods set forth
in the SEC's rules and regulations; and
(ii) For so long as any Notes remain outstanding, the Company shall
furnish to the Purchasers 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.
Except as otherwise required by law or judicial order or decree or by
any governmental agency or authority, each Person entitled to receive
information regarding the Company and its Subsidiaries under Sections 3.1.A.,
3.1.B., or 3.1.C. shall use its best efforts to maintain the confidentiality of
all nonpublic information obtained by it hereunder which the Company has
reasonably designated in writing as proprietary or confidential in nature;
provided that each such Person (i) may disclose such information in connection
with the sale or transfer or proposed sale or transfer of any Notes or
Underlying Common Stock, and (ii) may disclose such information to any partner,
subsidiary, Affiliate (as defined below) or parent of such Person or to
consultants, advisers, accountants, attorneys, representatives, officers,
directors or employees of the foregoing (provided that such persons are bound by
confidentiality provisions similar to those described herein) for the purpose of
evaluating its investment in the Company so long as such partner, subsidiary,
Affiliate or parent or such consultants, advisers, accountants, attorneys,
representatives, officer, director or employee is advised of the confidential
nature of the information.
For purposes of this Agreement, "confidential information" shall not
include (i) information that becomes publicly available (other than as result of
a breach of this Section 3.1.), (ii) any information which a Purchaser is
required to disclose under applicable law or regulation, including any
regulation applying to any stock exchange in which it or its Affiliates' shares
are listed, or as a result of an order or request of any competent judicial,
governmental or other authority, or (iii) any information that a Purchaser can
demonstrate was legally already in its possession prior to such Purchaser's
receipt of such information from another party or the Company.
For purposes of Sections 3.1.A., 3.1.B. and 3.1.C., the term
"Purchaser" shall include any Affiliate of a Purchaser who received Notes or
shares of Underlying Common Stock pursuant to a distribution from or a
liquidation of such Purchaser.
For purposes of this Agreement and the Registration Agreement, all
holdings of Underlying Common Stock by Persons who are Affiliates of each other
shall be aggregated for purposes of meeting any threshold tests under this
Agreement and the Registration Agreement. "Affiliate" shall have the meaning set
forth in Section 6.1 hereof and for purposes of meeting such threshold tests
shall include Persons which have received distributions of securities from a
<PAGE>
6
partnership holding such securities.
B. Inspection of Property. The Company shall permit any
----------------------
representatives designated by any Purchaser (so long as such Purchaser holds any
Underlying Common Stock) or any holder of at least 5% of the Underlying Common
Stock, upon reasonable notice and during normal business hours, to (i) visit and
inspect any of the properties of the Company and its Subsidiaries, (ii) examine
the corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom, and (iii) discuss the affairs, finances
and accounts of any such corporations with the directors, officers, key
employees and independent accountants of the Company and its Subsidiaries. The
presentation of an executed copy of this Agreement by any Purchaser to the
Company's independent accountants shall constitute the Company's permission to
its independent accountants to participate in discussions with such Persons.
C. Attendance at Board Meetings. The Company shall give each Purchaser
----------------------------
(so long as such Purchaser holds any Underlying Common Stock) and each holder of
at least 5% of the Underlying Common Stock written notice of each meeting of its
board of directors and each committee thereof at the same time and in the same
manner as notice is given to the directors (which notice shall be confirmed in
writing to each such Person) and the Company shall permit a representative of
each such Person to attend, as an observer, all meetings of its board of
directors and all committees thereof; provided that in the case of telephonic
meetings conducted in accordance with the Company's bylaws and applicable law,
each such Person's representative shall be given the opportunity to listen to
such telephonic meetings; and provided further that the Company has the right to
exclude such representatives from the entire meeting or portion thereof if
attendance by the representative at such meeting or portion thereof or
dissemination of such information would, in the reasonable determination of the
board of directors, compromise or adversely affect the attorney-client privilege
(on the basis of an opinion of counsel to the Company) or result in a conflict
of interest situation. Each representative shall be entitled to receive all
written materials and other information (including, without limitation, copies
of meeting minutes) given to directors in connection with such meetings at the
same time such materials and information are given to the directors. If the
Company proposes to take any action by written consent in lieu of a meeting of
its board of directors or of any committee thereof, the Company shall use its
best efforts to give written notice thereof to each such Person at least two
days prior to the effective date of such consent describing in reasonable detail
the nature and substance of such action.
D. Restrictions. So long as any of the Notes remain outstanding, the
Company shall not, without the consent of the holders of 51% of the Underlying
Common Stock:
(i)directly or indirectly make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the Notes except for a payment of
interest, principal or premium, if any,
<PAGE>
at Stated Maturity; provided that if an Event of Default on the Notes (as
defined therein) has occurred and is continuing, no such payment shall be
made until such time as the Event of Default has been cured or waived by
the holders of the Notes in accordance with their terms;
(ii) except as otherwise provided in Section 4.07 of the Indenture,
directly or indirectly declare or pay any dividends or make any
distributions upon any of its equity securities including the Series A
Preferred, the Series B Preferred or the Series C Preferred pursuant to the
terms of the Certificate of Incorporation;
(iii)directly or indirectly redeem, purchase or otherwise acquire,
or permit any Subsidiaries to redeem, purchase or otherwise acquire, any of
the Company's equity securities (including, without limitation, warrants,
options and other rights to acquire equity securities) other than for
repurchases of Common Stock from employees of the Company and its
Subsidiaries upon termination of employment pursuant to arrangements
approved by the Company's board of directors and other than pursuant to the
Conversion Rights Agreement dated the date hereof between the Company and
Merrill Lynch Global Allocation Fund, Inc. (the "Conversion Rights
Agreement");
(iv) engage in, or permit any Restricted Subsidiary to engage in, any
business other than a Permitted Business;
(v) directly or indirectly, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction
on the ability of any Restricted Subsidiary to (a) (i) pay dividends or
make any other distributions to the Company or any of its Restricted
Subsidiaries (A) on its Capital Stock or (B) with respect to any other
interest or participation in, or measured by, its profits or (ii) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries, (b)
make loans or advances to the Company or any of its Restricted
Subsidiaries, or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances
or restrictions existing under or by reasons of (i) the terms of any
Permitted Debt permitted to be incurred by any Restricted Subsidiary of the
Company, (ii) Existing Indebtedness as in effect on the date of the
Indenture, (iii) the Indenture, (iv) this Purchase Agreement and the Notes,
(v) applicable law, rules and regulations, (vi) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of
its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (vii) by reason of
customary non-
<PAGE>
8
assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (viii) purchase money
obligations or installment purchase agreements for property acquired in the
ordinary course of business that impose restrictions of the nature
described in clause (c) above on the property so acquired or (ix) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the
Indebtedness being refinanced;
(vi) increase the number of shares of Common Stock issuable pursuant
to stock option plans or stock ownership plans above 9% of the aggregate
number of shares of Common Stock, Underlying Common Stock and Common Stock
issuable on conversion of the Series A Preferred, the Series B Preferred
and the Series C Preferred outstanding immediately after the Closing date
(as such number is proportionately adjusted for stock splits, combinations
and dividends affecting the Common Stock and including all such employee
stock options, other purchase rights and conversion rights outstanding on
or before the Closing date) (the "Authorized Management Stock"), otherwise
amend or modify any stock option plan or employee stock ownership plan as
in existence as of the Closing (the "Stock Option Agreements"), adopt any
new stock option plan or employee stock ownership plan or issue any shares
of Common Stock to its or its Subsidiaries' employees other than pursuant
to the Company's existing stock option and employee stock ownership plans
and other than the repricing of options granted to certain executives of
the Company prior to the date hereof as determined by the Board of
Directors, which repricing shall not be below $1.45;
(vii)request the release of any funds in the Escrow Fund except in
connection and upon compliance with any certification requirements set
forth in the Escrow Agreement and the following:
(aa) with respect to the funding of the acquisition of an
Acquisition Target (as defined in the Escrow Agreement), (a) the
Company shall have prepared, with the assistance of U.S. and local
counsel, as appropriate, a detailed and complete due diligence report
with respect to the Acquisition Target, including legal advice
regarding each significant legal issue (to be considered in the light
of the circumstances, but including for example opinions as to the
effectiveness of the licenses or concessions for channels), (b) the
Company shall have prepared, with the assistance of financial
advisors, a financial analysis of the Acquisition Target (including
verification of the number of subscribers, if any, of the Acquisition
Target) and reviewed an audit of the financial statements for the most
recent fiscal period practicable, and (c) the Company's Board of
Directors shall have, on the basis of the reports, analysis and review
referred to above, approved the acquisition of the Acquisition Target.
In addition, the Acquisition Target shall be a direct or indirect
subsidiary of the Cayman Entities or the
<PAGE>
9
Company as required by Section 4.13 of the Indenture and will be a
"Restricted Subsidiary" (as defined in the Indenture); and
(bb) with respect to (a) the funding of Permitted Investments (as
defined in the Indenture) (except working capital, unless permitted by
clause (c) below), (b) the funds required for the acquisition of
channels, spectrum and other assets related to the operation of a
Permitted Business (as defined in the Indenture), or (c) the funding
of buildout in connection with the acquisition of a Permitted
Business, a Permitted Investment or the acquisition of channels,
spectrum and other assets related to the operation of a Permitted
Business or the funding of operating losses, not to exceed $3,000,000
in the aggregate, in connection with the Company's current and future
operations in the Republic of Chile (each a "Permitted Transaction"),
the Company's Board of Directors shall have approved the Permitted
Transaction. In addition, the assets and/or services which comprise
the Permitted Transaction shall be held in an entity that is a direct
or indirect subsidiary of the Cayman Entities or the Company.
Notwithstanding the foregoing, the Company may, with the consent of
the Majority Noteholders (as defined in the Pledge Agreement), request
the release of funds deposited in the Escrow Fund for other valid
business purposes;
(viii) except for the Additional Notes (as defined in the
Indenture) and as expressly contemplated by Section 4.09 of the Indenture,
authorize, issue or enter into any agreement providing for the issuance
(contingent or otherwise) of or otherwise "incur" as defined in Section
4.09 of the Indenture (a) any Indebtedness which is senior to the Notes
with respect to the payment of interest, principal or distributions upon
liquidation or otherwise, or (b) any Disqualified Stock; provided that
after the occurrence of a Triggering Event the restrictions set forth in
Section 3.1(D)(viii)(a) shall be of no further force and effect;
(ix) 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 (other than as permitted in Article 5 of the Indenture);
(x) except as set forth in Section 4.10 of the Indenture, (A)
sell, lease or otherwise dispose of, or permit any Restricted Subsidiary to
sell, lease or otherwise dispose of a material portion of its assets or
substantially all of its assets in any transaction or series of related
transactions, (B) sell or permanently dispose of any of its or any
Restricted Subsidiary's Proprietary Rights, or (C) create, incur or assume
or permit any Restricted Subsidiary to create, incur or assume, any Liens
other than Permitted Liens on any material assets of the Company and its
Restricted Subsidiaries; provided that the covenants in subclause (A) above
shall not restrict the sale or disposition of the
<PAGE>
10
Company's and its Subsidiary's U.S. wireless communications operations so
long as such sale or disposition is approved by the Company's board of
directors;
(xi) except as permitted in Section 4.11 of the Indenture, enter
into, any Affiliates' Transaction;
(xii)directly or indirectly, or permit its Subsidiaries to, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture or the Notes unless such consideration is
offered to be paid or is paid to all holders of the Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement; and
(xiii) (a) permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee any Indebtedness of the Company ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously
executes and delivers a Note Guarantee (a "Note Guarantee") of payment of
the Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Restricted Subsidiary of the
Company as a result of any payment by such Restricted Subsidiary under its
Note Guarantee. If the Guaranteed Indebtedness is pari passu with the
---- -----
Notes, then the guarantee of such Guaranteed Indebtedness shall be pari
----
passu with or subordinated to the Note Guarantee; and if the Guaranteed
-----
Indebtedness is subordinated to the Notes, then the guarantee of such
Guaranteed Indebtedness shall be subordinated to the Note Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
E. Affirmative Covenants. So long as any Notes remain outstanding,
the Company shall, and shall cause each Subsidiary to (unless waived by the
holders of 51% of the Underlying Common Stock):
(i) at all times cause to be done all things necessary to maintain,
preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses;
(ii) maintain and keep its properties in good repair, working order
and condition, and from time to time make all necessary and desirable
repairs, renewals and replacements, so that its businesses may be properly
and advantageously conducted at all times;
(iii)pay and discharge when due and payable all taxes, assessments
and
<PAGE>
11
governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon) and all claims for labor, materials or
supplies to the extent to which the failure to pay or discharge such
obligations would reasonably be expected to have a material adverse effect
upon the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries, taken as a whole,
unless and to the extent that the same are being contested in good faith
and by appropriate proceedings and adequate reserves (as determined in
accordance with generally accepted accounting principles, consistently
applied) have been established on its books with respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due unless and to the extent that the
same are being contested in good faith and by appropriate proceedings and
adequate reserves (as determined in accordance with generally accepted
accounting principles, consistently applied) have been established on its
books with respect thereto;
(v) comply in all material respects with all applicable laws,
rules and regulations of all governmental authorities;
(vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in
such amounts as are customary for corporations of similar size engaged in
similar lines of business;
(vii) maintain proper books of record and account which fairly
present its financial condition and results of operations and make
provisions on its financial statements for all such proper reserves as in
each case are required in accordance with generally accepted accounting
principles, consistently applied; and
(viii) enter into and maintain nondisclosure and noncompete
agreements with its key employees in the form approved by the board of
directors.
F. Compliance with Agreements. The Company shall perform and observe
--------------------------
(i) all of its obligations to each holder of the Notes and all of its
obligations to each holder of the Underlying Common Stock set forth in the
Notes, and the Company's bylaws, and (ii) all of its obligations to each holder
of Registrable Securities (as defined in the Registration Agreement) set forth
in the Registration Agreement.
G. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act, the Securities Exchange Act and the
<PAGE>
12
rules and regulations adopted by the Securities and Exchange Commission
thereunder and shall take such further action as any holder or holders of
Restricted Securities may reasonably request, all to the extent required to
enable such holders to sell Restricted Securities pursuant to (i) Rule 144
adopted by the Securities and Exchange Commission under the Securities Act (as
such rule may be amended from time to time) or any similar rule or regulations
hereunder adopted by the Securities and Exchange Commission, or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the Securities and Exchange Commission. Upon request, the
Company shall deliver to any holder of Restricted Securities a written statement
as to whether it has complied with such requirements.
H. Reservation of Common Stock. The Company shall at all times reserve
---------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the Notes, such number
of shares of Common Stock issuable upon the conversion of all outstanding Notes.
All shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Company shall take all such actions as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable laws or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be listed (except for
official notice of issuance which shall be immediately transmitted by the
Company upon issuance).
I. Proprietary Rights. The Company shall, and shall cause each
------------------
Subsidiary to, possess and maintain all material Proprietary Rights necessary to
the conduct of their respective businesses and own all right, title and interest
in and to, or have a valid license for, all material Proprietary Rights used by
the Company and each Subsidiary in the conduct of their respective businesses.
Neither the Company nor any Subsidiary shall take any action, or fail to take
any action, which would result in the invalidity, abuse, misuse or
unenforceability of such Proprietary Rights or which would infringe upon any
rights of other Persons.
J. Investments in United States Real Property Interests. The Company's
----------------------------------------------------
capital stock does not constitute a United States real property interest as that
term is defined in Section 897(c)(1)(A)(ii) of the Code. The preceding
representation is based on a determination by the Company that the Company is
not and has not been a United States real property holding corporation (as that
term is defined in Section 897(c)(2) of the Code) since the date of its
incorporation. The Company shall use its best efforts to ensure that it does not
at any time in the future become a United States real property holding
corporation. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify each Purchaser of such status.
K. Payment of Notes. The Company shall pay or cause to be paid the
----------------
principal of, premium, if any, and interest on the Notes on the dates and in the
manner provided in the Notes.
<PAGE>
13
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
L. Maintenance of Office. The Company shall maintain in the Borough of
---------------------
Manhattan, the City of New York, an office or agency where 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 Notes and this Agreement may be
served. The Company shall give prompt written notice to the holders of the Notes
of the location, and any change in the location, of such office or agency.
The Company may also from time to time designate one or more other
offices or agencies where the 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 holders of the Notes 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 defined in the Indenture) as one such office or agency of the
Company in accordance with Section 3.1.L.
M. Compliance Certificate. (a) The Company shall deliver to the
----------------------
Purchasers, within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Agreement and the Pledge Agreement, 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 Agreement and the Pledge Agreement and is not in default in the performance
or observance of any of the terms, provisions and conditions of this Agreement
and the Pledge Agreement (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 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.
<PAGE>
14
(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 3.1.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 III 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 Notes are outstanding,
deliver to the Purchasers, 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.
N. Stay, Usury; Extension. 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 Agreement; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law.
ARTICLE IV
TRANSFER RESTRICTIONS
Section 4.1 Transfer of Restricted Securities.
---------------------------------
A. Exceptions to Transfer Restrictions. Restricted Securities are
-----------------------------------
transferable pursuant to (a) public offerings registered under the Securities
Act, (b) Rule 144 of the Securities and Exchange Commission (or any similar rule
then in force) if such rule is available and (c) subject to the conditions
specified in Section 4.1.B. below, any other legally available means of
transfer.
B. Legend Removal. In connection with the transfer of any Restricted
--------------
Securities (other than a transfer described in Section 4.1.A.(a) or (b) above),
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or proposed transfer, together with an opinion of
counsel which (to the Company's reasonable satisfaction) is knowledgeable in
securities law matters to the effect that such transfer of Restricted Securities
may be effected without registration of such Restricted Securities under the
<PAGE>
15
Securities Act. In addition, if the holder of the Restricted Securities delivers
to the Company an opinion of counsel that no subsequent transfer of such
Restricted Securities shall require registration under the Securities Act, the
Company shall promptly upon such contemplated transfer deliver new notes or
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in Section 7.1.C.(ii). If the Company is not required to
deliver new Notes or certificates for such Restricted Securities not bearing
such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Article IV and Section 7.1.C.
ARTICLE V
REPRESENTATION AND WARRANTIES
Section 5.1 Representations and Warranties of the Company. As a
---------------------------------------------
material inducement to the Purchasers to enter into this Agreement and to
purchase the Notes, the Company hereby represents and warrants that:
A. No Order or Decree; No Registration Required. No order or decree
--------------------------------------------
asserting that the transactions contemplated by this Agreement are subject
to the registration requirements of the Securities Act has been issued and
no proceeding for that purpose has commenced or is pending or, to the
knowledge of the Company, is contemplated by any governmental authority or
agency.
B. Disclosure. The Preliminary Offering Memorandum and the Offering
----------
Memorandum delivered by the Company in connection with the Senior Notes as
of their respective dates and the Offering Memorandum as of the Closing
date, did not and any supplemental or amendment thereto will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
C. Status Report. The "Transaction Summary" contained in the Status
-------------
Report, dated October 24, 1997 (the "Status Report"), as at such date, did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Status Report made in reliance
upon and in conformity with information the Initial Purchasers furnished to
the Company in writing by or on behalf of the Initial Purchasers expressly
for use therein.
<PAGE>
16
D. Organization and Corporate Power. The Company is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of Delaware
and, except as set forth in the "Taxes Schedule" on this Agreement, is
qualified to do business in every jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement.
The copies of the Company's and each Subsidiary's constituent documents and
bylaws which have been furnished to the Purchasers' special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement
and are correct and complete. The Company has full corporate power and
authority to execute, deliver and perform its obligations under the
Purchase Agreement and the Notes and to consummate the transactions
contemplated by the Purchase Agreement and the Notes and to issue, sell and
deliver the Notes pursuant to this Agreement.
E. Release. On or prior to the Closing date, (i) the aggregate
-------
outstanding principal amount of the Company's 12% Senior Secured
Convertible Notes due 2002 (the "Series C Notes") and all accrued and
unpaid interest thereon were converted into shares of the Company's Series
C Preferred (as defined below) and (ii) the pledge of the shares of Capital
Stock of each of the Cayman Entities securing the Senior Notes was released
(the "Series C Note Release").
F. Capital Stock and Related Matters. As of the Closing and
---------------------------------
immediately thereafter, the authorized capital stock of the Company shall
consist of (a) seventeen million four hundred thousand (17,400,000) shares
of preferred stock, of which three hundred and fifty-two (352) shares shall
be designated as Series A Preferred (all of which shall be issued and
outstanding), six million three hundred ninety-nine thousand six hundred
forty-eight (6,399,648) shares will be designated as Series B Preferred
(five million seven hundred and thirty-five thousand two hundred and fifty-
one (5,735,251) of which will be issued and outstanding) and eleven million
(11,000,000) shares shall be designated as Series C Preferred (8,005,689 of
which will be issued and outstanding) and (b) forty million (40,000,000)
shares of Common Stock, of which three million five hundred and two
thousand six hundred fifty (3,502,650) shares shall be issued and
outstanding, 28,351,647 shares shall be reserved for issuance upon
conversion of the Notes, the Series C Preferred, the Series A Preferred and
the Series B Preferred, and two million three hundred and seven thousand
nine hundred and seventy-two (2,307,972) shares shall be reserved for
issuance pursuant to stock option plans. As of the Closing, neither the
Company nor any Subsidiary shall have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or
containing any profit
<PAGE>
17
participation features, nor shall it have outstanding any rights or options
to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock, except
for the Notes, the Series C Preferred, Series A Preferred, the Series B
Preferred, the Warrants and except as set forth on the attached
"Capitalization Schedule." The Capitalization Schedule accurately sets
forth the following with respect to all outstanding options and rights to
acquire the Company's capital stock: the holder, the number of shares
covered, the exercise price and the expiration date. As of the Closing,
neither the Company nor any Subsidiary shall be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to
acquire its capital stock, except as set forth on the Capitalization
Schedule, except in respect of the Senior Notes, the Warrants, Notes and
except pursuant to the Certificate of Incorporation. As of the Closing, all
of the outstanding shares of the Company's capital stock shall be validly
issued, fully paid and nonassessable and not subject to any preemptive
rights except as set forth in the Stockholders Agreement (as defined below)
and the Certificate of Incorporation.
Except as set forth in (a) the Purchase Agreement dated October 3,
1997 between the Company and the Purchasers listed therein (as amended to
the date hereof, the "Series C Purchase Agreement"), (b) the Purchase
Agreement dated November 22, 1996 between the Company and the holders of
the Series B Preferred (as amended to the date hereof, the "Series B
Purchase Agreement"), (c) the Registration Agreement, (d) the Stockholders
Agreement dated as of October 3, 1997 between the Company and the investors
party thereto (as amended to the date hereof, the "Stockholders
Agreement"), (e) the Purchase Agreement dated June 27, 1996 between the
Company and the holders of the Series A Preferred (as amended to the date
hereof, the "Series A Purchase Agreement") and (e) the Company's existing
certificate of incorporation, all of which have been waived, there are no
statutory or contractual stockholders preemptive rights or rights of
refusal with respect to the issuance of the Notes hereunder or the issuance
of any series of capital stock of the Company. The Company has not
violated any applicable federal or state securities laws in connection with
the offer, sale or issuance of any of its capital stock, and the offer,
sale and issuance of the Notes hereunder does not require registration
under the Securities Act or any applicable state securities laws. To the
best of the Company's knowledge, there are no agreements between the
Company's stockholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the
Company's affairs, except for the Stockholders Agreements between the
Company and certain of its stockholders, and the stock option agreements
set forth on the Capitalization Schedule.
Except as set forth in the Indenture, the Registration Agreement, the
Warrant Agreement, and the Note Registration Agreement dated the date
hereof between the Company and State Street Bank and Trust Company, as
trustee (the "Notes Registration
<PAGE>
18
Rights Agreement"), the Company is not under any obligation to register any
of its currently outstanding securities or any of its securities which may
hereafter be issued.
G. Subsidiaries; Investments. The attached "Subsidiary Schedule"
-------------------------
correctly sets forth the name of each Subsidiary of the Company, the
jurisdiction of its incorporation and the Persons owning the outstanding
capital stock of each Subsidiary. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own its
properties and to carry on its businesses as now being conducted and as
presently proposed to be conducted and is qualified to do business in every
jurisdiction in which the failure to so qualify would reasonably be
expected to have a material adverse effect on the financial condition,
operating results, assets, operations or business prospects of the Company
and its Subsidiaries, taken as a whole. Except as set forth on the
Subsidiary Schedule, all of the outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable, and all such
shares are owned by the Company or another Subsidiary free and clear of any
lien, charge or encumbrance. Except as set forth on the Subsidiary
Schedule, neither the Company nor any Subsidiary owns or holds the right to
acquire any shares of stock or any other security or interest in any other
Person.
H. Authorization; No Breach. The execution, delivery and performance
------------------------
of this Agreement, the Registration Agreement, the Notes, the Pledge
Agreement and all other agreements contemplated by this Agreement to which
the Company is a party and the filing of the amendment of the Certificate
of Incorporation have been duly authorized by the Company. This Agreement,
the Registration Agreement, the Pledge Agreement, the Notes, the
Certificate of Incorporation and all other agreements contemplated by this
Agreement each constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Pledge
Agreement will create a valid and perfected first priority security
interest in the Pledged Collateral (as defined therein). Except as set
forth on the attached "Restriction Schedule," the execution and delivery by
the Company of this Agreement, the Registration Agreement, the Pledge
Agreement, and all other agreements contemplated by this Agreement to which
the Company is a party, the offering, sale and issuance of the Notes
hereunder, the issuance of the Common Stock upon conversion of the Notes,
the filing of the amendment of the Certificate of Incorporation and the
fulfillment of and compliance with the respective terms hereof and thereof
by the Company, do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge
or encumbrance upon the Company's or any Subsidiary's capital stock or
assets pursuant to, (iv) give any third party the right to accelerate any
obligations under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the
Certificate of Incorporation or the
<PAGE>
19
bylaws of the Company or any Subsidiary, or any law, statute, rule or
regulation to which the Company or any Subsidiary is subject, or any
material agreement, instrument, order, judgment or decree to which the
Company or any Subsidiary is subject. Except as set forth on the
Restrictions Schedule, none of the Subsidiaries is subject to any
restrictions upon making loans or advances or paying dividends to,
transferring property to, or repaying any Indebtedness owed to, the Company
or another Subsidiary.
I. Financial Statements. Attached hereto as the "Financial Statements
--------------------
Schedule" are the following financial statements:
(i) the audited consolidated balance sheet, statement of
operations, statement of mandatorily redeemable, convertible preferred
stock and stockholders equity and cash flows of the Company and its
Subsidiaries for the period from inception October 25, 1995 to
December 31, 1995 and as of December 31, 1996, for the twelve-month
period then ended; and
(ii) the unaudited consolidated balance sheet and statement of
operations of the Company and its Subsidiaries as of September 30,
1997 (the "Latest Balance Sheet") and for the nine-month period then
ended.
Each of the foregoing financial statements (including in all cases the
notes thereto, if any) fairly presents the financial condition and results
of operations at the dates and for the periods indicated, is consistent
with the books and records of the Company (which, in turn, are accurate and
complete in all material respects) and has been prepared in accordance with
generally accepted accounting principles, consistently applied, subject in
the case of the unaudited financial statements to the lack of footnote
disclosure and changes resulting from normal year-end audit adjustments
(none of which would, alone or in the aggregate, be materially adverse to
the financial condition, operating results, assets, operations or business
prospects of the Company and its subsidiaries, taken as a whole).
J. Absence of Undisclosed Liabilities. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not
have any obligation or liability (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known to the Company or any
Subsidiary, whether due or to become due and regardless of when asserted)
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing other than: (i) liabilities set forth
on the Latest Balance Sheet (including any notes thereto), (ii) liabilities
and obligations which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business which are not material
individually or in the aggregate (none of which is a liability resulting
from breach of contract, breach of warranty, tort, infringement, claim or
lawsuit) and (iii) liabilities under executory contracts not required to be
disclosed on the Contracts Schedule, which are not material
<PAGE>
20
individually or in the aggregate.
K. No Material Adverse Change. Since the date of the Latest Balance
--------------------------
Sheet, there has been no material adverse change in the financial
condition, operating results, assets, operations, business prospects,
employee relations or customer or supplier relations of the Company and its
Subsidiaries, taken as a whole, except as set forth on the attached
"Adverse Change Schedule."
L. Absence of Certain Developments. Except as expressly contemplated
-------------------------------
by this Agreement, the divestiture of the Company's U.S. operations, the
Indenture or as set forth on the attached "Developments Schedule," since
the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has:
(i) issued any notes, bonds or other debt securities or any
equity securities or any securities convertible, exchangeable or
exercisable into any equity securities;
(ii) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(iii) discharged or satisfied any material lien or encumbrance
or paid any material obligation or liability, other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its stock or
purchased or redeemed any shares of its stock or any warrants, options
or other rights to acquire its stock;
(v) mortgaged or pledged any of its properties or assets or
subjected them to any material lien, security interest, charge or
other encumbrance, except liens for current property taxes not yet due
and payable;
(vi) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or canceled any material
debts or claims;
(vii) sold, assigned or transferred any Proprietary Rights or
other intangible assets, or disclosed any proprietary confidential
information to any Person;
(viii) suffered any extraordinary losses or waived any right of
material
<PAGE>
21
value, whether or not in the ordinary course of business or consistent
with past practice;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(x) entered into any other material transaction, whether or
not in the ordinary course of business;
(xi) made any loans or advances to, guarantees for the benefit
of, or any Investments in, any Persons in excess of $250,000 in the
aggregate;
(xii) made any charitable contributions or pledges;
(xiii) suffered any damage, destruction or casualty loss
exceeding in the aggregate $250,000, whether or not covered by
insurance;
(xiv) made any Investment in or taken steps to incorporate any
Subsidiary;
(xv) received any notice of the loss of a material service
order in excess of $100,000 or the loss of a major customer with
service orders in excess of $100,000 annually; or
(xvi) entered into an agreement or commitment to do any of the
foregoing.
Neither the Company nor any Subsidiary has at any time made any
payments for political contributions or made any bribes, kickback payments
or other illegal payments.
M. Assets. Except as set forth on the "Assets Schedule," the Company
------
and each Subsidiary have good and marketable title to, or a valid leasehold
interest in, the properties and assets used by them, located on their
premises or shown on the Latest Balance Sheet or acquired thereafter, free
and clear of all Liens, except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Liens for current property taxes not yet due and payable.
Except as described on the Assets Schedule, the Company's and each
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition in all materials respects and are fit for use in the
ordinary course of business.
N. Tax Matters. Except as set forth in the attached "Taxes Schedule,"
-----------
the
<PAGE>
22
Company and each Subsidiary have filed all tax returns which they are
required to file; all such returns are true and correct in all material
respects; the Company and each Subsidiary have in all respects paid all
taxes owed by them and withheld and paid over all taxes which they are
obligated to withhold from amounts owing to any employee, creditor or third
party; neither the Company nor any Subsidiary has waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to a tax assessment or deficiency; the assessment of any additional
taxes for periods for which returns have been filed is not expected; and
the federal income tax returns of the Company and its Subsidiaries have not
been audited.
O. Contracts and Commitments. Except as expressly contemplated by this
-------------------------
Agreement or as set forth on the attached "Contracts Schedule," as of the
Closing, neither the Company nor any Subsidiary is a party to any written
or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any contract with any labor union, or any severance
agreements;
(ii) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $100,000 or
contract relating to loans to officers, directors or affiliates;
(iii) contract under which the Company or a Subsidiary has
advanced or loaned any other Person amounts in the aggregate exceeding
$100,000;
(iv) agreement or indenture relating to the borrowing of
money or the mortgaging, pledging or otherwise placing a lien on any
material asset or material group of assets of the Company and its
Subsidiaries;
(v) guarantee of any obligation;
(vi) lease or agreement under which the Company or any
Subsidiary is lessee of or holds or operates any property, real or
personal, owned by any other party, except for any lease of real or
personal property under which the aggregate annual rental payments do
not exceed $25,000;
(vii) lease or agreement under which the Company or any
Subsidiary is lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by the Company or
any Subsidiary;
(viii) contract or group of related contracts with the same
party or group
<PAGE>
23
of affiliated parties the performance of which involves a
consideration in excess of $150,000;
(ix) assignment, license, indemnification or agreement with
respect to any Proprietary Rights or other intangible property;
(x) warranty agreement with respect to its services rendered
or its products sold or leased;
(xi) agreements under which it has granted any Person any
registration rights (including piggyback rights) other than the Notes
Registration Rights Agreement and the Registration Agreement;
(xii) contract, agreement or other arrangement with any
officer, director, employee or Affiliate, or any Affiliate of any
officer, director or employee except employment agreements terminable
at will;
(xiii) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world;
(xiv) any other agreement which is material to its operations
and business prospects or involves a consideration in excess of
$150,000 annually; and
(xv) any loan agreement with or guarantee to any employee,
officer or director of the Company.
The Company and each Subsidiary have performed all material
obligations required to be performed by them and are not in default under
or in breach of nor in receipt of any claim of default or breach under any
contract or commitment required to be set forth on the "Contracts Schedule"
(each, a "Material Contract"); no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach
or event of noncompliance under any Material Contract, to which the Company
or any Subsidiary is subject; neither the Company nor any Subsidiary has
any present expectation or intention of not fully performing all such
obligations; and neither the Company nor any Subsidiary has knowledge of
any breach or anticipated breach by the other parties to any Material
Contract or commitment to which it is a party.
Except as set forth on the Contracts Schedule, since the Latest
Balance Sheet, there have been no material changes in any employment
agreement or compensation arrangement between the Company and its
employees.
P. Proprietary Rights. The attached "Proprietary Rights Schedule"
contains a
<PAGE>
24
complete and accurate list of (i) all patented and registered Proprietary
Rights owned by the Company or any Subsidiary, (ii) all pending patent
applications and applications for registrations of other Proprietary Rights
filed by the Company or any Subsidiary, (iii) all unregistered trade names
and corporate names owned or used by the Company and its Subsidiaries and
(iv) all unregistered trademarks, service marks and copyrights and computer
software which are material to the financial condition, operating results,
assets, operations or business prospects of the Company and its
Subsidiaries, taken as a whole. The Proprietary Rights Schedule also
contains a complete and accurate list of all licenses and other rights
granted by the Company or any Subsidiary to any third party with respect to
any Proprietary Rights and all licenses and other rights granted by any
third party to the Company or any Subsidiary with respect to any
Proprietary Rights. The Company or one of its Subsidiaries owns or has the
right to use pursuant to a valid license all Proprietary Rights necessary
for the operation of the businesses of the Company and its Subsidiaries as
presently conducted and as presently proposed to be conducted. The loss or
expiration of any Proprietary Right or related group of Proprietary Rights
would not have a material adverse effect on the conduct of the Company's
and its Subsidiaries' respective businesses, and no such loss or expiration
is, to the best of the Company's knowledge, threatened, pending or
reasonably foreseeable. The Company and its Subsidiaries have taken all
necessary actions to maintain and protect the Proprietary Rights which they
own and use. To the best of the Company's knowledge, the owners of any
Proprietary Rights licensed to the Company or any Subsidiary have taken all
necessary actions to maintain and protect the Proprietary Rights which are
subject to such licenses. Except as indicated on the Proprietary Rights
Schedule, (i) the Company and its Subsidiaries own all right, title, and
interest in and to all of the Proprietary Rights listed on such schedule
and all other Proprietary Rights material to the operation of the
businesses of the Company and its Subsidiaries, (ii) there have been no
claims made against the Company or any Subsidiary asserting the invalidity,
misuse or unenforceability of any of such rights, and, to the best of the
Company's knowledge, there are no grounds for the same, (iii) neither the
Company nor any Subsidiary has received a notice of conflict with the
asserted rights of others, and (iv) the conduct of the Company's and each
Subsidiary's business has not infringed or misappropriated and does not
infringe or misappropriate any Proprietary Rights of other Persons, nor
would any future conduct as presently contemplated infringe any Proprietary
Rights of other Persons and, to the best of the Company's knowledge, the
Proprietary Rights owned by the Company or any Subsidiary have not been
infringed or misappropriated by other Persons. Each of the Company and the
Subsidiaries has good and marketable title to all property (real and
personal), free and clear of all liens, claims, security interests or other
encumbrances except for the lien under the Pledge Agreement and except for
the liens of E.F. Johnson Company, Boston Financial & Equity Corporation,
Maxon America, Inc. and other equipment suppliers in respect of leased
equipment being held under lease by each of the Company and the
Subsidiaries is held by it under valid, subsisting and enforceable leases,
with only such exceptions as in the aggregate are not materially burdensome
and do not interfere in any material respect with
<PAGE>
25
the conduct of the business of the Company and the Subsidiaries taken as a
whole.
Q. Litigation, etc. Except as set forth on the attached "Litigation
---------------
Schedule," there are no actions, suits, proceedings, orders, investigations
or claims pending or, to the best of the Company's knowledge, threatened
against or affecting the Company or any Subsidiary (or to the best of the
Company's knowledge, pending or threatened against or affecting any of the
officers, directors or employees of the Company and its Subsidiaries with
respect to their businesses or proposed business activities) at law or in
equity, or before or by any governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, any
actions, suit, proceedings or investigations with respect to the
transactions contemplated by this Agreement); neither the Company nor any
Subsidiary is subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Company's
knowledge, any governmental investigations or inquiries (including inquiry
as to the qualification to hold or receive any license or permit); and, to
the best of the Company's knowledge, there is no basis for any of the
foregoing. Neither the Company nor any Subsidiary is subject to any
judgment, order or decree of any court or other governmental agency.
Neither the Company nor any Subsidiary has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage which
may be material to its business.
R. Brokers. Except for fees to be paid to Salomon Brothers Inc and
-------
Prudential Securities Incorporated, there are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement binding upon the Company or any Subsidiary. The Company shall
pay, and hold each Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and out-
of-pocket expenses) arising in connection with any such claim.
S. Governmental Consent, etc. Except as set forth on the attached
-------------------------
"Consents Schedule," no permit, consent, approval or authorization of, or
declaration to or filing with, any governmental authority, agency or
official is required in connection with the execution, delivery and
performance by the Company of this Agreement or the other agreements
contemplated hereby, or the consummation by the Company of any other
transactions contemplated hereby or thereby, except as expressly
contemplated herein or in the Consents Schedule.
T. Insurance. The attached "Insurance Schedule" contains a description
---------
of each insurance policy maintained by the Company and its Subsidiaries
with respect to its properties, assets and businesses, and each such policy
is in full force and effect as of the Closing. Neither the Company nor any
Subsidiary is in default with respect to its obligations under any
insurance policy maintained by it. The insurance coverage of the
<PAGE>
26
Company and its Subsidiaries is customary for corporations of similar size
engaged in similar lines of business.
U. Employees and ERISA. The Company is not aware that any executive or
-------------------
key employee of the Company or any Subsidiary or any group of employees of
the Company or any Subsidiary has any plans to terminate employment with
the Company or any Subsidiary. The Company and each Subsidiary have
complied in all material respects with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and
other taxes, and the Company is not aware that it or any Subsidiary has any
material labor relations problems (including any union organization
activities, threatened or actual strikes or work stoppages or material
grievances).
Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge after due inquiry, any of their employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present
or proposed business activities of the Company and its Subsidiaries, except
for agreements between the Company and its present and former employees.
Neither the Company nor any Subsidiary presently maintains or
contributes to, or ever has maintained or contributed to, any "employee
benefit plan," as such term is defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), with respect
to which the Company is required to file Internal Revenue Service ("IRS")
Form 5500, and neither the Company nor any Subsidiary presently contributes
to or ever has contributed to any "multiemployer plan," as such term is
defined in Section 3 of ERISA.
V. Compliance with Laws. Except as set forth on the attached
"Compliance Schedule," neither the Company nor any Subsidiary has violated
any law or any governmental regulation or requirement which violation would
reasonably be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects of
the Company and its Subsidiaries, taken as a whole, and neither the Company
nor any Subsidiary has received notice of any such violation. Neither the
Company nor the Subsidiary is subject to any clean up or other liability,
or has reason to believe it may become subject to any clean up or other
liability, under any federal, state or local environmental law, rule or
regulation.
W. Environmental Laws. None of the Company, to the knowledge of the
Company, any of its Subsidiaries have violated any foreign, federal, state
of local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws") which could reasonably be
expected to have, individually or in the aggregate, a
<PAGE>
27
Material Adverse Effect.
X. Hazardous Material. There is no alleged liability, or to the
------------------
knowledge of the Company, potential liability (including, without
limitation, alleged or potential liability or investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property
damages, personal injuries or penalties), of the Company or any of its
Subsidiaries arising out of, based on or resulting from (i) the presence or
release into the environment of any Hazardous Material (as defined herein)
at any location owned or operated by the Company or any of its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect or
(ii) any violation of any Environmental Law. The term "Hazardous Material"
means (A) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
(B) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any
polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material waste or substance regulated under or
within the meaning of any other Environmental Law.
Y. Compliance with Regulations G, T, U or X. None of the execution,
----------------------------------------
delivery and performance of this Agreement, the issuance of the Notes, the
application of proceeds from the issuance and sale of the Notes and the
consummation of the transactions contemplated thereby will violate
Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System.
Z. Affiliated Transactions. Except as described in this Agreement or
-----------------------
as set forth on the attached "Affiliated Transactions Schedule," no
officer, director or stockholder of the Company or any Subsidiary or any
Person related by blood or marriage to any such Person or any entity in
which any such Person owns any beneficial interest, is a party to any
agreement, contract, commitment or transaction with the Company or any
Subsidiary or has any material interest in any material property used by
the Company or any Subsidiary.
AA. Disclosure. Neither this Agreement nor any of the schedules,
----------
attachments, written statements, documents, certificates or other items
prepared or supplied to any Purchaser by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading.
BB. Securities Compliance. Assuming (i) that the representations and
---------------------
warranties of the Purchasers set forth in Section 7.1.C. are true, and (ii)
that the Purchasers comply with the covenants set forth in Section 7.1.C.,
the purchase and sale of the Notes pursuant to this Agreement are exempt
from the registration requirements of the Securities Act.
<PAGE>
28
CC. Licenses. The "Licenses Schedule" sets forth a list of the
--------
licenses held by the Company in connection with 800 and 900 MHZ spectrum
for use in connection with specialized mobile radio ("SMR") or paging, as
the case may be (the "Licenses"). Each of the Licenses is currently in full
force and effect.
DD. No Distribution. Except as permitted by the Securities Act,
---------------
neither the Company nor any of the Subsidiaries have distributed and, as of
the Closing date and the completion of distribution of the Notes, will not
distribute any offering material in connection with the offering and sale
of Notes other than the Preliminary Offering Memorandum and the Offering
Memorandum.
EE. Illegal Payments. Neither the Company nor any of the Subsidiaries
nor, to the Company's knowledge, any employee or agent of the Company or
any Subsidiary has made any payments of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law, rule
or regulation, except to the extent that the violation of such law, rule or
regulation would not have, individually or in the aggregate, a Material
Adverse Effect.
FF. No Demand Registration. No holder of any security of the Company
or any of the Subsidiaries has any right to request or demand registration
of the shares of Common Stock or any other security of the Company or any
of the Subsidiaries because of the consummation of the transactions
contemplated by this Agreement or the Registration Agreement.
GG. Closing date. The representations and warranties of the Company
contained in this Section 5.1 and elsewhere in this Agreement and all
information contained in any exhibit, schedule or attachment hereto or in
any writing delivered by, or on behalf of, the Company to any Purchaser
shall be true and correct in all material respects on the date of Closing
as though then made, except as affected by the transactions expressly
contemplated by this Agreement.
ARTICLE VI
RELEASE OF PLEDGE AND SUBORDINATION OF NOTES
Section 6.1 Triggering Event. At any time on or after the date hereof,
upon the occurrence of a Triggering Event, (i) the holders of the Notes shall
have no rights to the Pledged Collateral under the Pledge Agreement, and (ii)
the Notes shall become subordinated to all other Indebtedness of the Company
that is permitted to be incurred by the Company pursuant to the Indenture.
<PAGE>
29
Upon the occurrence of a Triggering Event, the Majority Noteholders
(as defined in the Pledge Agreement), shall deliver to the Collateral Agent a
certificate confirming the occurrence of the Triggering Event and the
termination of the security interest in the Pledged Collateral for the benefit
of the holders of the Notes and the termination of such holders' rights under
the Pledge Agreement.
ARTICLE VII
DEFINITIONS
Section 7.1 Definitions. For purposes of this Agreement, the following
terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular
Person.
"Affiliate Transaction" shall have the meaning given to such term in
the Indenture.
"Capital Stock" shall have the meaning given to such term in the
Indenture.
"Disqualified Stock" shall have the meaning given to such term in the
Indenture.
"Escrow Agreement" means the Escrow Agreement, dated as of the date
hereof, by and among the Company and Morgan Stanley, Dean Witter, Discover
& Co., as Escrow Agent, and any other parties listed thereto, as such
agreement may be amended, modified or supplemented from time to time.
"Escrow Fund" shall have the meaning given to such term in the Escrow
Agreement.
"Event of Noncompliance" means an event that with notice or the
passage of time would cause an event of default under the Notes.
"Excluded Stock" shall have the meaning given to such term in the
Indenture.
"Existing Indebtedness" shall have the meaning given to such term in
the Indenture.
"Indebtedness" shall have the meaning given to such term in the
Indenture.
<PAGE>
30
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Lien" shall have the meaning given to such term in the Indenture.
"Material Adverse Effect" as defined in the Indenture.
"Officer's Certificate" means a certificate signed by the Company's
chief executive officer, president or its chief financial officer, stating that
(i) the officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the accuracy of
the information set forth in such certificate and (ii) to the best of such
officer's knowledge, such certificate does not misstate any material fact and
does not omit to state any fact necessary to make the certificate not
misleading.
"Permitted Business" shall have the meaning given to such term in the
Indenture.
"Permitted Debt" shall mean the Debt which is Permitted Debt as such
term is defined in Section 4.09 of the Indenture.
"Permitted Liens" shall mean the Liens which are Permitted Liens as
such term is defined in the Indenture.
"Permitted Refinancing Indebtedness" shall mean the Indebtedness which
is Permitted Refinancing Indebtedness as such term is defined in the Indenture.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Proprietary Rights" means all (i) patents, patent applications,
patent disclosures and inventions, (ii) trademarks, service marks, trade dress,
trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data and documentation, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and
<PAGE>
31
customer and supplier lists and information), (vii) other intellectual property
rights, and (viii) copies and tangible embodiments thereof (in whatever form or
medium).
"Restricted Securities" means (i) the Notes issued hereunder, (ii) the
Common Stock issued upon conversion of the Notes and (iii) any securities issued
with respect to the securities referred to in clauses (i) or (ii) above by way
of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) become eligible for sale pursuant to Rule 144(k) (or any
similar provision then in force) under the Securities Act or (c) been otherwise
transferred and new notes or certificates for them not bearing the Securities
Act legend set forth in Section 7.1.C.(ii) have been delivered by the Company in
accordance with Section 4.1. Whenever any particular securities cease to be
Restricted Securities, the holder thereof shall be entitled to like tenor not
bearing a Securities Act legend of the character set forth in Section
7.1.C.(ii).
"Restricted Subsidiary" shall have the meaning given to such term in
the Indenture.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" or "SEC" includes any
governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or
<PAGE>
32
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Triggering Event" shall have the meaning given to such term in the
Indenture.
"Underlying Common Stock" means (i) the Common Stock issued or
issuable upon conversion of the Notes and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who holds Notes shall be deemed to be the holder of
the Underlying Common Stock obtainable upon conversion of the Notes in
connection with the transfer thereof or otherwise, regardless of any restriction
or limitation on the conversion of the Notes. As to any particular shares of
Underlying Common Stock, such shares shall cease to be Underlying Common Stock
when they have been (a) effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (b)
distributed to the public through a broker, dealer or market maker pursuant to
Rule 144 under the Securities Act (or any similar provision then in force).
"Unrestricted Subsidiary" shall have the meaning given to such term in
the Indenture.
<PAGE>
33
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Miscellaneous
-------------
A. Expenses. The Company agrees to pay, and hold each Purchaser and
--------
all holders of Notes and shares of Underlying Common Stock harmless against
liability for the payment of (i) the reasonable out-of-pocket expenses of the
Purchasers incurred in connection with the transactions contemplated hereby,
including due diligence, (ii) the preparation and negotiation of this Agreement
and the agreements contemplated hereby, and the fees and expenses of special
counsel to the Purchaser arising in connection with negotiation and execution of
this Agreement, which shall be payable at the Closing, (iii) the reasonable fees
and expenses incurred with respect to any amendments or waivers (whether or not
the same become effective) under or in respect of this Agreement, the agreements
contemplated hereby or the Certificate of Incorporation (including, without
limitation, in connection with any proposed merger, sale or recapitalization of
the Company), (iv) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of any Notes or of Common Stock issuable upon conversion of the
Notes, (v) all costs fees and expenses incurred by the Purchaser in connection
with the enforcement of the rights granted under this Agreement, the agreements
contemplated hereby and the Certificate of Incorporation, and (vi) the
reasonable fees and expenses incurred at the request of the Company by each such
Person in any filing with any governmental agency with respect to its investment
in the Company or in any other filing with any governmental agency with respect
to the Company which mentions such Person.
B. Remedies. Each holder of Notes and Underlying Common Stock shall
--------
have all rights and remedies set forth in this Agreement and the Notes and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
The Company agrees to indemnify and hold the Purchasers, their
officers, directors, and Affiliates harmless against any loss, liability, damage
or expense (including reasonable legal fees and costs) which such Purchasers may
suffer, sustain or become subject to as a result of or in connection with the
breach by the Company of any representation, warranty, covenant or agreement of
the Company contained in this Agreement, or the Notes, or the other agreements
contemplated hereby.
C. Purchaser's Investment Representations. Each Purchaser, as to
--------------------------------------
itself only,
<PAGE>
34
hereby represents that:
(i) it is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act;
(ii) it is acquiring the Restricted Securities purchased hereunder or
acquired pursuant hereto for its own account with the present intention of
holding such securities for purposes of investment, and that it has no
intention of selling such securities in a public distribution in violation
of the federal securities laws or any applicable state securities laws;
provided that nothing contained herein shall prevent any Purchaser and
subsequent holders of Restricted Securities from transferring such
securities in compliance with the provisions of Section 4.1 hereof. Each
Note or certificate for Restricted Securities shall be imprinted with a
legend in substantially the following form:
"The securities represented by this certificate were originally
issued on January 15, 1998, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the securities
represented are subject to the conditions specified in the Purchase
Agreement, dated as of January 15, 1998 between the issuer (the
"Company") and certain investors, and the Company reserves the right
to refuse the transfer of such securities until such conditions have
been fulfilled with respect to such transfer. A copy of such
conditions shall be furnished by the Company to the holder hereof upon
written request and without charge."
(iii)it understands that it must bear the economic risk of the
investment in the Restricted Securities for an indefinite period of time
because the Restricted Securities have not been registered under the
Securities Act and applicable state securities laws and therefore cannot be
sold unless they are subsequently registered under the Securities Act and
applicable state securities laws or an exemption from such registration is
available; and
(iv) the execution, delivery and performance by such Purchaser of this
Agreement and all other agreements to which such Purchaser is a party have
been duly authorized by such Purchaser and each constitutes a valid and
binding obligation of such Purchaser, enforceable in accordance with its
terms.
D. Consent to Amendments. Except as otherwise expressly provided
---------------------
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of 51% of the Underlying Common Stock. No other course of dealing
between the Company and the holder of any Notes or Underlying Common Stock or
any delay in exercising any rights hereunder shall operate as a waiver of any
<PAGE>
35
rights of any such holders. For purposes of this Agreement, Notes or shares of
Underlying Common Stock held by the Company or any Subsidiaries shall not be
deemed to be outstanding. If the Company pays any consideration to any holder of
Notes or Underlying Common Stock for such holder's consent to any amendment,
modification or waiver hereunder, the Company shall also pay each other holder
of Notes or Underlying Common Stock granting its consent hereunder equivalent
consideration computed on a pro rata basis.
--- ----
E. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Purchaser or on its behalf for a period of 2 years
from the date hereof.
F. Successors and Assigns. This Agreement may not be assigned by the
----------------------
Company without the prior written consent of the Purchasers. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, and whether or not any express
assignment has been made, the provisions of this Agreement which are for any
Purchaser's benefit as a purchaser or holder of Notes or Underlying Common Stock
are also for the benefit of, and enforceable by, any subsequent holder of such
Note or such Underlying Common Stock.
G. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
H. Counterparts; Facsimile. This Agreement may be executed
-----------------------
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement. This Agreement may be executed by
facsimile.
I. Descriptive Headings; Interpretation. The descriptive headings of
------------------------------------
this Agreement are inserted for convenience only and do not constitute a Section
of this Agreement. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation.
J. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
K. Notices. All notices, demands or other communications to be
-------
given or
<PAGE>
36
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid) or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
Schedule of Purchasers and to the Company at the address listed below:
Centennial Communications Corp.
1610 Wynkoop, Suite 300
Denver, CO 80202
Attention: Chief Executive Officer
with a copy to:
Holland & Hart LLP
555 Seventeenth Street
Suite 3200
Denver, CO 80202
Attention: Michael S. Quinn
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
L. Integration. This Agreement, together with the Registration
-----------
Agreement, the Notes and the Pledge Agreement constitutes the entire agreement
between the Company and the Purchasers with respect to the subject matter
covered hereby and thereby and supersedes all prior or contemporaneous oral or
written agreements, arrangements or understandings.
M. Understanding Among the Purchasers. The determination of each
----------------------------------
Purchaser to purchase the Notes pursuant to this Agreement has been made by such
Purchaser independent of any other Purchaser and independent of any statements
or opinions as to the advisability of such purchase or as to the properties,
business, prospects or condition (financial or otherwise) of the Company and its
Subsidiaries which may have been made or given by any other Purchaser or by any
agent or employee of any other Purchaser.
* * * * * * * * *
<PAGE>
37
IN WITNESS WHEREOF, the parties hereto have executed this Purchase
Agreement on the date set forth in the first paragraph hereof.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Bernard G. Dvorak
------------------------------------------
Name: Bernard G. Dvorak
Title:Chief Financial Officer
MERRILL LYNCH GLOBAL
ALLOCATION FUND, INC.
By: /s/ Bryan N. Ison
------------------------------------------
Title: Bryan N. Ison
Title: VP
<PAGE>
SCHEDULE OF PURCHASERS
AGGREGATE
---------
PRINCIPAL AMOUNT
----------------
NAME AND ADDRESS OF NOTES
- ---------------- --------
Merrill Lynch Global
Allocation Fund, Inc. $10,000,000
800 Scudders Mill Road
Plainsboro, New Jersey 08536
<PAGE>
EXHIBIT A
FORM OF SUBORDINATED CONVERTIBLE NOTE
<PAGE>
EXHIBIT A
FORM OF NOTE
The security represented hereby was originally issued on
October __, 1997, and has not been registered under the
Securities Act of 1933, as amended. The transfer of such
security is subject to the conditions specified in the Purchase
Agreement dated as of October __, 1997, between the issuer
(the "Company") and certain investors, and the Company
reserves the right to refuse the transfer of such security until
such conditions have been fulfilled with respect to such
transfer. Upon written request, a copy of such conditions
shall be furnished by the Company to the holder hereof
without charge.
The security represented hereby is subject to a Stockholders
Agreement dated as of October __, 1997, between the
Company and certain of the Company's stockholders. A
copy of such Stockholders Agreement will be furnished
without charge by the Company to the holder hereof upon
written request.
SENIOR SECURED CONVERTIBLE NOTE
DUE 2002
October ____, 1997 $[Principal Amount]
Centennial Communications Corp., a Delaware corporation (the "Company"),
hereby promises to pay to the order of ______________ the principal amount of
$____________ together with interest thereon calculated from the date hereof in
accordance with the provisions of this Senior Secured Convertible Note due
2002(this "Note").
This Note is one of a number of Senior Secured Convertible Notes due 2002
(the "Notes") issued by the Company pursuant to a Purchase Agreement dated as of
October __, 1997 (the "Purchase Agreement") between the Company and certain
investors. The Purchase Agreement contains terms governing the rights of the
holder of this Note and all provisions of the Purchase Agreement are hereby
incorporated herein in full by reference. Unless otherwise indicated herein,
capitalized terms used in this Note have the same meanings set forth in the
Purchase Agreement.
1. Payment of Interest. Interest shall accrue at the rate of twelve
-------------------
percent (12%) per annum on the unpaid principal amount of this Note outstanding
from time to time. The Company shall pay to the holder of this Note all accrued
interest on each April 30, and October 31, (each, an "Interest Payment Date")
beginning April 30, 1998.
<PAGE>
Subject to paragraphs 2(a) and 6(a), any accrued interest on this Note which,
for any reason, has not theretofore been paid shall be paid in full on the
Maturity Date (as defined below). From the date hereof until the third
anniversary of the date hereof (the "Effective Period"), interest payable under
this Note may, at the option of the Company, be payable in cash or in Additional
Notes (as defined below) having an aggregate principal amount equal to the
accrued but unpaid interest on this Note as of any Interest Payment Date or
otherwise due under this Note. If a Qualified Public Offering does not occur
during the Effective Period, then thereafter, interest payable on this Note may,
at the option of the Company, be payable in cash, in Additional Notes or in
shares of Series C Preferred equal to the accrued but unpaid interest on this
Note as of any Interest Payment Date or otherwise due under this Note. For
purposes of this paragraph 1, each share of Series C Preferred shall be valued
at its Liquidation Value (as defined in the Company's Certificate of
Incorporation) (the "Series C Preferred Liquidation Value").
2. Payment of Principal on Note.
----------------------------
(a) Scheduled Payments. The Company shall pay the principal amount of
------------------
$_____ (or such lesser principal amount then outstanding) to the holder of this
Note on October __, 2002 (the "Maturity Date"); provided that on the Maturity
Date, at the option of the holder of this Note, the Company shall pay the
principal amount of this Note then outstanding plus, subject to paragraph 6(a),
all accrued but unpaid interest hereon in either cash or shares of Series C
Preferred. The holder of this Note shall provide the Company with at least 15
days prior written notice of its election to be repaid the outstanding principal
amount of this Note plus accrued but unpaid interest hereon in shares of Series
C Preferred. For purposes of this paragraph 2, each share of Series C Preferred
shall be valued at the Series C Preferred Liquidation Value and the number of
shares of Series C Preferred (excluding fractional shares) to be received by the
holder of this Note on the Maturity Date shall be determined by dividing the
principal amount of the Note then outstanding plus all accrued but unpaid
interest hereon by the Series C Preferred Liquidation Value.
(b) Conversion. Notwithstanding any provision contained in this
----------
paragraph 2, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note until such time as such amount has
been deemed to have been paid.
(c) Pro Rata Payment. The Company agrees that any payments to the
----------------
holders of the Notes (whether for principal, interest or otherwise) shall be
made pro rata among such holders based upon the aggregate unpaid principal
amount of the Notes held by each such holder. If any holder of a Note obtains
any payment (whether voluntary, involuntary, by application of offset or
otherwise) of principal of, or interest on, any Note in excess of such holder's
pro rata share of payments obtained by all holders of the Notes, such holder
shall purchase from the other holders of the Notes such participation in the
Notes held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this paragraph 2(c).
2
<PAGE>
3. Ranking; Secured Obligations.
----------------------------
(a) The Notes are secured obligations of the Company and rank senior in
right of payment to all unsecured Indebtedness of the Company and all
subordinated Indebtedness of the Company. The Notes will rank pari passu in
right of payment with all unsubordinated Indebtedness of the Company existing as
of the date hereof or incurred by the Company in the future.
(b) The obligations of the Company in respect of the Notes are secured
by a Deed of Charge dated as of the date hereof between the Company and
Prudential Securities Incorporated ("PSI") acting as collateral agent for the
benefit of the holders of the Notes (the "Deed of Charge"). Pursuant to the Deed
of Charge, the Company has, for the benefit of the holders of the Notes, pledged
66% of the outstanding capital stock of each of Centennial Cayman Corp. and SMR
Direct Cayman Corp. to secure the payment and the performance of all of the
obligations of the Company under the Notes. The Deed of Charge contains terms
governing the rights of the holder of this Note and all of the provisions of the
Deed of Charge are incorporated herein in full by reference. Each holder of this
Note hereby agrees to the appointment of PSI as collateral agent under the Deed
of Charge to act on behalf of the holders of the Notes pursuant to the terms of
the Notes and the Deed of Charge.
4. Events of Default.
-----------------
(a) Definition. For purposes of this Note, an event of default (an
----------
"Event of Default") shall be deemed to have occurred if:
(i) the Company defaults for 10 days in the payment when due of
interest on the Notes;
(ii) the Company defaults in the payment when due of the principal
of, or premium, if any, on the Notes;
(iii) the Company fails to perform or observe any other provision
contained in the Notes, the Deed of Charge, the Purchase Agreement, the
Registration Agreement or the Stockholders Agreement;
(iv) the Company or any Subsidiary makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Company or any Subsidiary bankrupt or insolvent; or any order
for relief with respect to the Company or any Subsidiary is entered under the
Federal Bankruptcy Code or similar statute; or the Company or any Subsidiary
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Company or any Subsidiary, or of any
substantial part of the assets of the Company or any Subsidiary, or commences
any proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Subsidiary) relating to the Company or any Subsidiary under
any bankruptcy reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation
3
<PAGE>
law of any jurisdiction; or any such petition or application is filed, or any
such proceeding is commenced, against the Company or any Subsidiary and either
(A) the Company or any such Subsidiary by any act indicates its approval
thereof, consent thereto or acquiescence therein or (B) such petition,
application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered against the
Company or any Subsidiary and, within 60 days after entry thereof, such judgment
is not discharged or execution thereof stayed pending appeal, or within 60 days
after the expiration of any such stay, such judgment is not discharged; or
(vi) the Company or any Subsidiary defaults in the performance of
any obligation if the effect of such default is to cause an amount exceeding
$500,000 to become accelerated and payable prior to its Stated Maturity.
(b) Consequences of Events of Default.
---------------------------------
(i) If an Event of Default of the type described in subparagraph
4(a)(ii) has occurred or an Event of Default of the type described in
subparagraph 4(a)(iii) has occurred and continues for 30 days or any other Event
of Default has occurred, the holder or holders of Notes representing at least
40% of the aggregate principal amount of Notes then outstanding may declare all
or any portion of the outstanding principal amount of the Notes due and payable
and demand immediate payment of all or any portion of the outstanding principal
amount of the Notes owned by such holder or holders. The Company shall give
prompt written notice of any such demand to the other holders of Notes, each of
which may demand immediate payment of all or any portion of such holder's Note.
If any holder or holders of the Notes demand immediate payment of all or any
portion of such holder's Notes, the Company shall immediately pay to such holder
or holders the outstanding principal amount of the Notes requested to be paid
plus, subject to the terms of the Notes, accrued interest thereon.
(ii) Each holder of the Notes shall also have any other rights which
such holder may have been afforded under the Deed of Charge and any other rights
which such holder may have pursuant to applicable law. No omission, failure or
delay by the holder of this Note in exercising any right, power, or privilege
hereunder shall impair such right, power, or privilege, shall operate as a
waiver thereof, or shall be construed to be a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies of the holder of this Note shall be
cumulative and not exclusive of any rights, remedies, warranties, or covenants
provided by applicable law.
5. Change of Control.
-----------------
(a) Offer to Repurchase Upon Change of Control. Upon the occurrence of a
Change of Control, the holder of this Note shall have the right to require the
Company to repurchase all or any part (equal to $1,000 or an integral multiple
thereof)
4
<PAGE>
of this Note pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash (the "Change of Control Payment") equal to
101% of the aggregate outstanding principal amount hereof plus accrued and
unpaid interest, if any, hereon, to the date of repurchase. Within 20 days
following any Change of Control, the Company shall mail a notice to each holder
stating: (i) that the Change of Control Offer is being made pursuant to this
paragraph 5 and that all Notes tendered will be accepted for payment; (ii) the
purchase price and the purchase date, which shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest, if any, after the Change of
Control Payment Date; (v) that holders electing to have any of the Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with a completed form entitled "Option of Holder to Elect Purchase"
mailed by the Company with the notice of Change of Control Offer, to the Company
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; (vi) that the
holders will be entitled to withdraw their election if the Company receives, not
later than the close of business on the second business day preceding the Change
of Control Payment Date, a facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have the Notes
purchased; and (vii) that holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount at maturity or an integral multiple thereof.
(b) Payment. On the Change of Control Payment Date, the Company shall,
-------
to the extent lawful, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer and (ii) deposit in an
account an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered. The Company shall promptly mail to each holder
of the Notes so tendered the Change of Control Payment for such Notes, and the
Company shall promptly authenticate and mail to each holder a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered, if any;
provided that each such new Note shall be in a principal amount at maturity of
$1,000 or an integral multiple thereof. The Company shall provide each holder of
Notes the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) Exceptions. The Company shall not be required to make a Change of
----------
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Note applicable to a Change of Control Offer made
by the Company and purchases this Note so long as it was validly tendered and
not withdrawn under such Change of Control Offer.
5
<PAGE>
(d) Compliance With Law. 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 the Notes as a result of a Change of Control.
6. Conversions.
-----------
(a) Mandatory Conversion into Conversion Stock.
------------------------------------------
(i) At any time during the Effective Period, the Company may require
the conversion of all of the outstanding principal amount of this Note into
shares of Conversion Stock of the Company immediately upon consummation of a
firm commitment underwritten Qualified Public Offering. On the consummation of
such Qualified Public Offering, the outstanding principal amount of this Note
shall be automatically converted into a number of shares of Conversion Stock
(excluding any fractional shares) determined by dividing such outstanding
principal amount by the Conversion Price then in effect. If a Qualified Public
Offering occurs during the Effective Period, the holder of this Note shall (A)
be deemed to waive the payment of any accrued but unpaid interest on the
outstanding principal amount of this Note and (B) return all Additional Notes
issued hereunder and all cash interest paid in respect of this Note and any
Additional Notes to the Company for cancellation and no principal amount or
interest thereon shall be required to be repaid by the Company on such
Additional Notes.
(ii) Any such mandatory conversion shall only be effected at the time
and subject to the closing of the sale of shares of Conversion Stock pursuant to
a Qualified Public Offering and upon written notice of such mandatory conversion
delivered to all holders of the Notes at least seven days prior to such closing.
(b) Mandatory Conversion into Series C Preferred.
--------------------------------------------
(i) At any time during the Effective Period, the Company may require
the conversion of all of the outstanding principal amount of this Note into
shares of Series C Preferred of the Company immediately upon consummation of a
Qualified Debt Offering. On the consummation of such Qualified Debt Offering,
the outstanding principal amount of this Note plus all accrued and unpaid
interest hereon shall be automatically converted into a number of shares of
Series C Preferred (excluding any fractional shares) determined by dividing such
outstanding principal amount plus all accrued and unpaid interest hereon by the
Series C Preferred Liquidation Value.
(ii) Any such mandatory conversion shall only be effected at the time
and subject to the closing of the sale of debt securities pursuant to a
Qualified Debt Offering and upon written notice of such mandatory conversion
delivered to all holders of the Notes at least seven days prior to such closing.
6
<PAGE>
(c) Optional Conversion.
-------------------
(i) At any time and from time to time prior to the payment of this
Note in full, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note plus accrued and unpaid interest
hereon into a number of shares of Conversion Stock (excluding any fractional
shares) determined by dividing the amount designated by such holder to be
converted by the Conversion Price then in effect.
(ii) Each such conversion of this Note shall be deemed to have been
effected as of the close of business on the date on which this Note has been
surrendered, in person or by courier, at the principal office of the Company
together with a letter from the holder hereof designating the amount of the Note
to be converted. At such time as such conversion has been effected, the rights
of the holder of this Note as such holder to the extent of the conversion shall
cease, and the Person or Persons in whose name or names any certificate or
certificates for shares of Conversion Stock are to be issued upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Conversion Stock represented thereby.
(d) Conversion Procedures.
---------------------
(i) As soon as possible after a conversion has been effected, the
Company shall deliver to the converting holder:
(A) a certificate or certificates representing the number of
shares of Conversion Stock or Series C Preferred (excluding any fractional
share), as the case may be, issuable by reason of such conversion in such name
or names and such denomination or denominations as the converting holder has
reasonably specified;
(B) if required by the terms of this Note, payment in an amount
equal to the sum of all accrued interest with respect to the principal amount
converted, which has not been paid prior thereto, plus the amount payable under
subparagraph (D) below;
(C) a new Note representing any portion of the principal amount
which was represented by the Note surrendered to the Company in connection with
such conversion but which was not converted; and
(D) if any fractional share of Conversion Stock or Series C
Preferred, as the case may be, would, except for the provisions hereof, be
deliverable upon conversion of this Note, the Company, in lieu of delivering
such fractional share, shall pay an amount equal to the Conversion Price or the
Series C Preferred Liquidation Value, as the case may be, of such fractional
share as of the date of such conversion.
(ii) The issuance of certificates for shares of Conversion Stock or
Series C Preferred, as the case may be, upon conversion of this Note shall be
made without charge to the holder hereof for any issuance tax in respect thereof
or other cost
7
<PAGE>
incurred by the Company in connection with such conversion and the related
issuance of shares of Conversion Stock or Series C Preferred, as the case may
be. Upon conversion of this Note, the Company shall take all such actions as are
necessary in order to insure that the Conversion Stock or Series C Preferred, as
the case may be, issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
(iii) The Company shall not close its books against the transfer of
Conversion Stock or Series C Preferred, as the case may be, issued or issuable
upon conversion of this Note in any manner which interferes with the timely
conversion of this Note.
(iv) The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Conversion Stock or Series C Preferred, as
the case may be, solely for the purpose of issuance upon the conversion of the
Notes, such number of shares of Conversion Stock or Series C Preferred, as the
case may be, issuable upon the conversion of all outstanding Notes. All shares
of Conversion Stock or Series C Preferred, as the case may be, which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges except those
contemplated by the Purchase Agreement, the Stockholders Agreement and the
Registration Agreement. The Company shall take all such actions as may be
necessary to assure that all such shares of Conversion Stock or Series C
Preferred, as the case may be, may be so issued without violation of any
applicable law or governmental regulation.
7. Conversion Prices.
-----------------
(a) Conversion Price for Conversion Stock. The initial Conversion Price
-------------------------------------
for shares of Conversion Stock (the "Conversion Price") shall be $1.45. Subject
to paragraph 7(e), if and whenever on or after the original date of issuance of
this Note the Company issues or sells, or in accordance with paragraph 7(c) is
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to such
time, the Conversion Price shall be reduced to the Conversion Price determined
by dividing (A) an amount equal to the sum of (x) the product derived by
multiplying the Conversion Price in effect immediately prior to such issue or
sale by the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale, plus (y) (i) the consideration, if any, received by
the Company upon such issue or sale and (ii) the consideration, if any, payable
to the Company upon the exercise of any Options (as defined in paragraph
7(c)(i)) or upon the conversion or exchange of any Convertible Securities (as
defined in paragraph 7(c)(i)), by (B) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale; provided that no
adjustment shall be made in the Conversion Price as a result of (i) any issuance
or sale (or deemed issuance or sale) of 2,307,972 shares of Common Stock to
directors, officers, employees and consultants of the Company pursuant to stock
option plans or stock ownership plans so long as the price of such Options is
not less than the Conversion Price then in effect (including any change in the
issue price of any options issued under such plans so long as the issue price is
not less than the Conversion Price then in effect) (as adjusted for stock
splits, stock
8
<PAGE>
dividends and similar recapitalizations) or (ii) the issuance of shares of
Convertible Securities or Common Stock as dividends or interest in respect of
any shares of Preferred Stock or the Notes, respectively.
(b) Conversion Price for Series C Preferred. The initial Conversion
---------------------------------------
Price for shares of Series C Preferred shall be $1.45 as set forth in the
Company's Certificate of Incorporation.
(c) Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under paragraph 7(a), the following
shall be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
-----------------------------
grants any rights or options to subscribe for or to purchase Common Stock or any
stock or other securities convertible into or exchangeable for Common Stock
(such rights or options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible Securities")
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities is
less than the Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon conversion or exchange
of the total maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the granting of such Options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" is determined by dividing (A) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
issuance or sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner
----------------------------------
issues or sells any Convertible Securities and the price per share for which
Common Stock is issuable upon conversion or exchange is less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common
9
<PAGE>
Stock is issuable" is determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Conversion Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issue or sale of such Convertible Securities is made upon exercise of
any Options for which adjustments of the Conversion Price had been or are to be
made pursuant to other provisions of this paragraph 7(c), no further adjustment
of the Conversion Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the purchase
-----------------------------------------
price provided for in any Option, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Security, or the rate
at which any Convertible Securities is convertible into or exchangeable for
Common Stock change at any time, the Conversion Price in effect at the time of
such change shall be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold; provided that if such adjustment of the Conversion Price would result in
an increase in the Conversion Price then in effect, such adjustment shall not be
effective until 30 days after written notice thereof has been given by the
Company to all holders of the Notes.
(iv) Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities without the exercise of such
Option or right, the Conversion Price then in effect hereunder shall be adjusted
to the Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued; provided that if such expiration or termination would result in an
increase in the Conversion Price then in effect, such increase shall not be
effective until 30 days after written notice thereof has been given by the
Company to all holders of the Notes.
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company shall be the Market Price thereof as of the date of
receipt. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
10
<PAGE>
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value of any
consideration other than cash and securities shall be determined jointly by the
Company and the holders of at least a majority of the aggregate principal amount
of the Notes then outstanding. If such parties are unable to reach agreement
within a reasonable period of time, the fair value of such consideration shall
be determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Company and the holders of a majority of
the aggregate principal amount of the Notes then outstanding. The determination
of such appraiser shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Company.
(vi) Integrated Transactions. In case any Option is issued in
-----------------------
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options shall be deemed to
have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the holders of
-----------
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(d) Change in Conversion Price on Sale of U.S. Assets. As more fully
-------------------------------------------------
described below, the Conversion Price shall also be reduced if, by March 31,
1998, the Company shall not have received $3,500,000 in aggregate net cash sale
proceeds (the "Threshold Amount") from the sale or other disposition of all or a
portion of the Company's or its Subsidiaries' United States wireless
communications businesses and assets (the "U.S. Assets") by the application of
the following formula:
CPE *(1-(Threshold Amount-NSP))
--------------------
25,000,000
where:
CPE = the Conversion Price then in effect.
Threshold Amount = 3,500,000.
11
<PAGE>
NSP = the aggregate net cash sale proceeds received by the Company and its
Subsidiaries on the sale or other disposition of the U.S. Assets less any
liabilities retained by the Company and its Subsidiaries related to the U.S.
Assets that were sold or disposed; provided that in the event the Company and
its Subsidiaries have received 80% of the Threshold Amount in cash from the sale
or other disposition of the U.S. Assets, then any amounts payable in cash which
are held back by the purchasers of such U.S. Assets solely pending governmental
approval of such sale or disposition, shall be taken into account in the
calculation of the aggregate net sale proceeds received.
If the Company and its Subsidiaries receive the Threshold Amount or more, no
adjustment in the Conversion Price shall occur as a result of the sale or other
disposition of the U.S. Assets. In no event shall the Conversion Price obtained
by application of this paragraph 7(d) be reduced to less than $1.25.
(e) Change in Conversion Price on Certain Capital Raisings. If, after
------------------------------------------------------
the original date of issuance of this Note, the Company issues or sells or, in
accordance with paragraph 7(c) is deemed to have issued or sold, any shares of
Common Stock, for a consideration per share (the "Per Share Trigger Price") less
than $1.93, the Conversion Price shall be reduced to the Conversion Price which
is the lesser of (i) 25% less than the Per Share Trigger Price but in no event
less than $1.25 or (ii) the Conversion Price obtained by application of
paragraph 7(a); provided that this paragraph 7(e) shall only apply to the next
$7,500,000 in aggregate capital raisings by the Company occurring after the date
of this Note.
(f) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(g) Reorganization, Reclassification, Consolidation, Merger or Sale. Any
---------------------------------------------------------------
recapitalization, reorganization, reclassification, consolidation, merger, any
sale of all or substantially all of the Company's assets to another Person or
other transaction effected in such a manner so that holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Prior to the consummation of such Organic
Change, the Company shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the aggregate principal amount of
the Notes then outstanding) to insure that each of the holders of the Notes
shall thereafter have the right to acquire and receive in lieu of or in addition
to (as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Note, such shares
of stock, securities or
12
<PAGE>
assets as such holder would have received in connection with such Organic Change
if such holder had converted the Note immediately prior to such Organic Change.
In each such case, the Company shall also make appropriate provision (in form
and substance satisfactory to the holders of a majority of the aggregate
principal amount of the Notes then outstanding) to insure that the provisions of
this paragraph 7 and paragraphs 8 and 9 shall thereafter be applicable in
relation to any shares of stock, securities or assets thereafter deliverable
upon the conversion of the Notes (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Company, an immediate adjustment of the Conversion Price to
the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and a corresponding immediate adjustment in the number of shares
of Conversion Stock acquirable and receivable upon conversion of the Notes, if
the value so reflected is less than the Conversion Price in effect immediately
prior to such consolidation, merger or sale). The Company shall not effect any
such consolidation, merger or sale, unless prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the aggregate principal amount of the Notes then outstanding), the obligation
to deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
(h) Certain Events. If any event occurs of the type contemplated by the
--------------
provisions of this paragraph 7 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
board of directors shall make an appropriate adjustment in the Conversion Price
so as to protect the rights of the holders of the Notes; provided that no such
adjustment shall increase the Conversion Price as otherwise determined pursuant
to this paragraph 7 or decrease the number of shares of Conversion Stock
issuable upon conversion of the Notes then outstanding.
(i) Notices.
-------
(i) Immediately upon any adjustment of the Conversion Price, the
Company shall send written notice thereof to the holder of this Note, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall send written notice to the holder of this
Note at least 20 days prior to the date on which the Company closes its books or
takes a record (A) with respect to any dividend or distribution upon the Common
Stock, (B) with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall also give at least 20 days prior written
notice of the date on which any Organic Change, dissolution or liquidation shall
take place.
13
<PAGE>
8. Liquidating Dividends. If the Company declares a dividend upon the
---------------------
Common Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Company shall pay to the holders of
the Notes at the time of payment thereof, in addition to the principal amount
and any accrued interest hereon, the Liquidating Dividend which would have been
paid to the holder of this Note on the Conversion Stock had this Note been fully
converted immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
9. Purchase Rights. If at any time the Company grants, issues or sells any
---------------
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of the Notes shall be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Conversion Stock acquirable upon conversion of
such holder's Note immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
10. Voting Rights. The holder of this Note shall be entitled to notice of
-------------
all stockholders meetings in accordance with the Company's bylaws and, except as
otherwise required by law, the holders of the Notes shall be entitled to vote or
act by written consent on all matters submitted to stockholders for a vote
together with the holders of Common Stock and Preferred Stock voting together as
a single class with (a) each share of Common Stock entitled to one vote per
share, (b) each share of Preferred Stock entitled to one vote for each share of
Common Stock issuable upon the conversion of the Preferred Stock at the time the
vote is taken and (c) each Note entitled to the number of votes equal to the
number of shares of Conversion Stock issuable upon the full conversion of the
outstanding principal amount of such Note at the time the vote is taken.
11. Amendment and Waiver. Except as otherwise expressly provided herein,
--------------------
the provisions of the Notes may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the holders of at
least a majority of the outstanding principal amount of the Notes; provided that
no such action shall change (i) the rate at which or the manner in which
interest accrues on the Notes or the times at which such interest becomes
payable, (ii) any provision relating to the scheduled payments or prepayments of
principal on the Notes, (iii) the Conversion Price of the Notes or the number of
shares or the class of stock into which the Notes are convertible, or (iv) the
provisions set forth in paragraph 4(b), without the written consent of the
holders at least 75% of the outstanding principal amount of the Notes.
14
<PAGE>
12. Registration of Transfer; Transfers.
-----------------------------------
(a) The Company shall keep at its principal office a register for the
registration of the Notes. Upon the surrender of any Note at such place, the
Company shall, at the request of the record holder of such Note, execute and
deliver (at the Company's expense) a new Note in exchange therefor representing
the aggregate outstanding principal amount represented by the surrendered Note.
Each such new Note shall be registered in such name and shall represent the then
outstanding principal amount as is requested by the holder of the surrendered
Note and shall be substantially identical in form to the surrendered Note.
(b) The holder of this Note represents and warrants that no transfer of
this Note may occur without a transfer of all Additional Notes, if any, issued
hereunder.
13. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Company (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any Note, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Company (provided that if the holder is a
financial institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
Note, the Company shall (at its expense) execute and deliver in lieu of such
Note, a new Note of like kind representing the then outstanding aggregate
principal amount of the Note represented by such lost, stolen, destroyed or
mutilated Note and dated the date of such lost, stolen, destroyed or mutilated
Note.
14. Definitions. For purposes of the Notes, the following capitalized terms
-----------
have the following meaning.
"Additional Notes" means Notes issued hereunder at the option of the
----------------
Company having identical terms to this Note except that no Additional Note may
be transferred except in connection with a permitted transfer of this Note.
"Change of Control" means the occurrence of any of the following in one
-----------------
transaction or series of related transactions: (i) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as such term is defined in Section
13(d)(3) of the Exchange Act), or "group" (as such term is defined in Sections
13(d)(3) and 14(d)(2) of the Exchange Act), other than the Principals and their
Related Parties, 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 50.1% of the Voting Stock of the Company (measured by voting power rather
than number of shares); (ii) the Company consolidates with, or merges with or
into, another "person" (as defined above) or "group" (as defined above) in a
transaction or series of related transactions in which the Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any transaction where (A) the outstanding Voting Stock of the Company
is converted into or exchanged for Voting Stock of the surviving or transferee
corporation and (B) the "beneficial owners" (as defined above) of the
outstanding Voting Stock of the Company
15
<PAGE>
immediately prior to such transaction own beneficially, directly or indirectly
through one or more Subsidiaries, not less than a majority of the total
outstanding Voting Stock of the surviving or transferee corporation immediately
after such transaction or (iii) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors.
"Common Stock" means, collectively, the Company's Common Stock, par value
------------
$.01 per share and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
"Common Stock Deemed Outstanding" means, at any given time, the number of
-------------------------------
shares of Common Stock actually outstanding at such time, plus (i) the number of
shares of Common Stock which would be issued upon exercise of all of the
Company's outstanding Options and (ii) the number of shares of Common Stock
which would be issued upon conversion or exchange of all of the Company's
outstanding Convertible Securities (including Convertible Securities issuable
upon exercise of Options).
"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 hereof, (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 or
(iii) became a member of the Board of Directors as a result of being designated
by a stockholder pursuant to, and in accordance with, the terms of Section 1 of
the Second Amended and Restated Stockholders Agreement dated as of the date
hereof between the Company and certain investors.
"Conversion Stock" means shares of the Company's Common Stock; provided
----------------
that if there is a change such that the securities issuable upon conversion of
the Notes are issued by an entity other than the Company or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
one share of the security issuable upon conversion of this Note if such security
is issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time.
"Indebtedness" means all indebtedness for borrowed money (including
------------
purchase money obligations), all indebtedness under revolving credit
arrangements, all capitalized lease obligations and all guarantees of any of the
foregoing.
"Market Price" of any security means the average of the closing prices of
------------
such security's sales on all securities exchanges on which such security may at
the time be listed or, if there have been no sales on any such exchange on any
day, the average of the
16
<PAGE>
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case,
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day. If at any time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market Price"
shall be the fair value thereof determined jointly by the Company and the
holders of at least a majority of the outstanding principal amount of the Notes.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected by
the Company and the holders of at least a majority of the outstanding principal
amount of the Notes. The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser shall be
borne by the Company.
"Person" means an individual, a partnership, a corporation, an association,
------
a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Preferred Stock" means the Series A Preferred, the Series B Preferred and
---------------
the Series C Preferred.
"Principals" means any of William J. Elsner, Jeff E. Rhodes, Bernard G.
----------
Dvorak, Stephen W. Schovee, Robert F. McKenzie, Steven C. Haldstedt, Adam
Goldman, William Sprague, Michael N. Simkin, William Stanfill, Prudential Bache
Capital Partners II, L.P., The Centennial Funds, Prudential Securities
Incorporated, The Roman Arch Fund, L.P., and the Roman Arch Fund, II, L.P.
"Public Offering" means any offering by the Company of its equity
---------------
securities to the public pursuant to an effective registration statement under
the Securities Act, or any comparable statement under any similar federal
statute then in force; provided that a Public Offering shall not include an
offering made in connection with a business acquisition or an employee benefit
plan.
"Qualified Debt Offering" means the sale of debt securities by the Company
-----------------------
resulting in aggregate proceeds (after taking into account underwriting
discounts and commissions) of at least $50,000,000 being received by the
Company; provided that a Qualified Debt Offering shall include the sale of debt
securities by the Company to a syndicate of investors led by Merrill Lynch
Pierce Fenner & Smith (the "ML Offering") so long as (i) the aggregate gross
proceeds is at least $30,000,000 (ii) the proceeds from the ML Offering will be
used in connection with the Company's wireless communications and ancillary
activities in Latin America for the period of nine months from the date
17
<PAGE>
hereof unless 75% of the holders of the Notes (or the shares of Series C
Preferred) otherwise agree, and (iii) such sale occurs no later than January 31,
1998.
"Qualified Public Offering" means the sale, in an underwritten Public
-------------------------
Offering registered under the Securities Act, of shares of the Company's Common
Stock in which (i) the aggregate proceeds (after taking into account
underwriting discounts and commissions) received by the Company for the shares
is at least $20,000,000 and (ii) the price per share paid by the public is at
least $6.00 (as adjusted for stock splits, reverse stock splits, stock dividends
and similar recapitalizations).
"Related Party" with respect to any Principal means (i) any controlling
-------------
stockholder, 50% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) a trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding a 50% or more controlling
interest of which consists of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time.
"Series A Preferred" means the Company's Series A Preferred Stock, par
------------------
value $.01 per share.
"Series B Preferred" means the Company's Series B Preferred Stock, par
------------------
value $.01 per share.
"Series C Preferred" means the Company's Series C Preferred Stock, par
------------------
value $.01 per share.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of 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 that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
"Voting Stock" of any Person as of any date means the capital stock or
------------
other securities of such Person that is at the time entitled to vote in the
election of the board of directors, managers or trustees of such Person.
18
<PAGE>
15. Put Option.
----------
(a) Sale Transaction. If, at any time during the term of this Note, the
----------------
Company and its Subsidiaries operating in the Republic of Peru sell, dispose or
otherwise transfer "control" (a "Sale Transaction") of 100 or more of their
specialized mobile radio channels for the City of Lima/Province of Callao (the
"Peruvian Channels"), then any holder of Notes having an aggregate principal
amount of $1,000,000 or more may, at the option of such holder, require the
Company to redeem all or part of such holder's Note or Notes plus all accrued
but unpaid interest thereon. For purposes of this paragraph 15, "control" shall
mean the transfer of more than 50% of the voting power of any Subsidiary owning
the Peruvian Channels or the sale of more than 50% of the power to direct or
cause the direction of the management or disposition of the Peruvian Channels.
(b) Within 20 days following any Sale Transaction, the Company shall
mail a notice to each holder stating: (i) that the Sale Transaction has occurred
and that all Notes tendered pursuant to this paragraph 15 will be accepted for
payment; (ii) the payment date, which shall be no earlier than 15 days and no
later than 30 days from the date such notice is mailed (the "Sale Payment
Date"); (iii) that any Note not tendered will continue to accrue interest; (iv)
that holders electing to have any of the Notes purchased pursuant to this
paragraph 15 will be required to surrender the Notes, with a completed form
entitled "Option of Holder to Elect Purchase" mailed by the Company with the
notice of Sale Transaction, to the Company at the address specified in the
notice prior to the close of business on the third business day preceding the
Sale Payment Date; (v) that the holders will be entitled to withdraw their
election if the Company receives, not later than the close of business on the
second business day preceding the Sale Payment Date, a facsimile transmission or
letter setting forth the name of the holder, the principal amount of the Notes
delivered for purchase, and a statement that such holder is withdrawing his
election to have the Notes purchased; and (vi) that holders whose Notes are
being purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount at maturity or an integral multiple
thereof.
(c) Payment. On the Sale Payment Date, the Company shall, to the extent
-------
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the offer made pursuant to this paragraph 15 and (ii) deposit in an
account an amount equal to the payment to be made in respect of all Notes or
portions thereof so tendered. The Company shall promptly mail to each holder of
the Notes so tendered the required payment for such Notes, and the Company shall
promptly authenticate and mail to each holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note shall be in a principal amount at maturity of $1,000 or
an integral multiple thereof.
16. Cancellation. After all principal and accrued interest at any time owed
------------
on this Note has been paid in full or after conversion of this Note as set forth
herein, this Note shall be surrendered to the Company for cancellation and shall
not be reissued.
19
<PAGE>
17. Place of Payment. Payments of principal of, and interest on, this Note
----------------
are to be delivered to the registered holder hereof at the address set forth in
the register of Notes maintained by the Company.
IN WITNESS WHEREOF, the Company has executed and delivered this Note on
October __, 1997.
CENTENNIAL COMMUNICATIONS CORP.
Attest
By:_______________________
Name:_____________________
_____________________ Title_____________________
20
<PAGE>
EXHIBIT B
REGISTRATION AGREEMENT
<PAGE>
EXHIBIT C
OPINIONS OF COUNSEL
<PAGE>
January 15, 1998
Merrill Lynch Global Allocation Fund, Inc.
800 Scudders Mill Road
Plainsboro, NJ 08536
Ladies and Gentlemen:
We have acted as counsel for Centennial Communications Corp., a Delaware
corporation (the "Company"), in connection with the sale to you of Ten Million
Dollars ($10,000,000) in Convertible Subordinated Notes due 2006 (the "Notes")
pursuant to the Purchase Agreement dated January 15, 1998, between the Company
and you (the "Purchase Agreement").
We are rendering this opinion pursuant to Section 2E of the Purchase
Agreement. Except as otherwise defined herein, capitalized terms used herein
have the respective meanings given to them in the Purchase Agreement.
In connection with this opinion, we have examined originals or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records or other instruments as we have deemed necessary or
appropriate for purposes of this opinion, including:
(a) the Purchase Agreement;
(b) the Third Amended and Restated Registration Agreement (the
"Registration Agreement");
(c) the Notes;
(d) the Escrow Agreement; and
(e) the Collateral Pledge Agreement dated January 15, 1998 between the
Company and State Street Bank and Trust Company (the "Pledge
Agreement").
The Registration Agreement, the Pledge Agreement, the Escrow Agreement and the
Notes are referred to collectively as the "Operative Agreements."
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 2
Without any verification by us, we have assumed the following for purposes
of rendering the opinions expressed below:
(a) The accuracy and completeness of all representations and warranties of
the Company and schedules contained in the Purchase Agreement and the Operative
Agreements with respect to the factual matters set forth therein, and that the
certificates of certain officers of the Company delivered to you in connection
with the transactions contemplated by the Purchase Agreement and the Operative
Agreements with respect to the factual matters set forth therein, are true and
correct in all material respects;
(b) All parties to the Purchase Agreement and the Operative Agreements
(other than the Company) are duly organized, validly existing and in good
standing under the laws of all jurisdictions where they are conducting their
businesses or otherwise required to be so qualified, and have full power and
authority to execute, deliver and perform their duties under such documents and
all such documents have been duly authorized, executed and delivered by such
parties and that such documents constitute legal, valid and binding obligations
of such parties, enforceable against them in accordance with their terms;
(c) The proceeds of the Notes have been funded by the Purchasers in
accordance with the terms of the Purchase Agreement and the proceeds of the
Notes will be used by the Company in compliance with the terms of the Purchase
Agreement;
(d) The accuracy of the representations and warranties made by the
Purchaser in the Purchase Agreement;
(e) That the Purchaser is domiciled and has its principal place of business
in the United States;
(f) That the Purchaser is an institutional "accredited investor" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act");
(g) That the Purchaser has such knowledge and experience in financial and
business matters that the Purchaser is capable of evaluating the merits and
risks of an investment in the Notes, that the Company believes this to be the
case, and that the Purchaser is able to bear the economic risks of such
investment;
(h) That the Purchaser has had effective access to (by means of the amount
being invested and otherwise), and the Company has made available, such
additional information, if
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 3
any, concerning the Company as the Purchaser has considered necessary in
connection with its investment decision to acquire the Notes;
(i) That the Purchaser is not acquiring the Notes with a view to any
resale, distribution or other disposition of the Notes that would violate the
Securities Act or the securities law of any State of the United States or any
other applicable jurisdiction;
(j) That no person has or will offer or sell the Notes by, or otherwise
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) in connection with the offering of the
Notes; and
(k) That neither the Company nor anyone acting on its behalf has offered or
sold or will offer or sell any of the securities of the Company, or has
solicited or will solicit any offer to acquire securities of the Company, if the
sale of the Notes would be integrated with such offer, sale or acquisition as a
single offering for purposes of the Securities Act.
We have also assumed for purposes of this opinion the genuineness of
signatures and the authority of persons signing agreements on behalf of parties
thereto other than the Company, the authenticity of all documents submitted to
us as originals, and the conformity to authentic original documents submitted to
us as certified, conformed or photostatic copies.
We have further assumed the accuracy, completeness and authenticity of
certificates of public officials, that all individuals executing and delivering
documents in their individual capacities have the legal capacity to so execute
and deliver; and that there are no extrinsic agreements or understandings among
the parties to the Purchase Agreement and the Operative Agreements that would
modify or interpret the terms of the Purchase Agreement or the Operative
Agreements or the respective rights or obligations of the parties thereunder.
As to certain factual matters, we have relied upon the certificate of the
Chief Financial Officer of the Company attached hereto (the "Certificate") and
have not sought independently to verify such matters. Specifically, we have not
searched or reviewed any litigation docket in any U.S. Federal or State court to
determine whether the Company is involved in any governmental or other legal
proceeding. With respect to our opinions expressed in paragraph 3 below, we
have relied solely upon the Certificate to the effect that the consideration for
all outstanding shares of capital stock of the Company was received by the
Company in accordance with the provisions of the applicable resolutions of the
Board of
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 4
Directors and any plan or agreement relating to the issuance of such shares, and
we have not undertaken any independent verification with respect thereto.
As used herein, the phrases "to our knowledge" or "known to us" mean that
in rendering the opinion so qualified, we are relying upon the Certificate with
respect to the factual basis for such opinion, and that in the course of our
representation of the Company, no information that would give us current actual
knowledge of the inaccuracy of such information has come to the attention of the
attorneys in the firm who had significant responsibility for rendering legal
services to the Company. We have not made any independent investigation to
determine the accuracy of such information.
We do not express any opinion herein as to any matters governed by laws
other than the laws of the State of Colorado, the General Corporation Law of the
State of Delaware, with respect to paragraphs 5 and 6 of this opinion only, the
laws of the State of New York, with respect to paragraph 7 of this opinion only,
the Uniform Commercial Code of the State of New York, and the Federal laws of
the United States of America (excluding the Communications Act of 1934, as
amended by the Telecommunications Act of 1996 or the rules, regulations and
written policies of the FCC, collectively referred to herein as "U.S.
Telecommunications Law"). We express no opinion as to whether the laws of a
particular jurisdiction apply, and no opinion as to the extent that laws of any
jurisdiction other than those identified above are applicable to the subject
matter hereof. We are not rendering any opinion as to compliance with any anti-
fraud law, rule or regulation relating to securities or to the sale or issuance
thereof.
Based upon and subject to the foregoing, and the qualifications and
limitations set forth below, we are of the opinion that:
1. Each of the Company and SMR Direct USA, Inc. ("USA") is a corporation
duly incorporated and validly existing in good standing under the laws of the
State of Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business. The Company is qualified to
do business and is in good standing under the laws of the State of Colorado.
With the exception of USA, the Company has no subsidiaries incorporated under
any law of any State of the United States of America.
2. All of the outstanding shares of capital stock of USA have been duly
authorized, validly issued, and are fully paid and nonassessable and, to our
knowledge in reliance upon the Certificate, are wholly-owned by the Company
directly, free and clear of any security interest, lien, adverse claim, equity
or other encumbrance.
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 5
3. All the shares of capital stock of the Company outstanding prior to the
issuance of the Notes have been duly authorized, validly issued and are fully
paid and nonassessable and, to our knowledge in reliance upon the Certificate,
are not subject to any preemptive rights except as set forth in the Second
Amended and Restated Stockholders Agreement dated October 3, 1997 between the
Company and the Investors listed therein and the Company's Amended and Restated
Certificate of Incorporation (the "Restated Certificate").
4. The Company has full corporate power and authority to execute, deliver
and perform its obligations under the Purchase Agreement and the Operative
Agreements and to consummate the transactions contemplated by the Purchase
Agreement and the Operative Agreements and to issue, sell and deliver the Notes
pursuant to the Purchase Agreement.
5. Each of the Purchase Agreement, the Registration Agreement, the Escrow
Agreement and the Pledge Agreement has been duly authorized, validly executed
and delivered by the Company. The Registration Agreement is a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and, subject as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law); provided that we express no opinion as to the enforceability of Section 8
of the Registration Agreement. Each of the Purchase Agreement, the Escrow
Agreement and the Pledge Agreement is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights generally and, subject
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law); provided that we
express no opinion as to the enforceability of Section 16, the indemnification
provisions set forth in Section 19.15 and Section 19.19 (viii) of the Pledge
Agreement.
6. The Notes have been duly authorized by the Company and when executed in
accordance with the terms of the Purchase Agreement and, upon delivery to the
Purchasers against payment therefor in accordance with the Purchase Agreement
and the terms of the Notes, the Notes will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 6
7. The Pledge Agreement creates a valid security interest in the Pledged
Collateral (as defined in the Pledge Agreement) covered thereby to the extent
that Article 9 of the Uniform Commercial Code of the State of New York (the
"Code") is applicable thereto, securing payment of the Obligations (as defined
in the Pledge Agreement). Assuming ownership by the Company of the Pledged
Collateral and that the Collateral Agent has taken the Pledged Stock in good
faith without notice (actual or constructive) of any adverse claim within the
meaning of the Code, the Pledge Agreement, together with delivery of any Pledged
Collateral represented by certificates to the Collateral Agent in the State of
New York, together with an endorsement in blank, will result in the creation and
perfection of such security interest in such Pledged Collateral to the extent
that Article 9 of the Code is applicable, assuming the continuous possession of
such certificates thereafter in the State of New York by the Collateral Agent.
Our opinion in this paragraph 7 is subject to the following qualifications:
(i) in the case of "proceeds" (as such term is defined in Section 9-306 of
the Code), continuation of perfection of the Collateral Agent's
security interest therein is limited to the extent set forth in
Section 9-306 of the Code; and
(ii) in the case of property that becomes Pledged Collateral after the date
hereof, Section 5552 of the Federal Bankruptcy Code limits the extent
to which property acquired by a debtor after the commencement of a
case under the Federal Bankruptcy Code may be subject to a security
interest arising from a security agreement entered into by the debtor
before the commencement of such case.
No filings or recordings are required under New York law in order to perfect the
security interest in the Pledged Collateral pursuant to the Pledge Agreement.
8. The shares of Common Stock to be issued on conversion of the Notes have
been duly authorized and reserved for issuance by the Company and, when issued
and delivered upon conversion of the Notes in accordance with the terms of the
Notes, such shares of Common Stock will have been validly issued and will be
fully paid and nonassessable and the issuance of the Common Stock will not be
subject to any preemptive rights which have not been previously waived.
9. Except as set forth in the Schedules to the Purchase Agreement, the
execution and delivery of the Purchase Agreement and the Operative Agreements by
the Company and the offer and sale of the Notes pursuant to the Purchase
Agreement (a) do not violate any provision of the Company's Restated Certificate
or Bylaws, and do not constitute a default by the Company under the provisions
of any agreement which is set forth on Exhibit C to the
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 7
Certificate, except for the agreements referred to in items 11, 14, 15, 19, 20,
21, 22, 23, 38, 39, 40, and 41 of such Exhibit C, which have previously been
waived, and (b) do not violate or contravene (i) the General Corporation Law of
the State of Delaware, any Federal law of the United States of America (other
than U.S. Telecommunications Law, as to which we express no opinion) or any
Colorado statute, rule or regulation applicable to the Company or (ii) any
order, writ, judgment, injunction, decree, determination or award which has been
entered against the Company and of which we have knowledge.
10. Except as set forth in the Schedules to the Purchase Agreement, to our
knowledge, based solely upon our review of the Certificate, there is no action,
proceeding or investigation pending or overtly threatened against the Company
before any state court or state administrative agency in the State of Colorado
or the State of Delaware or any United States Federal court or agency.
11. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with, any Federal, State of Colorado, or State
of Delaware governmental body required for the consummation by the Company of
the transactions contemplated by the Purchase Agreement (except as may be
required under the securities or Blue Sky laws of various jurisdictions or
except as may be required under U.S. Telecommunications Law, as to which we
express no opinion), have been made or obtained, except (a) as set forth in the
Schedules to the Purchase Agreement, (b) the filing of an amendment to the
Company's Restated Certificate which will occur on the date hereof, and (c) and
except for the filing of a Form D with the U.S. Securities and Exchange
Commission and the Colorado Division of Securities.
12. No registration of the Notes under the Securities Act is required for
the sale of the Notes to the Purchaser as contemplated by the Purchase
Agreement, assuming the accuracy of the Purchaser's representations set forth in
the Purchase Agreement and those of the Company in the Purchase Agreement and
compliance by them with their respective agreements contained in the Purchase
Agreement (it being understood that no opinion is being expressed as to any
resale of the Notes by any person).
13. To our knowledge, no holder of any security of the Company or any of
the Subsidiaries has any right to request or demand any registration of shares
of Common Stock or any other security of the Company or any of its Subsidiaries
because of the consummation of the transactions contemplated by the Purchase
Agreement, the Warrant Agreement, the Notes or the Registration Agreement.
<PAGE>
Merrill Lynch Global Allocation Fund, Inc.
January 15, 1998
Page 8
The opinions expressed herein are subject to the qualifications that
certain provisions of the Pledge Agreement are or may be unenforceable in whole
or in part, but, in our opinion, the inclusion of such provisions does not
affect the validity of the Pledge Agreement, and the Pledge Agreement contains
remedies which, if properly invoked, are adequate for the practical realization
of the principal legal benefits afforded thereby, except for the economic
consequences of any judicial, administrative, or other procedural delay which
may be imposed by, relative to, or result from any applicable law.
Our opinions are based upon the Federal laws of the United States
(excluding U.S. Telecommunications Law), the General Corporation Law of the
State of Delaware, the laws of the State of Colorado, with respect to paragraphs
5 and 6 of this opinion only, the laws of the State of New York, and with
respect to paragraph 7 of this opinion only, the Uniform Commercial Code of the
State of New York, and case decisions as of this date and upon facts known to us
as of this date; we expressly disavow any obligation to advise you with respect
to future changes in law or in our knowledge or in any event or change of
condition occurring subsequent to the date of this opinion.
The opinions expressed herein are strictly limited to the matters stated
herein, and no other opinions may be implied. This opinion is provided as a
legal opinion only, effective as of the date hereof, and not as a guaranty or
warranty of the matters discussed herein.
This opinion is furnished to you solely for your benefit and may not be
made available to or relied upon by any other person, firm or entity without our
prior written consent.
Very truly yours,
HOLLAND & HART LLP
<PAGE>
[LETTERHEAD OF ESTUDIO FERNANDEZ PORTOCARRERO, CANELO & ASOCIADOS APPEARS HERE]
Lima,
Messrs.
Salomon Brothers Inc.
Prudential Securities Incorporated
c/o Salomon Brothers Inc.
388 Greenwich St.
New York, NY
U.S.A.
- ------
Merrill Lynch Global Allocation Fund, Inc.
800 Scudders Mill Road
Plainsboro, N.J. 08536
Ladies and Gentlemen:
We act as Peruvian counsel to CCC Holdings Peru SRLtda., SMR Direct Peru
SRLtda., Pompano SRLtda., Telecom Supply SRLtda., C-Comunica SRLtda., Transnet
del Peru S.A. (collectively, the "Peru Corporations"), Centennial Communications
Corp. ("the Company"), SMR Direct Cayman Corp. and Centennial Cayman Corp. This
opinion is being given pursuant to section 7 (h) of the Purchase Agreement by
and between the Company, Salomon Brothers Inc. and Prudential Securities
Incorporated, dated January 12, 1998, (the "Agreement"). Capitalized terms into
otherwise defined herein shall have the meaning set forth in the Agreement.
A. Basis of Opinion
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
1. The Agreement.
2. The Preliminary Offering Memorandum dated October 30, 1997, and the Offering
Memorandum dated January 12, 1998, (collectively, the "Offering Memorandum").
<PAGE>
[LETTERHEAD OF FERNANDEZ, PORTOCARRERO, CANELO & ASOCIADOS APPEARS HERE]
3. The originals or photocopies, certified or otherwise of the corporate records
of each of the Peru Corporations.
4. The Escritura de Constitucion and Estatutos of each of the Peru Corporations.
5. The concessions held by each of the Peru Corporations (the "Peru Licenses").
6. Such matters of law as we have considered necessary or appropriate for the
expression of opinions expressed herein.
B. Assumptions
In rendering the opinions expressed below we have assumed and not verified the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to originals of all documents submitted to us as
photocopies, certified or otherwise, and the authenticity of the originals of
such latter documents.
C. Opinion
Based upon the foregoing it is our opinion that:
1. Each of the Peru Corporations is a corporation or limitada duly incorporated
and validly existing under the laws of Peru with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum.
2. All of the outstanding shares of capital stock of, or other ownership
interests in, each of the Peru Corporations have been duly authorized and
validly issued, are fully paid and nonassessable, and are wholly owned by the
Company indirectly through one or more of the Subsidiaries, free and clear of
any lien, adverse claim, security interest, equity or other encumbrance.
3. The statements under the caption "Business - Country-by-Country Operations -
Peru - Regulatory and Legal Overview" in the Offering Memorandum, insofar as
such statements constitute a summary of legal matters, proceeding or
documents, are accurate in all material respects and present fairly the
information set forth therein with respect to such legal matters, proceedings
and documents.
4. The Peru Corporations hold the Peru Licenses authorizing the use of an
aggregate of 144 800 MHz channels for the provision of SMR service.
5. The Peru Licenses have been validly issued and are in full force and effect.
To our knowledge, except as set forth in the Offering Memorandum, the Peru
Corporations are in material compliance with the Peru Licenses.
6. None of the Peru Corporations is subject to any proceeding, or to our
knowledge, any pending or threatened complaint or investigation by or before
(a) the Organization for
<PAGE>
[LETTERHEAD OF FERNANDEZ, PORTOCARRERO, CANELO & ASOCIADOS APPEARS HERE]
Supervision of Private Investments in Telecommunications or (b) the Ministry
of Transportation, Communications, Housing and Construction.
7. To our knowledge, none of the Peru Corporations is in violation in respect of
its respective Escritura de Constitucion, Estatutos or other organizational
documents.
8. To our knowledge, there are no legal or governmental proceedings, domestic
or foreign, pending against or affecting the Peru Corporations or to which
any of their respective properties is subject, that are not disclosed in the
Offering Memorandum.
9. None of (a) the issuance, offer, sale or delivery of the Units, (b) the
execution, delivery or performance of the Agreement or the other Operative
Documents, or (c) the consummation by the Company of the transactions
contemplated thereby, (i) requires any consent, approval, authorizations or
other order of, or registration or filing with, any Peruvian court,
regulatory body, administrative agency or other governmental body, agency or
official, (ii) conflicts with or constitutes a breach of, or a default under,
the Estatutos of any of the Peru Corporations, (iii) violates any Peruvian
statute law, regulation or filing applicable to the Peru Corporations or any
of their respective properties; (iv) violates any judgment, injunction,
order or decree applicable to the Peru Corporations or any of their
respective properties, (v) will result in the imposition of any lien, charge
or encumbrance upon any property or assets of the Peru Corporations pursuant
to the terms of any agreement, or instrument to which any of them is a party
or to which any of them may be bound or to which any of the property or
assets of any of them is subject, except for such creations and impositions
as would not have, individually or in the aggregate, a Material Adverse
Effect or (vi) violates the terms of any Peru Licenses.
In giving the foregoing opinions, we express no opinion other than as to the
laws of the Republic of Peru.
Very Truly Yours,
/s/ Eduardo Benavides
Eduardo Benavides
Senior Partner
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
<PAGE>
EXHIBIT E
ESCROW AGREEMENT
<PAGE>
EXHIBIT F
INDENTURE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
----
ARTICLE I PURCHASE AND SALE
Section 1.1 Authorization and Closing................................................................................1
-------------------------
A. Authorization of the Notes.......................................................................................1
--------------------------
B. Purchase and Sale of the Notes...................................................................................1
------------------------------
C. The Closing......................................................................................................1
-----------
ARTICLE II CONDITIONS TO CLOSING......................................................................................2
Section 2.1 Conditions of Each Purchaser's Obligations at the Closing................................................2
---------------------------------------------------------
A. Representations and Warranties...................................................................................2
------------------------------
B. Registration Agreement...........................................................................................2
----------------------
C. Sale of the Notes to Each Purchaser..............................................................................2
-----------------------------------
D. Blue Sky Clearances..............................................................................................2
-------------------
E. Opinion of Counsels..............................................................................................2
-------------------
F. Pledge Agreement.................................................................................................2
----------------
G. Escrow Agreement.................................................................................................3
-----------------
H. Closing Documents................................................................................................3
-----------------
I. Proceedings......................................................................................................4
-----------
J. Amendment to Existing Purchase Agreements........................................................................4
-----------------------------------------
K. Expenses.........................................................................................................4
--------
L. Closing of Senior Notes Transaction..............................................................................4
-----------------------------------
ARTICLE III COVENANTS.................................................................................................4
Section 3.1 Covenants................................................................................................4
---------
A. Financial Statements and Other Information.......................................................................4
------------------------------------------
B. Inspection of Property...........................................................................................6
----------------------
C. Attendance at Board Meetings.....................................................................................6
----------------------------
D. Restrictions.....................................................................................................6
------------
E. Affirmative Covenants...........................................................................................10
---------------------
F. Compliance with Agreements......................................................................................11
--------------------------
G. Current Public Information......................................................................................11
--------------------------
H. Reservation of Common Stock.....................................................................................12
---------------------------
I. Proprietary Rights..............................................................................................12
------------------
J. Investments in United States Real Property Interests............................................................12
----------------------------------------------------
K. Payment of Notes................................................................................................12
----------------
L. Maintenance of Office...........................................................................................13
---------------------
M. Compliance Certificate..........................................................................................13
----------------------
N. Stay, Usury; Extension..........................................................................................14
----------------------
ARTICLE IV TRANSFER RESTRICTIONS.....................................................................................14
Section 4.1 Transfer of Restricted Securities.......................................................................14
---------------------------------
A. Exceptions to Transfer Restrictions.............................................................................14
-----------------------------------
B. Legend Removal..................................................................................................14
--------------
ARTICLE V REPRESENTATION AND WARRANTIES..............................................................................15
Section 5.1 Representations and Warranties of the Company...........................................................15
---------------------------------------------
A. No Order or Decree; No Registration Required....................................................................15
--------------------------------------------
B. Disclosure......................................................................................................15
----------
C. Status Report...................................................................................................15
-------------
D. Organization and Corporate Power................................................................................16
--------------------------------
E. Release.........................................................................................................16
-------
F. Capital Stock and Related Matters...............................................................................16
---------------------------------
G. Subsidiaries; Investments.......................................................................................18
-------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
H. Authorization; No Breach......................................................... 18
------------------------
I. Financial Statements............................................................. 19
--------------------
J. Absence of Undisclosed Liabilities............................................... 19
----------------------------------
K. No Material Adverse Change....................................................... 20
--------------------------
L. Absence of Certain Developments.................................................. 20
-------------------------------
M. Assets........................................................................... 21
------
N. Tax Matters...................................................................... 21
-----------
O. Contracts and Commitments........................................................ 22
-------------------------
P. Proprietary Rights............................................................... 23
------------------
Q. Litigation, etc.................................................................. 25
---------------
R. Brokers.......................................................................... 25
-------
S. Governmental Consent, etc........................................................ 25
-------------------------
T. Insurance........................................................................ 25
---------
U. Employees and ERISA.............................................................. 26
-------------------
V. Compliance with Laws............................................................. 26
--------------------
W. Environmental Laws............................................................... 26
------------------
X. Hazardous Material............................................................... 27
------------------
Y. Compliance with Regulations G, T, U or X......................................... 27
----------------------------------------
Z. Affiliated Transactions.......................................................... 27
-----------------------
AA. Disclosure...................................................................... 27
----------
BB. Securities Compliance........................................................... 27
---------------------
CC. Licenses........................................................................ 27
--------
DD. No Distribution................................................................. 28
---------------
EE. Illegal Payments................................................................ 28
----------------
FF. No Demand Registration.......................................................... 28
----------------------
GG. Closing date.................................................................... 28
------------
ARTICLE VI RELEASE OF PLEDGE AND SUBORDINATION OF NOTES............................... 28
Section 6.1 Triggering Event......................................................... 28
----------------
ARTICLE VII DEFINITIONS............................................................... 29
Section 7.1 Definitions.............................................................. 29
-----------
ARTICLE VIII MISCELLANEOUS............................................................ 33
Section 8.1 Miscellaneous............................................................ 33
-------------
A. Expenses......................................................................... 33
--------
B. Remedies......................................................................... 33
--------
C. Purchaser=s Investment Representations........................................... 33
--------------------------------------
D. Consent to Amendments............................................................ 34
---------------------
E. Survival of Representations and Warranties....................................... 35
------------------------------------------
F. Successors and Assigns........................................................... 35
----------------------
G. Severability..................................................................... 35
------------
H. Counterparts; Facsimile.......................................................... 35
-----------------------
I. Descriptive Headings; Interpretation............................................. 35
------------------------------------
J. Governing Law.................................................................... 35
-------------
K. Notices.......................................................................... 35
-------
L. Integration...................................................................... 36
-----------
M. Understanding Among the Purchasers............................................... 36
----------------------------------
</TABLE>
ii
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Subordinated Secured Note
Exhibit B Registration Agreement
Exhibit C Opinions of Counsel
Exhibit D Pledge Agreement
Exhibit E Escrow Agreement Exhibit F Indenture
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Adverse Change Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Proprietary Rights Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Compliance Schedule
Affiliated Transaction Schedule
Licenses Schedule
iii
<PAGE>
CAPITALIZATION SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
NUMBER EXERCISE EXPIRATION
OPTION HOLDERS* GRANT DATE OF SHARES PRICE/SHARE DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joanne Abel 9/13/96 2,500 $1.45 9/12/06
10/3/97 500 $1.45 10/2/07
Michael Aberle 4/18/97 10,000 $1.45 4/17/07
10/3/97 20,000 $1.45 10/2/07
Jorge Bado 10/3/97 30,000 $1.45 10/2/07
Carlos Coello 10/3/97 20,000 $1.45 10/2/07
Duncan Craighead 11/15/96 2,000 $1.45 11/14/06
10/3/97 5,500 $1.45 10/2/07
Jeff Dunning 7/8/96 7,500 $1.45 7/7/06
10/3/97 5,500 $1.45 10/2/07
Bernard Dvorak 1/17/97 125,000 $1.45 1/16/07
10/3/97 125,000 $1.45 10/2/07
William Elsner 6/7/96 20,000 $1.00 6/6/06
12/1/96 80,000 $1.45 11/30/06
Mark Fetcenko 3/15/96 30,000 $1.00 3/14/06
7/8/96 10,000 $1.45 7/7/06
John Fullmer 5/16/97 25,000 $1.45 5/15/06
10/3/97 12,000 $1.45 10/2/07
Fred Gallart 10/7/96 38,000 $1.45 10/6/06
2/21/97 12,000 $1.45 2/20/07
7/18/97 20,000 $1.45 7/17/07
10/3/97 180,000 $1.45 10/2/07
Anne Haas 3/15/96 7,708 $1.00 11/1/99
7/8/96 3,688 $2.50 11/1/99
2/21/97 1,208 $3.25 11/1/99
Dave Jardinico 2/21/97 1,500 $1.45 2/20/07
10/3/97 3,500 $1.45 10/2/07
Rafael Luces 4/12/96 15,000 $1.00 4/11/06
7/8/96 7,500 $1.45 7/7/06
7/18/97 17,500 $1.45 7/17/07
10/3/97 60,000 $1.45 10/2/07
Karl Maier 9/13/96 20,000 $1.45 9/12/06
10/3/97 50,000 $1.45 10/2/07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER EXERCISE EXPIRATION
OPTION HOLDERS* GRANT DATE OF SHARES PRICE/SHARE DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Mancebo 2/21/97 12,500 $1.45 2/20/07
10/3/97 17,500 $1.45 10/2/07
Christian Manfre 4/18/97 2,500 $3.25 4/17/07
John Marcolina 7/8/96 3,000 $1.45 7/7/06
10/3/97 7,000 $1.45 10/2/07
Gladys Martinez 2/21/97 250 $1.45 2/20/07
10/3/97 2,750 $1.45 10/2/07
Robert McKenzie 1/12/96 20,000 $1.00 1/11/06
1/17/97 30,000 $1.45 1/16/07
Allen Nelson 2/21/97 5,000 $3.25 2/20/07
Miriam Quinn 2/21/97 5,000 $1.45 2/20/07
10/3/97 25,000 $1.45 10/2/07
Jeff Rhodes 1/12/96 100,000 $1.00 1/11/06
7/8/96 50,000 $2.50 7/7/06
2/21/97 24,000 $3.25 2/20/07
Matt Riley 7/8/96 1,000 $2.50 7/7/06
Debra Schneider 10/7/96 5,000 $2.50 10/6/06
Michael Simkin 7/1/97 500,000 $1.45 6/30/07
Vickie Van Buren 11/20/97 2,500 $1.45 11/19/07
Barbara Vonderheid 7/8/96 20,000 $1.00 7/7/06
7/8/96 10,000 $1.45 7/7/06
2/21/97 15,000 $1.45 2/20/07
10/3/97 80,000 $1.45 10/2/07
Matt Zuschlag 4/12/96 20,000 $1.00 4/11/06
7/8/96 10,000 $1.45 7/7/06
1,936,104
---------------
</TABLE>
<PAGE>
SUBSIDIARY SCHEDULE
TO PURCHASE AGREEMENT
1. SUBSIDIARIES
<TABLE>
<CAPTION>
SUBSIDIARY JURISDICTION STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMR Direct USA, Inc. Delaware Centennial Communications Corp.: 100%
SMR Direct Cayman Corp. Cayman Islands Centennial Communications Corp.: 100%
Centennial Cayman Corp. Cayman Islands Centennial Communications Corp.: 100%
CCC Holdings Peru, S.R.L. Peru Centennial Cayman Corp.: 99%/1/
Centennial Cayman Corp. Chile Centennial Cayman Corp.: 99%/1/
Chile, Ltda.
Centennial Ecuador, S.A. Ecuador Centennial Cayman Corp.: 99%/1/
Centennial Telecomunicaciones Venezuela Centennial Cayman Corp.: 100%
de Venezuela, S.A.
SMR Direct Peru, S.R.L. Peru CCC Holdings Peru S.R.L.: 99%/2/
Brunacci Compania Ltda. Ecuador Centennial Ecuador S.A.: 100%
Pompano, S.R.L. Peru CCC Holdings Peru, S.R.L.: 99%/2/
Telecom Supply, S.R.L. Peru CCC Holdings Peru, S.R.L.: 99%/2/
Transnet del Peru, S.A. Peru CCC Holdings Peru, S.R.L.: 99%/3/
C-Comunica, S.R.L. Peru CCC Holdings Peru, S.R.L: 99%/2/
Chilean Operating Company Chile Centennial Cayman Corp. Chile Limitada: 99%/2/ /4/
- ------------------------------------------------------------------------------------------------------------
</TABLE>
2. The Company also has 5 shell companies in Argentina which are currently
held in trust for the Company.
- ---------------------
/1/ SMR Direct Cayman Corp. is a nominee shareholder in this company.
/2/ Centennial Cayman Corp. is a nominee shareholder in this company.
/3/ Centennial Cayman Corp. and SMR Direct Cayman Corp. are nominee
shareholders in this company.
/4/ This company is the subject of certain confidentiality restrictions.
<PAGE>
RESTRICTIONS SCHEDULE
TO PURCHASE AGREEMENT
* The Series A Purchase Agreement
* The Series B Purchase Agreement
* The Senior Secured Convertible Notes Purchase Agreement
* The Senior Secured Convertible Notes due 2002 of the Company
* The Existing Registration Agreement
* The Existing Stockholders Agreement
* The Company's Amended and Restated Certificate of Incorporation
The Pledge Agreement
*All conflicts and restrictions contained in these documents will be waived
prior to the Closing.
<PAGE>
FINANCIAL STATEMENTS SCHEDULE
TO PURCHASE AGREEMENT
1. Audited consolidated balance sheets; statements of operations; statement of
mandatorily redeemable, convertible preferred stock and stockholders'
equity; and cash flows of Centennial Communications Corp. and its
subsidiaries (the "Company") for the period from inception (October 26,
1995) to December 31, 1995, and the year ended December 31, 1996.
2. Unaudited consolidated balance sheet and statement of operations of the
Company for the nine month period ended September 30, 1997.
<PAGE>
LIABILITIES SCHEDULE
TO PURCHASE AGREEMENT
1. Pursuant to a Purchase Order dated March 14, 1996, the Company has agreed to
pay approximately $2,490,000 to Maxon America Inc. for the purchase of
equipment from August 1996 through December 1996. The Company has since
negotiated an amendment to this purchase order which allows the Company to
take delivery of such equipment in any quantity over any time period the
Company chooses. Approximately $1,100,000 remains outstanding under this
purchase order.
2. Contingent upon the grant of an additional 40 channels of 800 MHz spectrum
in Lima, Peru, the Company is obligated to pay the previous shareholders of
C-Comunica, S.R.L. $1,380,000.
3. Contingent upon the grant of paging frequency in Lima, Peru, the Company is
obligated to pay the previous shareholders of C-Comunica, S.R.L. $250,000.
4. In connection with the Asset Purchase Agreement with Colorado Communication
Services, Inc., the Company has assumed certain liabilities with respect to
operations and employee compensation.
5. The indebtedness issued pursuant to the notes issued pursuant to the
Purchase Agreement dated October 3, 1997 with respect to the Senior Secured
Convertible Notes due 2002.
6. See "Contract Schedule" letters containing obligations with respect to
certain current employees.
<PAGE>
ADVERSE CHANGE SCHEDULE
TO PURCHASE AGREEMENT
None.
<PAGE>
DEVELOPMENT SCHEDULE
TO PURCHASE AGREEMENT
1. On October 3, 1997, the Company entered into an Executive Stock Pledge
Agreement and received a Promissory Note from Michael Simkin, Chief
Executive Officer of the Company, for a loan of $72,000 made by the Company
to Mr. Simkin. Mr. Simkin has purchased 50,000 shares of the Company's
Series C Preferred Stock for an aggregate purchase price of $72,500. Mr.
Simkin has given a Promissory Note, due October 3, 1999, for $72,000.
Interest on the note accrues at an annual rate of 6.5% and is payable
annually on October 3. The stock is being held by the Company as security
for the prompt and complete payment of the principal and accrued interest on
the note.
2. The Company has submitted a proposal to build out 40 nationwide 800 MHz
channels in the Chilean SMR concurso which was held in July 1997 (the "Chile
Concurso"). On October 29, 1997, the Company received written notice from
the Chilean Ministry of Transportation and Telecommunications that its
proposal had been accepted and awarded; although such award is subject to
appeal by the other participants in the Chile Concurso. The Company has been
informed that on November 28, 1997, CTC-VTR Communicaciones Moviles S.A.,
one of the other participants, filed an appeal objecting to the acceptance
of the Company's proposal.
3. On September 3, 1997, the Company purchased Fastcom, S.A., which holds a
nationwide paging license and certain bi-directional frequencies in
Argentina for a purchase price payable in two installments. The obligation
to make the second and final payment was secured by a pledge of the shares
of Fastcom, S.A. in favor of the former shareholders thereof. In connection
with the acquisition of Fastcom, S.A. and the posting of certain performance
bonds, the Company also pledged 100% of the stock of its subsidiary,
Radioservicios Moviles, S.A., which holds a paging license and paging
frequency in Argentina, to Intepla, S.R.L., a party related to the former
shareholders thereof. The company has allowed the stock of each of Fastcom,
S.A. and Radioservicios Moviles, S.A. to be foreclosed upon and to be
returned to the former owners pursuant to the terms of these two pledges. In
addition, in connection with these transactions, the Company has paid
$70,000 to the former owners of Radioservicios Moviles, S.A. as a
termination payment.
4. On November 17, 1997, the Company's President, Jeff E. Rhodes, resigned to
pursue other interests. Pursuant to the Confidential Termination and Release
Agreement between Mr. Rhodes and the Company, Mr. Rhodes will continue to
provide consulting services to the Company for a period of approximately 6
months.
<PAGE>
5. The Company is in the process of divesting its U.S. Operations. See
"Contracts Schedule" for asset purchase agreements and letters of intent
with respect to such divestiture.
6. On October 3, 1997 the Company reduced the exercise price of options held by
certain employees and members of the Board of Directors with exercise prices
of greater than $1.45 to $1.45.
7. On November 26, 1997 the Company, pursuant to the terms of a letter of
intent with Benjamin Bursztyn, loaned Asecones USA, Inc. an affiliate of Mr.
Bursztyn, $200,000 and received a pledge of certain shares of stock.
8. On October 3, 1997 the Company granted options with an exercise of $1.45 to:
Joanne Abel (500), Mike Aberle (20,000), Jorge Bado (30,000), Carlos Coello
(20,000), Duncan Craighead (5,500), Jeff Dunning (5,500) Bernard Dvorak
(125,000), John Fullmer (12,000) Fred Gallart (180,000), Dave Jardinico
(3,500), Rafeal Luces (60,000), Karl Maier (50,000), Robert Mancebo
(17,500), John Marcolina (7,000), Gladys Martinez (2,750), Miriam Quinn
(25,000), Barbara Vonderheid (80,000)
9. On January 2, 1998 the Company purchased 100% of the outstanding capital
stock of a Chilean operating company which holds 10 800 MHz channels in the
city of Santiago, Chile and is a party to an agreement relating to the
purchase by it of 40 800 MHz channels in the city of Santiago, Chile. This
transaction and the company purchased by the Company are currently subject
to certain confidentiality restrictions.
10. See "Assets Schedule."
11. See "Contracts Schedule" for current Letters of Intent and documents with
respect to the Senior Secured Convertible Notes due 2002 of the Company.
<PAGE>
ASSETS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company entered into a capital leasing agreement with E.F. Johnson
Company to lease and acquire infrastructure equipment. As of April 17, 1997,
E.F. Johnson Company assigned a portion of this lease agreement to Boston
Financial & Equity Corporation ("Boston Financial"). The remaining balance
payable to E.F. Johnson Company under this agreement is approximately
$176,521. The remaining balance payable to Boston Financial is approximately
$1,265,190. E.F. Johnson Company and Boston Financial hold security
interests in this equipment to the extent of the unpaid purchase price.
2. The Company has executed Installment Payment Plan Notes payable to the FCC
totaling $4,559,247 with respect to the 43 900 MHz MTA licenses it has
acquired. Each of these Notes is secured by a security interest held by the
FCC in the respective license. These licenses have been transferred by the
Company to its wholly-owned subsidiary, SMR Direct USA, Inc.
3. In connection with the sale of the Senior Secured Convertible Notes due 2002
of the Company, and pursuant to the Deed of Charge, the Company has pledged
66% of the shares it owns in Centennial Cayman Corp. and SMR Direct Cayman
Corp.
<PAGE>
TAXES SCHEDULE
TO PURCHASE AGREEMENT
See Attached.
<PAGE>
CONTRACT SCHEDULE
TO PURCHASE AGREEMENT
1. Employers Health Insurance Indemnity, POS and Standard Health Benefit Plan
for Colorado.
2. Agreement regarding Employment Termination between the Company and Jeff E.
Rhodes, President, dated May 16, 1997.
3. Confidential Termination and Release Agreement dated November 17, 1997
between Jeff E. Rhodes and the Company.
4. Leases for office space in Denver, Colorado, between the Company and Union
Square Partnership, dated March 1, 1997.
5. Indenture of Lease for office space in Denver, Colorado, between the Company
and Sixteen Hundred Wynkoop, Ltd., dated May 2, 1996.
6. Lease for office space in Miami, Florida, between the Company and New World
Partners Joint Venture, dated January 8, 1997.
7. Lease for office space in Guayaquil, Ecuador, between Brunacci Compania
Ltda. and Sra. Pilar Mantilla Rivadeneira (for Inmobiliaria Mancor S.A.),
dated December 15, 1996.
8. Lease for office space in Lima, Peru, between Mobil Line del Peru, S.A. (SMR
Direct Peru, S.R.L.) and Banco Continental (Office #'s 20 & 21, Centro
Comercial Continental), dated May 9, 1996.
9. Lease for office space in Lima, Peru, between Mobil Line del Peru, S.A. (SMR
Direct Peru, S.R.L.) and Banco Continental (Office # 19, Centro Comercial
Continental), dated February 20, 1997.
10. Sublease of Site for Communications Facilities between SBA and the Company
(Ruffner Mountain), dated July 26, 1996.
11. Sublease of Site for Communications Facilities between SBA and the Company
(Oak Mountain), dated February 5, 1997.
12. Sublease of Site for Communications Facilities between SBA and the Company
(Floyd Knobs, Indiana), dated August 2, 1996.
13. Sublease of Site for Communications Facilities between SBA and the Company
(Mitchell Hill), dated August 2, 1996.
14. Sublease of the Site for Communications Facilities between SBA and the
Company (NMJJ) dated September 1, 1996.
<PAGE>
15. Sublease of Site for Communications Facilities between SBA and the Company
dated September 1, 1996 (Twin Rivers, OH).
16. Sublease of Site for Communications Facilities between SBA and the Company
April 1, 1997 (Cordova Tower, TN).
17. Antenna Site License Permit between OneComm. Corp. d/b/a Nextel and the
Company (World Trade Center, Minneapolis) dated May 20, 1997.
18. Master Tower Site Sublease between SBA and the Company (Slidell, LA) dated
April 4, 1997.
19. Tower Lease and Agreement between Jasper Communications and the Company
dated May 1, 1997 (La Place, LA).
20. Tower Space Lease Agreement between Newport Technical, Inc. and the Company
(Barr Tower) dated April 4, 1997.
21. Antenna Site Sublicense between SBA and the Company (TCBY Building), dated
July 29, 1996.
22. Antenna Site Sublicense between SBA and the Company (Ruan Center), dated
September 1, 1997.
23. Antenna Site Sublicense between SBA and the Company (AUL Building), dated
September 15, 1996.
24. Antenna Site Sublicense between SBA and the Company (Plaza Tower), dated
April 1, 1997.
25. Antenna Site Sublicense between SBA and the Company (Spencer's Mountain),
dated July 29, 1996.
26. Antenna Site Sublicense between SBA and the Company (Sugar Creek), dated
August 16, 1996.
27. Antenna Site Sublicense between SBA and the Company (Liberty Bank Tower),
dated September 10, 1996.
28. Antenna Site Sublicense between SBA and the Company (Bank Four Tulsa),
dated September 9, 1996.
29. Antenna Site Sublicense between SBA and the Company (Echo 003- Crane
Avenue, Allegheny County, Pennsylvania), dated June 27, 1996.
30. Antenna Site Sublicense between SBA and the Company (Echo 001 -
Monroeville, Pennsylvania), dated June 27, 1996.
<PAGE>
31. Antenna Site Sublicense between SBA and the Company (Clark Tower), dated
August 15, 1996.
32. Antenna Site Sublicense between SBA and the Company (North Nashville
Tower), dated January 10, 1997.
33. Master Tower Site Sublease between SBA and the Company (Star Tower), dated
July 29, 1996.
34. Master Tower Space Reservation and Sublicense Agreement between SBA and the
Company (Nashville South/I-65, Tennessee), dated January 8, 1997.
35. Woodmen Tower Rooftop Antenna Sublicense Agreement between SBA and the
Company, dated July 29, 1996.
36. Roof Antenna Agreement between SBA and the Company (Carew Tower), dated
August 15, 1996.
37. Sublease Agreement between SBA and the Company (WIMZ), dated August 1,
1996.
38. Telecommunications Terminal Site Access Agreement between Broadcast
Services, Inc. and the Company (IDS Center, Minneapolis, Minnesota), dated
June 20, 1996.
39. License Agreement between the Company and Clear Channel Radio Inc., dated
November 1, 1996 (WRXL).
40. License Agreement between the Company and COM-ENT, LLC, dated October 17,
1996 (WCMS).
41. Antenna Site Sublease and Antenna Construction Contract between SMR Direct
Peru, S.R.L. and Hialeah Communications E.I.R.L. (Morro Solar, Chorrillos)
dated February 14, 1997.
42. Antenna Site Lease between Oficina de Normalizacion Previsional - O.N.P.
and C-Comunica S.R.L. (Torre de Oficinas del Centro Civico y Comercial de
Lima), dated March, 1996.
43. Antenna Service Contract between SEDITEL R.S. S.R.L. and C-Comunica S.R.L.
(Morro Solar, Chorrillos) dated March 20, 1996.
44. Antenna Site Sublease Agreement between Transnet del Peru, S.A., Compania
de Inversiones y Proyectos Immobliarios Portezuela, S.A., Sucursal del Peru
(Banco del Trabajo Building, San Isidro, Lima, Peru) dated April 9, 1996.
<PAGE>
45. Antenna Site Lease Agreement between SMR Direct Peru S.R. Ltda. and Banco
Continental (Banco Continental, Lima Peru) dated May 9, 1996.
46. Antenna Site Lease Agreement between the Municipality of Chorrillos and SMR
Direct Peru, S.R. Ltda. (Morro Solar) dated April 3, 1997.
47. Antenna Site Sublease between Multisistemas Electronicos M.S.E. S.A. and
Consorcio Ecuatoriano de Telecomunicaciones CONECELL S.A. (Cerro Azul,
Guayaquil) dated June 24, 1994.
48. Land Sales Contract for Antenna Site between Multisistemas Electronicos
M.S.E. S.A. and Magdalena Leon de Serrano, Alfredo Serrano Pallares and
Carmen Leon de Monsalve (Chaupicruz, Quito) dated March 14, 1994.
49. Purchase Agreement for Common Stock between the Company and Telecom
Partners, L.P., Centennial Holdings, Inc., and Centennial Fund IV, L.P.
(collectively the "Purchasers"), dated December 8, 1995.
50. Registration Rights Agreement between the Company and the Purchasers, dated
December 8, 1995.
51. Stockholders Agreement between the Company and the Purchasers, dated
December 8, 1995.
52. First Amendment to Purchase Agreement between the Company and the
Purchasers, dated January 31, 1996.
53. Centennial Communications Corp. 1996 Stock Option Plan.
54. Amendment to Centennial Communications Corp. 1996 Stock Option Plan.
55. Early Exercise Stock Purchase Agreement.
56. Series A Preferred Stock Purchase Agreement between the Company and the
Purchasers, Trailhead Ventures, L.P., Boulder Ventures, L.P., GC&H
Investments, William Elsner, MGVF II, Ltd., Robert McKenzie and Jeff Rhodes
(together with the Purchasers, the "Series A Purchasers"), dated June 27,
1996.
57. Amended and Restated Initial Stockholders Agreement between the Company and
the Purchasers, dated June 27, 1996.
58. Stockholders Agreement between the Company and the Series A Purchasers
dated June 27, 1996.
59. Registration Agreement between the Company and the Series A Purchasers,
dated June 27, 1996.
<PAGE>
60. First Amendment to Series A Preferred Stock Purchase Agreement between the
Company and the Series A Purchasers, dated March 19, 1997.
61. Series B Preferred Stock Purchase Agreement between the Company and the
Series A Purchasers, Centennial Fund V, L.P., Centennial Entrepreneurs Fund
V, L.P., Crest Funding Partners, L.P., Crest SMR, L.L.C., BancBoston
Ventures Incorporated and Kyle Lefkoff (as attorney-in-fact for Larry
Macks, Jurassic Ltd., Josh Fidler, Morty Macks Will's Wei Corp., Robert
Lemle, Caruthers Family, L.L.C., Tim Snipes, Ramer 1990 Living Trust, Grope
Schneider Securities, JLS, L.L.C., Doug Ramer, Trisun Financial, L.L.C.,
Eric Becker, Slade, Inc. and 250 Venture Capital Association) (together
with the Series A Purchasers, the "Series B Purchasers"), dated November
22, 1996.
62. Amended and Restated Stockholders Agreement between the Company and the
Series B Purchasers, dated November 22, 1996.
63. Amended and Restated Registration Agreement between the Company and the
Series B Purchasers, dated November 22, 1996.
64. First Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
65. Second Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
66. Third Amendment to Series B Preferred Stock Purchase Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
67. First Amendment to Amended and Restated Registration Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
68. Second Amendment to Amended and Restated Registration Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
69. First Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated March 19, 1997.
70. Second Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated May 16, 1997.
71. Third Amendment to Amended and Restated Stockholders Agreement between the
Company and the Series B Purchasers, dated July 1, 1997.
72. Purchase Agreement dated as of October 3, 1997 between the Company and the
persons listed on the Schedule of Purchasers attached thereto (Senior
Secured Convertible Notes).
<PAGE>
73. Second Amended and Restated Registration Agreement dated as of October 3,
1997 between the Company and the Investors listed on the Schedule of
Investors attached thereto.
74. Second Amended and Restated Stockholders Agreement dated as of October 3,
1997 between the Company and the Investors listed on the Schedule of
Investors attached thereto.
75. Deed of Charge between the Company and Prudential Securities Incorporated
dated as of October 3, 1997.
76. First Amendment to Purchase Agreement (Senior Secured Convertible Notes)
dated as of October 6, 1997 between the Company and the persons listed on
the Schedule of Purchasers attached thereto.
77. Stock Purchase Agreement by and among SMR Direct Cayman Corp., Centennial
Cayman Corp., Ernesto Uribe Abad, Pedro Uribe Abad and Pedro Kovacic
Taramona, dated September 6, 1996 (acquisition of Telecom Supply, S.R.L.).
78. Stock Purchase Agreement by and among CCC Holdings Peru, S.R.L., SMR Direct
Cayman Corp., Centennial Cayman Corp., Michael Bettsack Muller, Joseph
Bettsack Muller and Daniel Bettsack Maduro, dated January 22, 1997
(acquisition of C-Comunica S.R.L.).
79. Stock Purchase Agreement by and among Centennial Ecuador, S.A., Carlos Gil
Loor and Maria Soledad Del Alcazar Granda, dated November 20, 1996
(acquisition of Brunacci Compania Ltda).
80. Purchase Agreement by and among Mobil Line Peru, S.A., the Company and
Jesus Escudero Presa, dated February 29, 1996 (acquisition of 51% of Mobil
Line Peru, S.A.). 81. Stock Purchase Agreement between the Company and
Jesus Escudero Presa, dated July 8, 1996 (acquisition of 49% of Mobil Line
Peru, S.A.).
82. Stock Purchase Agreement by and among L.A. Technologies Corp. (acting in
its own capacity and representing and acting on behalf of Eduardo Ibarra
Diaz Ufano, Felipe Bertorini Guibert and Jose Carlos Godoy Lacoste),
Centennial Cayman Corp., SMR Direct Cayman Corp. and CCC Holdings Peru,
S.R.L., dated November 18, 1996 (acquisition of Pompano, S.R.L.).
83. Stock Purchase Agreement by and among Alicia Raquel Alonso Bernard,
Santiago D'Onofrio, SMR Direct Cayman Corp., Centennial Cayman Corp. and
Arturo Manuel Alonso, dated March 24, 1997 (acquisition of Radioservicios
Moviles, S.A.).
<PAGE>
84. Stock Purchase Agreement by and among Montecasino Investments Corporation,
CCC Holdings Peru, S.R.L., SMR Direct Cayman Corp. and Centennial Cayman
Corp., dated July 31, 1997 (acquisition of Transnet del Peru, S.A.).
85. Stock Purchase Agreement by and among Gustavo Guillermo Fernandez Supera,
Miguel Angel Cappa, SMR Direct Cayman Corp. and Centennial Cayman Corp.,
dated September 3, 1997 (acquisition of Fastcom, S.A.).
86. Equipment Lease Agreement, between the Company and E.F. Johnson Company,
dated June 28, 1996.
87. Amendment to Equipment Lease Agreement between the Company and E.F. Johnson
Company, dated August 1, 1996.
88. Purchase Agreement between the Company and E.F. Johnson Company, dated June
28, 1996.
89. Confidentiality Agreement between the Company and E.F. Johnson Company,
dated February 21, 1996.
90. Notice of Assignment and Highlights of Contract between the Company and
E.F. Johnson Company, dated April 17, 1997 (giving notice of the sale of
the Lease Agreement between the Company and E.F. Johnson Company to Boston
Financial & Equity Corporation on June 2, 1997).
91. Purchase Order between the Company and Maxon America, Inc., dated March 14,
1996, and amended April 23, 1997.
92. Joint Development Agreement dated June 26, 1997 between Comunicationes
Multitrunking Ltda., Comunicaciones Multisistomas Ltda., and Centennial
Cayman Corp. Chile Ltda.
93. Letter of Intent, dated May 8, 1997, by and between the Company and Radio
Enlaces Ltda., Benjamin Bursztyn and Asecones Ltda. with respect to the
purchase and sale of all of the outstanding capital stock of Radionet
Ltda., Secom Ltda., Radiolink Ltda., Satelcom Ltda. and Asesoria en
Comunicaciones-Asecones Cali Ltda. Extension of Letter of Intent dated
September 11, 1997. Extension of Letter of Intent dated October 22, 1997.
Extension of Letter of Intent dated December 9, 1997.
94. Loan Agreement dated as of November 26, 1997 by and among the Company and
Asecones USA, Inc. and Benjamin Bursztyn.
95. Asset Purchase Agreement between Colorado Communication Services, Inc. and
the Company dated August 1, 1997.
<PAGE>
96. Pledge Agreement by and between Centennial Cayman Corp., SMR Direct Cayman
Corp., Gustavo Guillermo Fernandez Supera and Miguel Angel Cappa, dated
September 3, 1997.
97. Letter Agreement between Arturo Alonso, Centennial Cayman Corp. and SMR
Direct Cayman Corp., dated September 8, 1997.
98. Stock Purchase Agreement by Kuhn Limitada, Carlos Garcia Kuhn, Centennial
Cayman Corp. Chile Limitada and Centennial Cayman Corp. dated as of
December 10, 1997.
99. First Amendment to the Stock Purchase Agreement by and between Kuhn
Limitada, Carlos Garcia Kuhn, Centennial Cayman Corp. Chile Limitada and
Centennial Cayman Corp. dated as of December 31, 1997.
100. Executive Stock Pledge Agreement between Michael Simkin and the Company,
dated October 3, 1997.
101. Promissory Note executed by Michael Simkin on October 3, 1997, in favor of
the Company.
102. Purchase Order between the Company and Maxon America, Inc., dated March
14, 1996.
103. Purchase Order between Motorola, Inc. and the Company, September 26, 1996.
104. Asset Purchase Agreement dated as of December 4, 1997 by and between
American Wireless Network, Inc., the Company and SMR Direct USA, Inc. ("SMR
Direct").
105. Asset Purchase Agreement dated as of October 27, 1997 by and between M.J.
Communications, Inc., the Company and SMR Direct.
106. Asset Purchase Agreement dated as of October 17, 1997 by and between
Wireless USA, LLC, the Company and SMR Direct.
107. Asset Purchase Agreement dated as of November 14, 1997 by and between
Radio Dispatch Network, LLC, the Company and SMR Direct.
108. Asset Purchase Agreement dated as of November 14, 1997 by and between
Fleet Talk Partners, the Company and SMR Direct.
109. Asset Purchase Agreement dated as of December 11, 1997 by and between
Electronic SMR Communications Corp., the Company and SMR Direct.
<PAGE>
110. Asset Purchase Agreement dated as of December 4, 1997 by and between
American Wireless, Inc., the Company and SMR Direct.
111. Letter regarding employment dated September 25, 1997 from the Company to
Jeff Dunning.
112. Letter regarding employment dated September 25, 1997 from the Company to
Debbie Schneider.
113. Letter regarding employment dated September 29, 1997 from the Company to
Matt Zuschlag.
114. Letter regarding employment dated September 29, 1997 from the Company to
Mark Fetcenko.
115. Separation Letter dated October 2, 1997 between the Company and Anne Haas.
116. Exclusive Subleasing Leasing Agreement dated November 6, 1997 between the
Company and CB Commercial Real Estate Group, Inc.
117. Separation Letter dated October 6, 1997 between the Company and Matthew
Zuschlag.
<PAGE>
PROPRIETARY RIGHTS SCHEDULE
TO PURCHASE AGREEMENT
1. The Company operates under the name "SMR Direct" in the United States and
has begun the process to register the trademark. The Company has received a
letter from Centennial Cellular Corporation demanding written assurances
that the Company will cease any use of Centennial Communications Corp. as a
trade name and threatening legal action if such assurances are not given.
The Company does not believe it has violated any rights Centennial Cellular
Corporation may have in "Centennial" as a service mark and has responded to
such letter.
2. The Company has received a letter from counsel to Southern Marine Research,
Inc. objecting to the use of the trademark "SMR Direct" by the Company. The
Company has communicated to this party its intent to abandon the SMR Direct
trademark in the State of Connecticut.
3. The Company operates under the names "Radio Trunking del Peru," "SMR Direct
Peru, S.R.L." "Telecom Supply, S.R.L.," "Pompano, S.R.L.," "C-Comunica,
S.R.L." and "Transnet, S.A." in Peru. On April 22, 1997, Telefonica del
Peru, S.A. petitioned INDECOPI, the Peruvian trademark authority, to nullify
the trademark "Radio Trunking del Peru" previously granted to the Company's
subsidiary, SMR Direct Peru, S.R.L., by INDECOPI on the grounds that such
trademark is not distinctive. The Company is in the process of responding to
this petition.
4. The Company also holds the rights to the following trademarks and tradenames
in Peru: (a) NEXTEL; (B) Transnet del Peru; (c) MULTIZONE; (d) TRONKIN; (E)
C-COMUNICA; and (f) C-COMUNICA del Peru.
5. Transnet del Peru S.A. ("Transnet") possesses certain rights to use the
trademark "Nextel" in the Republic of Peru. In connection with Transnet's
plans to use such trademark, the Company received a letter from counsel to
Nextel (i) contesting Transnet's rights in respect of such trademark; (ii)
requesting an assignment of such trademark rights to Nextel; and (iii)
setting forth Nextel's intent to commence nullification proceedings with
respect to such trademark rights. The Company has responded to Nextel and
has ceased its use of the name Nextel in Peru.
6. The Company operates under the names "Radio Trunking del Ecuador" and
"Brunacci Compania Ltda." in Ecuador. The Company has registered the name
"Radio Trunking" and has filed a complaint with the applicable Ecuadorian
authorities regarding the use of the name "International Radio Trunking
Communications of Ecuador" by a third party.
<PAGE>
7. See "Licenses Schedule" for a description of the 900 MHz MTA licenses issued
by the FCC to the Company.
<PAGE>
LITIGATION SCHEDULE
TO PURCHASE AGREEMENT
1. The Company has received a letter from Centennial Cellular Corporation
demanding written assurances that the Company will cease any use of
Centennial Communications Corp. as a trade name and threatening legal action
if such assurances are not given. The Company does not believe it has
violated any rights Centennial Cellular Corporation may have in "Centennial"
as a service mark and has responded to such letter.
2. In April 1997, Telefonica del Peru, S.A. petitioned INDECOPI, the Peruvian
trademark authority, to nullify the trademark "Radio Trunking del Peru"
previously granted to the Company's subsidiary, SMR Direct Peru, S.R.L., by
INDECOPI and to oppose the application by the Company for the trademarks
"RADIO TRUNKING + LOGO" on the grounds that such trademarks are not
distinctive. The Company is in the process of responding to this petition
and is considering appropriate modifications to this trademark in the event
this petition is successful. The Company does not believe that the outcome
of this petition will have a material adverse effect on the Company's
operations in Peru.
3. The municipality of San Isidro, Peru, has begun proceedings against SMR
Direct Peru, S.R.L. for operating without an occupancy permit. The Company
is in the process of curing this condition.
4. The Company has received a letter from a former employee of the Company
concerning the cessation of his employment with the Company which alleges
that he was treated unfairly in connection with the cessation of his
employment. The Company and such employee are currently involved in
settlement negotiations.
5. Transnet del Peru S.A. ("Transnet") possesses certain rights to use the
trademark "Nextel" in the Republic of Peru. In connection with Transnet's
plans to use such trademark, the Company received a letter from counsel to
Nextel (i) contesting Transnet's rights in respect of such trademark; (ii)
requesting an assignment of such trademark rights to Nextel; and (iii)
setting forth Nextel's intent to commence nullification proceedings with
respect to such trademark rights. The Company has responded to Nextel and
has ceased its use of the name Nextel in Peru.
6. The Company has received a letter from counsel to Southern Marine Research,
Inc. objecting to the use of the trademark "SMR Direct" by the Company. The
Company has communicated to this party its intent to abandon the SMR Direct
trademark in the State of Connecticut.
<PAGE>
7. The Company filed suit against A&S Dispatch and Patty Armstrong for breach
of contract. A&S Dispatch and Patty Armstrong filed a counterclaim against
the Company for failure to provide services as required under the contract.
An extension to file an answer to the counterclaim has been agreed to by the
parties. The Company has agreed to dismiss its complaint and A&S Dispatch
and Patty Armstrong have agreed to dismiss their counterclaim.
<PAGE>
BROKERAGE SCHEDULE
TO PURCHASE AGREEMENT
None.
<PAGE>
CONSENTS SCHEDULE
TO PURCHASE AGREEMENT
None
<PAGE>
INSURANCE SCHEDULE
TO PURCHASE AGREEMENT
<TABLE>
<CAPTION>
INSURANCE COMPANY COVERAGE*
- ---------------------------------------- -----------------------------------
<S> <C>
Associated Indemnity Group Commercial General Liability
Associated Indemnity Group Simplified Commercial Property
Associated Indemnity Group Hired/Borrowed Auto
Associated Indemnity Group Workers Compensation
Fireman's Fund Insurance Company Commercial Umbrella
Fireman's Fund Insurance Company Marine Cargo
American International Assistance Foreign Travel
Services
Great Northern Insurance Company Foreign Liability
Great Northern Insurance Company Foreign Employees Liability
Great Northern Insurance Company Foreign Property
Great Northern Insurance Company Foreign Auto
</TABLE>
*All coverage expires on May 1, 1998, except for the Marine Cargo Policy, which
has no expiration date.
<PAGE>
COMPLIANCE SCHEDULE
TO PURCHASE AGREEMENT
1. See "Litigation Schedule."
2. The Company currently is not in compliance with certain minimum subscriber
loading requirements with respect to a portion of its channels in Peru.
Requests for amendment of such loading requirements have been filed by the
Company with the Peruvian Ministry of Transportation, Communications,
Housing and Construction.
3. See "Tax Schedule" for sales tax issues.
<PAGE>
AFFILIATED TRANSACTION SCHEDULE
TO PURCHASE AGREEMENT
1. On October 3, 1997, the Company entered into an Executive Stock Pledge
Agreement and received a Promissory Note from Michael Simkin, Chief
Executive Officer of the Company, for a loan of $72,000 made by the Company
to Mr. Simkin. Mr. Simkin has purchased 50,000 shares of the Company's
Series C Preferred Stock for an aggregate purchase price of $72,500. Mr.
Simkin has given a Promissory Note, due October 3, 1999, for $72,000.
Interest on the note accrues at an annual rate of 6.5% and is payable
annually on October 3. The stock is being held by the Company as security
for the prompt and complete payment of the principal and accrued interest on
the note.
2. See "Development Schedule" for description of the Company's agreement with
Jeff E. Rhodes.
3. See "Contract Schedule" for Separation Agreements between Anne Haas and the
Company and Matt Zuschlag and the Company.
4. No others, except for agreements otherwise referred to in the "Contracts
Schedule."
<PAGE>
LICENSES SCHEDULE
TO PURCHASE AGREEMENT
1. UNITED STATES LICENSES. The Company and its Subsidiaries currently hold
licenses, each issued by the FCC, to operate on the 900 MHZ frequency band,
as set forth below:
<TABLE>
<CAPTION>
MTA Number of Channels
--- -----------------------
<S> <C>
Charlotte/Greensboro/Greensville/Raleigh 20
Minneapolis/St. Paul 20
NewOrleans/Baton Rouge 20
Cincinnati/Dayton 20
St. Louis 30
Pittsburgh 20
Richmond/Norfolk 20
Louisville/Lexington/Evansville 20
Memphis/Jackson 30
Birmingham 20
Indianapolis 20
Des Moines/Quad Cities 20
Kansas City 20
Columbus 10
Little Rock 30
Oklahoma City 30
Nashville 20
Knoxville 20
Omaha 20
Tulsa 20
Total 430
</TABLE>
2. PERU LICENSES. The Company and its Subsidiaries currently hold licenses to
operate 144 800 MHZ SMR channels in Lima/Callao.
3. ECUADOR LICENSES. The Company and its Subsidiaries currently hold licenses
to operate 800 MHZ SMR channels as set forth below:
<TABLE>
<CAPTION>
CITY Number of Channels
---- -----------------------
<S> <C>
Guayaquil 90
Quito 90
Machala 5
Salinas 5
Santa Domingo de Los Colorados 5
Total 195
</TABLE>
4. CHILE LICENSES. The Company and its Subsidiaries currently hold licenses
to operate 10 800 MHz SMR Channels in Santiago.
<PAGE>
EXHIBIT 10.8
EXECUTION COPY
THIRD AMENDED AND RESTATED REGISTRATION AGREEMENT
THIS AGREEMENT (this "Agreement") is dated as of January 15, 1998, among
Centennial Communications Corp., a Delaware corporation (the "Company"), the
parties listed as Investors (the "Investors") on the schedule attached to this
Agreement, Salomon Brothers Inc and Prudential Securities Incorporated (each an
"Initial Purchaser" and collectively, the "Initial Purchasers"), each of whom
has agreed to purchase the Company's units (the "Units"), each initial Unit
consisting of $1,000 principal amount at maturity of 14% Senior Discount Notes
due 2005 of the Company (the "Notes") and one warrant (each a "Warrant" and
collectively, the "Warrants") to purchase 64 Warrant Shares, and the purchasers
("Convertible Note Purchasers") of the Company's Subordinated Convertible Notes
due 2006 (the "Convertible Notes"), which notes are convertible into shares of
the Company's Common Stock ("Convertible Note Shares"). Unless otherwise
provided in this Agreement, capitalized terms used herein shall have the
meanings set forth in paragraph 10 hereof.
RECITALS
A. The Company and the Initial Purchasers are parties to a Purchase
Agreement dated January 15, 1998 (the "Initial Purchaser Agreement") pursuant to
which the Initial Purchasers agreed to purchase the Units from the Company with
the intent to sell such Units to Exempt Purchasers pursuant to Exempt Resales
(as each such term is defined in the Initial Purchaser Agreement).
B. The Company and the Convertible Note Purchasers are parties to a
Purchase Agreement dated January 15, 1998 (the "Convertible Note Purchase
Agreement") pursuant to which the Convertible Note Purchasers agreed to purchase
the Convertible Notes from the Company.
C. In order to induce the Initial Purchasers to enter into the Initial
Purchaser Agreement and the Convertible Note Purchasers to enter into the
Convertible Note Purchase Agreement, the Company has agreed to provide the
Initial Purchasers and the holders of Warrant Shares, the Convertible Notes and
the Convertible Note Shares ("Holders") with the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to closing contained in the Initial Purchaser Agreement and the Convertible Note
Purchase Agreement.
D. The Investors and the Company are parties to a Second Amended and
Restated Registration Agreement, dated October 3, 1997 (the "Prior Registration
Agreement"). A further condition to the execution of the Initial Purchaser
Agreement is
<PAGE>
that the Prior Registration Agreement be amended and restated and replaced with
this Agreement.
The parties hereto agree as follows:
AGREEMENTS
1. PSI Demand Registrations.
- -- ------------------------
(a) Requests for Registration. At any time after 120 days following the date
- --- -------------------------
the Company has completed a public offering of its equity securities under
the Securities Act of 1933, as amended, (the "Securities Act"), Prudential
Securities Incorporated and its Affiliates that hold Registrable Securities
(collectively "PSI") may, so long as they hold 33% of the Registrable
Securities held collectively by PSI as of October 3, 1997, request
registration under the Securities Act of all or part of their Registrable
Securities on Form S-1 or any similar long-form registration ("Long-Form
Registrations"), or, if available on Form S-2 or S-3 or any similar short-
form registration ("Short-Form Registrations"). Each request for a PSI
Demand Registration (as defined below) shall specify the approximate number
of Registrable Securities requested to be registered and the anticipated
per share price range for such offering. Within ten days after receipt of
any such request, the Company shall give written notice of such requested
registration to all other holders of Registrable Securities and subject to
paragraph 1(c) below, shall include in such registration all Registrable
Securities with respect to which the Company has received written requests
for inclusion therein within 15 days after the receipt of the Company's
notice. All registrations requested pursuant to this paragraph 1(a) are
referred to herein as "PSI Demand Registrations."
(b) Long-Form Registrations. PSI shall be entitled to request 2 Long-Form
- --- -----------------------
Registrations in which the Company shall pay all Registration Expenses (as
defined below) of PSI ("PSI Company-paid Long-Form Registrations"). A
registration shall not count as one of the permitted PSI Company-paid Long-
Form Registrations until it has become effective (unless such PSI Company-
paid Long-Form Registration has not become effective due solely to the
fault of PSI), and no PSI Company-paid Long-Form Registration shall count
as one of the permitted PSI Demand Registrations unless PSI is able to
register and sell at least 90% of the Registrable Securities requested to
be included in such registration; provided that in any event the Company
shall pay all Registration Expenses in connection with any registration
initiated as a PSI Company-paid Long-Form Registration whether or not it
has become effective.
(c) Priority on Demand Registrations. The Company shall not include in any PSI
- --- --------------------------------
Demand Registration any securities which are not Registrable Securities
without the prior written consent of PSI. If a PSI Demand Registration is
an underwritten offering and the managing underwriters advise the Company
in writing that in their opinion the number of Registrable Securities and,
if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable
-2-
<PAGE>
Securities and other securities, if any, which can be sold (in an orderly
manner) in such offering within a price range acceptable to PSI, the
Company shall include in such registration prior to the inclusion of any
securities which are not Registrable Securities (i) first, the number of
Registrable Securities requested to be included by PSI, (ii) second, the
number of Registrable Securities requested to be included, pro rata among
the respective holders of Registrable Securities on the basis of the amount
of Registrable Securities owned by each such holder; and (iii) third, other
securities requested to be included in such registration. Any Persons other
than holders of Registrable Securities who participate in PSI Demand
Registrations which are not at the Company's expense must pay their share
of the Registration Expenses as provided in paragraph 7 hereof.
(d) Restrictions on Demand Registrations. The Company may postpone for up to
- --- ------------------------------------
six months the filing or the effectiveness of a registration statement for
one PSI Demand Registration if the Company believes that such PSI Demand
Registration would reasonably be expected to have a material adverse effect
on (x) any proposal or plan by the Company or any of its Subsidiaries to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction
or (y) any proposed primary registration of securities by the Company;
provided that in such event, PSI shall be entitled to withdraw such request
and, if such request is withdrawn, such Demand Registration shall not count
as one of the permitted PSI Demand Registrations hereunder and the Company
shall pay all Registration Expenses in connection with such registration.
Alternatively, the Company may postpone for up to six months the filing or
effectiveness of any PSI Demand Registration if the Company has, within 180
days of the request for the PSI Demand Registration, effected a Demand
Registration (as defined below) pursuant to paragraph 2 hereof.
(e) Selection of Underwriters. PSI shall have the right to select the
- --- -------------------------
investment banker(s) and manager(s) to administer the offering that is the
subject of the PSI Demand Registration, subject to the approval of the
Company's Board of Directors, which approval shall not be unreasonably
withheld.
(f) Treatment of PSI. Except as set forth in this paragraph 1, PSI shall have
- --- ----------------
no additional rights under this Agreement in comparison to any other holder
of Registrable Securities that is a party hereto and shall have all rights
afforded to any other holder of Registrable Securities under any other
provisions of this Agreement.
2. Demand Registrations.
- -- --------------------
(a) Requests for Registration. At any time after the third anniversary of the
- --- -------------------------
Closing under that certain Purchase Agreement dated October 3, 1997, as
amended, between the Company and the Investors (the "Purchase Agreement")
or such earlier time as the Company has completed a public offering of its
equity securities under the Securities Act, the holders of at least 20% of
the Registrable Securities may request a Long-Form Registration under the
Securities Act of all or part of their
-3-
<PAGE>
Registrable Securities, or, if available, a Short-Form Registration (a
"Demand Registration"). Each request for a Demand Registration shall
specify the approximate number of Registrable Securities requested to be
registered and the anticipated per share price range for such offering.
Within ten days after receipt of any such request, the Company shall give
written notice of such requested registration to all other holders of
Registrable Securities and subject to paragraph 2(d) below, shall include
in such registration all Registrable Securities with respect to which the
Company has received written requests for inclusion therein within 15 days
after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of Registrable Securities shall be
- --- -----------------------
entitled to request (i) 2 Long-Form Registrations in which the Company
shall pay all Registration Expenses of the holders of Registrable
Securities ("Company-paid Long-Form Registrations") and (ii) 2 Long-Form
Registrations in which the holders of Registrable Securities shall pay
their share of the Registration Expenses as set forth in paragraph 6
hereof. A registration shall not count as one of the permitted Long-Form
Registrations until it has become effective (unless such Long-Form
Registration has not become effective due solely to the fault of the
holders requesting such registration), and no Long-Form Registration shall
count as one of the permitted Long-Form Registrations unless the holders of
Registrable Securities are able to register and sell at least 90% of the
Registrable Securities requested to be included in such registration;
provided that in any event the Company shall pay all Registration Expenses
in connection with any registration initiated as a Company-paid Long-Form
Registration whether or not it has become effective.
(c) Short-Form Registrations. In addition to the Long-Form Registrations
- --- ------------------------
provided pursuant to paragraph 2(b), the holders of Registrable Securities
shall be entitled to request an unlimited number of Short-Form
Registrations in which the Company shall pay all Registration Expenses of
the holders of Registrable Securities. Demand Registrations shall be
Short-Form Registrations whenever the Company is permitted to use any
applicable short form. After the Company has become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended,
the Company will use its best efforts to make Short-Form Registrations
available for the sale of Registrable Securities.
(d) Priority on Demand Registrations. The Company shall not include in any
- --- --------------------------------
Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of a majority of the
Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold (in an orderly
manner) in such offering within a price range acceptable to the holders of
a majority of the Registrable Securities initially requesting registration,
the Company shall include in such registration prior to the
-4-
<PAGE>
inclusion of any securities which are not Registrable Securities (i) first, the
number of Registrable Securities requested to be included, pro rata among the
respective holders of Registrable Securities on the basis of the amount of
Registrable Securities owned by each such holder; and (ii) second, other
securities requested to be included in such registration. Any Persons other than
holders of Registrable Securities who participate in Demand Registrations which
are not at the Company's expense must pay their share of the Registration
Expenses as provided in paragraph 7 hereof.
(e) Restrictions on Demand Registrations. The Company may postpone for up
------------------------------------
to six months the filing or the effectiveness of a registration statement for
one Demand Registration if (A) the Company believes that such Demand
Registration reasonably would be expected to have a material adverse effect on
(x) any proposal or plan by the Company or any of its Subsidiaries to engage in
any acquisition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or similar transaction or (y) any proposed
primary registration of securities by the Company, or (B) the Company has,
within 180 days of the Demand Registration request, effected a PSI Demand
Registration; provided that in such event, the holders of Registrable Securities
initially requesting such Demand Registration shall be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration shall not
count as one of the permitted Demand Registrations hereunder and the Company
shall pay all Registration Expenses in connection with such registration; and
provided, further, that if the Company undertakes a primary registration
following its deferral right, notwithstanding anything to the contrary contained
herein, the holders of Registrable Securities shall have "piggyback" rights
under paragraph 3 hereof with respect to not less than one-third of the number
of shares of Common Stock to be sold in such offering.
(f) Selection of Underwriters. The holders of a majority of the
-------------------------
Registrable Securities included in any Demand Registration shall have the right
to select the investment banker(s) and manager(s) to administer the offering,
subject to the approval of the Company's Board of Directors, which approval
shall not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in this Agreement, the
-------------------------
Company shall not grant to any Person the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of a majority of the Registrable Securities.
3. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. Whenever the Company proposes to register any of
------------------
its Common Stock under the Securities Act (other than pursuant to a PSI Demand
Registration, a Demand Registration, a Warrant Shelf Registration Statement, a
Warrant Shares Shelf Registration Statement, a Convertible Note Shelf
Registration Statement or
-5-
<PAGE>
a Convertible Note Shares Shelf Registration Statement), and the
registration form to be used may be used for the registration of
Registrable Securities, Warrant Shares and Convertible Note Shares (a
"Piggyback Registration"), the Company shall give prompt written notice (in
any event within three business days after its receipt of notice of any
exercise of demand registration rights other than under this Agreement) to
all holders of Registrable Securities, and to all Holders of Warrant Shares
and Convertible Note Shares of its intention to effect such a registration
and, subject to paragraphs 3(c) and 3(d) below, shall include in such
registration all Registrable Securities, Warrant Shares and Convertible
Note Shares with respect to which the Company has received written requests
for inclusion therein within 15 days after the receipt of the Company's
notice. The Holders of Warrant Shares and Convertible Notes Shares shall
have no rights to a Piggyback Registration as to any of their securities
which are the subject of shelf registrations effective under the Securities
Act pursuant to paragraph 4 hereof.
(b) Piggyback Expenses. The Registration Expenses of the holders of
- --- ------------------
Registrable Securities, the Holders of Warrants and Warrant Shares and the
Holders of Convertible Notes and Convertible Note Shares shall be paid by
the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
- --- ---------------------------------
underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion
the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, then subject to paragraph
3(a) above the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among
the holders of such Registrable Securities on the basis of the number of
shares of Registrable Securities owned by each such holder, (iii) third,
the Warrant Shares requested to be included in such registration, pro rata
among the Holders of such Warrant Shares on the basis of the amount of
Warrant Shares owned by each such Holder of Warrant Shares, (iv) fourth,
the Convertible Note Shares requested to be included in such registration,
pro rata among the Holders of such Convertible Note Shares on the basis of
the amount of Convertible Note Shares owned by each such Holder of
Convertible Note Shares, and (v) fifth, other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
- --- -----------------------------------
underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in
such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders initially
requesting such registration, then the Company shall include in such
registration (i) first, the securities requested to be included therein by
the holders requesting such registration, (ii) second, the Registrable
Securities requested to be
-6-
<PAGE>
included in such registration, pro rata among the holders of such
Registrable Securities on the basis of the number of shares of Registrable
Securities owned by each such holder, (iii) third, the Warrant Shares
requested to be included in such registration, pro rata among the Holders
of such Warrant Shares on the basis of the amount of Warrant Shares owned
by each such Holder of Warrant Shares, (iv) fourth, the Convertible Note
Shares requested to be included in such registration, pro rata among the
Holders of such Convertible Note Shares on the basis of the amount of
Convertible Note Shares owned by each such Holder of Convertible Note
Shares, and (v) fifth, other securities requested to be included in such
registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
- --- -------------------------
underwritten offering, the selection of investment banker(s) and manager(s)
for the offering must be approved by the holders of a majority of the
Registrable Securities included in such Piggyback Registration. Such
approval shall not be unreasonably withheld.
(f) Other Registrations. If the Company has previously filed a registration
- --- -------------------
statement with respect to Registrable Securities pursuant to paragraphs 1
or 2 or pursuant to this paragraph 3, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders
of such securities, until a period of at least six months has elapsed from
the effective date of such previous registration.
4. Shelf Registration
- -- ------------------
(a) Convertible Note Shelf Registration. The Company shall cause to be filed
- --- -----------------------------------
within the earlier of (i) three years after the date hereof; (ii) 60 days
after an Initial Public Offering as defined in the Indenture between the
Company and State Street Bank and Trust Company as Trustee dated the date
hereof (the "Indenture"), or (iii) in the event of a Change of Control as
defined in the Indenture, a shelf registration statement under the
Securities Act (the "Convertible Note Shelf Registration Statement"),
relating to all Convertible Notes, the Holders of which shall have provided
the information required pursuant to paragraph 4(c) hereof, and shall use
its best efforts to cause such Convertible Note Shelf Registration
Statement to become effective under the Securities Act within 180 days
thereafter. The Company shall use its best efforts to keep the Convertible
Note Shelf Registration Statement to become continuously effective,
supplemented and amended as required to the extent necessary to ensure that
it is available for sales of Convertible Notes by the Holders thereof
entitled to the benefit of this paragraph 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Securities Act and
the policies, rules and regulations of the Commission as announced from
time to time, until the earlier of (i) such time as all Convertible Notes
have been sold thereunder or otherwise converted, or (ii) the date the
-7-
<PAGE>
Convertible Notes are freely tradeable under the Securities Act (and the
Holders thereof have received an opinion of counsel to such effect).
(b) Convertible Note Shares Shelf Registration. The Company shall cause to be
- --- ------------------------------------------
filed within the earlier of (i) three years after the date hereof; (ii) 60
days after an Initial Public Offering, or (iii) in the event of a Change of
Control as defined in the Indenture, a shelf registration statement under
the Securities Act (the "Convertible Note Shares Shelf Registration
Statement"), relating to all Convertible Note Shares, the Convertible Note
Share Holders of which shall have provided the information required
pursuant to paragraph 4(c) hereof, and shall use its best efforts to cause
such Convertible Note Shares Shelf Registration Statement to become
effective under the Securities Act within 180 days thereafter. The Company
shall use its best efforts to keep the Convertible Note Shares Shelf
Registration Statement continuously effective, supplemented and amended as
required to the extent necessary to ensure that it is available for sales
of Convertible Note Shares by the Holders thereof entitled to the benefit
of this paragraph 4(b), and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules
and regulations of the Commission as announced from time to time, until the
earlier of (i) the date on which all of the Convertible Note Shares covered
by such Convertible Note Shares Shelf Registration Statement have been sold
thereunder or (ii) the date the Convertible Note Shares are freely
tradeable under the Securities Act (and the Holders thereof have received
an opinion of counsel to such effect).
(c) Provision by Holders of Certain Information in Connection with a Shelf
- --- ----------------------------------------------------------------------
Registration Statement. A Holder of Convertible Notes or Convertible Note
----------------------
Shares (all of which are "Transfer Restricted Securities") may not 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 ten (10) business days after receipt of a
written request therefor, such information specified in Item 507 of
Regulation S-K under the Securities Act, and any other similar information
reasonably requested by the Company, for use in connection with any shelf
registration statement, prospectus or preliminary prospectus included
therein. Each Holder as to which any shelf 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.
(d) Each Holder whose Transfer Restricted Securities are covered by a Shelf
Registration Statement filed pursuant to this paragraph 4 agrees, upon the
request of the underwriter(s) in any underwritten offering permitted
pursuant to this Agreement, not to effect any public sale or distribution
of securities of the Company of the same class as the Transfer Restricted
Securities included in such shelf registration statement (except as part of
such registration) including a sale pursuant to Rule 144 under the
Securities Act, during the 10-day period prior to, and during the 90-day
period beginning on, the closing date of any such underwritten offering
made pursuant to such
-8-
<PAGE>
shelf registration statement, to the extent timely notified in writing by
the Company or such underwriter(s).
(e) Shelf Registration for Market Making. The Company shall (i) include in the
- --- ------------------------------------
Convertible Note Shelf Registration Statement and the Convertible Note
Shares Shelf Registration Statement, such disclosures as may be necessary
to permit the prospectus contained in each such shelf registration
statement to be used in connection with offers and sales by market makers
of the Transfer Restricted Securities and (ii) following the effectiveness
of each such shelf registration statement, use its best efforts to keep
each such shelf registration statement continuously effective, supplemented
and amended as required for the time periods specified in this paragraph 4
of this Agreement, to the extent necessary to ensure that it is available
for sales of Transfer Restricted Securities in connection with market
making activities by market makers entitled to the benefit of this
paragraph 4(e), and to ensure that it conforms with the requirements of
this Agreement, the Securities Act and the policies, rules and regulations
of the Commission as announced from time to time, for so long as any shelf
registration statement is required to be effective pursuant to this
Agreement and such market makers or any of their affiliates (as defined in
the rules and regulations of the Commission under the Securities Act) own
any equity securities of the Company and propose to make a market in such
Transfer Restricted Securities as part of their business in the ordinary
course.
5. Holdback Agreements.
- -- -------------------
(a) Each holder of Registrable Securities, each Holder of Warrants or Warrant
Shares, and each Holder of Convertible Notes or Convertible Note Shares
agrees not to effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable
for such securities, during such period of time prior to and following the
effective date of any underwritten PSI Demand Registration, or Demand
Registration (or any underwritten Piggyback Registration in which
Registrable Securities, Warrants, Warrant Shares, Convertible Notes or
Convertible Note Shares, as the case may be, are included) as shall be
requested by the underwriters managing the registered public offering
(except as part of such underwritten registration), unless the underwriters
managing the registered public offering otherwise agree, which period of
time shall not exceed 90 days.
(b) The Company agrees (i) not to effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during such period of time prior to and
following the effective date of any underwritten PSI Demand Registration or
Demand Registration or any underwritten Piggyback Registration as shall be
requested by the underwriters managing the registered public offering
(except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered public offering otherwise agree, and (ii) to cause
each holder of
-9-
<PAGE>
at least 2% (on a fully-diluted basis) of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common
Stock, purchased from the Company at any time after the date of this
Agreement (other than in a registered public offering) to agree not to
effect any public sale or distribution (including sales pursuant to Rule
144 under the Securities Act) of any such securities during such period
(except as part of such underwritten registration, if otherwise permitted),
unless the underwriters managing the registered public offering otherwise
agree.
6. Registration Procedures. Whenever the holders of Registrable Securities, or
- -- -----------------------
the Holders of Warrant Shares, Warrants, Convertible Notes or Convertible Note
Shares, as the case may be, have requested that any Registrable Securities,
Warrant Shares, Warrants, Convertible Notes or Convertible Note Shares, as the
case may be, be registered pursuant to this Agreement, and with respect to the
shelf registration statements provided for in paragraph 4, the Company shall use
its best efforts to effect the registration and the sale of all securities
covered by such registration statement, in accordance with the intended method
of disposition thereof including the registration of the Preferred Stock, held
by a holder of Registrable Securities requesting registration as to which the
Company has received reasonable assurances that only Registrable Securities will
be distributed to the public, and pursuant thereto the Company shall as
expeditiously as possible:
(a) prepare and file with the Commission a registration statement with respect
to the securities to be included therein pursuant to the terms of this
Agreement and use its best efforts to cause such registration statement to
become effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to the counsel selected by the holders of a majority of the
securities covered by such registration statement copies of all such
documents proposed to be filed, which documents shall be subject to the
review of such counsel);
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period of not less than six months and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to each seller of the securities covered by such registration
statement, such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as such seller may reasonably request in order to
facilitate the disposition of the securities covered by such registration
statement, owned by such seller;
-10-
<PAGE>
(d) use its best efforts to register or qualify the securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
securities covered by such registration statement, owned by such seller
(provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required
to qualify but for this subparagraph, (ii) subject itself to taxation in
any such jurisdiction or (iii) consent to general service of process in any
such jurisdiction);
(e) promptly notify each seller of the securities covered by such registration
statement, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading, and, at the request of any
such seller, the Company shall prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all securities covered by such registration statement to be listed on
each securities exchange on which similar securities issued by the Company
are then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such Registrable Securities,
Convertible Note Shares or Warrant Shares, as the case may be, covered by
such registration statement as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Securities and Exchange
Commission or, failing that, to secure NASDAQ authorization for such
securities, and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such with respect to
such securities, with the NASD;
(g) provide a transfer agent and registrar for all securities covered by such
registration statement, not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including underwriting agreements in
customary form) and take all such other actions as the holders of a
majority of the securities covered by such registration statement, or the
underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such securities, (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of securities, covered by such
registration statement, any underwriter participating in any disposition
pursuant to
-11-
<PAGE>
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of securities covered by such registration statement
which holder, in its sole and exclusive judgment, might be deemed to be an
underwriter or a controlling person of the Company, to participate in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which
in the reasonable judgment of such holder or Holder and its counsel should
be included, provided that such material shall be furnished under such
circumstances as shall cause it to be subject to the indemnification
provisions provided pursuant to paragraph 8(b) hereof;
(l) in the event of the issuance of any stop order suspending the effectiveness
of a registration statement, or of any order suspending or preventing the
use of any related prospectus or suspending the qualification of any
securities included in such registration statement for sale in any
jurisdiction, the Company shall use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(m) use its best efforts to cause the securities covered by such registration
statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the sellers thereof
to consummate the disposition of such securities;
(n) obtain a cold comfort letter addressed to the holders of the securities
included in any offering and the underwriter, if any, from the Company's
independent public accountants in customary form and covering such matters
of the type customarily covered by cold comfort letters as the holders of a
majority of the securities being sold; and
(o) obtain an opinion of Company counsel addressed to the holders of the
securities covered by the registration statement and to the underwriter, if
any, included in any offering as the holders, of a majority of the
securities being sold reasonably request.
-12-
<PAGE>
If any such registration or comparable statement refers to any holder by
name or otherwise as the holder of any securities of the Company and if in its
sole and exclusive judgment, such holder is or might be deemed to be a
controlling person of the Company, such holder shall have the right to require
(i) the insertion thereof of language, in form and substance satisfactory to
such holder and presented to the Company in writing, to the effect that the
holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force, the
deletion of the reference to such holder; provided that with respect to this
clause (ii) such holder shall furnish to the Company an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to the
Company.
7. Registration Expenses.
- -- ---------------------
(a) All expenses incident to the Company's performance of or compliance with
this Agreement, including without limitation all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified
public accountants, underwriters (excluding discounts and commissions) and
other Persons retained by the Company (all such expenses being herein
called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense
of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued
by the Company are then listed or quoted on the NASD automated quotation
system.
(b) In connection with each PSI Demand Registration, Demand Registration, each
Piggyback Registration and each shelf registration pursuant to paragraph 4
hereof, the Company shall reimburse the holders of securities covered by
such registration for the reasonable fees and disbursements of one counsel
chosen by the holders of a majority of the Registrable Securities (if a PSI
Demand Registration, Demand Registration or Piggyback Registration in which
the holder of Registrable Securities are participating); or chosen by
Holders of a majority of other securities covered by such registration (if
a shelf registration pursuant to paragraph 4 or a Piggyback Registration in
which the holders of Registrable Securities are not participating);
provided that in no event shall the Company be required to pay for fees and
disbursements of more than one counsel.
(c) To the extent Registration Expenses are not required to be paid by the
Company, each holder of securities included in any registration hereunder
shall pay
-13-
<PAGE>
those Registration Expenses allocable to the registration of such holder's
securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration
in proportion to the aggregate selling price of the securities to be so
registered.
8. Indemnification.
- -- ---------------
(a) The Company agrees to indemnify and hold harmless, to the extent permitted
by law, each holder of Registrable Securities and each Holder of Warrant
Shares, Convertible Notes and Convertible Note Shares, their respective
officers, directors, employees and agents and each Person who controls such
holder or Holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses ("Losses") caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
holder or Holder expressly for use therein or by such holder's or Holder's
failure to deliver a copy of the registration statement or prospectus or
any amendments or supplements thereto after the Company has furnished such
holder or Holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company shall indemnify such
underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the holders
of Registrable Securities and the Holders of Warrant Shares, Convertible
Notes and Convertible Note Shares.
(b) In connection with any registration statement in which a holder of
Registrable Securities or a Holder of Warrant Shares, Convertible Notes and
Convertible Note Shares is participating, each such holder or Holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
shall indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against any
Losses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such holder or Holder
expressly for use therein; provided that the obligation to indemnify shall
be individual to each holder or Holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities (or by such Holder from the sale of Warrant Shares, Convertible
Notes or Convertible Note Shares, as the case may be) pursuant to such
registration statement.
-14-
<PAGE>
(c) Any Person entitled to indemnification hereunder shall (i) give prompt
written notice to the indemnifying party of any claim with respect to which
it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, upon receipt of
written notice from the indemnifying party, permit such indemnifying party
to assume the defense of such claim with counsel reasonably satisfactory to
the indemnified party. If such defense is assumed, the indemnifying party
shall not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall remain in full
force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of
such indemnified party and shall survive the transfer of securities.
(e) If the indemnification provided for in this paragraph 8 is unavailable
(other than by reason of the exceptions provided herein) in respect of any
Losses or is insufficient to hold the party claiming indemnification
hereunder harmless, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions,
statements or omissions that results in such Losses as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a material fact, has been taken or made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this paragraph 8, any legal or
other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph 8(e) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provision of this paragraph 8(e),
an indemnifying party that is a selling holder of Registrable
-15-
<PAGE>
Securities or a selling Holder of Warrant Shares, Convertible Notes or
Convertible Note Shares shall not be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities or Warrant Shares, Convertible Notes or Convertible Note Shares
sold by such indemnifying party and distributed to the public were offered
to the public exceeds the amount of any damages that such indemnifying
party has otherwise been required to pay by reason of such untrue or
alleged untrue written statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
9. Participation in Underwritten Registrations. No person may participate in
-------------------------------------------
any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Person entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting
arrangements.
10. Definitions.
-----------
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated
organization and a government entity or any department, agency or political
subdivision thereof.
"Preferred Stock" means shares of the Company's Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock.
"Registrable Securities" means (a) any Common Stock issued or issuable upon
the conversion of the Company's Series A Preferred Stock issued pursuant to
the Purchase Agreement dated June 27, 1996, as amended, between the Company
and the Purchasers listed therein (including the related Agreements to
Purchase Additional Shares), (b) any Common Stock issued or issuable upon
conversion of the Company's Series B Preferred Stock issued pursuant to the
Purchase Agreement dated November 22, 1996, as amended, between the Company
and the Purchasers listed therein, (c) any Common Stock issued or issuable
upon conversion of the Company's Senior Secured Convertible Notes due 2002
issued pursuant to the Purchase Agreement, or upon the conversion of the
Company Series C Preferred Stock, as the case may be, (d) any Common Stock
issued or issuable with respect to the securities referred to in clause
(a),
-16-
<PAGE>
(b) or (c) by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization, and (e) any other shares of Common Stock held by Persons
holding securities described in clauses (a), (b), (c) and (d) above,
excluding any Warrant Shares. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities (x) when they have
been distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar
rule then in force) or (y) at such time as any holder, which together with
its Affiliates, owning less than 5% of the Company's outstanding Common
Stock can sell all such Registrable Securities under Rule 144(k) under the
Securities Act (or any similar rule then in force). For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such
acquisition has actually been effected.
"Subsidiary" means with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is t the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership,
association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other
business entity.
"Warrants" means the Initial Warrants and any Contingent Warrants as
defined in and issued pursuant to the Warrant Agreement between the Company
and State Street Bank and Trust Company, as Warrant Agent, dated the date
hereof (the "Warrant Agreement").
"Warrant Shares" means shares of Common Stock issued or issuable upon
exercise of the Warrants issued pursuant to the Warrant Agreement, or any
shares of Common Stock issued or issuable with respect to such shares by
way of a stock dividend or stock split or in connection with a combination
of shares, recapitalization, merger, consolidation or other reorganization.
As to any particular Warrant Shares, such securities shall cease to be
Warrant Shares (x) when they have been distributed to the public pursuant
to an offering registered under the Securities Act or sold to the public
through a broker, dealer or market maker in compliance with Rule 144 under
the
-17-
<PAGE>
Securities Act (or any similar rule then in force) or (y) at such time as
any Holder, which together with its Affiliates, owning less than 5% of the
Company's outstanding Common Stock can sell all such Warrant Shares under
Rule 144(k) under the Securities Act (or any similar rule then in force).
For purposes of this Agreement, a Person will be deemed to be a Holder of
Warrant Shares whenever such Person has the right to acquire directly or
indirectly such Warrant Shares (upon conversion or exercise in connection
with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or
not such acquisition has actually been effected.
"Warrant Shelf Registration" means the registration of the Warrants under
the Securities Act effected by the Company pursuant to the terms of the
Warrant Agreement.
"Warrant Share Shelf Registration" means the registration of the Warrant
Shares under the Securities Act effected by the Company pursuant to the
terms of the Warrant Agreement.
Unless otherwise stated in this Agreement, other capitalized terms
contained herein have the meanings set forth in the Purchase Agreement.
11. Miscellaneous.
- --- -------------
(a) Selection of Investment Bankers. Except as otherwise provided herein in
- --- -------------------------------
connection with Demand Registrations, the selection of investment banker(s)
and manager(s) for any public offering or private sale by the Company of
its securities must be approved by the holders of a majority of the
Registrable Securities, which approval shall not be unreasonably withheld.
(b) No Inconsistent Agreements. The Company shall not hereafter enter into any
- --- --------------------------
agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities or to
the Holders of Warrant Shares, Convertible Notes or Convertible Note Shares
in this Agreement.
(c) Adjustments Affecting Registrable Securities, Warrant Shares, Convertible
- --- -------------------------------------------------------------------------
Notes or Convertible Note Shares. The Company shall not take any action,
--------------------------------
or permit any change to occur, with respect to its securities which would
materially and adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities (or the ability of the
Holders of Warrant Shares, Convertible Notes or Convertible Note Shares to
include such Warrant Shares, Convertible Notes or Convertible Note Shares)
in a registration undertaken pursuant to this Agreement or which would
materially and adversely affect the marketability of such Registrable
Securities, Warrant Shares, Convertible Notes or Convertible Note Shares,
as the case may be, in any such registration (including, without
limitation, effecting a stock split or a combination of shares).
-18-
<PAGE>
(d) Remedies. Any Person having rights under any provision of this Agreement
- --- --------
shall be entitled to enforce such rights specifically to recover damages
caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and
for other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement.
(e) Amendments and Waivers. Except as otherwise provided herein, the
- --- ----------------------
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company and the holders of a majority of the
Registrable Securities and, with respect to the provisions contained in
paragraphs 2(g) through 2(j), paragraph 7 and this paragraph 11(e), the
Holders of a majority of the outstanding Warrant Shares, and with respect
to the provisions contained in paragraphs 4(a) through 4(h) and this
paragraph 11(e), the holders of a majority of the Convertible Notes and
Convertible Note Shares; provided that the provisions set forth in
paragraph 1 hereof (and any provisions related to PSI Demand Registrations
including, without limitation, paragraphs 5, 6, and 7 hereof) may only be
amended with the prior written consent of PSI. In addition, no amendments
may be made to the "piggyback" registration provisions contained in
paragraph 3 hereof or any provision hereof by the holders of the Series A
Preferred and the Series B Preferred to the detriment of the holders of the
Series C Preferred without the prior written consent of the holders of 75%
of the Series C Preferred.
(f) Successors and Assigns. All covenants and agreements in this Agreement by
- --- ----------------------
or on behalf of any of the parties hereto shall bind and inure to the
benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for
the benefit of purchasers or holders of Registrable Securities or Holders
of Warrant Shares, Convertible Notes or Convertible Note Shares are also
for the benefit of, and enforceable by, any subsequent holder of
Registrable Securities or Holder of Warrant Shares, Convertible Notes, or
Convertible Note Shares.
(g) Severability. Whenever possible, each provision of this Agreement shall be
- --- ------------
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
(h) Counterparts; Facsimile. This Agreement may be executed simultaneously in
- --- ------------------------
two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together shall
constitute one and the same Agreement. This Agreement may be executed by
facsimile.
-19-
<PAGE>
(i) Descriptive Headings. The descriptive headings of this Agreement are
- --- --------------------
inserted for convenience only and do not constitute a part of this
Agreement.
(j) Governing Law. The corporate law of the State of Delaware shall govern all
- --- -------------
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedules hereto
shall be governed by the internal law, and not the law of conflicts, of the
State of Colorado.
(k) Notices. All notices, demands or other communications to be given or
- --- -------
delivered under or by reason of the provisions of this Agreement shall be
in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier
service (charges prepaid) or mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications shall be sent to each Investor at
the address indicated on the Schedule of Investors, to the Holders of
Warrant Shares at the addresses set forth on the records of the Warrant
Agent under the Warrant Agreement, to the Holders of Convertible Notes or
Convertible Note Shares at the addresses set forth on the schedule attached
to the Convertible Note Purchase Agreement and to the Company at the
address indicated below:
Centennial Communications Corp.
1610 Wynkoop, Suite 300
Denver, CO 80202
Attention: Chief Financial Officer
with a copy to:
Holland & Hart LLP
555 Seventeenth Street, Suite 2700
Denver, CO 80202
Attention: Michael S. Quinn
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(l) Integration; Termination of Prior Registration Agreement. This Agreement,
- --- --------------------------------------------------------
together with the Initial Purchaser Agreement, the Convertible Note
Purchase Agreement, the Purchase Agreement, the Warrant Agreement and the
other documents referred to in the Initial Purchaser Agreement, the
Convertible Note Purchase Agreement, the Purchase Agreement and the Warrant
Agreement, sets forth the entire agreement between the Company, the Initial
Purchasers, Investors and the Holders of Warrant Shares, Convertible Notes
and Convertible Note Shares with respect to the subject matter covered
hereby and supersedes all prior or contemporaneous oral or
-20-
<PAGE>
written agreements, arrangements or understandings including the Prior
Registration Agreement.
* * * * *
-21-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement of the date
first written above.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Bernard G. Dvorak
---------------------
Name: Bernard G. Dvorak
-----------------
Title: Chief Financial Officer
-----------------------
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ George Alex
---------------
Name: George Alex
-----------
Title: Managing Director
-----------------
THE ROMAN ARCH FUND, L.P.
By:
---------------------
Name:
-------------------
Title:
-------------------
THE ROMAN ARCH FUND II, L.P.
By:
----------------------
Name:
--------------------
Title:
--------------------
CENTENNIAL FUND IV, L.P.
By: Centennial Holdings IV L.P.
Its: General Partner
By: /s/ Adam Goldman
----------------
Name: Adam Goldman
------------
Title: General Partner
---------------
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<PAGE>
TELECOM PARTNERS, L.P.
By: /s/ Steven W. Schovee
---------------------
Title: Managing Member of the General
Partner
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
----------------
Name: Adam Goldman
------------
Title: General Partner
---------------
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.
Its: General Partner
By: /s/ Adam Goldman
----------------
Name: Adam Goldman
------------
Title: General Partner
---------------
MGVF II, LTD.
By: [illegible signature]
---------------------
General Partner
CREST FUNDING PARTNERS, L.P.
By: /s/ William W. Sprague
----------------------
Name: William W. Sprague
------------------
Title: President of Manager
--------------------
TRAILHEAD VENTURES, L.P.
By: Wind River Partners
By: /s/ William D. Stanfill
-----------------------
Name: William D. Stanfill
-------------------
Title: General Partner
BOULDER VENTURES, L.P.
By: /s/ Kyle Lefkoff
----------------
Name: Kyle Lefkoff
------------
Title: Partner
-------
-23-
<PAGE>
GC&H INVESTMENTS
By: /s/ John L. Cardoza
-------------------
Name: John L. Cardoza
---------------
Title: Executive Partner
-----------------
/s/ William Elsner
------------------
William Elsner
/s/ Robert McKenzie
-------------------
Robert McKenzie
Jeff E. Rhodes
CENTENNIAL HOLDINGS, INC.
By: /s/ Adam Goldman
----------------
Name: Adam Goldman
------------
Title: Sr. Vice President
------------------
CENTENNIAL HOLDINGS I, LLC
By: Centennial Holdings Inc., its Managing Member
By: /s/ Adam Goldman
----------------
Name: Adam Goldman
------------
Title: Sr. Vice President
------------------
-24-
<PAGE>
CREST SMR, L.L.C.
By: CREST PARTNERS (I) LLC
Its: Managing Member
By: /s/ William W. Sprague
----------------------
Name: William W. Sprague
------------------
Title: President of Manager
--------------------
KYLE LEFKOFF*
By: /s/ Kyle Lefkoff
----------------
*as attorney in fact for the following
Purchasers:
Larry Macks
Jurassic Ltd.
Josh Fidler
Morty Macks
Will's Wei Corp.
Robert Lemle
Caruthers Family LLC
Tim Snipes
Ramer 1990 Living Trust
Groupe Schneider Securities
JLS LLC
Doug Ramer
Trisun Financial, LLC
Eric Becker
Slade, Inc.
250 Venture Capital Associates
BANCBOSTON VENTURES INC.
By:
----------------------
Name:
----------------------
Title:
----------------------
SALOMON BROTHERS INC
By:
----------------------
Name:
----------------------
Title:
----------------------
-25-
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ George Alex
---------------
Name: George Alex
-----------
Title: Managing Director
-----------------
/s/ Ed Flanders
---------------
Ed Flanders
/s/ Barbara H. Vonderheid
-------------------------
Barbara Vonderheid
-------------------------
Fred Gallart
/s/ Karl Maier
--------------
Karl Maier
/s/ Matt Zuschlag
-----------------
Matt Zuschlag
-------------------------
Anne Haas
/s/ Bernard Dvorak
------------------
Bernard Dvorak
-------------------------
Michael Simkin
-26-
<PAGE>
FG-CC
By: /s/ John H. Fullmer
-------------------
Name: John H. Fullmer
---------------
Title:
-27-
<PAGE>
SCHEDULE OF INVESTORS
---------------------
Telecom Partners, L.P. Centennial Fund IV, L.P.
3200 Cherry Creek Drive South 1428 15th Street
Suite 450 Denver, CO 80202
Denver, CO 80209
Centennial Holdings, Inc. Centennial Fund V, L.P.
1428 15th Street 1428 15th Street
Denver, CO 80202 Denver, CO 80202
Centennial Entrepreneurs Fund V, L.P. Jeff E. Rhodes
1428 15th Street 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
Robert McKenzie William Elsner
60 Kearney Street 83 Glenmoor Place
Denver CO 80220 Englewood, CO 80110
Trailhead Ventures, L.P. MGVF II, Ltd.
730 17th Street, Suite 690 2400 Banc One Center
Denver, CO 80202 910 Travis Street
Houston, TX 77002
Boulder Ventures, L.P. Crest Funding Partners, L.P.
Suite 301 320 Park Avenue, 17th Floor
1634 Walnut Street New York, NY 10022
Boulder, CO 80202
Crest SMR, L.L.C. Larry Macks
320 Park Avenue, 17th Floor c/o Kyle Lefkoff
New York, NY 10022 1634 Walnut St., Suite 301
Boulder, CO 80302
Jurassic Ltd. Josh Fidler
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Morty Macks Will's Wei Corp.
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
<PAGE>
Centennial Holdings I, LLC GC&H Investments
1428 15th Street 1 Maritime Plaza
Denver, CO 80202 20th Floor
San Francisco, CA 94111-3580
Robert Lemle Caruthers Family LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Tim Snipes Ramer 1990 Living Trust
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Groupe Schneider Securities JLS LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Doug Ramer Trisun Financial, LLC
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
Eric Becker Slade, Inc.
c/o Kyle Lefkoff c/o Kyle Lefkoff
1634 Walnut St., Suite 301 1634 Walnut St., Suite 301
Boulder, CO 80302 Boulder, CO 80302
250 Venture Capital Assoc. BancBoston Ventures Incorporated
c/o Kyle Lefkoff 100 Federal St., 32nd Floor
1634 Walnut St., Suite 301 Boston MA 02110
Boulder, CO 80302
Ed Flanders Bernard Dvorak
12150 E. Briarwood Ave., Suite 145 1610 Wynkoop, Suite 300
Englewood, CO 80112 Denver, CO 80202
Barbara Vonderheid Fred Gallart
1610 Wynkoop, Suite 300 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
2
<PAGE>
Matt Zuschlag Anne Haas
1600 Wynkoop, Suite 300 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
Karl Maier Michael Simkin
1610 Wynkoop, Suite 300 1610 Wynkoop, Suite 300
Denver, CO 80202 Denver, CO 80202
Prudential Securities Incorporated The Roman Arch Fund, L.P.
One New York Plaza, 18th Floor c/o Prudential Securities
New York, NY 10292-2018 Incorporated
One New York Plaza, 18th Floor
New York, NY 10292-2018
The Roman Arch Fund II, L.P. FG-CC
c/o Prudential Securities Incorporated c/o FG II
One New York Plaza, 18th Floor 72 Cummings Point Road
New York, NY 10292-2018 Stamford, CT 06902
3
<PAGE>
EXHIBIT 10.9
CENTENNIAL COMMUNICATIONS CORP.
1996 STOCK OPTION PLAN
ADOPTED JANUARY 12, 1996
AS AMENDED JULY 8, 1996
As Amended February 19, 1997
1. PURPOSES.
(a) The purpose of the 1996 Stock Option Plan (the "Plan") of Centennial
Communications Corp., a Delaware corporation (the "Company"), is to provide a
means by which selected Employees and Directors of, and Consultants to, the
Company, and its Affiliates, may be given an opportunity to purchase stock of
the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Centennial Communications Corp., a Delaware
corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided
1.
<PAGE>
that the term "Consultant" shall not include Directors who are paid only a
director's fee by the Company or who are not compensated by the Company for
their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated. The Board, in its sole discretion, may determine whether Continuous
Status as an Employee, Director or Consultant shall be considered interrupted in
the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; or (ii) transfers between
locations of the Company or between the Company, Affiliates or their successors.
(h) "DIRECTOR" means a member of the Board.
(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "FAIR MARKET VALUE" means the value of the Common Stock of the Company
as determined in good faith by the Board.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(n) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "OPTION" means a stock option granted pursuant to the Plan.
(p) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(q) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(r) "PLAN" means this Stock Option Plan.
(s) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
2.
<PAGE>
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofor possessed by the Board (and
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. Additionally, and notwithstanding anything to the contrary contained
herein, the Board may delegate administration of the Plan to any person or
persons and the term "Committee" shall apply to any person or persons to whom
such authority has been delegated.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate fifty (50) shares of Common Stock of the Company. If
any Option shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not purchased under such
Option shall revert to and again become available for issuance under the Plan.
3.
<PAGE>
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of either the grant or
the exercise of the Option, (A) by delivery to the Company of other Common Stock
of the Company, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
Common Stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
4.
<PAGE>
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 under the Exchange Act and the rules thereunder (a "QDRO"), and shall
be exercisable during the lifetime of the person to whom the Option is granted
only by such person or any transferee pursuant to a QDRO. The person to whom
the Option is granted may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it at the date of termination) but only
5.
<PAGE>
within such period of time ending on the earlier of (i) the date three (3)
months after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant, or such longer or shorter period specified in the Option
Agreement, or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionee does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the Common
6.
<PAGE>
Stock of the Company otherwise issuable to the participant as a result of the
exercise of the Option; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director, Consultant or Optionee with or
without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its
7.
<PAGE>
Affiliates exceeds One Hundred Thousand Dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) (1) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan to reduce the exercise price of such Options and/or (ii) with the
consent of the affected holders of Options, the cancellation of any outstanding
Options and the grant in substitution therefor of new Options under the Plan
covering the same or different numbers of shares of Common Stock, but having an
exercise price per share not less than fifty percent (50%) of the Fair Market
Value (one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a ten percent (10%) stockholder (as
defined in subsection 5(c)), not less than one hundred and ten percent (110%) of
the Fair Market Value)) per share of Common Stock on the new grant date.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in
the class(es) and number of shares and price per share of stock subject to such
outstanding Options.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, or (4) any other capital reorganization in which the
Company's shareholders receive less than fifty (50%) of the outstanding voting
shares of the new or surviving corporation, then the time during which such
Options may be exercised shall be accelerated to permit the optionee to exercise
all such Options in full prior to such event, and the Options shall terminated
if not exercised prior to such event. In the event that any such accelerated
option vesting received or to be received by an optionee pursuant to this
subsection 10(b)(the "Benefit") would (i) constitute a "parachute payment"
within the meaning of Section 280G of the Code and (ii) but for this subsection
10(b), be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then such Benefit shall be reduced to the extent necessary so
that no portion of the Benefit would be subject to the Excise Tax, as determined
in good faith by the Company; provided, however, that if, in the absence of any
such reduction (or after such reduction), the optionee believes that the Benefit
or any portion thereof (as reduced, if applicable) would be subject to the
Excise Tax, the Benefit shall be reduced (or further reduced) to the extent
determined by the optionee in his or her discretion so that the Excise Tax would
not apply. If, notwithstanding any such reduction (or in the absence of such
reduction), the Internal Revenue Service ("IRS") determines that the optionee is
liable for the Excise Tax as a result of the Benefit, then the
8.
<PAGE>
optionee shall be obligated to return to the Company, within thirty (30) days of
such determination by the IRS, a portion of the Benefit sufficient such that
none of the Benefit retained by the optionee constitutes a "parachute payment"
within the meaning of Code Section 280G that is subject to the Excise Tax.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b 3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be altered or impaired by any such amendment unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.
9.
<PAGE>
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the ten (10) year anniversary of
the date the Plan is adopted by the Board or approved by the stockholders of the
Company, whichever is earlier. No Options may be granted under the Plan while
the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
10.
<PAGE>
CENTENNIAL COMMUNICATIONS CORP.
AMENDMENT TO
1996 STOCK OPTION PLAN,
ADOPTED JANUARY 12, 1996
Effective July 8, 1996, The Board of Directors of Centennial Communications
Corp. (the "Company") adopted an amendment to the Company's 1996 Stock Option
Plan (the "Plan") so that section 4(a) of the Plan was amended and restated to
read as follows:
"4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate seventy-seven (77) shares of Common Stock of the
Company. If any Option shall for any reason expire or otherwise terminate, in
whole or in part, without having been exercised in full, the stock not purchased
under such Option shall revert to and again become available for issuance under
the Plan."
11.
<PAGE>
CENTENNIAL COMMUNICATIONS CORP.
AMENDMENT TO
1996 STOCK OPTION PLAN,
ADOPTED FEBRUARY 19, 1997
Effective February 19, 1997, the Board of Directors of Centennial Communications
Corp. (the "Company") adopted an amendment to the Company's 1996 Stock Option
Plan (the "Plan") so that section 4(a) of the Plan was amended and restated to
read as follows:
"4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate one million four hundred eighty-eight thousand
(1,488,000) shares of Common Stock of the Company. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan."
12.
<PAGE>
NON-STATUTORY STOCK OPTION
_______________, Optionee:
Centennial Communications Corp. (the "Company"), pursuant to its 1996 Stock
Option Plan (the "Plan") has as of the ___ day of _____, ____, granted to you,
the optionee named above, an option to purchase shares of the common stock of
the Company ("Common Stock"). This option is not intended to qualify and will
not be treated as an "incentive stock option" within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
__________(_______).
2. Subject to the limitations contained herein and the provisions for
early exercise set forth in paragraph 4 hereof, this option shall be exercisable
with respect to such shares of Common Stock which have vested. A share, or a
fraction thereof, shall be deemed to have vested such that twenty percent (20%)
of the shares subject to this option shall vest on each anniversary of the grant
date of _________, ____, for a period of five (5) years until such time as all
shares are fully vested; provided, however, that such vesting shall be
accelerated such that immediately prior to the consummation of a Corporate
Transaction (as defined below), you shall vest in all the shares subject to this
option.
For the purposes of this option a Corporate Transaction shall mean one or
more of the following shareholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons different from
those who held those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or dissolution of the
Company.
3. (a) The exercise price of this option is $______ per share, being not
less than one hundred percent (100%) of the fair market value of the Common
Stock on the date of grant of this option as determined by the Board of
Directors of the Company.
<PAGE>
(b) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment of this option in which you have
vested pursuant to the terms of paragraph 2 above. You may elect, to the extent
permitted by applicable statutes and regulations, to make payment of the
exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash (including check)
at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company prior to the issuance of Common Stock;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment permitted by
subparagraph 3(b)(i) through 3(b)(iii) above.
4. (a) Subject to the provisions of this option you may elect at any time
during your membership on the Board of Directors of the Company or an affiliate
thereof, to exercise the option as to any part or all of the shares subject to
this option at any time during the term hereof, including without limitation, a
time prior to the date of such shares have vested pursuant to paragraph 2
hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to cover first
vested shares and then the earliest vesting installment of unvested shares;
(ii) any shares so purchased from installments which have not vested
as of the date of exercise shall be subject to the purchase option in favor of
the Company as described in the Early Exercise Stock Purchase Agreement attached
hereto; and
(iii) you shall enter into an Early Exercise Stock Purchase Agreement
in the form attached hereto with a vesting schedule that will result in the same
vesting as if no early exercise had occurred.
(b) The election provided in this paragraph 4 to purchase shares upon
the exercise of this option prior to the vesting dates shall cease upon
termination of your membership on the Board of Directors of the Company or an
affiliate thereof for any reason or no reason and may not be exercised after the
date thereof.
5. This option may be exercised for fractional shares.
<PAGE>
6. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Act or, if such shares are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the
registration requirements of the Act.
7. The term of this option commences on the date hereof and, unless sooner
terminated as set forth below or in the Plan, terminates on ____________ (the
"Termination Date"). In no event may this option be exercised on or after the
date on which it terminates. This option shall terminate prior to the
expiration of its term as follows: thirty (30) days after the termination of
your membership on the Board of Directors of the Company or an affiliate thereof
for any reason or for no reason ("Cessation") unless:
(a) such Cessation is due to your permanent and total disability
(within the meaning of Section 422(c)(6) of the Code), in which event the option
shall terminate on the earlier of the Termination Date set forth above or twelve
(12) months following such termination of employment; or
(b) such Cessation is due to your death, in which event the option
shall terminate on the earlier of the Termination Date set forth above or twelve
(12) months after your death; or
(c) during any part of such thirty (30) day period the option is not
exercisable solely because of the condition set forth in paragraph 6 above, in
which event the option shall not terminate until the earlier of the Termination
Date set forth above or until it shall have been exercisable for an aggregate
period of thirty (30) days after such Cessation; or
(d) exercise of the option within thirty (30) days after such
Cessation would result in liability under section 16(b) of the Securities
Exchange Act of 1934, in which case the option will terminate on the earlier of
(i) the termination date set forth above, (ii) the tenth (10th) day after the
last date upon which exercise would result in such liability or (iii) six (6)
months and ten (10) days after such Cessation.
However, this option may be exercised following Cessation only as to that
number of shares which have vested pursuant to paragraph 2 of this option.
8. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form attached hereto or otherwise
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse of
any substantial risk of
<PAGE>
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;
(ii) the shares received upon exercise of this option may be subject
to the Company's right of first refusal and other restrictions as may be set
forth in the Early Exercise Stock Purchase Agreement; and
(iii) in connection with the first underwritten registered offering
of any securities of the Company under the Act, you will not sell or otherwise
transfer or dispose of (a "transfer") any shares of Common Stock exercised
hereunder during such period following the effective date (the "Effective Date")
of the registration statement of the Company filed under the Act as may be
requested by the Company or a representative of the underwriters; provided,
however, that such restriction shall apply only if, on the Effective Date, the
officers and directors of the Company agree with the Company or a representative
of the underwriters not to transfer securities of the Company owned by them for
the same or greater period. You further agree that the Company may impose stop-
transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
9. This option is not transferable, except by will or by the laws of
descent and distribution, or pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act (a
"QDRO"), and is exercisable during your life only by you or a transferee
pursuant to a QDRO. By delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
10. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company. In the event that this option is granted to you in
connection with the performance of services as a consultant or director,
references to employment, employee and similar terms shall be deemed to include
the performance of services as a consultant or a director, as the case may be,
provided, however, that no rights as an employee shall arise by reason of the
use of such terms.
11. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
12. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
<PAGE>
Dated: _____________.
Very truly yours,
CENTENNIAL COMMUNICATIONS CORP.
By_________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1996 Stock Option Plan
Notice of Exercise
Early Exercise Stock Purchase Agreement
<PAGE>
The undersigned:
Acknowledges receipt of the foregoing option and the attachments referenced
therein and understands that all rights and liabilities with respect to this
option are set forth in the option and the Plan; and
Acknowledges that as of the date of grant of this option, it sets forth the
entire understanding between the undersigned optionee and the Company and its
affiliates regarding the acquisition of stock in the Company and supersedes all
prior oral and written agreements on that subject with the exception of (i) the
options previously granted and delivered to the undersigned under stock option
plans of the Company, and (ii) the following agreements only:
NONE __________
(Initial)
OTHER _____________________________
_____________________________
_____________________________
_____________________________
_______________, Optionee
Address:_____________________
_____________________________
<PAGE>
NOTICE OF EXERCISE
Centennial Communications Corp. Date of Exercise:____________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive [ ] Nonstatutory [X]
Stock option dated: _____________
Number of shares as
to which option is
exercised: _____________
Certificates to be
issued in name of: _____________
Total exercise price: $_____________
Cash payment delivered
herewith: $_____________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1996 Stock Option Plan, (ii) to provide
for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any shares
of Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted
securities"
<PAGE>
under Rule 701 and "control securities" under Rule 144 promulgated under the
Act. I warrant and represent to the Company that I have no present intention of
distributing or selling said Shares, except as permitted under the Act and any
applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety days after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply
to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if requested by the Company or a representative of
the underwriters in connection with the first underwritten registered offering
of any securities of the Company under the Act, I will not sell or otherwise
transfer or dispose of (a "transfer") any shares of Common Stock during such
period following the effective date of the registration statement of the Company
filed under the Act (the "Effective Date") as may be requested by the Company or
the representative of the underwriters; provided, however, that such restriction
shall apply only if, on the Effective Date, the officers and directors of the
Company agree with the Company or a representative of the underwriters not to
transfer securities of the Company owned by them for the same or greater period.
I further agree that the Company may impose stop transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period.
Very truly yours,
_______________________________
<PAGE>
INCENTIVE STOCK OPTION
[Optionee's Name] Optionee:
Centennial Communications Corp. (the "Company"), pursuant to its 1996 Stock
Option Plan (the "Plan") has this day, ______________, 199___, granted to you,
the optionee named above, an option to purchase shares of the common stock of
the Company ("Common Stock"). This option is intended to qualify as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is _____
shares.
2. Subject to the limitations contained herein and the provisions for early
exercise set forth in paragraph 4 hereof, this option shall be exercisable with
respect to such shares of Common Stock which have vested. A share, or a
fraction thereof, shall be deemed to have vested such that twenty percent (20%)
of the shares subject to this option shall vest on each anniversary of the grant
date of this option, __________, 199___, on which you are employed by the
Company or an affiliate thereof until such time as all shares are fully vested.
3. (a) The exercise price of this option is $___________________ per share,
being not less than one hundred percent (100%) of the fair market value of the
Common Stock on the date of grant of this option as determined by the Board of
Directors of the Company.
(b) Payment of the exercise price per share is due in full upon exercise of
all or any part of each vested installment of this option. You may elect, to
the extent permitted by applicable statutes and regulations, to make payment of
the exercise price under one of the following alternatives:
a. Payment of the exercise price per share in cash (including check) at the
time of exercise;
<PAGE>
b. Payment pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board which results in the receipt of cash (or check) by the
Company prior to the issuance of Common Stock;
c. Provided that at the time of exercise the Company's Common Stock is publicly
traded and quoted regularly in the Wall Street Journal, payment by delivery of
already-owned shares of Common Stock, held for the period required to avoid a
charge to the Company's reported earnings, and owned free and clear of any
liens, claims, encumbrances or security interests, which Common Stock shall be
valued at its fair market value on the date of exercise; or
d. Payment by a combination of the methods of payment permitted by subparagraph
3(b)(i) through 3 (b)(iii) above.
4. (a) Subject to the provisions of this option you may elect at any time
during your employment with the Company or an affiliate thereof, to exercise the
option as to any part or all of the shares subject to this option at any time
during the term hereof, including without limitation, a time prior to the date
when such shares have vested pursuant to paragraph 2 hereof; provided, however,
that:
a. a partial exercise of this option shall be deemed to cover first vested
shares and then the earliest vesting installment of unvested shares;
b. any shares so purchased from installments which have not vested as of the
date of exercise shall be subject to the purchase option in favor of the Company
as described in the Early Exercise Stock Purchase Agreement attached hereto; and
c. you shall enter into an Early Exercise Stock Purchase Agreement in the form
attached hereto.
(b) The election provided in this paragraph 4 to purchase shares upon the
exercise of this option prior to the vesting dates shall cease upon termination
of your employment with the Company or an affiliate thereof for any reason and
may not be exercised after the date thereof.
5. This option may be exercised for fractional shares.
6. Notwithstanding anything to the contrary contained herein, this option may
not be exercised unless the shares issuable upon exercise of this option are
then registered under the Act or, if such shares are not then so registered, the
Company has determined that such exercise and issuance would be exempt from the
registration requirements of the Act.
7. The term of this option commences on the date of grant and, unless sooner
terminated as set forth below or in the Plan, terminates on _________, 20___
[TEN YEARS LATER]. In no event may this option be exercised on or after the
date on which it terminates. This option shall terminate prior to the
expiration of its term as follows:
<PAGE>
thirty (30) days after the termination of your employment with the Company or an
affiliate thereof for any reason unless one of the following circumstances
exists:
i. Your termination of employment is due to your permanent and total disability
(within the meaning of Section 422(c)(6) of the Code), in which event the option
shall terminate on the earlier of the termination date set forth above or twelve
(12) months following such termination of employment. You should be aware that
if your disability is not considered a permanent and total disability within the
meaning of Section 422(c)(6) of the Code, and you exercise this option more than
three (3) months following the date of your termination of employment, your
exercise will be treated for tax purposes as the exercise of a "nonstatutory
stock option" instead of an "incentive stock option";
ii. Your termination of employment is due to your death. This option will then
terminate on the earlier of the termination date set forth above or twelve (12)
months after your death;
iii. If during any part of such thirty (30) day period you may exercise your
option solely because of the condition set forth in paragraph 6 above, then your
option will not terminate until the earlier of the termination date set forth
above or until it shall have been exercisable for an aggregate period of thirty
(30) days after the termination of employment; or
iv. If your exercise of the option within thirty (30) days after termination of
your employment with the company or with an affiliate would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will terminate on the earlier of (i) the termination date set forth above, (ii)
the tenth (10th) day after the last date upon which exercise would result in
such liability or (iii) six (6) months and ten (10) days after the termination
of your employment with the company or an affiliate.
However, this option may be exercised following termination of employment
only as to that number of shares which have vested pursuant to paragraph 2
hereof.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
affiliate, except in the event of your death or permanent and total disability.
The Company has provided for extended exercisability of your option under
certain circumstances for your benefit, but cannot guarantee that your option
will necessarily be treated as an "incentive stock option" if you provide
services to the Company or an affiliate as a consultant or exercise your option
more than three (3) months after the date your employment with the Company and
all affiliates terminates.
<PAGE>
8. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form attached hereto or otherwise
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to the Plan or as set forth in paragraph 4 hereof.
(b) By exercising this option you agree that:
a. The Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (A) the exercise of this option; (B) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (C) the disposition of shares acquired upon such exercise;
b. the shares received upon exercise of this option may be subject to the
Company's right of first refusal and other restrictions as may be set forth in
the Early Exercise Stock Purchase Agreement; and
c. in connection with the first underwritten registered offering of any
securities of the Company under the Act, you will not sell or otherwise transfer
or dispose of any shares of Common Stock exercised hereunder during such period
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters' provided, however, that such
restriction shall apply only if, on the Effective Date, the officers and
directors of the Company agree with the representatives of the underwriters not
to transfer shares of Common Stock owned by them for the same or greater period.
You further agree that the Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period.
9. This option is not transferable, except by will or by the laws of descent
and distribution, and is exercisable during your life only by you.
10. This option is not an employment contract and nothing in this option shall
be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment by the Company.
11. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
<PAGE>
12. This option is subject to all the provisions of the Plan, a copy of which
is attached hereto and its provisions are hereby made a part of this option
including, without limitation, the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated this _________ day of _________, 19_____.
Very truly yours,
CENTENNIAL COMMUNICATIONS CORP.
By:___________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1996 STOCK OPTION PLAN
NOTICE OF EXERCISE
EARLY EXERCISE STOCK PURCHASE AGREEMENT
<PAGE>
The undersigned:
i. Acknowledges receipt of the foregoing option and the attachments referenced
therein and understands that all rights and liabilities with respect to this
option are set forth in the option and the Plan; and
ii. Acknowledges that as of the date of grant of this option, it sets forth the
entire understanding between the undersigned optionee and the Company and its
affiliates regarding the acquisition of stock in the Company and supersedes all
prior oral and written agreements on that subject with the exception of (i) the
options previously granted and delivered to the undersigned under stock option
plans of the Company, and (ii) the following agreements only:
NONE _______
(Initial)
OTHER _____________________________
_____________________________
_____________________________
_____________________________
[Optionee's Name], Optionee
Address:_____________________
_____________________
<PAGE>
NOTICE OF EXERCISE
Centennial Communications Corp. Date of Exercise:_____________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive [ ] Nonstatutory [X]
Stock option dated: _____________
Number of shares as
to which option is
exercised: _____________
Certificates to be
issued in name of: _____________
Total exercise price: $_____________
Cash payment delivered
herewith: $_____________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1996 Stock Option Plan, (ii) to provide
for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any shares
of Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted
securities"
<PAGE>
under Rule 701 and "control securities" under Rule 144 promulgated under the
Act. I warrant and represent to the Company that I have no present intention of
distributing or selling said Shares, except as permitted under the Act and any
applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety days after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply
to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if requested by the Company or a representative of
the underwriters in connection with the first underwritten registered offering
of any securities of the Company under the Act, I will not sell or otherwise
transfer or dispose of (a "transfer") any shares of Common Stock during such
period following the effective date of the registration statement of the Company
filed under the Act (the "Effective Date") as may be requested by the Company or
the representative of the underwriters; provided, however, that such restriction
shall apply only if, on the Effective Date, the officers and directors of the
Company agree with the Company or a representative of the underwriters not to
transfer securities of the Company owned by them for the same or greater period.
I further agree that the Company may impose stop transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period.
Very truly yours,
__________________________
<PAGE>
EXHIBIT 10.10
EXECUTION COPY
================================================================================
CENTENNIAL COMMUNICATIONS CORP.
40,000 Units, Each Unit Consisting of $1,000
Principal Amount at Maturity of 14% Senior Discount Notes
due 2005 and One Warrant to Purchase 64 Shares of Common Stock
WARRANT AGREEMENT
Dated as of January 15, 1998
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
-------------------------------------------------------------------------------
<PAGE>
WARRANT AGREEMENT dated as of January 15, 1998 between Centennial
Communications Corp., a Delaware corporation (the "Company"), and State Street
Bank and Trust Company, as warrant agent (the "Warrant Agent").
WHEREAS, the Company proposes to issue warrants (the "Initial Warrants")
to initially purchase up to an aggregate of 2,560,000 shares of Common Stock,
par value $.01 per share (the "Common Stock"), of the Company in connection with
the offering (the "Offering") by the Company of 40,000 Units (the "Units"), each
Unit consisting of $1,000 principal amount at maturity of the Company's 14%
Senior Discount Notes due 2005 (the "Notes") and one Warrant representing the
right to purchase 64 Warrant Shares. The aggregate Warrant Shares to be issued
upon exercise of the Initial Warrants will initially represent 7.5% of the
Company's fully-diluted common equity. The Notes will be issued under an
indenture, dated as of the date hereof (the "Indenture"), between the Company
and State Street Bank and Trust Company, as trustee (the "Trustee"). Under
certain circumstances contemplated by the purchase agreement, dated as of
January 12, 1998 (the "Purchase Agreement"), between the Company, Salomon
Brothers Inc and Prudential Securities Incorporated (together, the "Initial
Purchasers"), on or prior to February 13, 1998, the Company may issue and sell
to the Initial Purchasers up to an additional 20,000 Units, each Unit consisting
of $1,000 in principal amount at maturity of Notes and one warrant to purchase
64 shares of Common Stock of the Company (the "Additional Warrants"). To the
extent that any Additional Warrants are issued under the circumstances
contemplated by the Purchase Agreement, such additional warrants shall be
treated for purposes of this Agreement as "Warrants" issued on January 15, 1998.
WHEREAS, the Company proposes to issue additional warrants (the
"Contingent Warrants") to purchase up to an additional 7.5% of the Company's
fully-diluted common equity, under the circumstances called for in the Indenture
(such Contingent Warrants being referred to herein collectively with the Initial
Warrants as the "Warrants").
WHEREAS, the shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the "Warrant Shares."
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) and other matters as provided
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent
----------------------------
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth in this Agreement, and the
Warrant Agent hereby accepts such appointment.
SECTION 2. Issuance of Warrants
--------------------
The Initial Warrants shall be originally issued in connection with the
issuance of the Units and shall not be separately transferable from the Notes
until on or after the Separation Date (as defined).
SECTION 3. Warrant Certificates
--------------------
Certificates evidencing the Warrants (the "Warrant Certificates")
initially will be issued in global form (the "Global Warrants"), substantially
in the form of Exhibit A attached hereto (including the text referred to in
footnotes 1 and 2 thereto). Each Global Warrant shall represent such of the
outstanding Warrants as shall be specified therein
<PAGE>
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 Company initially appoints
The Depository Trust Company ("DTC") to act as the Depositary with respect to
the Global Warrants until a successor shall be appointed by the Company and the
Warrant Agent. Subject to the terms hereof, upon request, a holder may receive
from the Depositary and the Warrant Agent separate Warrants in definitive form
(the "Definitive Warrants"), substantially in the form of Exhibit A attached
hereto (not including the text referred to in footnotes 1 and 2 thereto).
SECTION 4. Execution of Warrant Certificates. Warrant Certificates shall be
---------------------------------
signed on behalf of the Company by its Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, President or Vice President and by its
Secretary or an Assistant Secretary. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, Chief Executive Officer, Chief Financial Officer,
President or Vice President and Secretary or Assistant Secretary and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, President or Vice President and Secretary or Assistant Secretary,
notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of he or she shall have ceased to hold
such office. 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.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
SECTION 5. Separation of Initial Warrants and Notes; Transfers of Warrants
---------------------------------------------------------------
Prior to the Separation Date. The Notes and Initial Warrants shall not be
- ----------------------------
separately transferable until the earliest to occur of (i) 360 days from the
date of issuance of thereof, (ii) such date as Salomon Brothers Inc may, in its
discretion, deem appropriate and (iii) in the event of a Change in Control (as
defined in the Indenture), the date the Company mails notice thereof (such date,
the "Separation Date"), at which date such Notes and Initial Warrants shall be
separately transferable.
Notwithstanding the provisions of Section 7 hereof, until Separated (as
defined) each Warrant Certificate shall be held by the Trustee, as custodian for
the registered holders of each Note or Note in global form, and shall be
registered in the name of the registered holder of such Note
2
<PAGE>
initially in the amount specified to the Warrant Agent by the Company. Such
holder may, at any time, on or after the Separation Date, at its option, by
notice to the Trustee elect to separate and/or separately transfer the Warrants
and the Notes represented by such Note or Note in global form containing a
Warrant Endorsement (as defined in the Indenture), in whole or in part, for a
definitive Warrant Certificate or Certificates or a beneficial interest in a
Global Warrant evidencing the underlying Warrants and for a Note or Notes or a
beneficial interest in a global Note of a like aggregate principal amount at
maturity of authorized denominations and not containing a Warrant Endorsement in
accordance with the Indenture (such surrender and exchange being referred to
herein as a "Separation" and the related Warrants being referred to as
"Separated"); provided that no delay or failure on the part of the Warrant Agent
or the Trustee to exchange such Warrant Certificates and Notes will affect the
Separation of the Warrants and the Notes or their separate transferability.
Prior to Separation, record ownership of the Warrants shall be evidenced by the
certificates for the Notes or a global Note registered in the names of the
holders of the Notes or global Note, which certificates or global Note shall
bear thereon a Warrant Endorsement substantially in the form set forth in the
Indenture, and the right to receive or exercise Warrants shall be transferable
only in connection with the transfer of such Notes or a beneficial interest in a
global Note.
All Notes and global Notes containing a Warrant Endorsement presented for
Separation shall be duly endorsed by the registered holder or holders thereof or
by the duly appointed legal representative thereof or by a duly authorized
attorney, and in the case of transfer, which signature shall be medallion
guaranteed by an institution which is a member of a Securities Transfer
Association recognized signature guarantee program. Upon notice from the
Trustee of a Separation, the Warrant Agent shall, with respect to Definitive
Warrants, deliver (or cause to be delivered) the Warrant Certificate or Warrant
Certificates executed by the Company and countersigned by the Warrant Agent in
the name of such registered holder or holders or such transferee or transferees
or shall, with respect to Global Warrants, deliver (or cause to be delivered) a
Global Warrant (CUSIP 15134B110) executed by the Company and countersigned by
the Warrant Agent in the name of the Depositary or its nominee for such
aggregate number of Warrants (or, with respect to a Global Warrant, increasing
the number of Warrants represented thereby in such amount) as shall equal one
Warrant for each $1,000 principal amount at maturity of Notes so exchanged for
Separation, bearing numbers or other distinguishing symbols not
contemporaneously outstanding, to the person or persons entitled thereto. Upon
registration of transfer or exchange of a Warrant Certificate, the Warrant Agent
shall countersign and deliver by certified mail a new Warrant Certificate to the
persons entitled thereto.
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, Chief Executive
Officer, Chief Financial Officer, President or Vice President of the Company,
initially countersign, issue and deliver Warrant Certificates 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 Warrant
Certificates as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the registered holder(s)
of
3
<PAGE>
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding
any notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary.
SECTION 7. Registration of Transfers and Exchanges. Subject to Section 5
---------------------------------------
hereof:
(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
and, subject to Section 10 hereof, a new Warrant Certificate shall be issued and
the surrendered Warrant Certificate shall be cancelled; provided, however, 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 registered holder thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney; and
(y) in the case of Registrable Securities (as defined), 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 attached hereto);
(B) if such Registrable Security is being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933, as amended (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 attached 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, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and a
certification from the applicable transferee containing
representations and agreements relating to the restrictions on
transfer of the security (the form of which
4
<PAGE>
letter can be obtained from the Warrant Agent);
(D) if such Registrable Security is being transferred pursuant to an
exemption from registration in accordance with Rule 904 under 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 attached hereto); or
(E) 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 attached 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, duly executed by the
registered holder thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney, together with:
(A) if such Definitive Warrant is a Registrable Security,
certification from the holder thereof (in substantially the form
of Exhibit B attached hereto) to the effect that such Definitive
Warrant is 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 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 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.
5
<PAGE>
(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 attached 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 attached hereto);
(C) if such beneficial interest is being transferred to any
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, a certification to that effect (in
substantially the form of Exhibit B attached hereto) and a
certification from the applicable transferee containing
representations and agreements relating to the restrictions on
transfer of the security (the form of which letter can be
obtained from the Warrant Agent;
(D) if such beneficial interest is being transferred pursuant to an
exemption from registration in accordance with Rule 904 under 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 attached hereto); or
(E) 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 attached hereto),
then the Warrant Agent shall cause, in accordance with the standing
instructions and procedures existing between the Depositary and
Warrant Agent, the number of
6
<PAGE>
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 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:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
7
<PAGE>
AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION
HEREOF OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "IAI") (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(D) UNDER THE SECURITIES ACT, IF
APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF
THE TRANSFER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT TO (A) THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI, THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE [WARRANT AGENT OR THE TRANSFER AGENT
AND REGISTRAR] A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH CAN BE OBTAINED FROM THE [WARRANT AGENT OR THE
TRANSFER AGENT AND REGISTRAR]) AND, IF SUCH TRANSFER IS IN
RESPECT OF [WARRANTS/WARRANT SHARES], AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR
(G) 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 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE [WARRANT
8
<PAGE>
AGENT/TRANSFER AGENT AND REGISTRAR] TO REFUSE TO REGISTER ANY
TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING."
(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,
however, that with respect to any request for an exchange of a
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 upon 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 attached hereto).
(iii) Prior to the Separation Date, any Warrants Certificates to be
delivered pursuant to this Agreement also shall bear a legend in
substantially the following form:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE
SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH SUCH
WARRANTS UNTIL THE EARLIEST TO OCCUR OF (I) 360 DAYS FROM THE
DATE OF ISSUANCE OF HEREOF, (II) SUCH DATE AS SALOMON BROTHERS
INC MAY, IN ITS DISCRETION, DEEM APPROPRIATE AND (III) IN THE
EVENT OF A CHANGE IN CONTROL (AS DEFINED IN THE INDENTURE
RELATING TO THE NOTES), THE DATE THE COMPANY MAILS NOTICE THEREOF
(SUCH DATE, THE "SEPARATION DATE").
(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
9
<PAGE>
the Warrant Agent is hereby authorized to countersign, in accordance
with the provisions of Sections 5 and 6 hereof and this Section 7,
Definitive Warrants and Global Warrants as required pursuant to the
provisions hereof.
(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. The Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration, transfer or exchange of
Warrant Certificates.
SECTION 8. Terms of Warrants; Exercise of Warrants. The Warrants may
---------------------------------------
be exercised as follows: (A) in the case of the Initial Warrants, on or after
the earliest to occur of (i) one year from the date of issuance of thereof, (ii)
in the event of a Change in Control (as defined in the Indenture), the date the
Company mails notice thereof, and (iii) 180 days after the consummation of an
Initial Public Offering (as defined in the Indenture) of the Company's Common
Stock and (B) in the case of the Contingent Warrants, at any time after the
issuance thereof (such date, the "Exercise Commencement Date"). Unless
exercised, all Warrants shall automatically expire at 5:00 p.m., New York, New
York time on January 1, 2005 (such date, the "Expiration Date" and, the period
commencing on the Exercise Commencement Date and ending on the Expiration Date,
the "Exercise Period"). The Company shall notify the holders of the Warrants
(the "Expiration Date Notice") of the Expiration Date not less than 90 days nor
more than 120 days prior thereto. If the Company fails to give the Expiration
Date Notice within the time period prescribed in the preceding sentence, the
Expiration Date shall be extended until the date that is 90 days after the date
such Expiration Date Notice is actually given.
Subject to the terms of this Agreement, each Warrant holder shall have
the right, which may be exercised during the Exercise Period, to exercise each
Warrant and receive from the Company the number of fully paid and nonassessable
Warrant Shares which the holder may at the time be entitled to receive upon
exercise of such Warrants and payment of the Exercise Price (as defined in the
Definitive Warrants) 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 Securities and Exchange Commission (the "SEC"), and no stop
order suspending the effectiveness of such registration statement has been
issued by the SEC or (ii) the issuance of the Warrant Shares is permitted
pursuant to an exemption from the registration requirements of the Securities
Act and, in the case of clauses (i) and (ii) above, such securities are
qualified for sale or exempt from qualification under the applicable securities
laws of the states in which the various holders of the Warrants or other persons
to whom it is proposed that the Warrant
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<PAGE>
Shares be issued upon exercise of the Warrants reside. Each Warrant, when
exercised shall entitle the holder thereof to purchase 64 fully paid and
nonassessable shares of Common Stock at the Exercise Price. Each Warrant not
exercised prior to the Expiration Date shall become void and all rights
thereunder and all rights in respect thereof under this Agreement shall cease as
of such time. No adjustments as to dividends will be made upon exercise of the
Warrants.
The Warrants may be exercised by surrendering to the Company at the principal
office of the Warrant Agent the Warrant Certificates evidencing the Warrants to
be exercised with the accompanying form of election to purchase on the reverse
thereof properly completed and signed, which signature shall be medallion
guaranteed by an institution which is a member of a Securities Transfer
Association recognized signature guarantee program, and upon payment to the
Warrant Agent for the account of the Company of the Exercise Price, as adjusted
as herein provided, for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the Exercise Price may be made (i) in
the form of cash or by certified or official bank check payable to the order of
the Company, (ii) by tendering Notes having an aggregate principal amount at the
time of tender, plus accrued and unpaid interest, if any, thereon, to the date
of exercise (or if such exercise occurs prior to the Full Accretion Date (as
defined in the Indenture), an Accreted Value (as defined in the Indenture) on
the date of exercise) equal to the Exercise Price, (iii) by tendering Warrants
having a fair market value equal to the Exercise Price or (iv) by tendering a
combination of cash, Notes and Warrants. For purposes of clause (iii) above,
the fair market value of the Warrants shall be determined as follows: (A) to
the extent the Common Stock is publicly traded and listed on the Nasdaq National
Market or a national securities exchange, the fair market value shall be equal
to the greater of (1) the difference between (a) the average closing price as
quoted on the Nasdaq National Market of the Common Stock for each of the 10
trading days immediately prior to the exercise date (or, if the Common Stock is
listed on a national securities exchange, the average closing price as reported
on such national securities exchange during such 10-trading-day period) and (b)
the Exercise Price, and (2) zero; or (B) to the extent the Common Stock is not
publicly traded, or otherwise is not listed on a national securities exchange,
the fair market value shall be equal to the value per share as determined in
good faith by the Board of Directors of the Company.
If Notes are surrendered in payment of the Exercise Price, the Warrant Agent
shall deliver such Notes to the Company and the Company shall deliver such Notes
to the Trustee for cancellation and, upon written notification from the Trustee
to the Company that such Notes were in good form, the Company shall notify the
Warrant Agent in writing that the Company has received full and proper payment
of the Exercise Price. Upon surrender of any Notes in payment of the Exercise
Price and cancellation of such Notes, the Trustee or the Depositary (as defined
in the Indenture) at the direction of the Trustee, as applicable, shall issue a
new Note with a principal amount at maturity adjusted to reflect the reduction
for payment of the Exercise Price, in accordance with Article 2 of the
Indenture.
Subject to the provisions of Section 9 hereof, upon such surrender of Warrants
and payment of the Exercise Price, the Company shall deliver and cause to be
delivered with all reasonable dispatch to or upon the written order of the
Warrant holder and in such name or names as such Warrant holder may designate, a
certificate or certificates representing the number of whole Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 15 hereof; provided that if any consolidation, merger or lease or sale
of assets is proposed to be effected by the Company as described in subsection
(m) of Section 13 hereof, or a tender offer or an exchange offer for shares of
Common Stock of the Company is made, upon such surrender of
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Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
deliver or cause to be delivered the whole number of Warrant Shares issuable
upon the exercise of such Warrants in the manner described in this sentence
together with cash as provided in Section 15 hereof. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price therefor.
The Warrants shall be exercisable, at the election of the holders thereof,
either in full or from time to time in part (in whole shares) and, in the event
that a Warrant Certificate 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 shall 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 8 and of Section 4
hereof, and the Company, whenever required by the Warrant Agent, shall supply
the Warrant Agent with Warrant Certificates duly executed on behalf of the
Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then
be disposed of by the Company in accordance with applicable law. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently surrender to the Company all Notes and Warrants 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 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 shall 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 issuance of any Warrant Certificates or any certificates for
Warrant Shares in a name other than that of the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant, and the Company shall
not be required to issue or deliver such Warrant Certificates unless or until
the person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
SECTION 10. Mutilated or Missing Warrant Certificates. If any of the Warrant
-----------------------------------------
Certificates shall be mutilated, lost, stolen or destroyed, the Company shall
issue and the Warrant Agent may countersign, in exchange and substitution for
and upon cancellation of the mutilated Warrant Certificate, or in lieu of and in
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 satisfactory to the Company and the
Warrant Agent of such loss, theft or destruction of such Warrant Certificate and
indemnity therefor, if requested, also 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
12
<PAGE>
Agent may prescribe.
SECTION 11. Reservation of Warrant Shares. The Company shall at all times
-----------------------------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or 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 (including Contingent Warrants
that may become issuable at a subsequent date), the maximum number of shares of
Common Stock which may then be or become deliverable upon the exercise of all
outstanding Warrants.
The Company or, if appointed by the Company, 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 shall be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company shall keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company shall supply such Transfer Agent with
duly executed certificates for such purposes and shall provide or otherwise make
available any cash which may be payable as provided in Section 15 hereof. The
Company shall furnish such Transfer Agent a copy of all notices of adjustments
and certificates related thereto, transmitted to each holder pursuant to Section
16 hereof.
Before taking any action which would cause an adjustment pursuant to Section
13 hereof to reduce the Exercise Price below the then par value (if any) of the
Warrant Shares, the Company shall take all corporate action necessary, in the
opinion of its counsel (which may be counsel employed by the Company), in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will be, upon payment of the Exercise Price and issuance
thereof, fully paid, nonassessable, free of preemptive rights and free from all
taxes, liens, charges and security interests with respect to the issuance
thereof.
SECTION 12. Obtaining Stock Exchange Listings. The Company shall also from
---------------------------------
time to time take all action necessary so that the Warrant Shares, immediately
upon their issuance upon the exercise of Warrants, will be listed on the Nasdaq
National Market or such other principal securities exchanges, interdealer
quotation systems and markets within the United States of America, if any, on
which other shares of Common Stock are then listed or quoted.
SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares
---------------------------------------------------------
Issuable. The Exercise Price and the number of Warrant Shares issuable upon the
- --------
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 13. For purposes of this
Section 13, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred
13
<PAGE>
stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock. If the Company (i) pays a dividend
--------------------------------------
or makes a distribution on its Common Stock in shares of its Common Stock, (ii)
subdivides its outstanding shares of Common Stock into a greater number of
shares, (iii) combines its outstanding shares of Common Stock into a smaller
number of shares, (iv) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock or (v) issues by reclassification of its
Common Stock any shares of its capital stock; then the Exercise Price shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in the
case of a dividend or distribution and immediately after the effective date in
the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise thereof may
receive shares of two or more classes or series of capital stock of the Company,
the Company shall determine the allocation of the adjusted Exercise Price
between the classes or series of capital stock. After such allocation, the
exercise privilege and the Exercise Price of each class or series of capital
stock shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Section 13. Such adjustment shall be made
successively whenever any event listed above shall occur.
Upon calculation of the adjusted Exercise Price, 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 shares of Common Stock (calculated to the nearest hundredth) as
calculated pursuant to subsection (r) of this Section 13.
(b) Adjustment for Rights Issue.
---------------------------
If the Company distributes any rights, options or warrants to all holders
of its Common Stock entitling them to purchase shares of Common Stock or
securities convertible into, or exchangeable or exercisable for, Common Stock at
a price per share (or with an initial conversion, exchange or exercise price)
less than the current market price per share of Common Stock on the record date
for such distribution, the Exercise Price shall be adjusted in accordance with
the following formula:
O + N x P
-----
E' = E x M
-----------------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record date.
14
<PAGE>
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or warrants
shall have been exercised, the Exercise Price shall be immediately readjusted to
what it would have been if "N" in the above formula had been the number of
shares actually issued.
Upon calculation of the adjusted Exercise Price, 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 shares of Common Stock (calculated to the nearest
hundredth) as calculated pursuant to subsection (r) of this Section 13.
This subsection (b) does not apply to the issuance of the
Contingent Warrants or the issuance of any Additional Warrants, in each case,
pursuant to the Indenture.
(c) Adjustment for Other Distributions. If the Company
----------------------------------
distributes to all holders of its Common Stock any of its assets (including
cash), debt securities, preferred stock or any rights or warrants to purchase
any such securities, assets or other securities of the Company, the Exercise
Price shall be adjusted in accordance with the following formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect of
one share of Common Stock. The Board of Directors shall determine
the fair market value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
Upon calculation of the adjusted Exercise Price, each Warrant
outstanding prior to the making of the adjustment in the Exercise Price shall
thereafter evidence the right to receive upon
15
<PAGE>
payment of the adjusted Exercise Price that number of shares of Common Stock
(calculated to the nearest hundredth) as calculated pursuant to subsection (r)
of this Section 13.
This subsection (c) does not apply to rights, options or warrants
referred to in subsection (b) of this Section 13.
(d) Adjustment for Common Stock Issue. If the Company issues
---------------------------------
shares of Common Stock for a consideration per share less than the current
market price per share of Common Stock on the date the Company fixes the
offering price of such additional shares, the Exercise Price shall be adjusted
in accordance with the following formula:
P
---
E' = E x O + M
------------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the current market price per share of Common Stock on the date of
issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
Upon calculation of the adjusted Exercise Price, 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 shares of Common Stock (calculated to the nearest
hundredth) as calculated pursuant to subsection (r) of this Section 13.
This subsection (d) does not apply to:
(i) any of the transactions described in subsections
(a), (b) and (c) of this Section 13;
(ii) the exercise of Warrants or other warrants
outstanding on the date of this Agreement, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock;
16
<PAGE>
(iii) up to 2,307,972 shares of Common Stock issued to the
Company's employees, consultants or directors pursuant to stock option
plans or stock ownership plans so long as the price at which such shares
are issued is not less than $1.45;
(iv) Common Stock issuable upon the exercise of rights or
warrants issued to the holders of Common Stock;
(v) Common Stock issued in a bona fide public offering
pursuant to a firm commitment underwriting;
(vi) Common Stock issued upon conversion of the Series A
Preferred Stock, par value $0.01 per share, of the Company in accordance
with the Certificate of Designation with respect thereto, Common Stock
issued upon conversion of the Series B Preferred Stock, par value $0.01 per
share, of the Company in accordance with the Certificate of Designation
with respect thereto, and Common Stock issued upon conversion of the Series
C Preferred Stock, par value $0.01 per share, of the Company in accordance
with the Certificate of Designation with respect thereto, in each case, as
such Certificate of Designation is in effect on the date hereof;
(vii) Common Stock or securities convertible into or
exchangeable for Common Stock issued as dividends or interest in respect
of any shares of preferred stock of the Company existing on the date
hereof or in respect of the Notes; and
(viii) Common Stock issued upon conversion of the Company's
9% Convertible Notes due 2006.
(e) Adjustment for Convertible Securities Issue. If the Company
-------------------------------------------
issues any securities convertible into or exchangeable for Common Stock
(including any rights, warrants or options) for a conversion or exchange price
per share of Common Stock initially deliverable upon conversion or exchange of
such securities, plus consideration received upon issuance thereof, less than
the current market price per share on the date of issuance of such securities,
the Exercise Price shall be adjusted in accordance with the following formula:
P
---
E' = E x O + M
------------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
17
<PAGE>
M = the current market price per share on the date of issuance of
such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for such securities at the initial
conversion or exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
Upon calculation of the adjusted Exercise Price, 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 shares of Common Stock (calculated to the nearest
hundredth) as calculated pursuant to subsection (r) of this Section 13.
This subsection (e) does not apply to:
(i) any of the transactions described in subsections
(a), (b), (c), (d)(vi), (d)(vii) and (d)(viii) of this Section 13;
(ii) convertible securities issued to stockholders of
any person which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such person immediately
prior to such merger, upon such merger;
(iii) convertible securities issued in a bona fide
public offering pursuant to a firm commitment underwriting; and
(iv) stock options issued to the Company's employees,
consultants or directors.
(f) Adjustment for Dividend Shares. If (i) the Company does
------------------------------
not consummate a firm commitment underwritten Public Offering of shares of
Common Stock by October 3, 2000 in which (A) the aggregate gross proceeds
received by the Company for the shares is at least $25,000,000 and (B) the price
per share paid by the public is at least $6.00 (as adjusted for stock splits,
reverse stock splits, stock dividends and similar recapitalizations) and (ii)
the holders of shares of the Company's Series C Preferred Stock are not required
to return to the Company any additional shares of Series C Preferred Stock
received as dividends (or interest on the notes from which such Series C
Preferred Stock were previously converted) ("Dividend Shares"), then the number
of Warrant Shares issuable on the exercised of each Initial Warrant which, for
the purpose of this paragraph, shall include any Additional Warrants, shall be
proportionately adjusted to take into account the number of shares of Common
Stock issuable upon conversion of the Dividend Shares so that, on an as adjusted
and fully diluted basis, the aggregate number of Warrant Shares to be received
upon exercise of each Initial Warrant equals 7.5% of the sum of (x) the number
of shares of Common
18
<PAGE>
Stock calculated on a fully diluted basis as of January 15, 1998 and (y) the
number of shares of Common Stock issuable upon conversion of the Dividend
Shares. For purposes of this Agreement, "Public Offering" means any offering by
the Company of its equity securities to the public pursuant to an effective
registration statement under the Securities Act or any comparable statement
under any similar federal statute then in force; provided that a Public Offering
shall not include an offering made in connection with a business acquisition or
combination or an employee benefit plan.
(g) Current Market Price. In subsections (b), (c), (d) and (e) of this
--------------------
Section 13 the current market price per share of Common Stock on any date is the
average of the Quoted Prices of the Common Stock for 30 consecutive trading days
commencing 45 trading days before the date in question. The "Quoted Price" of
the Common Stock is the last reported sales price of the Common Stock as
reported by the Nasdaq National Market or if the Common Stock is listed on a
securities exchange, the last reported sales price of the Common Stock on such
exchange which shall be for consolidated trading if applicable to such exchange,
or if not so reported or listed, the last reported bid price of the Common
Stock. In the absence of one or more such quotations, the Board of Directors of
the Company shall determine the current market price on such basis as it in good
faith considers appropriate; provided that in the event the Board of Directors
determine that the current market price is below $2.25 then, for the purposes of
subsections (b), (c), (d) and (e) of this Section 13, the current market price
shall be deemed to be $2.25.
(h) Consideration Received. For purposes of any computation respecting
----------------------
consideration received pursuant to subsections (b), (c), (d) and (e) of this
Section 13, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the net amount of such cash;
(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive, and
described in a resolution of the Board of Directors which shall be filed
with the Warrant Agent; and
(iii) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
any, to be received by the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this subsection).
(i) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise
------------------------------------------
Price need be made unless the adjustment would require an increase or decrease
of at least 1% in the Exercise Price. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 13 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be.
19
<PAGE>
(j) When No Adjustment Required. No adjustment need be made for a transaction
---------------------------
referred to in subsections (a), (b), (c), (d) or (e) of this Section 13 if
Warrant holders are to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction. No adjustment need be made for (i) rights to purchase Common Stock
pursuant to a Company plan for reinvestment of dividends or interest and (ii) a
change in the par value, or from par value to no par value, or from no par value
to par value, of the Common Stock. To the extent the Warrants become convertible
into cash, no adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
(k) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company
--------------------
shall provide the notices required by Section 16 hereof.
(l) Voluntary Reduction. The Company from time to time may, as the Board of
-------------------
Directors deems appropriate, reduce the Exercise Price by any amount for any
period of time if the period is at least 20 days and if the reduction is
irrevocable during the period; provided that in no event may the Exercise Price
be less than the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail to Warrant
holders a notice of the reduction. The Company shall mail the notice at least
15 days before the date the reduced Exercise Price takes effect. The notice
shall state the reduced Exercise Price and the period during which it will be in
effect.
A reduction of the Exercise Price pursuant to this Section 13(l), other than a
reduction which the Company has irrevocably committed will be in effect for so
long as any Warrants are outstanding, does not change or adjust the Exercise
Price otherwise in effect for purposes of subsections (a), (b), (c), (d) and (e)
of this Section 13.
(m) Notice of Certain Transactions. If (i) the Company takes any action that
------------------------------
would require an adjustment in the Exercise Price pursuant to subsections (a),
(b), (c), (d) or (e) of this Section 13 and if the Company does not arrange for
Warrant holders to participate pursuant to subsection (j) of this Section 13,
(ii) the Company takes any action that would require a supplemental Warrant
Agreement pursuant to subsection (n) of this Section 13, or (iii) there is a
liquidation or dissolution of the Company, the Company shall mail to Warrant
holders a notice stating the proposed record date for a dividend or distribution
or the proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution. The Company
shall mail the notice at least 15 days before such date. Failure to mail the
notice or any defect in it shall not affect the validity of the transaction.
20
<PAGE>
(n) Reorganization of the Company. If the Company consolidates or merges with
-----------------------------
or into, or transfers or leases all or substantially all its assets to, any
person, upon consummation of such transaction the Warrants shall automatically
become exercisable for the kind and amount of securities, cash or other assets
which the holder of a Warrant would have owned immediately after the
consolidation, merger, transfer or lease if the holder had exercised the Warrant
immediately before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Company, or the person to which
such sale or conveyance shall have been made (any such person, the "Successor
Company"), shall enter into a supplemental Warrant Agreement so providing and
further providing for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Section 13. The Successor
Company shall mail to Warrant holders a notice describing the supplemental
Warrant Agreement. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an affiliate of the formed,
surviving, transferee or lessee corporation, that issuer shall join in the
supplemental Warrant Agreement. If this subsection (n) applies, subsections (a),
(b), (c), (d) and (e) of this Section 13 do not apply.
(o) The Company Determination Final. Any determination that the Company or the
-------------------------------
Board of Directors must make pursuant to subsection (a), (b), (c), (d), (e),
(g), (h) or (j) of this Section 13 is conclusive.
(p) Warrant Agent's Disclaimer. The Warrant Agent has no duty to determine
--------------------------
when an adjustment under this Section 13 should be made, how it should be made
or what it should be. The Warrant Agent has no duty to determine whether any
provisions of a supplemental Warrant Agreement under subsection (n) of this
Section 13 are correct. The Warrant Agent makes no representation as to the
validity or value of any securities or assets issued upon exercise of Warrants.
The Warrant Agent shall not be responsible for the Company's failure to comply
with this Section 13.
(q) When Issuance or Payment May Be Deferred. In any case in which this
----------------------------------------
Section 13 shall require that an adjustment in the Exercise Price be made
effective as of a record date for a specified event, the Company may elect to
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Warrant Shares and other capital
stock of the Company, if any, issuable upon such exercise over and above the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise on the basis of the Exercise Price and (ii) paying to such holder
any amount in cash in lieu of a fractional share pursuant to Section 15 hereof;
provided that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
Warrant Shares, other capital stock and cash upon the occurrence of the event
requiring such adjustment.
(r) Adjustment in Number of Shares.
------------------------------
(i) General. Upon each adjustment of the Exercise Price pursuant to this
-------
Section 13, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of shares of Common Stock (calculated
to the nearest hundredth) obtained from the following formula:
21
<PAGE>
N'= N x E
---
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise of
a Warrant by payment of the Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(ii) Adjustment for Certain Cash Distributions. If the Company, by
-----------------------------------------
dividend or otherwise, at any time distributes to all holders of Common
Stock cash (excluding any cash that it distributed as part of a
distribution referred to in Section 13(c) or in connection with a
transaction to which Section 13(n) applies) in an aggregate amount that,
together with (A) the aggregate amount of any other distributions to all
holders of Common Stock made exclusively in cash within the 12 months
preceding the date fixed for the determination of shareholders entitled to
such distribution and in respect of which no adjustment in the Exercise
Price pursuant to Section 13(c) or the number of shares pursuant to this
clause (ii) has been made previously and (B) the aggregate of any cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) as of such date of determination of consideration
payable in respect of any tender offer by the Company or any of its
subsidiaries for all or any portion of the Common Stock and any purchase by
the Company of Common Stock in the open market, consummated within the 12
months preceding such date of determination and in respect of which no
adjustment in the number of shares pursuant clause (iii) below has been
made previously, exceeds 12.5% of the product of the current market price
(determined as provided in subsection (g) of this Section 13) on such date
of determination times the number of shares of Common Stock outstanding on
such date, the number of Warrant Shares shall be adjusted in accordance
with the following formula:
N'= N x M
---
M - C
where:
N'= the adjusted number of Warrant Shares.
N = the then current number of Warrant Shares.
M = the current market price per share on the date of such distribution.
C = the amount of cash to be distributed in respect of one share of Common
Stock.
22
<PAGE>
The adjustment shall become effective immediately prior to the opening of
business on the date of determination.
(iii) Adjustment for Tender/Exchange Offer. If the Company or any
------------------------------------
subsidiary of the Company makes a tender or exchange offer for all or any
portion of the Common Stock, or if the Company purchases Common Stock in the
open market, the number of Warrant Shares shall be adjusted in accordance with
the following formula:
N'= N x F x A + M(O - A)
----------------
M x O
where:
N'= the adjusted number of Warrant Shares.
N = the then current number of Warrant Shares.
F = the fair market value of the aggregate consideration payable to
shareholders upon consummation of such tender or exchange offer, or upon
such purchase. The Board of Directors shall determine the fair market
value.
M = the current market price per share of Common Stock as determined below.
O = the number of shares of Common Stock outstanding (including any shares
tendered or submitted for exchange) at the Expiration Time (as defined).
A = the number of shares of Common Stock accepted for payment in such tender
or exchange offer, or so purchased.
The current market price on any date shall be deemed to be the average of
the daily closing prices for the five consecutive trading days commencing on the
first trading day immediately following the Expiration Time. For the purpose of
this clause (iii), "Expiration Time" means either the last time that tenders may
be made pursuant to a tender offer or exchanges may be made pursuant to an
exchange offer, or the time of an agreement to purchase shares in the open
market as the case may be.
The adjustment shall become effective immediately following the close of
business on the last trading day used to compute the current market price,
provided, however, that, such increase shall be deemed to have become effective
immediately prior to the opening of business on the day following the Expiration
Time. To the extent that a holder exercises Warrants prior to the conclusion of
the period for which the current market price is to be calculated, any
adjustment in the number of shares of Common Stock issuable upon exercise of
such Warrant shall inure to the benefit of the holder of record of such Warrant
at the close of business on the first trading day following the Expiration Time.
In no event shall the number of Warrant Shares be reduced as a result of the
consummation of any of the transactions contemplated by this subsection (iii).
23
<PAGE>
(s) Form of Warrants. Irrespective of any adjustments in the
----------------
Exercise Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
(t) Section Applies to Warrants Issued in Debt Offering. This
---------------------------------------------------
Section 13 shall apply to the issuance of warrants to purchase shares of Common
Stock of the Company, at an exercise price of $.01 per share in connection with
an offering of debt securities of the Company.
SECTION 14. No Dilution or Impairment. (a) If any event shall
-------------------------
occur as to which the provisions of Section 13 are not strictly applicable but
the failure to make any adjustment would adversely affect the purchase rights
represented by the Warrants in accordance with the essential intent and
principles of such Section 13, then, in each such case, the Company shall
appoint an investment banking firm of recognized national standing, or any other
financial expert that does not (or whose directors, officers, employees,
affiliates or stockholders do not) have a direct or material indirect financial
interest in the Company or any of its subsidiaries, who has not been, and, at
the time it is called upon to give independent financial advice to the Company,
is not (and none of its directors, officers, employees, affiliates or
stockholders are) a promoter, director or officer of the Company or any of its
subsidiaries, which shall give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles established in Section
13, necessary to preserve, without dilution, the purchase rights, represented by
the Warrants. Upon receipt of such opinion, the Company shall promptly mail a
copy thereof to the holders of the Warrants and shall make the adjustments
described therein.
(b) The Company shall not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Warrants, but shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of the Warrants against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) shall take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrants from time
to time outstanding and (ii) shall not take any action which results in any
adjustment of the Exercise Price if the total number of Warrant Shares issuable
after the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock then authorized by the Company's certificate of
incorporation and available for the purposes of issue upon such exercise. A
consolidation, merger, reorganization or transfer of assets involving the
Company covered by Section 13(n) shall not be prohibited by or require any
adjustment under this Section 14.
SECTION 15. Fractional Interests. The Company shall not be
--------------------
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same holder, the number of whole Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable upon exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 15,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall notify the Warrant Agent in writing of the amount to be paid in
lieu of the fraction of a Warrant Share and concurrently pay or provide to the
Warrant
24
<PAGE>
Agent for payment to the Warrant holder an amount in cash equal to the product
of (i) such fraction of a Warrant Share and (ii) the difference between the
current market price of a Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, and the Exercise
Price, computed to the nearest whole cent.
SECTION 16. Notices to Warrant Holders. Upon any adjustment of the Exercise
--------------------------
Price pursuant to Section 13 hereof, the Company shall within 15 days thereafter
(i) cause to be filed with the Warrant Agent a certificate of a firm of
independent public accountants of recognized 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 Warrants at such registered holder's address appearing on the Warrant
register written notice of such adjustments by first-class mail, postage
prepaid. Where appropriate, such notice may be given in advance and included as
a part of the notice required to be mailed under the other provisions of this
Section 16.
In case:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants;
(b) the Company shall authorize the distribution to all holders of shares of
Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends payable in shares of Common Stock or distributions referred
to in subsection (a) of Section 13 hereof);
(c) of any consolidation or merger to which the Company is a party and for
which approval of any stockholders 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;
(d) of the voluntary or involuntary dissolution, liquidation or winding up of
the Company;
(e) a Change of Control (as defined in the Indenture) occurs; or
(f) the Company proposes to take any action (other than actions of the
character described in Section 13(a)) which would require an adjustment of the
Exercise Price pursuant to Section 13,
then 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 Warrants at his address
appearing on the Warrant register, at least 20
25
<PAGE>
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, in addition to any other relevant information, (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, (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or (iv) the date on which the Change of
Control (as defined in the Indenture) notice shall be mailed. The failure to
give the notice required by this Section 16 or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or
winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant Certificates
shall be construed as conferring upon the holders thereof the right to vote or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or the election of Directors of the Company or any other matter, or
any rights whatsoever as stockholders 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 20 hereof. 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:
26
<PAGE>
(a) The statements contained herein and in the Warrant Certificates shall be
taken as statements of the Company. The Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the Company
to comply with any of the covenants contained in this Agreement or in the
Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory to it
(who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the Company
or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, or other paper, document
or instrument believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties. The Warrant Agent shall not be
bound by any notice or demand, or any waiver, modification, termination or
revision of this Agreement or any of the terms hereof, unless evidenced by
a writing between the Company and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent reasonable compensation for
all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes
(including withholding taxes) and governmental charges and other charges of
any kind and nature incurred by the Warrant Agent in the execution,
delivery and performance of its responsibilities under this Agreement and
to indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done
or omitted by the Warrant Agent in the execution, delivery and performance
of its responsibilities under this Agreement except as a result of its
negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrants
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
registered holders of the Warrants, as their respective rights or interests
may appear.
27
<PAGE>
(g) Except as prohibited by law, the Warrant Agent, and any stockholder,
director, officer or employee of the Warrant Agent, may buy, sell or deal
in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act
as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the Company, and
its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence
or bad faith.
(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. Registration Rights.
-------------------
(a) Prior to the Exercise Commencement Date, the Company shall prepare and
cause to be filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 415 under the Securities Act a shelf
registration statement on the appropriate form relating to the offer and
sale by the Company of the Warrant Shares to the holders of Warrants upon
exercise of the Warrants and resales of the Warrant Shares by the holders
thereof (the "Registration Statement").
(b) The Company shall use its best efforts to cause such Registration Statement
to be declared effective by the Commission no later than the Exercise
Commencement Date.
(c) The Company shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act in order to permit the
prospectus included therein to be lawfully delivered by the Company to the
holders exercising the Warrants until the Expiration Date or such shorter
period that shall terminate when all the Warrants have been exercised;
provided that, except as provided below with respect to any Black Out
Period (as defined), the Company shall be deemed not to have used its best
efforts to keep the Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in it not being
able to offer and sell the Warrant Shares upon exercise of the Warrants
during that period, unless such action is required by applicable law.
Notwithstanding the foregoing, the Company shall not be required to amend
or supplement the Registration Statement, any related prospectus or any
document incorporated therein by reference, for a period (a "Black Out
Period") not to exceed, for so long as this Agreement is in
28
<PAGE>
effect, an aggregate of 90 days in any calendar year, in the event that (i)
an event occurs and is continuing as a result of which the Registration
Statement, any related prospectus or any document incorporated therein by
reference as then amended or supplemented would, in the Company's good
faith judgment, contain an untrue statement of a material fact or omit 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 (ii)(A) the Company determines in its good faith judgment that the
disclosure of such event at such time would have a material adverse effect
on the business, operations or prospects of the Company or (B) the
disclosure otherwise relates to a material business transaction which has
not yet been publicly disclosed; provided that no Black Out Period may be
in effect during the six months prior to the Expiration Date.
(d) The Company shall cause the Registration Statement and the related
prospectus and any amendment or supplement thereto, as of the effective
date of the Registration Statement, amendment or supplement, (i) to comply
in all material respects with the applicable requirements of the Securities
Act and the rules and regulations of the Commission and (ii) not to contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(e) The Company shall give prompt written notice to the holders of the Warrants
and the Warrant Agent of (i) the effectiveness of the Registration
Statement or any post-effective amendment thereto, (ii) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceedings
for that purpose, (iii) the receipt by the Company or its legal counsel of
any notification with respect to the suspension of the qualification of the
Warrant Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (iv) the happening of any
event that requires the Company to make changes in the Registration
Statement or the prospectus in order to make the statements therein not
misleading and (v) the commencement and termination of any Black Out
Period.
(f) The Company shall use its best efforts to prevent the issuance or obtain
the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible time.
(g) Upon the occurrence of any event contemplated by Section 19(e)(iv) or (v)
hereof (subject to the last sentence of Section 19(c) hereof) the Company
shall promptly prepare a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to holders of the
Warrants, the prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading and shall contain the current information required by
the Securities Act.
(h) Not later than the effective date of the Registration Statement, the
Company shall provide a CUSIP number for the Warrant Shares and provide the
Warrant Agent with printed certificates for the Warrant Shares in a form
eligible for deposit with DTC.
(i) The Company shall comply with all rules and regulations of the Commission
to the extent and so long as they are applicable to the Registration
Statement.
29
<PAGE>
(j) The Company shall register or qualify or cooperate with the holders in
connection with the registration or qualification of the Warrant Shares for
offer and sale by the Company upon exercise of the Warrants under the
securities or blue sky laws of such states of the United States as any
holder reasonably requests and do any and all other acts or things
necessary or advisable to enable such offer and sale in such jurisdictions;
provided that the Company shall not be required to (i) qualify to do
business in any jurisdiction in which it is not then so qualified or (ii)
take any action which would subject it to general service of process or to
taxation in any jurisdiction in which it is not then so subject.
(k) The Company shall bear all expenses incurred by it in connection with the
performance of its obligations under this Section 19.
(l) The Company acknowledges and agrees that any remedy at law for breach of
any provision of this Section 19 will be inadequate and that, in addition
to any other remedies that the holder may have, the holders shall be
entitled to the remedy of specific performance to ensure the Company
performs its obligations under this Section 19. The election of any one or
more remedies by the holders hereunder shall not constitute a waiver of the
right to pursue other available remedies.
(m) No person is entitled to include any securities of the Company held by such
person in, or to have such securities registered under, the Registration
Statement.
SECTION 20. Change of Warrant Agent. If the Warrant Agent shall become
-----------------------
incapable of acting as Warrant Agent, the Company shall appoint a successor to
such Warrant Agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such incapacity by
the Warrant Agent or by the registered holder of a Warrant Certificate, then the
registered holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. The holders of a majority of the unexercised Warrants shall be entitled
at any time to remove the Warrant Agent and appoint a successor to such Warrant
Agent. Such successor to the Warrant Agent need not be approved by the Company
or the former Warrant Agent. After appointment the successor to the Warrant
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Warrant Agent without further act or deed;
provided that the former Warrant Agent shall deliver and transfer to the
successor to the Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section 20,
however, or any defect therein, shall not affect the legality or validity of the
appointment of a successor to the Warrant Agent.
SECTION 21. Notices to the Company and Warrant Agent. Any notice or demand
----------------------------------------
authorized by this Agreement to be given or made by the Warrant Agent or by the
registered holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
30
<PAGE>
Centennial Communications Corp.
1610 Wynkoop Street
Suite 300
Denver, Colorado 80202
Attention: Chief Financial Officer
with a copy to:
Holland & Hart LLP
555 17th Street
Denver, Colorado 80220
Attention: Michael S. Quinn, Esq.
Any notice pursuant to this Agreement to be given by the Company or by the
registered holder(s) of any Warrant Certificate to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent at the Warrant Agent Office
as follows:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street
Hartford, Connecticut 06103
Telecopier No.: (860) 986-1889
Attention: Corporate Trust Department
Notice may also be given by facsimile transmission (effective when receipt is
acknowledged) or by overnight delivery service (effective the next business
day).
SECTION 22. 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. Supplements and Amendments. The Company and the Warrant Agent may
--------------------------
from time to time supplement or amend this Agreement without the consent of any
holders of Warrants 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 materially adversely
affect the interests of the holders of the Warrants. Any amendment or supplement
to this Agreement that has a material adverse effect on the interests of holders
of the Warrants shall require the written consent of registered holders of a
majority of the then outstanding Warrants (excluding Warrants held by the
Company or any of its Affiliates). The consent of each holder of a Warrant
affected shall be required for any amendment pursuant to which the Exercise
Price would be increased or the number
31
<PAGE>
of Warrant Shares purchasable upon exercise of Warrants would be decreased
(other than in accordance with Section 13 or 15 hereof).
SECTION 24. 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 25. Termination. This Agreement shall terminate at 5:00 p.m., New
-----------
York, New York time on January 1, 2005. Notwithstanding the foregoing, this
Agreement shall terminate on such earlier date on which all outstanding Warrants
have been exercised.
SECTION 26. Governing Law; Jurisdiction. This Agreement and each Warrant
---------------------------
Certificate issued hereunder shall be governed by and construed in accordance
with the laws of the State of New York. The parties hereto irrevocably consent
to the jurisdiction of the courts of the State of New York and any federal court
located in such state in connection with any action, suit or proceeding arising
out of or relating to this Agreement.
SECTION 27. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
SECTION 28. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 29. Further Assurances. From time to time on and after the date
------------------
hereof, the Company shall deliver or-cause to be delivered to the Warrant Agent
such further documents and instruments and shall do and cause to be done such
further acts as the Warrant Agent shall reasonably request (it being understood
that the Warrant Agent shall have no obligation to make such request) to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
SECTION 30. Contingent Warrants. The Company agrees to take all steps
-------------------
necessary to ensure that the Contingent Warrants are exercisable upon issuance
including, without limitation, by amending the Registration Statement to provide
for the Contingent Warrants.
[Signature Page Follows]
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
Centennial Communications Corp.
By: /s/ Bernard G. Dvorak
------------------------------
Name: Bernard G. Dvorak
Title: Chief Financial Officer
State Street Bank and Trust Company
By: [illegible signature]
-----------------------------
Authorized Signatory
By:
-----------------------------
Authorized Signatory
<PAGE>
EXHIBIT A
Form of Warrant Certificate
[Face]
No. _____ _______ Warrants
CENTENNIAL COMMUNICATIONS CORP.
[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.]"/1/
THE SECURITY EVIDENCED BY THIS CERTIFICATE IS NOT TRANSFERABLE SEPARATELY
FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH SUCH SECURITY UNTIL THE
EARLIEST TO OCCUR OF (I) 360 DAYS FROM THE DATE OF ISSUANCE OF HEREOF, (II)
SUCH DATE AS SALOMON BROTHERS INC MAY, IN ITS DISCRETION, DEEM APPROPRIATE
AND (III) IN THE EVENT OF A CHANGE IN CONTROL (AS DEFINED IN THE INDENTURE
RELATING TO THE NOTES), THE DATE THE COMPANY MAILS NOTICE THEREOF (SUCH
DATE, THE "SEPARATION DATE").
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "IAI") (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(K) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(D) UNDER THE SECURITIES ACT, IF APPLICABLE)
A-1
- ----------------------------
1. This paragraph is to be included only if the Warrant is in global form.
<PAGE>
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS
SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT TO (A) THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (E) TO AN IAI, THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE [WARRANT AGENT OR THE TRANSFER AGENT AND REGISTRAR] A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS SECURITY (THE FORM OF WHICH CAN BE OBTAINED FROM THE
[WARRANT AGENT OR THE TRANSFER AGENT AND REGISTRAR]) AND, IF SUCH TRANSFER
IS IN RESPECT OF [WARRANTS/WARRANT SHARES], AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) 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 (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE
902 OF REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT
CONTAINS A PROVISION REQUIRING THE [WARRANT AGENT/TRANSFER AGENT AND
REGISTRAR] TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION
OF THE FOREGOING.
This Warrant Certificate certifies that __________, or its registered
assigns, is the registered holder of Warrants expiring on January 1, 2005 (the
"Warrants"), to purchase shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Centennial Communications Corp., a Delaware corporation (the
"Company"). Each Warrant entitles the registered holder upon exercise at any
time from 9:00 a.m. on the Exercise Commencement Date referred to on the reverse
hereof until 5:00 p.m. New York, New York Time on January 1, 2005 to receive
from the Company 64 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 upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of the Warrant Agent, subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. No Warrant may be exercised after 5:00 p.m., New York, New York
Time on January 1, 2005 and to the extent not exercised by such time such
Warrants will become void. The Exercise Price and number of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement.
All capitalized terms not defined herein shall have the meanings
assigned to such terms in the Warrant Agreement.
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
A-2
<PAGE>
though fully set forth at this place.
This Warrant Certificate will not be valid unless countersigned by the Warrant
Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate will be governed and construed in accordance with the
internal laws of the State of New York.
A-3
<PAGE>
IN WITNESS WHEREOF, Centennial Communications Corp. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary and
may cause its corporate seal to be affixed hereunto or imprinted hereon.
Dated: January __, 1998
CENTENNIAL COMMUNICATIONS CORP.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
Countersigned:
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By:___________________________________
Authorized Signatory
A-4
<PAGE>
Form of Warrant Certificate
[Reverse]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on January 1, 2005 entitling the holder
upon exercise to receive shares of Common Stock and are issued or to be issued
pursuant to a Warrant Agreement dated as of January 15, 1998 (the "Warrant
Agreement"), duly executed and delivered by the Company to State Street Bank and
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.
Warrants may be exercised at any time from 9:00 a.m. on or after the earliest
to occur of (i) one year from the date of issuance of hereof, (ii) in the event
of a Change in Control, the date the Company mails notice thereof, and (iii) 180
days after the consummation of an Initial Public Offering of the Company's
Common Stock (such date, the "Exercise Commencement Date") and until 5:00 p.m.,
New York, New York Time on January 1, 2005; provided that holders will be able
to exercise their Warrants only if a registration statement relating to the
Warrant Shares is then in effect, or the exercise of such Warrants is exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and such securities are qualified for sale or exempt
from qualification under the applicable securities laws of the states in which
the various holders of the Warrants or other persons to whom it is proposed that
the Warrant Shares be issued on exercise of the Warrants reside.
The holder of Warrants evidenced by this Warrant Certificate may exercise such
Warrants 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 at the office of the Warrant Agent, which payment of the
Exercise Price may be made (i) in the form of cash or by certified or official
bank check payable to the order of the Company, (ii) by tendering Notes having
an aggregate principal amount at the time of tender, plus accrued and unpaid
interest, if any, thereon, to the date of exercise (or if such exercise occurs
prior to the Full Accretion Date (as defined in the Indenture), an Accreted
Value (as defined in the Indenture) on the date of exercise) equal to the
Exercise Price, (iii) by tendering Warrants having a fair market value equal to
the Exercise Price or (iv) by tendering a combination of cash, Notes and
Warrants. 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 will be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised. No
adjustment will 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 may, subject to certain conditions,
be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides
that the number of shares of Common Stock issuable upon the exercise of each
Warrant will 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.
A-5
<PAGE>
The Company has agreed under the terms of the Warrant Agreement to file and
use its best efforts to make effective and maintain effective (subject to Black
Out Periods) until expiration or exercise of all Warrants a shelf registration
statement (the "Registration Statement") on an appropriate form under the
Securities Act covering the issuance and resale of Warrant Shares 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 will be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, of any distribution to the holder(s) hereof, and for all
other purposes, and neither the Company nor the Warrant Agent will be affected
by any notice to the contrary. Neither the Warrants nor this Warrant
Certificate entitles any holder hereof to any rights of a stockholder of the
Company.
A-6
<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 Centennial
Communications Corp.:
(check item)
_____ by tendering cash or by certified or official bank check payable to the
Company;
_____ by tendering Notes having an aggregate principal amount at the time of
tender, plus accrued and unpaid interest, if any, thereon, to the date of
exercise (or if such exercise occurs prior to the Full Accretion Date, an
Accreted Value on the date of exercise) equal to the Exercise Price;
_____ by tendering Warrants having a fair market value equal to the Exercise
Price; or
_____ by tendering a combination of cash, Notes and Warrants, in accordance with
the terms of the Warrant Agreement.
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
_____________________.
Date: ____________________
Your Signature:
----------------------
(Sign exactly as your name appears on
the face of this Warrant)
Signature Guarantee*:
- ------------------------------
A-7
<PAGE>
* Participant in a recognized Signature Guarantee Medallion Program.
A-8
<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>
<S> <C> <C> <C> <C>
Number of
Amount of Amount of Warrants in this
decrease in increase in Global Warrant
Number of Number of following such Signature of
Warrants in this Warrants in this decrease or authorized
Global Warrant Global Warrant increase officer of
Date of Exchange Warrant Agent
- --------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------
2. This is to be included only if the Warrant is in global form.
A-9
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: _____ Warrants to Purchase Common Stock (the "Warrants") of CENTENNIAL
COMMUNICATIONS CORP.
This Certificate relates to _____ Warrants held in * ________ book-entry or *
________ definitive form by _________ (the "Transferor") and such Warrants to be
exchanged or transferred will be held in * ________ book-entry or * ________
definitive form by the transferee.
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 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; and
[_]
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 5 of the Warrant Agreement).
[_]
Such Warrant is being transferred to a qualified institutional buyer (as
defined in Rule 144A under the Securities Act), in reliance on Rule 144A.
[_]
Such Warrant is being transferred pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and based on
an opinion of counsel if the Company so requests).
[_]
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(es).
B-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(es).
B-2
<PAGE>
EXHIBIT 10.11
EXECUTION COPY
CONFIDENTIAL TERMINATION AND RELEASE AGREEMENT
THIS CONFIDENTIAL TERMINATION AND RELEASE AGREEMENT (THIS "AGREEMENT")
DATED AS OF FEBRUARY 19, 1998, IS ENTERED INTO BY AND BETWEEN CENTENNIAL
COMMUNICATIONS CORP., A DELAWARE CORPORATION (THE "COMPANY"), AND MICHAEL N.
SIMKIN ("OFFICER").
RECITALS
A. Officer has been the Chief Executive Officer and a director of the Company
and its subsidiaries.
B. Officer and the Company desire to terminate Officer's employment as Chief
Executive Officer of the Company, to terminate Officer's position as a director
on the board of directors of the Company and on the boards of directors of each
of the Company's subsidiaries and to settle fully and finally all claims.
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties agree as follows:
TERMS AND CONDITIONS
Section 1. Termination of Officer. Officer hereby resigns as Chief Executive
----------------------
Officer of the Company effective as of the date of this Agreement.
Section 2. Termination of Board Positions. Officer hereby resigns as a
------------------------------
director of the Company, and as a director of each of the Company's
subsidiaries, including but not limited to the following: SMR Direct USA, Inc.,
SMR Direct Cayman Corp., Centennial Cayman Corp., SMR Direct Peru, S.R.L,
Pompano, S.R.L., Brunacci Compania Ltda., Telecom Supply S.R.L., C-Comunica
S.A., Transnet del Peru, S.A., CCC Holdings Peru, S.R.L., Centennial Ecuador
S.A., Centennial Cayman Corp. Chile, Ltda, Centennial Telecomunicaciones de
Venezuela S.A. and Telecomunicaciones y Servicios S.A., effective as of the date
of this Agreement.
Section 3. Compensation. In consideration for the release by Officer contained
------------
in Section 8 and the other covenants of Officer contained in this Agreement, the
Company shall pay Officer (i) upon expiration of the revocation period specified
in Section 15 below but no more than 10 days after the execution of this
Agreement (A) a severance payment equal to 6 months' salary to be payable in a
lump sum in the amount of $105,000 and (B) a relocation payment in the amount of
$25,000 and (ii) upon execution of this Agreement $8,985.44 representing 89
hours of accrued but unused vacation pay.
Section 4. Stock Options. The Company hereby agrees that 20% of Officer's
-------------
currently unvested stock options ("Unvested Stock Options") (representing
options in
<PAGE>
respect of 100,000 shares of the Company's Common Stock) granted pursuant to the
Company's 1996 Stock Option Plan adopted January 12, 1996, shall become
immediately and fully exercisable and vested as of the date of this Agreement.
Notwithstanding any provision to the contrary contained in Officer's Incentive
Stock Option or in any other agreement between the Company and Officer, (i) the
remaining 80% of the Unvested Stock Options shall automatically expire on the
date hereof and (ii) all of Officer's vested stock options shall expire and be
of no further force and effect if not exercised by Officer on or before the
second anniversary of the date hereof.
Section 5. Withholding. Officer authorizes the Company to withhold, in
-----------
accordance with applicable law, from the compensation specified in Sections 3
and 4, any taxes required to be withheld by any federal, state or local law or
regulation arising out of such compensation.
Section 6. Promissory Note. Officer is the obligor on a promissory note dated
---------------
October 3, 1997, payable to the order of the Company in the original principal
amount of $72,000 (the "Note"). The Company hereby agrees that Officer's
termination of employment contemplated herein shall not constitute a
"Separation" as defined in the Note, and that the term of the Note is unaffected
by this Agreement, and is payable in full on October 3, 1999.
Section 7. Noncompetition, Nonsolicitation and Confidentiality Covenants.
-------------------------------------------------------------
(a) Officer acknowledges that he possesses proprietary and trade secret
information concerning the Company. Officer further acknowledges the highly
competitive nature of the Company's business. Officer further acknowledges that
the restrictions contained in this Section 7 (collectively, the "Noncompetition
Covenant") are reasonable and necessary for the protection of the immediate
interests of the Company, that the Company would not have entered into this
Agreement but for the inclusion herein of this Noncompetition Covenant, and that
any violation of the Noncompetition Covenant would cause substantial injury to
the Company. Officer further acknowledges that this Noncompetition Covenant is
intended to protect the legitimate business interests of the Company and not to
prevent or interfere with Officer's ability to conduct business.
(b) From the date of this Agreement and until 6 months after the date of
this Agreement (the "Covenant Period"), Officer shall not directly own (other
than publicly traded securities), manage, control, actively participate in,
consult with, directly render services for or in any manner engage in any line
of business or activity competing with the specialized mobile radio business of
the Company or any of its Affiliates (as defined below) conducted in the
countries of Peru, Ecuador and Chile.
(c) In furtherance of the foregoing and not in limitation thereof,
during the Covenant Period Officer shall not, directly or indirectly, (i) induce
or attempt to induce any employee of the Company or any of its Affiliates to
leave the employ of the Company or such Affiliate, or in any way interfere with
the relationship between the Company or any Affiliate and any employee thereof,
or (ii) induce or attempt to induce any customer, supplier, licensee or other
business relation of the Company or any
2
<PAGE>
Affiliate to cease doing business with the Company or such Affiliate, or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any Affiliate.
(d) For a period of 18 months from the date hereof, Officer shall keep
in strictest confidence and trust all Proprietary Information (as defined
below), and shall not use or disclose any Proprietary Information without the
written consent of the Company. Moreover, Officer shall deliver to the Company
all documents, notes, drawings, blueprints, computer programs, data, security
card keys and similar devices, and other materials of any nature pertaining to
any Proprietary Information or to Officer's work with the Company, and Officer
shall not take any of the foregoing, or any reproduction of any of the
foregoing, that is embodied in a tangible medium of expression. The term
"Proprietary Information" includes, without limitation, discoveries,
developments, designs, improvements, inventions, blueprints, processes, computer
programs, know how, data, marketing and business plans and outlines, budgets,
projections, unpublished financial statements, costs, fee schedules, client and
supplier lists, client and prospective client databases, and access codes and
similar security information and procedures; provided, however, that the term
"Proprietary Information" shall not include any of the foregoing which is in the
public domain other than as the result of a breach of Officer's obligations
under this Section 7(d).
(e) If, at the time of enforcement of this Section 7, a court shall hold
that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area.
(f) In the event of the breach or a threatened breach by Officer of any
of the provisions of this Section 7, the Company, in addition and supplementary
to other rights and remedies existing in its favor, may apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof.
Section 8. Release.
-------
(a) As a material inducement to the Company to enter into this
Agreement, Officer hereby irrevocably and unconditionally releases, acquits and
forever discharges the Company, each of the Company's owners, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions and persons controlling, controlled by or
under common control with the Company ("Affiliates") (and present or former
agents, directors, officers, employees, representatives and attorneys of such
Affiliates) acting by, through or in concert with the Company and all other
persons acting by, through or in concert with any of them (collectively,
"Releasees") and each of them, from any and all charges, complaints, claims,
demands and liabilities whatsoever of every name and nature (including
reasonable attorney's fees and costs actually incurred), known or unknown,
existing or that may hereafter exist, and any and all causes of action which
could have been asserted
3
<PAGE>
by claim, counterclaim or otherwise, against any of the Releasees pertaining to
the business and affairs of the Company, Officer's employment with the Company
or the termination thereof, the relationships between Officer and any of the
Releasees or any other act of omission which has previously transpired up to the
date of execution of this Agreement. The claims released by this Section 8(a)
include but are not limited to any claims under the Age Discrimination in
Employment Act, 29 U.S.C. (S) 621, et seq. ("ADEA"), or any other statute or law
prohibiting discrimination in employment on the basis of age, race, religion,
disability, gender or national origin or other status (collectively, "Claims").
(b) As a material inducement to Officer to enter into this Agreement,
the Company, on behalf of itself and its subsidiaries described in Section 2,
hereby irrevocably and unconditionally releases, acquits and forever discharges
Officer from any and all charges, complaints, claims, demands and liabilities
whatsoever of every name and nature (including reasonable attorney's fees and
costs actually incurred), known or unknown, existing or that may hereafter
exist, and any and all causes of action which could have been asserted by claim,
counterclaim or otherwise, pertaining to the business and affairs of the
Company, Officer's employment with the Company or the termination thereof, the
relationships between Officer and any of the Releasees, or any other act of
omission which has previously transpired up to the date of execution of this
Agreement (collectively, "Company Claims").
Section 9. Representation Regarding No Complaints or Charges and Covenant Not
------------------------------------------------------------------
to Sue. Officer and the Company each represents to the other that it has not
- ------
filed any complaints or charges against any of the Releasees or Officer,
respectively, with any local, state or federal agency or court. Officer and the
Company each further represents, agrees and covenants to the other that it will
not file any such complaints or charges against any of the Releasees or Officer,
respectively, with any local, state or federal agency or court at any time
hereafter with respect to any Claim or Company Claim, as the case may be. If
any complaint or charge against the Company or any Releasee is filed on behalf
of Officer, Officer agrees to take all reasonable steps necessary to effectuate
the withdrawal of such complaint or charge. In the event that any local, state
or federal agency or court undertakes any proceeding relating to Officer's
employment by the Company or the circumstances of his leaving the Company's
employ, Officer hereby waives any right he may have to recover any damages or
any remedy of whatever nature as a result of any such proceeding.
Section 10. Ownership of Claims. Officer represents and agrees that he has not
-------------------
previously assigned or transferred, or purported to have assigned or
transferred, to any person whomsoever, any Claim or portion thereof or interest
therein against any of the Releasees. Officer agrees to indemnify, defend and
hold harmless each and all of the Releasees against any and all claims based on,
arising out of, or in connection with any such transfer or assignment, or
purported transfer or assignment, of any Claims or any portion thereof or
interest therein. The Company represents and agrees that it has not, and to the
best of its knowledge no other Releasee has, previously assigned or transferred,
or purported to have assigned or transferred, to any person whomsoever, any
4
<PAGE>
Company Claim or portion thereof or interest therein against Officer. The
Company agrees to indemnify, defend and hold harmless Officer against any and
all claims based on, arising out of, or in connection with any such transfer or
assignment, or purported transfer or assignment, of any Company Claims or any
portion thereof or interest therein.
Section 11. No Admission of Liability. Officer and the Company each
-------------------------
acknowledge that neither the execution of this Agreement nor the performance of
its terms shall constitute an admission by the Company or Officer of any
wrongful acts whatsoever against any other party or any other person, and the
Company and Officer each specifically disclaim any liability to any other party
or any other person.
Section 12. Disclosure. Except as otherwise required by law, Officer agrees
----------
that he will not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information about the Company and its Affiliates or its
management or about the Company's and its Affiliates' prospects for the future,
to any person or entity, including, but not limited to, any current, former, or
prospective employee or investor in the Company or any of its Affiliates.
Except as otherwise required by law or by the instruments governing the
Company's existing indebtedness, the Company agrees that it will not disclose or
cause to be disclosed any negative, adverse or derogatory comments or
information about Officer to any person or entity, including any prospective
employer of Officer.
Section 13. Confidentiality. Officer and the Company agree that they will keep
---------------
the facts associated with this matter, and the terms of this Agreement strictly
--------
confidential; provided, however, that Officer and the Company may disclose such
- ------------
matters to attorneys, tax advisors or as may be required by law. Further, it is
expressly understood and agreed that this confidentiality provision is an
essential provision of this Agreement.
Section 14. Complete Agreement. This Agreement embodies the complete agreement
------------------
and understanding between the parties and supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter of this Agreement in any
way. Officer represents and agrees that he has been informed by the Company
that he should consult with his own attorney before executing this Agreement,
that he has carefully read and fully understands all of the provisions of this
Agreement and that he is voluntarily entering into this Agreement. The Company
and Officer each further represent and agree that, with respect to the matters
set forth in this Agreement, none of them can rely on any statements or
representations other than those set forth in this Agreement.
Section 15. Revocation. Officer acknowledges that he is knowingly and
----------
voluntarily waiving and releasing any rights he may have under the ADEA. He
also acknowledges that the consideration given for the release in Section 8
hereof is in addition to anything of value to which he was already entitled. He
further acknowledges that he has been advised by this writing, as required by
the ADEA, that: (a) his waiver and release do not apply to any rights or claims
that may arise after the execution date of this Agreement; (b) he has 21 days to
consider this Agreement (although he may choose
5
<PAGE>
to voluntarily execute this Agreement earlier); and (c) he has seven days
following the execution of this Agreement by the parties to revoke the
Agreement. Notice of revocation, together with any shares of the Company's
common stock exercised pursuant to Section 4, should be sent to the Company in
accordance with Section 19.
Section 16. Successors and Assigns. This Agreement is intended to bind and
----------------------
inure to the benefit of and be enforceable by Officer and the Company and their
respective successors and assigns.
Section 17. Choice of Law. All questions concerning the construction, validity
-------------
and interpretation of this Agreement will be governed by the internal law, and
not the law of conflicts, of the State of Colorado.
Section 18. Modifications and Waivers. No provision of this Agreement may be
-------------------------
modified, altered or amended except by an instrument in writing executed by each
of the parties to this Agreement. No waiver by any party to this Agreement of
any breach by another party to this Agreement of any term or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar terms or provisions at the time or at any prior or
subsequent time.
Section 19. Notices. Any notice provided for in this Agreement shall be in
-------
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) at the respective addresses set forth below or at such address or to
the attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, three days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
Centennial Communications Corp.
1610 Wynkoop Street, Suite 300
Denver, CO 80202
Facsimile: 303-405-0465
Officer's address is:
Michael N. Simkin
5227 Geneva Street
Englewood, CO 80110
Facsimile: 303-740-9375
Section 20. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same Agreement.
Section 21. Authority. The Company represents to Officer that its President
---------
and Chief Executive Officer has the authority to execute this Agreement. The
Company
6
<PAGE>
will submit this Agreement to its Board of Directors for ratification at the
next scheduled meeting of its Board of Directors, a copy of which ratification
shall be provided to Officer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CENTENNIAL COMMUNICATIONS CORP.
By: /s/ Bernard G. Dvorak
----------------------
Name: Bernard G. Dvorak
----------------------
Title: President and CEO
----------------------
/s/ Michael N. Simkin
----------------------
Michael N. Simkin
7
<PAGE>
EXHIBIT 10.12
CONFIDENTIAL TERMINATION AND RELEASE AGREEMENT
This Confidential Termination and Release Agreement (this
"Agreement"), dated as of November 17, 1997, is entered into by and between
Centennial Communications Corp. d/b/a SMR Direct., a Delaware corporation (the
"Company"), and Jeff E. Rhodes ("Officer").
RECITALS
A. Officer has been the President and a director of the Company.
B. Officer and the Company desire to terminate Officer's employment as
President of the Company, to terminate Officer's position as a director on the
board of directors of the Company and on the boards of directors of each of the
Company's subsidiaries, to terminate the Agreement Regarding Employment
Termination dated May 16, 1997 between them, and to settle fully and finally all
claims.
In consideration of the mutual covenants and agreements set forth in
this Agreement, the parties agree as follows:
TERMS AND CONDITIONS
1. Termination of Officer. Officer hereby resigns as President of the Company
----------------------
effective as of the date of this Agreement.
2. Termination of Board Positions. Officer hereby resigns as a director of the
------------------------------
Company, and as a director of each of the Company's subsidiaries, including but
not limited to the following: SMR Direct USA, Inc., SMR Direct Cayman Corp.,
Centennial Cayman Corp., SMR Direct Peru, S.R.L, Pompano, S.R.L., Brunacci
Compania Ltda., Telecom Supply S.R.L., C-Comunica S.A., Radioservicios Moviles,
S.A., Transnet del Peru, S.A., and Fastcom, S.A.
3. Termination of Agreement Regarding Employment Termination. Officer and the
---------------------------------------------------------
Company hereby agree that the Agreement Regarding Employment Termination between
Officer and the Company dated May 16, 1997 shall be terminated in its entirety,
and shall have no further force or effect.
4. Compensation. In consideration for the continued non-exclusive employment
------------
of Officer provided for in Paragraph 6, the release by Officer contained in
Paragraph 9 and the other covenants of Officer contained in this Agreement, the
Company shall (i) continue to pay to Officer a monthly salary of $16,667 during
the Employment Period (as defined below) on the same day and/or the same terms
as Officer received his salary prior to entering into this Agreement; (ii)
reimburse Officer for up to $1500 of Officer's expenses incurred in connection
with a trade show in Cancun, Mexico that Officer intended to attend, which
amount shall be paid promptly upon receipt by the Company of written receipts
confirming payment by Officer of such expenses; (iii) pay Officer one month's
vacation pay, or $16,667, upon execution of this Agreement; and (iv)
<PAGE>
continue to pay the Company's portion of Officer's medical insurance under the
Company's medical insurance plan as such medical insurance plan exists from time
to time, for a period of the earlier of (a) three years following the date of
this Agreement, or (b) one year following the commencement of Officer's
employment with a company that makes medical insurance available to its
employees or members. Moreover, the Company hereby agrees that 80% of Officer's
currently unvested stock options ("Unvested Stock Options") granted pursuant to
the Company's 1996 Stock Option Plan adopted January 12, 1996, shall vest as of
the date of this Agreement, starting with the Unvested Stock Options that have
the lowest exercise price. The remaining 20% of the Unvested Stock Options shall
remain unvested, and shall not vest pursuant to the vesting provision contained
in the Incentive Stock Option Agreements between the Company and Officer dated
February 1, 1996, February 1, 1996, July 8, 1996 and February 21, 1997.
Notwithstanding any provision to the contrary in Officer's Incentive Stock
Option Agreements, all of Officer's vested stock options shall remain
outstanding until the earlier of (i) six months following the date of an initial
public offering of the Company; or (ii) ten years from the date of grant.
5. Withholding. Officer authorizes the Company to withhold, in accordance
-----------
with applicable law, from the compensation specified in Paragraph 4, any taxes
required to be withheld by any federal, state or local law or regulation arising
out of such compensation.
6. Employment Services. From the date of this Agreement until six months after
-------------------
the date of this Agreement (the "Termination Date", and such six-month period,
the "Employment Period"), Officer agrees to render services to the Company as an
employee of the Company. These services shall include negotiation of and other
assistance on any corporate development projects currently being pursued by the
Company as described on Exhibit A hereto (the "Corporate Development Projects"),
and advising the Company on strategic matters. Such services shall be rendered
upon reasonable notice during normal business hours, from time to time, when and
as requested by the CEO of the Company; provided, however, that Officer shall
not be required to devote more than 33% of his business time to the Company
during the Employment Period.
7. Noncompetition, Nonsolicitation and Confidentiality Covenants.
-------------------------------------------------------------
(a) Officer acknowledges that he possesses proprietary and trade secret
information concerning the Company and the Corporate Development Projects.
Officer further acknowledges the highly competitive nature of the Company's
business. Officer further acknowledges that the restrictions contained in this
Noncompetition Covenant are reasonable and necessary for the protection of the
immediate interests of the Company, that the Company would not have entered into
this Agreement but for the inclusion herein of this Noncompetition Covenant, and
that any violation of this covenant would cause substantial injury to the
Company. Officer further acknowledges that this Noncompetition Covenant is
2
<PAGE>
intended to protect the legitimate business interests of the Company and not to
prevent or interfere with Officer's ability to conduct business.
(b) During the Employment Period, Officer shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business or activity which is involved in a Corporate
Development Project as per Exhibit A, other than on behalf of the Company
pursuant to Officer's employment with the Company as set forth in Paragraph 6.
For an additional period of six months following the Employment Period, Officer
may become so involved in a Corporate Development Project as per Exhibit A,
other than on behalf of the Company, provided that Officer must provide three
months advance written notice to the Company of such intended involvement.
Following this additional six month period, no such limitation on the
involvement of Officer in Corporate Development Projects shall apply.
(c) In furtherance of the foregoing and not in limitation thereof, during
the Employment Period and for a period of one year following the Employment
Period, Officer shall not, directly or indirectly, (i) induce or attempt to
induce any employee of the Company or an Affiliate of the Company (as defined
below) to leave the employ of the Company or such Affiliate, or in any way
interfere with the relationship between the Company or any Affiliate any
employee thereof, or (ii) induce or attempt to induce any customer, supplier,
licensee or other business relation of the Company or any Affiliate to cease
doing business with the Company or such Affiliate, or in any way interfere with
the relationship between any such customer, supplier, licensee or business
relation and the Company or any Affiliate.
(d) For a period of one year commencing on the date of this Agreement,
Officer shall keep in strictest confidence and trust all Proprietary Information
(as defined below), and shall not use or disclose any Proprietary Information
without the written consent of the Company, except as may be necessary in the
ordinary course of performing his duties as an employee of the Company.
Moreover, at the conclusion of the Employment Period, Officer shall deliver to
the Company all documents, notes, drawings, blueprints, computer programs, data,
security card keys and similar devices, and other materials of any nature
pertaining to any Proprietary Information or to Officer's work with the Company,
and Officer shall not take any of the foregoing, or any reproduction of any of
the foregoing, that is embodied in a tangible medium of expression. The term
"Proprietary Information" includes, without limitation, discoveries,
developments, designs, improvements, inventions, blueprints, processes, computer
programs, know-how, data, marketing and business plans and outlines, budgets,
projections, unpublished financial statements, costs, fee schedules, client and
supplier lists, client and prospective client databases, and access codes and
similar security information and procedures; provided, however, that the term
"Proprietary Information" shall not include any of the foregoing which is in the
3
<PAGE>
public domain other than as the result of a breach of Officer's obligations
under this Paragraph 7(d).
(e) If, at the time of enforcement of this Paragraph 7, a court shall hold
that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area.
(f) In the event of the breach or a threatened breach by Officer of any of
the provisions of this Paragraph 7, the Company, in addition and supplementary
to other rights and remedies existing in its favor, may apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof.
8. Right of First Refusal. During the Employment Period, Officer shall provide
----------------------
written notice to the Company of any acquisition, joint venture or investment
opportunity Officer intends to market involving wireless communications.
Officer's notification shall set forth all relevant details and information
about the business opportunity necessary for the Company to evaluate such
opportunity. The Company shall have the option, but not the obligation, to
pursue the business opportunity itself. Notification of the Company's intention
to pursue the business opportunity in the form of a negotiated and signed Letter
of Intent shall be given to Officer within 45 days of the Company's receipt of
Officer's notification concerning the project. If the Company elects not to
pursue the business opportunity, or fails to give Officer notice of such
intention within 45 days of the Company's receipt of Officer's notification, the
Company's right of first refusal set forth in this Paragraph 8 shall expire.
9. Release.
-------
(a) As a material inducement to the Company to enter into this Agreement,
Officer hereby irrevocably and unconditionally releases, acquits and forever
discharges the Company, each of the Company's owners, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, and persons controlling, controlled by or
under common control with the Company ("Affiliates") (and present or former
agents, directors, officers, employees, representatives and attorneys of such
divisions and Affiliates) acting by, through or in concert with the Company and
all other persons acting by, through, or in concert with any of them
(collectively "Releasees") and each of them, from any and all charges,
complaints, claims, demands and liabilities whatsoever of every name and nature
(including attorney's fees and costs actually incurred), known or unknown,
existing or that may hereafter exist, and any and all causes of action which
could have been asserted by claim, counter claim or otherwise, against any of
the Releasees pertaining to the business and affairs of the Company, Officer's
employment with the Company or
4
<PAGE>
the termination thereof, the relationships between Officer and any of the
Releasees or any other act of omission which has previously transpired up to the
date of execution of this Agreement. The claims released by this Paragraph 9(a)
include but are not limited to any claims under Title VII of the Civil Rights
Act of 1964, the Federal Age Discrimination in Employment Act, 29 U.S.C. (S)
621, et seq. ("ADEA"), or any other statute or law prohibiting discrimination in
employment on the basis of age, race, religion, disability, gender or national
origin or other status ("Claim" or "Claims").
(b) As a material inducement to Officer to enter into this Agreement, the
Company, on behalf of itself and its subsidiaries described in Paragraph 2,
hereby irrevocably and unconditionally releases, acquits and forever discharges
Officer from any and all charges, complaints, claims, demands and liabilities
whatsoever of every name and nature (including attorney's fees and costs
actually incurred), known or unknown, existing or that may hereafter exist, and
any and all causes of action which could have been asserted by claim,
counterclaim or otherwise, pertaining to the business and affairs of the
Company, Officer's employment with the Company or the termination thereof, the
relationships between Officer and any of the Releasees, or any other act of
omission which has previously transpired up to the date of execution of this
Agreement ("Company Claim").
10. Representation Regarding No Complaints or Charges and Covenant Not to Sue.
-------------------------------------------------------------------------
Officer and the Company, each, represents to the other that it has not filed any
complaints or charges against any of the Releasees or Officer, respectively,
with any local, state or federal agency or court. Officer and the Company,
each, further represents, agrees and covenants to the other that it will not
file any such complaints or charges against any of the Releasees or Officer,
respectively, with any local, state or federal agency or court at any time
hereafter with respect to any Claim or Company Claim, as the case may be. If
any complaint or charge against the Company is filed on behalf of Officer,
Officer agrees to take all reasonable steps necessary to effectuate the
withdrawal of such complaint or charge. In the event that any local, state or
federal agency or court undertakes any proceeding relating to Officer's
employment by the Company or the circumstances of his leaving the Company's
employ, Officer hereby waives any right he may have to recover any damages or
any remedy of whatever nature, as a result of any such proceeding.
11. Ownership of Claims. Officer represents and agrees that he has not
-------------------
previously assigned or transferred, or purported to have assigned or
transferred, to any person whomsoever, any claim or portion thereof or interest
therein against any of the Releasees. Officer agrees to indemnify, defend and
hold harmless each and all of the Releasees against any and all claims based on,
arising out of, or in connection with any such transfer or assignment, or
purported transfer or assignment, of any claims or any portion thereof or
interest therein. The Company represents and agrees that it has not, and to the
best of its knowledge no other Releasee has, previously assigned or transferred,
or purported to have assigned or transferred, to any person whomsoever, any
claim or
5
<PAGE>
portion thereof or interest therein, and the Company agrees to indemnify, defend
and hold harmless Officer against any and all claims based on, arising out of,
or in connection with any such transfer or assignment, or purported transfer or
assignment, of any claims or any portion thereof or interest therein.
12. No Admission of Liability. Officer and the Company each acknowledge that
-------------------------
neither the execution of this Agreement nor the performance of its terms shall
constitute an admission by the Company or Officer of any wrongful acts
whatsoever against any other party or any other person, and the Company and
Officer each specifically disclaim any liability to any other party or any other
person.
13. Future Assistance. Except as otherwise required by law, Officer agrees
-----------------
that he will not disclose or cause to be disclosed any negative, adverse or
derogatory comments or information about the Company and its Affiliates or its
management or about the Company's and its Affiliates' prospects for the future,
to any person or entity, including, but not limited to, any current, former, or
prospective employee or investor in the Company or any of its Affiliates.
Except as otherwise required by law, the Company agrees that it will not
disclose or cause to be disclosed any negative, adverse or derogatory comments
or information about Officer to any person or entity, including any prospective
employer of Officer. Officer agrees that after the Employment Period has ended,
the Company may continue to seek his assistance or cooperation in connection
with matters within his knowledge and related to his positions with the Company
and its Affiliates, including but not limited to cooperating fully with respect
to the defense or prosecution of any litigation. The Company shall reimburse
Officer for his reasonable expenses incurred in the rendering of such
assistance.
14. Competitive Investment or Participation. If, during the Employment Period,
---------------------------------------
Officer makes any direct or indirect investment in a non-U.S. wireless
communication project or venture, Officer shall provide immediate written notice
of such act to the Company. The Company then shall have the option, at its sole
discretion, to cease paying to Officer the monthly salary described in Paragraph
4 hereof. If the Company elects to cease making such monthly payments, the
noncompetition covenant set forth in Paragraph 7(b) hereof shall terminate, and
the 45 day right of first refusal period set forth in Paragraph 8 hereof shall
be shortened to 30 days.
15. Complete Agreement. This Agreement and Exhibit A attached hereto embody
------------------
the complete agreement and understanding between the parties and supersede and
preempt any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related to the subject matter of
this Agreement in any way. Officer represents and agrees that he has been
informed by the Company that he has the right to discuss all aspects of this
Agreement with his own attorney, that he has availed himself of that right to
the fullest extent that he wishes to do so, that he has carefully read and fully
understands all of the provisions of this Agreement, and that he is voluntarily
entering into this Agreement. The Company and Officer each further represent
and agree that, with respect to the matters set forth in this Agreement,
6
<PAGE>
none of them can rely on any statements or representations other than those set
forth in this Agreement.
16. Revocation. Officer acknowledges that he is knowingly and voluntarily
----------
waiving and releasing any rights he may have under the ADEA. He also
acknowledges that the consideration given for the release in Paragraph 9 hereof
is in addition to anything of value to which he was already entitled. He
further acknowledges that he has been advised by this writing, as required by
the ADEA, that: (a) his waiver and release do not apply to any rights or claims
that may arise after the execution date of this Agreement; (b) he has 21 days to
consider this Agreement (although he may choose to voluntarily execute this
Agreement earlier); (c) he has seven days following the execution of this
Agreement by the parties to revoke the Agreement. Notice of revocation,
together with all amounts paid to Officer pursuant to Paragraph 2 of this
Agreement, should be sent to the Company in accordance with Paragraph 22.
17. Confidentiality. Officer and the Company agree that they will keep the
---------------
facts associated with this matter, and the terms of this Agreement strictly
--------
confidential; provided, however, that Officer may disclose such matters to
- ------------
members of his immediate family, his attorneys, his tax advisors, or as may be
required by law. Further, it is expressly understood and agreed that this
confidentiality provision is an essential provision of this Agreement.
18. Counterparts. This Agreement may be executed on separate counterparts,
------------
each of which is deemed to be an original and all of which taken together
constitute one and the same Agreement.
19. Successors and Assigns. This Agreement is intended to bind and inure to
----------------------
the benefit of and be enforceable by Officer and the Company and their
respective successors and assigns; provided that in no event may Officer's
obligation under this Agreement be delegated or transferred by Officer.
20. Choice of Law. All questions concerning the construction, validity and
-------------
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Colorado.
21. Modifications and Waivers. No provision of this Agreement may be modified,
-------------------------
altered or amended except by an instrument in writing executed by each of the
parties to this Agreement. No waiver by any party to this Agreement of any
breach by another party to this Agreement of any term or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar terms or provisions at the time or at any prior or
subsequent time.
22. Notices. Any notice provided for in this Agreement shall be in writing and
-------
shall be either personally delivered, or mailed first class mail (postage
prepaid) or sent by reputable overnight courier service (charges prepaid) at the
respective addresses set forth below or at such address or to the attention of
such other person as the recipient
7
<PAGE>
party has specified by prior written notice to the sending party. Notices will
be deemed to have been given hereunder when delivered personally, three days
after deposit in the U.S. mail and one day after deposit with a reputable
overnight courier service. The Company's address is:
Centennial Communications Corp. d/b/a SMR Direct
1600 Wynkoop Street, Suite 300
Denver, CO 80202
Facsimile: 303-571-5333
Officer's address is:
Jeff E. Rhodes
640 Columbine Street
Denver, CO 80209
Facsimile:
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CENTENNIAL COMMUNICATIONS CORP.
d/b/a SMR DIRECT
By: /s/ Michael N. Simkin
---------------------
Title: CEO
---------------------
/s/ Jeff E. Rhodes
---------------------
Jeff E. Rhodes
8
<PAGE>
<TABLE>
<CAPTION>
Ratio of Earnings to Fixed Charges EXHIBIT 12.1
Inception Years Ended Six Months Ended Pro Forma
(October 26, 1995) December 31, June 30, Year Ended
through ------------------------- ------------------------ December 31,
December 31, 1995 1998 1997 1997 1998 1997
------------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pre tax loss (58,088) (4,774,816) (15,715,031) (5,702,668) (5,025,987) (7,749,000)
Fixed charges:
Interest expensed 5,129 237,060 887,324 303,519 2,158,649 433,513
Interest capitalized
Amortization of debt expense
Rental expense
Preferred stock dividend requirements
of majority-owned subsidiaries
------------------ ----------- ------------ ----------- ----------- -----------
Deficiency of earnings to fixed charges (52,959) (4,537,756) (14,827,707) (5,399,149) (2,867,338) (7,315,487)
================== =========== ============ =========== =========== ===========
As disclosed in thousands 53 4,538 14,828 5,399 2,867 7,315
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF COMPANY
-----------------------
NAME JURISDICTION OF
ORGANIZATION
1. SMR Direct USA, Inc. Delaware
2. SMR Direct Cayman Corp. Delaware
3. Centennial Cayman Corp. Delaware
4. SMR Direct Cayman Corp. Chile Ltda. Chile
5. Centennial Cayman Corp. Chile Ltda. Chile
6. Telecomunicaciones y Servicios S.A. Chile
7. Centennial Ecuador, S.A. Ecuador
8. Comovec S.A. Ecuador
9. Brunacci Compania Ltda Ecuador
10. Radio Trunking de El Salvador, Ltda., C.V. El Salvador
11. Centennial Communications de El Salvador, Ltda., C.V. El Salvador
12. CCC Holdings Peru, S.R.L. Peru
13. Peru Tel S.A. Peru
14. SMR Direct Peru, S.R.L. Peru
15. Pompano S.R.L. Peru
16. Telecom Supply S.R.L. Peru
17. C-Comunica S.R.L. Peru
18. Transnet del Peru, S.A. Peru
19. Centennial Telecomunicaciones de Venezuela, S.A. Venezuela
<PAGE>
ARTHUR ANDERSEN LLP
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of all our
reports (and to all references to our firm) included in or made a part of this
registration statement.
Denver, Colorado, /s/ARTHUR ANDERSEN LLP
September 2, 1998.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bernard G. Dvorak and Patricia J. Reichman
and each of them, as such person's true and lawful attorney-in-fact and agent
with full power of substitution for such person and in such person's name, place
and stead, in any and all capacities, to sign and to file with the Securities
and Exchange Commission a Registration Statement of Centennial Communications
Corp., a Delaware corporation (the "Company"), on Form S-4 with respect to the
exchange of certain 14% Senior Discount Notes due 2005 of the Company for new
14% Senior Discount Notes due 2005 of the Company, and any and all amendments
and post-effective amendments to said Registration Statement, with exhibits
thereto and other documents in connection therewith, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or any substitute therefor, may lawfully do or cause to be done by virtue
thereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Bernard G. Dvorak President, Chief Executive 8/28/98
- -------------------------------------- Officer, Director (Principal
Bernard G. Dvorak Executive Officer)
/s/ Patricia J. Reichman Controller (Principal Financial 8/28/98
- -------------------------------------- and Accounting Officer)
Patricia J. Reichman
/s/ Steven W. Schovee Director 8/28/98
- --------------------------------------
Steven W. Schovee
/s/ Robert F. McKenzie Director 8/28/98
- --------------------------------------
Robert F. McKenzie
/s/ Adam Goldman Director 8/28/98
- --------------------------------------
Adam Goldman
/s/ William W. Sprague Director 8/28/98
- --------------------------------------
William W. Sprague
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William D. Stanfill Director 8/28/98
- --------------------------------------
William D. Stanfill
/s/ John Fullmer Director 8/28/98
- --------------------------------------
John Fullmer
/s/ Mark A. Leavitt Director 8/28/98
- --------------------------------------
Mark A. Leavitt
</TABLE>
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
CENTENNIAL COMMUNICATIONS CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 84-1324155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 WYNKOOP STREET
SUITE 300
DENVER, CO 80202
(Address of principal executive offices) (Zip Code)
14% SENIOR DISCOUNT NOTES DUE 2005
(Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of
eligibility.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No. 22-
17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Eastern Edison
Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the
City of HARTFORD and The STATE OF CONNECTICUT, on the AUGUST 31, 1998.
STATE STREET BANK AND TRUST COMPANY
By: ________________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issuance by CENTENNIAL
COMMUNICATIONS CORP. of its 14% Senior DIiscount Notes due 2005 we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: _____________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
Dated: August 31, 1998
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1998,
--------------
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...................................................... 1,144,309
Interest-bearing balances............................................................................... 9,914,704
Securities................................................................................................... 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary..................................................................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income ............ 6,433,627
Allowance for loan and lease losses.................. 88,820
Allocated transfer risk reserve...................... 0
Loans and leases, net of unearned income and allowances................................................. 6,344,807
Assets held in trading accounts.............................................................................. 1, 117,547
Premises and fixed assets.................................................................................... 453,576
Other real estate owned...................................................................................... 100
Investments in unconsolidated subsidiaries................................................................... 44,985
Customers' liability to this bank on acceptances outstanding................................................. 66,149
Intangible assets............................................................................................ 263,249
Other assets................................................................................................. 1,066,572
----------
Total assets................................................................................................. 38,552,020
==========
LIABILITIES
Deposits:
In domestic offices..................................................................................... 9,266,492
Noninterest-bearing...................................... 6,824,432
Interest-bearing......................................... 2,442,060
In foreign offices and Edge subsidiary.................................................................. 14,385,048
Noninterest-bearing...................................... 75,909
Interest-bearing......................................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary..................................................................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities............................................. 171,783
Trading liabilities.......................................................................................... 1,078,189
Other borrowed money......................................................................................... 406,583
Subordinated notes and debentures............................................................................ 0
Bank's liability on acceptances executed and outstanding..................................................... 66,149
Other liabilities............................................................................................ 878,947
Total liabilities............................................................................................ 36,203,185
----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................................................ 0
Common stock................................................................................................. 29,931
Surplus...................................................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses)................................. 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities....................................... 18,136
Cumulative foreign currency translation adjustments.......................................................... (6,256)
Total equity capital......................................................................................... 2,348,835
----------
Total liabilities and equity capital......................................................................... 38,552,020
----------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTENNIAL
COMMUNICATIONS CORP.'S DECEMBER 31, 1997 AND UNAUDITED JUNE 30, 1998 FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1996 DEC-31-1997 JUN-30-1998
<CASH> 18,710,845 9,079,677 25,486,632
<SECURITIES> 0 0 0
<RECEIVABLES> 464,052 1,801,395 1,843,738
<ALLOWANCES> 0 517,986 559,774
<INVENTORY> 468,020 1,371,762 2,203,043
<CURRENT-ASSETS> 20,111,364 17,536,550 36,267,409
<PP&E> 8,812,191 6,210,672 9,222,305
<DEPRECIATION> 495,082 1,205,769 1,952,591
<TOTAL-ASSETS> 34,916,248 29,872,383 58,569,428
<CURRENT-LIABILITIES> 2,537,903 6,644,895 7,932,693
<BONDS> 4,897,047 11,144,703 26,529,129
28,829,116 29,252,063 41,262,462
0 0 0
<COMMON> 35,025 35,027 35,028
<OTHER-SE> (1,382,843) (17,204,305) (17,189,884)
<TOTAL-LIABILITY-AND-EQUITY> 34,916,248 29,872,383 58,569,428
<SALES> 45,992 1,672,388 902,025
<TOTAL-REVENUES> 295,881 4,826,355 3,441,801
<CGS> 40,765 2,256,993 1,080,296
<TOTAL-COSTS> 513,425 3,556,410 1,308,181
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 597,751 302,363
<INTEREST-EXPENSE> 237,060 887,324 2,158,649
<INCOME-PRETAX> (4,774,816) (15,715,031) (5,025,987)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (4,774,816) (15,715,031) (5,025,987)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (4,774,816) (15,715,031) (5,025,987)
<EPS-PRIMARY> (1.38) (4.53) (1.64)
<EPS-DILUTED> 0 0 0
</TABLE>
