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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______
F O R M 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ to ________
Commission File No. 19869-99
CORECOMM INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 13-3927257
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
110 East 59th Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)906-8485
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__________
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ X ] Yes [ ] No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by non-
affiliates at March 24, 1997, valued in accordance with the Nasdaq Stock
Market's National Market closing sale price for the registrant's common stock,
was approximately $188,984,000.
As of March 24, 1997, there were 13,073,856 shares of the registrant's sole
class of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Document Part of 10-K in which
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Incorporated
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Definitive proxy statement Part III
for the 1997 Annual Meeting
of the Stockholders of
CoreComm Incorporated
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
EXCEPT FOR THE HISTORICAL INFORMATION PRESENTED, THE MATTERS DISCUSSED IN THIS
REPORT MAY INCLUDE FORWARD-LOOKING STATEMENTS. THEY REPRESENT THE COMPANY'S
REASONABLE JUDGMENT ON THE FUTURE AND ARE SUBJECT TO RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. SUCH FACTORS INCLUDE A
CHANGE IN ECONOMIC CONDITIONS IN THE AREAS SERVED BY THE COMPANY'S OPERATIONS
WHICH WOULD ADVERSELY AFFECT THE LEVEL OF DEMAND FOR ITS PRODUCT; GREATER-THAN-
ANTICIPATED COMPETITIVE ACTIVITY; AND THE IMPACT OF NEW BUSINESS OPPORTUNITIES.
THESE AND OTHER FACTORS RELATED TO THE BUSINESS ARE DESCRIBED HEREIN.
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TABLE OF CONTENTS
PART I PAGE
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Item 1 Business........................................... 1
Item 2 Property........................................... 16
Item 3 Legal Proceedings.................................. 16
Item 4 Submission of Matters to a Vote of Stockholders.... 16
PART II
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Item 5 Market for the Registrant's Common Stock and
Related Stockholder Matters....................... 17
Item 6 Selected Financial Data............................ 18
Item 7 Management's Discussion and Analysis of Results
of Operations and Financial Condition............. 19
Item 8 Financial Statements and Supplementary Data........ 23
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............... 24
PART III
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Item 10 Directors and Executive Officers of the Registrant. 24
Item 11 Executive Compensation............................. 24
Item 12 Security Ownership of Certain Beneficial Owners and
Management........................................ 24
Item 13 Certain Relationships and Related Transactions..... 24
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................... 24
Exhibit Index.................................................. 25
Signatures..................................................... 27
Index to Financial Statements.................................. F-1
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PART I
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ITEM 1. BUSINESS
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GENERAL
Prior to January 31, 1997 (the "Merger Date") CoreComm Incorporated
("CoreComm" or the "Company") was known as Cellular Communications of Puerto
Rico, Inc. ("CCPR"). CoreComm is a Delaware corporation that was incorporated
on January 13, 1997. From its date of incorporation until the Merger Date
CoreComm was a wholly-owned subsidiary of CCPR. On the Merger Date CCPR
effected a corporate restructuring (the "Restructuring") whereby shareholders of
CCPR become shareholders of CoreComm on a one-for-one basis upon the completion
of a merger of CCPR with and into a subsidiary of CoreComm. As a result of the
Restructuring Corecomm replaced CCPR as the publicly traded entity and CCPR
became a wholly-owned subsidiary of CoreComm.
The Company, through wholly and majority owned entities, owns, operates
and markets cellular and paging systems in the Commonwealth of Puerto Rico and
the U.S. Virgin Islands and conducts other cellular and paging related
operations described below. From time to time the Company reviews opportunities
in other telecommunications related industries both inside and outside of Puerto
Rico and the U.S. Virgin Islands. The Company's executive offices are located
at 110 East 59th Street, New York, New York 10022 and its telephone number is
(212) 906-8485.
COMMONWEALTH OF PUERTO RICO
The Commonwealth of Puerto Rico has been a territory of the United
States since 1898 and a Commonwealth since 1952. Puerto Ricans are U.S. citizens
with non-voting representation in Congress, who cannot vote in national
elections unless they reside in the United States. The system of government is
modeled after the state governments of the United States, with an executive
branch headed by a Governor and a legislature consisting of a 27-member Senate
and a 53-member House of Representatives. The judicial system is closely linked
to the United States system. Most United States laws apply in Puerto Rico and
Puerto Rico is under the jurisdiction of the First Circuit, United States Court
of Appeals, which maintains a United States District Court in Puerto Rico.
Judicial decisions may be appealed to the Supreme Court of the United States in
the same manner that decisions are appealed from state courts. The United States
and Puerto Rico also share common monetary, defense and postal systems.
The Commonwealth of Puerto Rico has a land area approximately 70
percent the size of Connecticut and has a population of approximately 3.8
million people. The population is concentrated primarily in the coastal regions,
in particular, the San Juan metropolitan area. Puerto Rico maintains a highway
and road network of approximately 8,600 miles, including a partially completed
all island beltway loop.
THE U.S. VIRGIN ISLANDS
The U.S. Virgin Islands has been a territory of the United States since
1917. Virgin Islanders are U.S. citizens with non-voting representation in
Congress, who cannot vote in national elections unless they reside in the United
States. The system of government is modeled after the state governments of the
United States, with three main branches of government. The executive
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branch is headed by a Governor, elected every four years through a direct vote.
The legislative branch consists of one chamber having 14 members. The judicial
system is closely linked to the United States system with a Territorial Court
that has jurisdiction over local matters and a United States District Court,
which falls under the jurisdiction of the Third Circuit, United States Court of
Appeals. Judicial decisions may be appealed to the Supreme Court of the United
States in the same manner that decisions are appealed from state courts. United
States Federal law applies in the U.S. Virgin Islands. The United States and the
U. S. Virgin Islands share common monetary, defense and postal systems.
The U.S. Virgin Islands has a land area of approximately 84 square
miles and has a population of approximately 102,000 people. The population is
divided in three islands: St. Thomas (with a population of approximately 46,000
people), St. Croix (with a population of approximately 50,000 people) and St.
John (with a population of approximately 6,000 people).
CELLULAR TELEPHONE OWNERSHIP INTERESTS
The following table sets forth the Company's cellular Metropolitan
Statistical Area ("MSA") and Rural Service Area ("RSA") markets and approximate
percentage ownership as of December 31, 1996:
<TABLE>
<CAPTION>
MARKET POPULATION(1)(2) OWNERSHIP POPS (3)
- ------ ---------------- --------- --------
<S> <C> <C> <C>
San Juan/Caguas MSA (4)............... 2,124,891 100.00% 2,124,891
Aguadilla MSA......................... 180,687 99.01 178,898
Mayaguez MSA.......................... 227,941 100.00 227,941
Ponce MSA............................. 261,585 100.00 261,585
Arecibo MSA........................... 195,843 100.00 195,843
PR-1 Rincon RSA....................... 13,726 100.00 13,726
PR-2 Adjuntas RSA..................... 276,517 100.00 276,517
PR-3 Ciales RSA....................... 126,052 100.00 126,052
PR-4 Aibonito RSA(5).................. 295,140 0.00 0
PR-5 Ceiba RSA(6)..................... 42,172 0.00 0
PR-6 Vieques RSA...................... 8,975 100.00 8,975
PR-7 Culebra RSA...................... 1,598 100.00 1,598
U.S. Virgin Islands-1 St. Thomas/St. 51,670 100.00 51,670
John.................................
U.S. Virgin Islands-2 St. Croix....... 50,139 100.00 50,139
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Total.............................. 3,856,936 3,517,835
========= =========
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</TABLE>
(1) 1995 U.S. Census Bureau Population Estimates for Puerto Rico.
(2) 1990 U.S. Census Bureau Population Estimates for the U.S. Virgin Islands.
(3) A cellular system operator's "pops" is currently the most common technique
for measuring the relative size of different companies in the cellular
telephone business. Pops are defined as the estimated population of a
market multiplied by a company's ownership interest in the entity operating
the system in that market. The number of pops owned by a cellular operator
does not represent the number of users of cellular service and is not
necessarily indicative of the number of potential subscribers. Rather,
this term is used only as a basis for comparison of the current size of
cellular system operators.
(4) In February 1996, the Company acquired the remaining minority interests
aggregating 6.14% in the San Juan Cellular Telephone Company, the entity
holding the operating license for the San Juan/Caguas MSA.
(5) In December 1995, the Company signed various agreements with the holder of
the construction permit for the PR-4 Aibonito RSA setting forth the
material terms and
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obligations between both parties. These agreements include: (i) a Dual
Licensing Agreement, (ii) a Switching and Interconnect Agreement, (iii) a
Tower and Building Lease Agreement and (iv) a Roaming Agreement.
(6) The Company has received interim operating authority in the PR-5 Ceiba RSA
from the Federal Communications Commission ("FCC") and from Puerto Rico
authorities. The FCC is currently considering whether permanent operating
authority with respect to PR-5 Ceiba RSA should be issued by lottery or by
auction.
The Company had, as of December 31, 1996, an aggregate of
approximately 159,300 subscribers which represents a penetration rate (i.e., the
number of subscribers divided by the total estimated population of the Company's
markets) for the Company of approximately 4.1%. See "Sales and Marketing".
PAGING
A subsidiary of the Company has received authorization from the FCC to
operate two 900 MHz paging systems to serve Puerto Rico and the U.S. Virgin
Islands. The Company completed the construction of the Puerto Rico paging system
and began operations during March 1995. The Company completed construction of
the U.S. Virgin Islands paging system and began operations in November 1995. As
of December 31, 1996, the Company's paging operations had approximately 31,000
pagers in use.
SALES AND MARKETING
The Company targets subscribers through direct and indirect
distribution channels and aggressive advertising. The Company relies on its
direct sales force, indirect channels such as dealers, retailers and resellers,
sales literature, sponsorship of local events, and substantial television, print
and radio advertising campaigns to create awareness of its services and to
communicate the benefits and promotional offers associated with it.
Sales are targeted at two primary segments: individual and corporate
accounts. Each segment has its own dedicated direct sales force. The Company has
over 300 employees in sales and marketing functions. Direct sales, including
corporate accounts, represented over 50% of the Company's total sales in 1996.
The 120-person direct sales force is distributed among twelve fixed sales and
service centers throughout Puerto Rico and the U.S. Virgin Islands, with five in
San Juan/Caguas, one in Ponce, one in Fajardo, one in Arecibo, one in Mayaguez
and three in the U.S. Virgin Islands, as well as four kiosks located in major
shopping centers, 19 mini-kiosks inside large retail stores (e.g., WalMart,
Sams, Western Auto) and four mobile units. The sales and service centers are
designed for up-market consumers, have convenient hours of operation, and the
ability to sell and service cellular telephones while the customer waits. The
sales and service centers also play a major role in the Company's ability to
provide superior customer service. See "Customer Service". In addition, the
Company utilizes a network of carefully selected independent dealers and large
retailers (such as Sears and Radio Shack) which accounted for over 40% of the
Company's new activations in 1996. Currently, resellers account for only a small
percentage of new activations.
The use of a broad mix of different distribution channels in Puerto
Rico gives the Company a widespread marketing presence and provides easy access
to its subscriber base while maintaining a high quality of service to its
subscribers. In addition, the Company's growing network of direct sales, dealers
and large retailers provide it with a strong presence in the telecommunications
market. The Company markets its services under the nationally recognized
CELLULARONE(R) brand name and its sales and marketing strategy carefully
promotes CELLULARONE(R)'s premium brand image.
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Although the Company employs a segmented pricing approach whereby
specific pricing plans are developed to attract different segments of the
market, the Company has differentiated itself from the Puerto Rico Telephone
Company ("PRTC"), the Company's significant competitor and the landline
telephone service provider in Puerto Rico, primarily by offering premium
services at premium prices and directing significant efforts toward customer
service, technical excellence and advanced calling features. In contrast, the
Company believes that the PRTC has tended to compete on the basis of name
recognition and appeal to local sentiment.
CUSTOMER SERVICE
An important element in the Company's business strategy is to provide
the highest quality, localized customer service in the individual markets it
serves. This is especially significant because, in the Company's view, customer
service has not been emphasized by the PRTC.
The Company's commitment to superior quality service is reflected by
the 96% overall satisfaction rating--the highest in the United States--it
received from its subscribers in an annual independent survey of customer
satisfaction conducted by the Cellular One Group in 1996. This rating far
exceeded the 86% United States national average.
The Company has introduced a full-service program utilizing customer
service representatives and local customer service centers in all of its major
markets. A recent introduction to the Puerto Rico cellular market, customer
service centers are located within existing sales and service distribution
outlets, offering a specific, non-sales-oriented point of contact where existing
customers can pay their bills, ask questions about their cellular service or
hardware, etc.
In addition, the Company provides a 24-hour customer service hotline.
This full-service policy means that a customer service person is available at
all times to answer inquiries and to respond rapidly to customer emergencies.
The Company proactively implements fraud detection and sophisticated prevention
mechanisms to protect its subscribers and in 1992 implemented fraud
identification software. Through programs such as these, the Company has taken a
leading role in the industry to educate the public about the growing problem of
cellular telephone fraud and how to detect and prevent its occurrence. In
addition, through its participation in the North American Cellular Network
("NACN"), the Company is assured that only bona-fide subscribers enjoy roaming
services.
The Company also employs a proactive, segment-driven approach to
customer retention and loyalty, beginning with a "welcome call" shortly after a
subscriber receives its first bill. Subsequently, each subscriber is classed
according to segment (corporate or individual), usage (high, medium, low),
tenure, payment history, etc., and subsequent contact patterns and methods
depend on a subscriber's class. This allows the Company to service and satisfy
its subscriber base according to their value to the Company in a cost effective
manner.
CELLULAR TECHNOLOGY
Cellular mobile radio technology was developed to provide high
quality, high capacity mobile and portable telephone systems. In a cellular
telephone system, the service area is subdivided into smaller geographic areas
or "cells." Each cell has its own relatively low power transmitter and receiver
that communicates by radio signal with cellular telephones located in the
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cell. Each cell is connected by microwave or telephone line to a mobile
telephone switching office ("MTSO"), which in turn is connected to the worldwide
telephone network. See "--Regulation--Federal Communications Commission
Regulation" for the interconnection arrangements with the worldwide telephone
network.
When a cellular subscriber in a particular cell dials a number, the
mobile telephone sends the call by radio to the cell's transmitter/receiver,
where it is sent to the MTSO. The MTSO then completes the call through its
connection with the landline telephone network. Conversely, incoming calls are
received by the MTSO, which instructs the appropriate cell to complete the
communications link by radio signal between the cell's transmitter/receiver and
the cellular telephone.
The MTSO controls communications within the cellular system, including
the "hand-off" process as a cellular telephone moves from one cell to another.
In this process, the system recognizes that a cell boundary has been crossed,
finds an available channel in the new cell, and transfers the call to that
channel--all within a fraction of a second.
Cellular telephone systems have a high capacity because of the
substantial frequency spectrum generally allocated for the purpose of cellular
service by the FCC and because all frequencies can be reused throughout the
system. Frequency reuse is possible because the transmission power of cell site
equipment and mobile units is relatively low and signals on the same channel
will not interfere with each other if they are transmitted in cells that are
sufficiently far apart. Reuse multiplies the number of channels available to the
system operator and thereby increases the telephone calling capacity. A cellular
licensee may also use its cellular frequencies to provide paging, data
transmission, and other services so long as the provision of these services does
not impair its ability to provide cellular service, cause interference to other
cellular licensees and, when required, has the appropriate regulatory approval.
NETWORK AND SYSTEM CONSTRUCTION
The Company's network was designed specifically for the Puerto Rico
market using extensive geographic and engineering studies. The Company
continually updates its network in order to ensure quality service and maximum
geographic coverage. The Company has completed a network that as of December
31, 1996, included approximately 78 cell sites and two MTSOs covering over 90%
of the population of Puerto Rico and the U.S. Virgin Islands. Engineering and
system construction is carried out by approximately 85 employees.
Cell sites are equipped with both analog and dual mode (i.e. digital
or analog cellular) digital-ready radio transceivers. Digital Time Division
Multiple Access ("TDMA") was installed in 1995. Digital technology offers many
advantages over analog technology, including substantially increased capacity,
lower costs and the opportunity to provide enhanced services such as improved
data transmission. The Company has introduced and distributed to selected groups
of subscribers, including internal users, dual mode phones using the TDMA format
for digital signaling. Because existing analog cellular telephones will not be
able to receive digital transmissions from the base station, the Company expects
that the transition from analog to digital will be phased in over a number of
years, during which time the system will maintain both analog and digital
transmitting equipment and will thus be able to serve both analog and digital
forms of cellular telephones and transmitting equipment.
In order to hasten cell site commissioning, increase network
reliability and reduce ongoing operating costs, the Company has built its own
digital microwave transmission network to connect its cell sites and switches.
The backbone of the network is a ring around the mountainous regions of the
island, providing substantial capacity (135 Mb/sec). The ring network provides
redundant communication paths to ensure minimal network disruption in the
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event of a cell site outage and spurs provide at least 6 Mb/sec of capacity to
each cell site. The Company resells spare capacity on this network to major
telecommunications users.
The Company uses a UNIX-based Computer Automated Design system to
choose the proper network configuration that will provide maximum capacity and
service reliability in the island's heavily populated coastal areas. The design
is based on the ring network concept, which provides a good fit with Puerto
Rico's topography. In addition, to test the network design, the Company uses a
performance testing system to predict and measure signal levels. By utilizing
sophisticated network design and system testing techniques, the Company's
completed network provides similar geographic coverage to the PRTC with fewer
cell sites and with greater service reliability.
Cellular systems are capital intensive, requiring significant levels
of investment for equipment, construction and cell site acquisition. As of
December 31, 1996, the Company had operating plant and equipment and
construction-in-progress with an historical cost of approximately $118,000,000.
SOURCES OF REVENUE
The cellular mobile telephone services available to customers and the
sources of revenue available to a system operator are similar to those available
with standard home and office telephones. Cellular telephone subscribers are
charged separately for monthly access, air time, toll calls and custom calling
features such as voice mail, call forwarding, call waiting and third party
conferencing. Cellular telephone subscribers are generally responsible for
purchasing or otherwise obtaining their own cellular mobile telephone. Paging
subscribers are charged on a monthly basis for service and are generally
responsible for purchasing their own pager. The Company also generates some
revenue from the resale of its digital microwave transmission network.
When service is provided to "roamers" (i.e., registered customers of a
cellular system other than the Company's cellular system who place calls on the
Company's cellular system), the Company charges a daily access fee and the
roamer air time rate, which is typically higher than standard usage rates.
Roaming is an added service offered by the Company which allows a customer to
place or receive a call in a cellular service area away from the customer's home
market area. The Company has entered into "roaming agreements" with operators of
other cellular systems covering most of the United States cellular systems.
These reciprocal agreements allow a subscriber of a participating system to roam
or travel into a Company market and make and receive calls on the Company's
system. The charge for this service is billed by the Company to the subscriber's
home system, which then bills the subscriber. Roamers from systems that do not
participate in this arrangement are routed to an outside service bureau which
completes the call upon the receipt of a valid credit card number. The Company
receives a fee from the service bureau for each completed call. The Company
provides roaming services under the NACN, which allows calls to and from roamers
from systems who participate in NACN to be delivered automatically without the
use of access codes. NACN also provides such roamers the ability to use their
custom calling features in roaming markets.
The cellular telephone industry is typically characterized by high
fixed costs and low variable costs. Therefore, once revenues exceed fixed costs,
incremental revenues should yield a high incremental operating profit. In
addition, once initial system capacity has been reached, additional cellular
system capacity can be added in increments that closely match demand and at less
than the proportionate cost of the initial capacity.
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PATENT, COPYRIGHTS AND LICENSES
The Company does not have any patents or copyrights nor does the
Company believe patents or copyrights play a material role in its business.
Other than the Company's FCC licenses, the Company's only license is for the use
of the service mark and trademark CELLULARONE(R), which is also licensed to many
of the non-wireline systems in the United States. In 1992, the owners of such
mark entered into a new agreement with the Company, with an effective twenty-
year term, under which the Company is required to maintain certain service
quality standards. Under this agreement, the Company is required to pay
licensing and other fees for the use of the service mark. The total fees paid in
the year ended December 31, 1996 were $202,000, which were determined by the
size of the Company's markets.
COMPETITION
FCC rules formerly provided that two licensees will be authorized to
provide wireless communications service in each market. PRTC is one of the
licensees (the "Wireline Licensee") in each Puerto Rico market. VitelCellular,
Inc., an affiliate of Virgin Islands Telephone Company (the provider of landline
telephone service in each market in the U.S. Virgin Islands) is the Wireline
Licensee in each U.S. Virgin Islands market. The second authorization in each of
Puerto Rico and the U.S. Virgin Islands was available for applications by a non-
telephone company carrier (the "Non-Wireline Licensees"). The Company is a Non-
Wireline Licensee. The FCC's regulation of cellular system licensing,
construction and operation is substantially the same for both the Non-Wireline
Licensee and the Wireline Licensee. Each Licensee is assigned 25 megahertz of
the radio spectrum, which is further divided into 416 two-way channels. Given
the cellular market duopoly, the Company faces facilities-based competition in
each of its Puerto Rico markets from the PRTC and in each of its U.S. Virgin
Islands markets from VitelCellular, Inc. Although the cellular services offered
by the Company, the PRTC and VitelCellular, Inc. are similar in terms of price,
the Company has attempted to differentiate itself from the PRTC and
VitelCellular, Inc. by directing significant efforts toward customer service,
technical services and calling features.
The PRTC and VitelCellular, Inc. are significantly larger and better
capitalized than the Company. The Company believes the PRTC currently provides
service to approximately 56% of the subscribers of cellular service in Puerto
Rico. In the U.S. Virgin Islands, the Company believes that VitelCellular, Inc.
currently provides service to approximately 45% of the subscribers of cellular
service in the U.S. Virgin Islands.
In 1990, the Commonwealth of Puerto Rico attempted to sell the PRTC to
an independent third party, but did not consummate such a transaction. The
Commonwealth has halted this process, but there can be no assurances that it
will not again attempt to sell, or otherwise alter its ownership of the PRTC.
Such sale could be to another experienced cellular operator or to a
telecommunications company, such as an affiliate of a Bell Operating Company
("BOC"). Given that the FCC-defined markets and the technical standards are the
same for both licensees in a market, the Company believes that its ability to
make and implement decisions rapidly and its customer service oriented strategy
should enable it to compete effectively with the PRTC or any other competitor.
Broadband personal communications systems ("PCS") will in the near
future be competitive with cellular services. Broadband PCS is a digital,
wireless communications service consisting of a variety of new mobile and
portable services and technologies, such as small, lightweight telephone
handsets that work at home, in the office, or on the streets; portable, wireless
facsimile machines; wireless electronic mail services; advanced paging
techniques; and other wireless communications services. Broadband PCS providers
are beginning to deploy a large number of low power base stations to take
advantage of the radio propagation
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characteristics of the 2 GHz spectrum. Accordingly, more PCS base stations than
cellular base stations will be needed to cover a particular area, although PCS
facilities are expected to cost less than comparable cellular facilities.
The FCC has allocated 120 MHz of 2 GHz spectrum for broadband PCS and
has commenced licensing the service to the public pursuant to three separate
consecutive auctions. In the first broadband PCS auction, approximately 30
different companies were granted a total of 102 MTA 30 MHz licenses on June 23,
1995. On May 6, 1996, the FCC concluded its second broadband PCS auction of 493
smaller Basic Trading Area ("BTA") 30 MHz licenses. Eligibility for this auction
was limited to applicants meeting certain financial qualifications. Grant of
these BTA licenses created a third broadband PCS service provider in the markets
served by the Company. On January 14, 1997, the FCC concluded the final
broadband PCS auction for 1,479 10 MHz BTA licenses. One block of those licenses
(493 authorizations) was reserved for applicants meeting certain financial
qualifications. In late 1995, American Personal Communications, Inc. launched
the first PCS service in the Washington, D.C. MTA, and several more broadband
PCS licensees commenced service in late 1996.
In total, the FCC will award six broadband PCS licenses by auction in
each market, with each licensee holding either 10 MHz, 20 MHz, 30 MHz, or 40 MHz
of spectrum in service areas larger than most individual cellular markets.
Eligible entities are permitted to aggregate up to 45 MHz of commercial mobile
radio services spectrum in any given area. Thus, the Company, the PRTC, and
VitelCellular, Inc. are eligible for 20 MHz each of PCS spectrum in their
cellular markets. Like cellular licensees, PCS licensees will also be permitted
to aggregate markets to create regional and national systems. In addition, the
FCC recently modified its rules to permit broadband PCS licensees to
disaggregate their spectrum or geographically partition their service areas.
Therefore, the auction winners in Puerto Rico and the U.S. Virgin Islands may
now sell blocks of their spectrum or portions of their service areas to other
competitors.
The FCC completed the first auction process for broadband PCS in March
1995. The principal winners in the first PCS auction, which consisted of two 30
MHz licenses in each of 51 MTAs comprising the entire United States, are large
telecommunications companies such as AT&T, the BOCs, major cable television
companies and large independent telephone companies. The Company cannot predict
the nature or extent to which PCS will actually develop as a viable competitor.
In the Puerto Rico-Virgin Islands MTA, the two high bidders were AT&T and
Centennial Cellular Corp. ("Centennial"). Upon construction of their PCS
systems, AT&T and Centennial will each eventually be able to provide a single
seamless system overlapping the Company's system. Centennial began marketing
its PCS services in December 1996. In the recently-concluded D-F block PCS
auction, the PRTC and VitelCom, Inc., an affiliate of VitelCellular, Inc., each
purchased 10 MHz licenses that cover their respective cellular service areas.
Accordingly, after the FCC completes the licensing process, each of these
companies will hold 35 MHz of wireless spectrum in their regions. The remaining
D, E, and F blocks PCS licenses were acquired by entities unaffiliated with
existing wireless providers in Puerto Rico and the U.S. Virgin Islands.
The FCC has also issued local and nationwide licenses in the 220-222
MHz band for the provision of land mobile service. These licenses are expected
to provide various one-way acknowledgment, and certain two-way voice and data
services. Further, the FCC has completed the licensing of "narrowband PCS" in
the 900 MHz band, which includes, among other services,
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data messaging, advanced one-way and two-way paging, and facsimile. The
messaging and paging services are expected to include electronic mail and
digitized voice messages. These licenses were issued by auction on a local,
regional, and national basis, including in the Company's markets. Narrowband PCS
will likely be competitive with the Company's paging operations.
Cellular telephone systems also face competition from, among others,
specialized mobile radio ("SMR") systems. Although the rules for SMR service
permit interconnection with the landline network, the Company believes that SMR
has been most effective as a two-way radio (i.e., dispatch) service. Several SMR
companies have received waivers from the FCC of certain rules to permit them to
overcome certain technological limitations and offer service that is more
competitive with cellular service, including the use of digital technologies.
This service is known as enhanced SMR (''ESMR''). The waivers issued by the FCC
are specific to certain large markets, none of which are in Puerto Rico or the
U.S. Virgin Islands. The FCC has recently adopted rules applicable to SMR
services in the 800 and 900 MHz band to enable the creation of seamless regional
or national SMR systems similar to those which it has authorized under the
waiver process.
With respect to the 800 MHz spectrum, on December 15, 1995, the FCC
issued new rules that establish a new category of 175 license service areas
covering the United States known as ''EAs'' for SMR licensees operating on three
spectrum blocks comprised of a total of 200 channels at 800 MHz (10 MHz total).
The FCC established three additional EA licensing regions for the five United
States possessions. EAs will be available in three spectrum blocks: a 120-
channel block, a 60-channel block and a 20-channel block. Like the rules
applicable to other commercial wireless services such as cellular, 800 MHz SMR
licensees will now be able to construct on any available site within the EA and
add, remove, or relocate site locations within the EA during the license term
without prior FCC approval. EA's will be permitted to use any spectrum within
the EA service area that is recovered by the FCC from an incumbent SMR licensee
in the event of termination of the incumbent's license. In addition, 525 EA
licenses will be awarded for the upper 200 channels by a single simultaneous
multiple round auction. With respect to the 900 MHz spectrum, the FCC adopted a
licensing scheme that divides the 900 MHz SMR band into 20 ten-channel blocks in
each of 51 service areas based on Major Trading Areas (''MTAs''). SMR licensees
will have the flexibility to construct or modify their facilities similar to the
rules applicable to cellular licensees. These rules have the potential to
increase the ability of SMR to compete with cellular. In the same rulemaking
proceeding the FCC also adopted rules applicable to the auctioning of the MTA
licenses in the 900 MHz SMR service. A total of 1,020 MTA licenses were awarded
in the 900 MHz SMR service. The FCC closed the 900 MHz spectrum auction in April
1996.
Technological advances in the communications field continue to make it
impossible to predict the extent of future competition for cellular services.
For example, the FCC has licensed three mobile satellite systems and has pending
two additional systems in which transmissions from mobile units to satellites
would augment or replace transmissions to cell sites. There are a number of
large, well-financed entities involved in the mobile satellite business. One
international investment consortium, Iridium LLC, has stated its intent to
provide a cellular-type telephone service via satellite technology that will be
available anywhere in the world beginning in September 1998. Iridium also plans
to offer a means of roaming among the world's major ground-based cellular phone
standards. A rocket launch mishap has caused Iridium to delay the launch date of
the first three of 66 satellites from January 1997 to May 1997. Potential
satellite competitors to Iridium include Globalstar LP, which has announced its
intention to be in operation by 1999; ICO Global Communications LP; and Odyssey,
a 12-satellite system developed by TRW Inc. In addition, the FCC has recently
allocated additional spectrum for use by the Mobile-Satellite Service to provide
mobile communications services. According to the
9
<PAGE>
FCC, ten companies already have expressed an interest in utilizing this
spectrum. The FCC has also authorized Basic Exchange Telecommunications Radio
Service to make basic telephone service more accessible to rural households and
businesses.
Further, various other FCC rulemaking proceedings may affect the
manner in which radio frequency spectrum will be allocated among the various
potential competitors of cellular service. For example, the FCC has adopted
rules allocating 25 MHz below 5 GHz for commercial fixed and mobile radio
services which could eventually compete with cellular. The FCC has also adopted
rules allocating a portion of the spectrum above 40 GHz for commercial radio
service some of which could compete with cellular. There can be no assurance
that existing cellular operators will be permitted to receive licenses for such
spectrum, or that the adoption of auctions would not increase the cost to the
Company of obtaining such licenses or their renewal. In addition, Congress
recently allocated 30 MHz of spectrum in the 2.3 GHz band for wireless
communication services ("WCS"), and the FCC has adopted rules permitting
licensees to offer virtually any wireless service on this band, subject to
specific technical rules to prevent interference with services in adjacent
bands. Congress has mandated that the auction for these licenses be completed
and all money collected by September 30, 1997. In the auction, which the FCC has
set to commence on April 15, 1997, two types of licenses will be made available:
(1) two 10-MHz blocks in each of 46 Major Economic Area Groupings ("MEAs"); and
(2) two 5-MHZ blocks in each of 11 Regional Economic Areas ("REAGs"). Puerto
Rico and the U.S. Virgin Islands will constitute a single MEA and a single REAG
for initial licensing purposes. Because the FCC has adopted restrictive out-of-
band emission limits for WCS spectrum, which it believes will render WCS
spectrum technologically infeasible for mobile operations, WCS licensees will
probably not present significant competition to the Company's operations for the
foreseeable future. Other technological advances or regulatory changes in the
future may make available other alternatives to cellular service, thereby
creating additional sources of competition.
REGULATION
Federal Communications Commission Regulation. The Communications Act
of 1934 (the "Communications Act") requires cellular system, paging system and
microwave station operators such as the Company to obtain authorization from the
FCC prior to constructing or operating their systems.
For cellular licensing purposes, the FCC divided the United States,
including Puerto Rico and other areas under the FCC's jurisdiction, into
separate geographic markets, known as MSAs and RSAs. Licenses have been issued
in all 306 MSAs and in all 428 RSAs. There are no pre-designated microwave
markets. Applicants may apply for microwave licenses anywhere they seek to
provide microwave services, provided that operation of the microwave facility at
that location will not cause interference to other parties.
When the initial phase of a cellular system has been constructed in an
authorized manner, the licensee is required to notify the FCC that construction
has been completed before it is authorized to offer commercial service to the
public. The licensee then is said to have "operating authority" and is issued
an operating license. The Company has obtained operating authority for each of
its currently operating cellular systems. Initial licenses are granted for 10-
year periods and are renewable upon application to the FCC for periods of 10
years.
The Company's initial operating licenses for its systems were issued
in 1988 through 1993. Licenses may be revoked and license renewal applications
denied for cause. Prior to the expiration of its license term, each cellular
licensee seeking renewal must file an application. Other parties seeking
authorization to serve the licensee's market may also file competing
applications. The FCC has ruled that an incumbent licensee would receive a
"renewal expectancy" if, during its license term, (i) its performance has been
"substantial," defined as
10
<PAGE>
"sound, favorable, and substantially above a level of mediocre service"; and
(ii) it had substantially complied with applicable FCC rules, policies, and the
Communications Act. Under rules currently in effect, in granting a license
renewal, the FCC would compare competing applications at a hearing in which the
incumbent's renewal expectancy is the most important factor. The FCC has also
adopted rules which would award an incumbent its license renewal and not require
a full comparative hearing if the incumbent qualifies for a renewal expectancy.
The FCC may grant an uncontested renewal application without conducting a
comparative hearing or finding a renewal expectancy. There can be no assurance
that a license will be renewed.
The FCC has adopted regulations regarding auctions for the award of
radio spectrum licenses. Pursuant to such rules, the FCC at any time may require
auctions for new or existing services prior to the award of any license.
Accordingly, the Company can give no assurance with respect to its continued
ability to procure additional frequencies or to expand existing services using
frequencies for which the Company is licensed into new geographic areas.
Under FCC rules, the authorized cellular service area for the Company
in each of its markets is referred to as the "cellular geographic service
area" or "CGSA." The boundaries of the CGSA are determined by a mathematical
formula that is a function of transmitting station effective radiated power and
antenna height. The CGSA may be coincident with, smaller than, or in some cases
larger than the related MSA or RSA boundary. The right to serve areas which fall
within the licensee's MSA or RSA but outside of its CGSA is exclusive to such
licensee for a period of five years from the grant of its initial construction
permit. As licensees serve such areas, their CGSAs will be extended to cover the
additional served areas inside the MSA or RSA and, in some cases, area beyond
the MSA/RSA boundary. Although overlapping service areas are common, under rules
adopted by the FCC in 1993, service area extensions into the CGSA of a
neighboring system on the same frequency block must be withdrawn from such CGSA
at the request of the neighboring licensee. At the conclusion of the initial
five-year construction period any entity, including the licensee, may file with
the FCC an application to serve the "unserved areas," of that MSA or RSA which
are outside of the licensee's CGSA, subject to certain restrictions. The FCC has
begun accepting and granting applications for unserved areas pursuant to lottery
and recently has adopted rules for auctioning other unserved areas. The Company
has determined that there are no significant unserved areas within its licensed
markets. There are no unserved areas in Puerto Rico currently on the FCC's slate
to be auctioned. In a comprehensive rewrite of its rules applicable to cellular
service, effective in 1995, the FCC revised the rules to allow cellular carriers
more flexibility to operate their systems. For example, except in limited
circumstances (i.e., environmental concerns), licensees will only have to notify
the FCC of new or modified transmission facilities that result in an extension
outside of the licensees' authorized CGSA.
The Communications Act requires telecommunications common carriers to
file and maintain with the FCC tariffs describing rates, terms and conditions
under which their international telecommunications services are offered to the
public. Accordingly, the Company must file tariffs for international
telecommunications services that it proposes to offer. These tariff filings
qualify for streamlined regulations. Two subsidiaries of the Company have filed
tariffs for provision of international long distance resale services.
The FCC's rules also prohibit common carrier licensees from imposing
restrictions on the resale of service by third parties who purchase blocks of
mobile telephone numbers from an operational system and then resell them to the
public. The Company currently provides service to third party resellers. The FCC
recently extended this nondiscriminatory resale requirement to broadband PCS and
certain SMR licensees. Further, under this new policy, all resale obligations
for cellular, broadband PCS and SMR operators will terminate five years after
the date that the last group of initial PCS licenses are granted.
11
<PAGE>
On February 8, 1996, Congress enacted the Telecommunications Act of
1996 (the "1996 Act"), which effected a sweeping overhaul of the Communications
Act. In particular, the 1996 Act substantially amended Title II of the
Communications Act, which governs common carriers. The 1996 Act imposes a duty
on all telecommunications carriers, including cellular, to interconnect with the
facilities of other telecommunications carriers. Only incumbent local exchange
carriers ("LECs") are required to provide "direct" interconnection with their
facilities, however. In addition, the 1996 Act requires that interconnection be
the subject of good faith negotiations leading to voluntary agreements that must
be filed with and approved by state commissions. Moreover, the 1996 Act
establishes certain guidelines for the manner in which LECs may charge for
providing interconnection services (e.g., tandem switching, transport and
termination) and provides that LECs must pay wireless providers, including
cellular and paging operators, for termination of landline-originated calls.
Furthermore, provisions of the 1996 Act may qualify PRTC for a suspension of
certain interconnection obligations. Although the initial term of the Company's
original interconnection agreement with PRTC has expired, that agreement
requires the parties to continue to operate under the terms of the agreement
until a new one is reached. The outcome of any future negotiations cannot yet be
determined.
In exchange for opening their local loops to competition, the 1996 Act
permits the BOCs, which previously had been prohibited from providing interLATA
services (i.e., long distance services), to provide such services, including,
but not limited to, the provision of interLATA services in connection with
commercial mobile radio service ("CMRS"). In addition, the 1996 Act permits
registered public utilities to provide cellular and other telecommunications
services through separate affiliates authorized by the FCC as "exempt
telecommunications companies."
As directed by the 1996 Act, in August 1996, the FCC issued
comprehensive rules regarding the introduction of competition into the local
telephone market. These rules address most aspects of the provision of
competitive local telephony services from both facilities-based and non-
facilities-based competitors, including cellular and paging operators. The rules
address the process by which potential competitors negotiate with incumbent
telephone companies for interconnection, the facilities that must be available
for interconnection, the use of components of the incumbents' networks (referred
to as "unbundled access"), the resale of services of others, and the pricing of
interconnection and other services and facilities used for offering competitive
local telephone services. The rules also provide that incumbent LECs, such as
the PRTC and the Virgin Islands Telephone Company, must begin paying the Company
and other wireless providers immediately for terminating landline-originated
traffic on the wireless facilities. In October 1996, after an appeal by the
BOCs and other incumbent local exchange carriers, the U.S. Court of Appeals for
the Eighth Circuit stayed certain aspects of the FCC's rules (primarily
affecting the pricing provisions) after arguments were made that the FCC may
have exceeded its jurisdiction. Two weeks later, the Eighth Circuit lifted the
stay with regard to some of the FCC's rules affecting compensation for CMRS
providers. In addition, numerous parties have sought reconsideration of the
FCC's rules. Going forward, the manner in which the FCC changes these rules,
whether due to the legal mandate of the Court or due to changes it makes on
reconsideration, may affect substantially the pace and development of wireless
services.
Notwithstanding the Eighth Circuit's stay of some of the FCC's
regulations regarding rates and terms for interconnection with incumbent LECs,
the Company has continued negotiations initiated on September 20, 1996 to
replace its existing interconnection agreement with the PRTC with an
interconnection agreement at rates, terms, and conditions consistent with the
1996 Act. The Company currently interconnects with the PRTC pursuant to an
agreement that does not reflect the rates, terms, and conditions that the
Company is entitled to under the 1996 Act. The current effort to negotiate a
new agreement has failed to produce agreement on all material terms, and
consequently, pursuant to the 1996 Act and the FCC's implementing
12
<PAGE>
regulations, the Company filed a Petition for Arbitration with the Puerto Rico
Telecommunications Regulatory Board (the "Board") on February 27, 1997. The
Board has not yet set a schedule for the arbitration, but it is required to act
on the Company's petition by June 20, 1997. It is expected that the Board will
commence arbitration hearings or settlement negotiations in April or May 1997.
The results of any arbitration or further negotiations between the Company and
the PRTC cannot be predicted at this time.
Following enactment of the 1996 Act, no CMRS provider, including those
owned or affiliated with BOCs, are required to provide equal access to long
distance service providers. The 1996 Act, however, does permit the FCC to impose
rules requiring CMRS providers to afford subscribers unblocked access to a long
distance provider of their choice through the use of carrier identification
codes or other mechanisms, but only if the FCC determines that cellular and
other CMRS subscribers are being denied access to their chosen long distance
providers and that such denial is contrary to the public interest. It cannot be
predicted whether the FCC will subsequently order cellular carriers and other
CMRS providers to provide such unblocked access.
The overall impact of the 1996 Act on the business of the Company is
unclear and will likely remain so for the foreseeable future. The Company may
benefit from reduced costs in acquiring required communications services, such
as LEC interconnection. However, other provisions of the 1996 Act relating to
interconnection, telephone number portability, equal access and resale could
subject the Company to increased competition.
Several of the Company's subsidiaries also hold point-to-point common
carrier microwave licenses to transport the Company's traffic. These licenses
have been issued by the FCC for specified terms, and the licensed facilities, as
well as proposed new microwave facilities, must be authorized by the FCC and
operated in accordance with the FCC regulations. FCC rules had provided for a
universal expiration date every 10 years for all common carrier microwave
licenses, regardless of when they had been issued, with the next expiration
occurring in February 2001. Under new rules that became effective in August
1996, licensees may select either a full 10-year license term dating from the
original issuance, modification or renewal of license or a term of less than 10
years to allow for consolidated renewal application filings. Microwave renewal
applications are not subject to comparative proceedings. There can be no
assurance that a license will be renewed.
Alien Ownership. Section 310(b) of the Communications Act places
significant restrictions on alien ownership in and involvement with any
companies that use electromagnetic spectrum frequencies under the FCC's
broadcast or common carrier authority. Section 310(b)(3) of the Communications
Act places an absolute prohibition on aliens owning or voting more than 20
percent of the capital stock of any corporation holding such a license. Section
310(b)(4) prohibits aliens from owning or voting more than 25 percent of the
capital stock of any holding company of such a corporate licensee. The FCC has
statutory discretion to refrain from applying the holding company proscriptions
of Section 310(b)(4) in a particular case if it determines that doing so would
not adversely affect the public interest. Through examination of a recent list
of the record holders of the outstanding stock, the Company is not aware of
alien ownership of its outstanding stock that would cause it to be in violation
of the Communications Act. However, a large percentage of the Common Stock is
held in nominee name and, accordingly, the Company is not aware of the
citizenship of the actual beneficial owners of such shares.
The FCC has determined that it will apply an "effective competitive
opportunities" test in the exercise of its statutory discretion to permit
indirect alien ownership of more than a 25% interest in a common carrier
licensee. If the FCC finds that United States investors are permitted to own an
interest greater than 25% in a communications carrier offering similar services
in the alien investor's home market, it will generally permit that alien to own
an
13
<PAGE>
equivalent interest in a United States licensed common carrier. Other factors,
such as the promotion of competition in the United States market and national
security concerns, may affect this determination.
Puerto Rico and U.S. Virgin Islands Regulation. On September 12,
1996, the Governor of Puerto Rico signed into law Puerto Rico Bill 1500, the
Puerto Rico Telecommunications Act of 1996 ("P.R. Telecom Act"). The P.R.
Telecom Act created the Board. The Board has primary regulatory jurisdiction in
Puerto Rico over all telecommunications services, all service providers, and all
persons with a direct or indirect interest in said services or providers. On
October 17, 1996, the three members of the Board, having been selected by the
Governor of Puerto Rico, were sworn in. Among other things, the P.R. Telecom Act
provides the Board with the power to guarantee the availability of universal
service, ensure the reliability of telecommunications services, guarantee
services to rural areas, and promote competition. In this regard, the law
requires all providers of telecommunications services, except commercial mobile
radio services providers, to obtain certification to do business in Puerto Rico
and directs the Board to adopt regulations specifying the form, contents, and
procedures for such certification. Entities must be certified to obtain access
to government-owned property or notice of proposed Board regulations. In
addition, the P.R. Telecom Act provides interconnection to the PRTC's facilities
at any technically feasible point in PRTC's networks at cost-based rates. The
P.R. Telecom Act requires that telecommunication carriers provide detailed
instructions regarding the procedures for interconnection between the PRTC and
other telecommunications providers. Finally, the P.R. Telecom Act requires
telecommunications providers to submit fee and price lists to the Board and
gives the Board jurisdiction to impose fines if rates to end users are not cost-
based.
The Company and two other telecommunications providers in Puerto Rico
have filed petitions with the FCC alleging that the P.R. Telecom Act constitutes
impermissible regulation of CMRS providers by enacting numerous statutory
provisions that operate as barriers to entry and to the continued participation
of CMRS providers in Puerto Rico. These companies argued that the P.R. Telecom
Act violates the Omnibus Budget Reconciliation Act of 1993 ("1993 Budget Act"),
which prohibits states, including Puerto Rico and the U.S. Virgin Islands, from
regulating rates charged for cellular service unless and until the state files
with the FCC, and the FCC grants, a petition demonstrating that such rate
regulation is necessary to protect subscribers adequately from unjust and
unreasonable rates or rates that are unjustly or unreasonably discriminatory.
The FCC is required to act on any such petition within nine months from the date
it is filed. Neither Puerto Rico nor the U.S. Virgin Islands have filed any such
petition. In addition, the preemption petitions allege that the P.R. Telecom Act
permits the Board to regulate the entry of CMRS providers into the Puerto Rico
market, in violation of the 1993 Budget Act's prohibition on state entry
regulation. Similarly, the petitions assert that the P.R. Telecom Act is
contrary to the 1996 Act, which requires the FCC to preclude enforcement of
state laws and regulations that prohibit or have the effect or prohibiting the
ability of any entity to provide any interstate or intrastate telecommunications
service. The FCC has initiated a proceeding regarding these requests for
preemption of the P.R. Telecom Act. At this time, the Company is unable to
predict the outcome of this proceeding.
The foregoing does not purport to be a complete summary of all the
provisions of the Communications Act or the 1996 Act or the regulations and
policies of the FCC promulgated thereunder or of all the provisions of the
applicable Puerto Rico and U.S. Virgin Islands local laws, regulations or
policies that relate to cellular telecommunications services.
Other Regulation; Safety. In addition to FCC and other regulatory
approvals discussed above, the siting and construction of the cellular
transmitter towers and antennas are subject to certain Federal Aviation
Administration ("FAA") regulations. The Company has
14
<PAGE>
obtained FAA clearance for the construction of antenna structures where such
approval is necessary. The siting and construction of cellular communications
facilities requires land use and construction approval in Puerto Rico and in the
U.S. Virgin Islands. In the past the Company has experienced delays in receiving
the required approvals in Puerto Rico. The 1996 Act prohibits the FCC from
preempting local and state regulations of the siting and construction of antenna
towers for commercial mobile radio service providers except in certain limited
circumstances.
Media reports have suggested that certain radio frequency emissions
from portable cellular telephones might be linked to cancer. The Cellular
Telecommunications Industry Association, as a result of industry concern, has
asked the Federal Food and Drug Administration and the Environmental Protection
Agency to appoint a panel of experts to review and revalidate the previously
existing research that established the safety of cellular telephones, and which
had resulted in an FCC determination in 1987 that microwave and cellular radio
transmissions did not pose a material health hazard. The FCC recently adopted
new standards governing the emission of electromagnetic frequencies, including
those used by cellular systems. In certain respects, these standards are more
stringent than existing regulations. While the rules impose more restrictive
standards on radio frequency emissions from low power devices such as portable
cellular telephones, the Company believes that all cellular telephones currently
marketed and in use comply with those standards.
CUSTOMER DEPENDENCE AND SEASONALITY
The Company is not dependent upon any single customer for any
significant portion of its business. The Company's business, as well as the
cellular communications industry, is not generally characterized as having a
material seasonal element and it is not expected to become seasonal in the
foreseeable future.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries had an
aggregate of approximately 740 employees. No employees are represented by any
labor organization. The Company believes that its relationship with its
employees is excellent.
INTERCOMPANY ADMINISTRATION AND MANAGEMENT AGREEMENTS
Under the terms of certain administration and management agreements
(the "Administration and Management Agreements"), dated as of February 28, 1992
between CCPR Services, Inc. ("Services"), a wholly-owned subsidiary of CCPR, and
each of CCPR's subsidiaries that owns or controls an FCC cellular license in a
Puerto Rico market (collectively, the "Company Entities"), each of the Company
Entities agreed to share, on an allocated basis, all the direct and indirect
costs associated with the operation of the Puerto Rico cellular system.
Currently, Services is the principal operating subsidiary of the Company for the
operation and management of the Puerto Rico cellular system. The purpose of
operating the Company's Puerto Rico cellular system in this fashion is to enable
a single company to efficiently manage multiple cellular systems. The Company
Entities hold the various FCC and other licenses and permits necessary to
operate the Company's Puerto Rico cellular system. The Administration and
Management Agreements require the Company Entities to reimburse Services for
their allocable share of expenses and to make additional payments to Services
based on allocable shares of revenue and capital costs pursuant to agreed
formulas. There is no financial effect on the Company from the Administration
and Management Agreements because the agreements only allocate costs among
Services and the Company Entities.
15
<PAGE>
ITEM 2. PROPERTY
- ------- --------
Certain of the Company's subsidiaries lease office space, sales and
service centers and warehouse space in the Commonwealth of Puerto Rico and in
the U.S. Virgin Islands. In addition, the Company Entities and other
subsidiaries either own or lease transmitter sites and lease a cellular switch
site. The loss of any of these leases, either because of a failure to obtain a
renewal of a lease or for any reason not known or anticipated by the Company,
could have an adverse effect on the Company's cellular operations until a
substitute site could be found.
The Company believes that the properties that are currently under
lease or owned by the Company are adequate to serve its present business
operations and its goals of providing continuous coverage throughout Puerto Rico
and the U.S. Virgin Islands, although the Company may require additional
properties for new cell sites and sales and service centers as demand for
cellular service increases. See the Notes to the Company's Consolidated
Financial Statements included elsewhere in this Form 10-K for information
concerning lease commitments.
ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------
The Company is involved in various disputes, arising in the ordinary
course of business, which may result in pending or threatened litigation. The
Company's management expects no material adverse effect on the Company's
financial condition to result from these matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
- ------- -----------------------------------------------
No matter was submitted to a vote of security holders of the Company
during the quarter ended December 31, 1996.
16
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PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
- ------- ----------------------------------------------------------------
MATTERS.
--------
CoreComm's Common Stock began trading on the Nasdaq Stock Market's
National Market on February 3, 1997, under the Nasdaq symbol "COMM". CoreComm
is the successor issuer to Cellular Communications of Puerto Rico, Inc. whose
common stock traded under the Nasdaq symbol "CCPR" from February 28, 1992 until
January 31, 1997. The following table sets forth for the periods indicated, the
high and low last sale prices on the Nasdaq Stock Market's National Market.
<TABLE>
<CAPTION>
LAST SALE PRICE
HIGH LOW
-----------------
<S> <C> <C>
1995
----
First Quarter $ 35.25 $29.00
Second Quarter 32.75 27.25
Third Quarter 32.25 28.75
Fourth Quarter 31.25 25.75
1996
----
First Quarter 28.50 22.88
Second Quarter 32.50 26.00
Third Quarter 32.65 24.75
Fourth Quarter 26.25 19.25
1997
----
First Quarter (through March 24) 21.50 15.00
</TABLE>
On March 24, 1997, the last sales price for the Common Stock on the
Nasdaq Stock Market's National Market was $15.00. As of March 24, 1997 there
were approximately 374 record holders of the Common Stock. This figure does not
reflect beneficial ownership of shares held in nominee names.
The Company has never declared or paid any cash dividends on the
Common Stock. The Company anticipates that it will retain earnings, if any, for
use in the operation and expansion of its business and does not anticipate
paying any cash dividends in the foreseeable future.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------
The following table sets forth certain financial data for the years
ended December 31, 1996, 1995, 1994, 1993 and 1992. This information should be
read in conjunction with the consolidated financial statements and notes thereto
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues $133,818 $108,668 $ 67,141 $ 29,146 $ 11,986
Operating expenses 115,817 97,647 65,187 42,023 23,592
Operating income (loss) 18,001 11,021 1,954 (12,877) (11,606)
Net income (loss) 5,114 (1,451) (4,812) (18,731) (14,126)
Net income (loss) per share (1) .36 (.13) (.49) (1.93) (1.56)
Weighted average number of common
shares (1) 14,027 11,070 9,867 9,699 9,073
DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------
(2)
BALANCE SHEET DATA:
Working capital $ 11,078 $ 12,444 $ 10,808 $ 18,658 $ 33,934
Property, plant and equipment-net 97,945 75,769 55,077 42,653 38,733
Total assets 300,722 256,997 231,371 218,669 222,745
Long-term debt 115,000 90,000 101,212 95,506 92,456
Shareholders' equity 162,608 144,152 112,784 111,621 124,454
</TABLE>
(1) After giving retroactive effect to the recapitalization in connection
with the distribution pursuant to which each holder of Cellular
Communications, Inc. ("CCI") (the former parent company of CCPR) stock
received one share of Common Stock for every six shares of CCI Stock held
by such holder and the 5-for-4 stock split by way of a stock dividend
paid in October 1992.
(2) In 1995, the $40,000,000 principal amount Convertible Senior Subordinated
Notes were converted into approximately 2,778,000 shares of common stock.
The Company did not declare or pay any cash dividends during the periods
indicated.
18
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- ------- -----------------------------------------------------------------
FINANCIAL CONDITION.
--------------------
Prior to January 31, 1997, CoreComm Incorporated ("CoreComm" or the
"Company") was known as Cellular Communications of Puerto Rico, Inc. ("CCPR").
On January 31, 1997 CCPR effected a corporate restructuring whereby shareholders
of CCPR become shareholders of CoreComm on a one-for-one basis upon the
completion of a merger of CCPR with and into a subsidiary of CoreComm. As a
result of this restructuring, CoreComm replaced CCPR as the publicly traded
entity and CCPR became a wholly-owned subsidiary of CoreComm.
RESULTS OF OPERATIONS
Years Ended December 31, 1996 and 1995
- --------------------------------------
Service revenues increased to $119,839,000 from $94,409,000 as a result
of subscriber growth that increased the Company's current revenue stream.
Average monthly revenue per subscriber decreased to $73 in 1996 from $86 in
1995. Ending subscribers were 159,300 and 115,500 as of December 31, 1996 and
1995, respectively.
The loss from equipment, before depreciation of rental equipment,
decreased to $3,983,000 from $6,376,000 primarily because of reductions in the
cost of cellular telephones offset by an increase in the loss from pager sales.
The Company sells cellular telephones and pagers below cost in response to
competition and to generate subscriber growth.
Operating expenses increased to $15,214,000 from $10,207,000 primarily
due to increased usage of the network and additional costs associated with the
expanded network (including paging operations), which account for 90% and 10% of
the increase, respectively.
Selling, general and administrative expenses increased to $63,223,000
from $51,148,000 as a result of increased selling and marketing to increase the
customer base and additional personnel to service the expanding customer base.
Increases in bad debt expense, customer retention expense, property taxes and
subscriber billing expense also contributed to this increase. The increases in
selling and marketing costs, personnel costs, bad debt expense, customer
retention expense, property taxes and subscriber billing expense were 31%, 8%,
12%, 13%, 8% and 11%, respectively, of the total $12,075,000 increase.
Depreciation of rental equipment increased to $521,000 from $225,000
due to an increase in the number of rental pagers, offset by a decrease in
rental telephone depreciation due to rental telephones becoming fully
depreciated.
Depreciation expense increased to $12,710,000 from $9,638,000 primarily
because of an increase in property, plant and equipment.
Amortization expense increased to $6,187,000 from $5,794,000 primarily
due to increases in license acquisition costs.
Interest income and other, net, increased to $646,000 from $358,000
primarily due to an increase in interest income on short term investments.
19
<PAGE>
Interest expense decreased to $8,181,000 from $8,501,000 as a result of
lower effective interest rates on long-term debt outstanding during 1996.
The provision for income taxes increased to $5,352,000 from $4,007,000
as a result of an increase in Puerto Rico or U.S. Virgin Islands taxable income
of certain of the Company's consolidated subsidiaries and an increase in
deferred Puerto Rico income tax liability.
Years Ended December 3l, 1995 and 1994
- --------------------------------------
Service revenue increased to $94,409,000 from $55,900,000 as a result
of subscriber growth that increased the Company's current revenue stream.
Average monthly revenue per subscriber decreased to $86 in 1995 from $94 in
1994. Ending subscribers were 115,500 and 68,300 as of December 31, 1995 and
1994, respectively.
The loss from equipment, before depreciation of rental equipment,
increased to $6,376,000 from $2,577,000 as a result of the increase in new
subscribers. The Company sells cellular telephones and accessories below cost in
response to competition and to increase subscriber growth.
Operating expenses increased to $10,207,000 from $8,501,000 primarily
due to additional costs associated with the expanded cellular network and
increased usage of the network, which account for 74% and 26% of the increase,
respectively.
Selling, general and administrative expenses increased to $51,148,000
from $30,944,000 as a result of increased selling and marketing to increase the
customer base and additional personnel to service the expanding customer base.
Increases in bad debt expense and subscriber billing expense also contributed to
this increase. The increases in selling and marketing costs, bad debt expense
and subscriber billing expense were 53%, 11%, 17% and 8%, respectively, of the
total $20,204,000 increase.
Depreciation of rental equipment decreased to $225,000 from $312,000
due to rental telephones in the corporate account rental program becoming fully
depreciated.
Depreciation expense increased to $9,638,000 from $6,400,000 primarily
because of an increase in property, plant and equipment.
Amortization expense increased to $5,794,000 from $5,212,000 due to
increases in license acquisition costs as a result of the U.S. Virgin Islands
acquisitions in July and October 1994 and deferred financing costs as a result
of the new bank revolving credit facility in April 1995.
Interest income and other, net, decreased to $358,000 from $867,000 due
to an increase in losses on disposals of equipment.
Interest expense increased to $8,501,000 from $7,305,000 as a result of
a higher average balance of long-term debt outstanding during 1995.
The provision for income taxes increased to $4,007,000 from $328,000 as
a result of an increase in Puerto Rico or U.S. Virgin Islands taxable income of
certain of the Company's consolidated subsidiaries.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to expand its cellular and paging
networks, for debt service and, potentially, for the acquisition and development
of additional wireless licenses or communications businesses. The Company is
currently adding cell sites and increasing capacity throughout its Puerto Rico
and U.S. Virgin Islands markets. The Company expects to use approximately
$34,000,000 in 1997 for contemplated additions to the cellular system, the
paging network and for other non-cell site related capital expenditures.
Additionally, the 1997 amount includes one time expenditures of approximately
$4,000,000 for the occupancy of a new building and $5,000,000 for hardware and
software for an in-house billing system. The Company's commitments at December
31, 1996 of $8,800,000 for cellular network and other equipment and for
construction services are included in the total anticipated expenditures. The
Company expects to be able to meet these requirements with cash on hand and cash
from operations.
In April 1995, CCPR and Services entered into a $200,000,000 revolving
credit facility with various banks. The line of credit was available until March
31, 1999, on which date it would have converted into a term loan with principal
payments based on an amortization schedule until September 30, 2003.
In January 1997, Services issued $200,000,000 principal amount 10%
Senior Subordinated Notes due 2007 (the "Notes") and received proceeds of
$194,500,000 after discounts and commissions. The notes are unconditionally
guaranteed by CCPR. CCPR and Services used approximately $116,000,000 of the
proceeds to repay the $115,000,000 principal outstanding plus accrued interest
and fees under the bank loan. In addition, Services made a cash payment to CCPR
of approximately $80,000,000 in exchange for a 21% interest in the San Juan
Cellular Telephone Company, and CCPR distributed that amount to CoreComm.
The Notes are due February 1, 2007. Interest on the Notes is payable
semiannually commencing on August 1, 1997. The Notes are redeemable, in whole
or in part, at the option of Services at any time on or after February 1, 2002,
at a redemption price of 105% that declines annually to 100% in 2005, in each
case together with accrued and unpaid interest to the redemption date. The
Indenture contains certain covenants with respect to CCPR, Services and certain
subsidiaries that limit their ability to, among other things, (i) incur
additional indebtedness, (ii) pay dividends or make other distributions or
restricted payments, (iii) create liens, (iv) sell assets, (v) enter into
mergers or consolidations or (vi) sell or issue stock of subsidiaries.
In April 1996, CCPR announced that its Board of Directors authorized
the repurchase of up to an additional 750,000 shares of CCPR's common stock
through open market purchases from time to time as market conditions warrant.
This repurchase plan is in addition to a previously announced repurchase plan
for up to 250,000 shares. As of December 31, 1996, CCPR had repurchased 550,000
shares for an aggregate of $14,468,000, of which 207,000 shares that cost an
aggregate of $6,145,000 were retired.
Cash provided by operating activities was $28,912,000 in 1996 and cash
used in operating activities was $7,779,000 in 1995. Cash used in operating
activities in 1995 includes $12,978,000 of accrued interest expense that was
paid in connection with the repayment of outstanding debt. The increase in cash
flow from operating activities is also a result of the increase in net income
and from changes in operating assets and liabilities. Purchases of property,
plant and equipment of $36,564,000 in 1996 were primarily for additional cell
sites and increased
21
<PAGE>
capacity in the Company's cellular and paging systems. Purchases of cellular
license interests of $5,811,000 in 1996 is comprised of $5,755,000 (including
expenses of $5,000) paid to acquire the remaining interests, aggregating 49%, in
Star Associates, Inc., the company which owns the FCC license for the non-
wireline cellular system in Adjuntas, Puerto Rico (RSA-2), plus $56,000 in
expenses paid in connection with the acquisition by Services of the remaining
minority interests aggregating 6.14% in the San Juan Cellular Telephone Company.
This acquisition was in exchange for approximately 820,000 shares of CCPR's
common stock which was valued at $21,536,000, the fair market value on the date
of acquisition. As a result of these acquisitions, CCPR owns, either directly or
through its subsidiaries, 100% of Star Associates, Inc. and the San Juan
Cellular Telephone Company. The San Juan Cellular Telephone Company made a
special cash distribution of $1,172,000 to its minority interest holders in
1996.
The allowance for doubtful accounts was $3,767,000 as of December 31,
1996 and $3,233,000 as of December 31, 1995. Write-offs net of recoveries as a
percentage of service revenue was 5.8% for the year ended December 31, 1996
compared to 4.8% for the year ended December 31, 1995. This percentage increased
because the Company and its subsidiaries have attracted and continue to attract
new segments of the market. The Company and its subsidiaries continue to attempt
to reduce this percentage by improving credit procedures and instituting
innovative forms of payment such as prepaid billing.
The Company may also require additional capital for acquisitions of
minority interests in its Aguadilla market, or for the acquisition of certain
other RSAs or in other telecommunications related industries, if opportunities
for such acquisitions arise. The Company has from time to time engaged in
discussions with third parties regarding such acquisitions both inside and
outside of Puerto Rico and the U.S. Virgin Islands.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
The Financial Statements are included herein commencing on page F-1.
The following is a summary of the quarterly results of operations for the
years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996
THREE MONTHS ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $31,476 $31,714 $34,914 $35,714
Operating income 4,734 2,120 5,233 5,914
Net income (loss) 1,289 (248) 2,273 1,800
Net income (loss) per common share .09 (.02) .16 .13
1995
THREE MONTHS ENDED
-------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------
Revenues $22,804 $26,183 $27,972 $31,709
Operating income 1,274 1,491 3,423 4,833
Net income (loss) (1,249) (2,603) (1,570) 3,971
Net income (loss) per common share (.12) (.26) (.13) .29
</TABLE>
23
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
Not applicable.
PART III
--------
ITEMS 10, 11, 12 AND 13.
- -----------------------
The information required by Part III is incorporated by reference from
the Company's definitive proxy statement involving the election of directors
which the Company expects to file, pursuant to Regulation 14A, within 120 days
following the end of its fiscal year.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
- ------- -----------------------------
SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------
(a)(1) Financial Statements -
See list of Financial Statements on page F-1.
(2) Financial Statement Schedules - See list of Financial Statement
Schedules on page F-1.
(3) Exhibits - See Exhibit Index on page 25.
(b) Reports on Form 8-K - The Company filed no current reports on Form 8-K
for the quarter ended December 31, 1996.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules - See list of Financial Statement
Schedules on page F-1.
24
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
2 Agreement and Plan of Merger, dated as of January 31, 1997 by and among
CCPR, the Company and CoreComm Sub, Inc.
3.1 Restated Certificate of Incorporation of the Company.
3.1(a) Certificate of Designation with respect to the Series A Junior
Participating Preferred Stock of the Registrant (Incorporated by
reference to Exhibit 4.1, File Number 33-44420)
3.2 By-laws of the Company.
4.1 Specimen of Common Stock Certificate.
4.2 Rights Agreement, dated as of January 24, 1992, between the Company and
Continental Stock Transfer & Trust Company, as Rights Agent, as amended
by Amendment No. 1 dated January 31, 1997.
4.3 Indenture dated as of January 31, 1997 by and between Services, CCPR and
The Chase Manhattan Bank, N.A.
4.4 Registration Rights Agreement dated as of January 31, 1997 by and among
Services, CCPR and Donaldson, Lufkin & Jenrette Securities Corporation,
Salomon Brothers Inc and Wasserstein Perella Securities, Inc.
10.1 Partnership Agreement relating to San Juan Cellular Telephone Company.
(Incorporated by reference to Exhibit 10.4, File Number 33-44420)
10.2 Tax Sharing Agreement dated as of January 31, 1997 by and among the
Company, CCPR and CCPR Services.
10.3 Tax Sharing Agreement, dated as of January 24, 1992 between the Company
and Cellular Communications, Inc. (Incorporated by reference to Exhibit
10.8, File Number 33-44420)
10.4 Form of Administration and Management Agreement between CCPR Services,
Inc., on the one hand and, on the other hand, individually, each of
Aguadilla Cellular Telephone Company, Inc., CCI PR RSA, Inc., Cellular
Communications of Arecibo, Inc., Cellular Ponce, Inc., Gamma
Communications, Mayaguez Cellular Telephone Co., Inc., San Juan Cellular
Telephone Company and Star Associates, Inc. (Incorporated by reference to
Exhibit 10.9, File Number 33-44420)
10.5 Compensation Plan Arrangement - Cellular Communications of Puerto Rico,
Inc. 1992 Stock Option Plan (effective as of June 2, 1993). (Incorporated
by reference to Exhibit 10.6, 1993 Form 10-K, File Number 0-19869)
25
<PAGE>
10.6 Compensation Plan Arrangement - Non-Employee Directors Stock Option Plan
(effective as of June 2, 1993). (Incorporated by reference to Exhibit
10.7, 1993 Form 10-K, File Number 0-19869)
10.7 Agreement dated as of January 31, 1997, by and between CCPR and CCPR
Services, Inc.
11 Statement re Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23 Consent of Ernst & Young LLP
27 Financial Data Schedule
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: March 28, 1997
CORECOMM INCORPORATED
By: /s/ J. Barclay Knapp
-----------------------------
J. Barclay Knapp
President and Chief Operating
and Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ George S. Blumenthal
- ---------------------------- Chief Executive Officer, March 28, 1997
George S. Blumenthal Treasurer and Director
(Principal Executive
Officer)
/s/ J. Barclay Knapp
- ---------------------------- President and Chief March 28, 1997
J. Barclay Knapp Operating and Financial
Officer and Director
(Principal Financial
Officer)
/s/ Gregg Gorelick
- ---------------------------- Vice President-Controller March 28, 1997
Gregg Gorelick (Principal Accounting
Officer)
/s/ Sidney R. Knafel
- ---------------------------- Director March 28, 1997
Sidney R. Knafel
/s/ Ted H. McCourtney
- ---------------------------- Director March 28, 1997
Ted H. McCourtney
/s/ Del Mintz
- ---------------------------- Director March 28, 1997
Del Mintz
</TABLE>
27
<PAGE>
/s/ Alan J. Patricof
- ---------------------------- Director March 28, 1997
Alan J. Patricof
/s/ Warren Potash
- ----------------------------- Director March 28, 1997
Warren Potash
28
<PAGE>
Form 10-K--Item 14(a)(1) and (2)
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Index to Consolidated Financial Statements
and Financial Statement Schedules
The following consolidated financial statements and schedule of CoreComm
Incorporated and subsidiaries are included in Item 8:
Report of Independent Auditors............................................F-2
Consolidated Balance Sheets--December 31, 1996 and 1995...................F-3
Consolidated Statements of Operations--Years Ended
December 31, 1996, 1995 and 1994.......................................F-4
Consolidated Statement of Shareholders' Equity--Years Ended
December 31, 1996, 1995 and 1994.......................................F-5
Consolidated Statements of Cash Flows--Years Ended
December 31, 1996, 1995 and 1994.......................................F-6
Notes to Consolidated Financial Statements................................F-8
The following consolidated financial statement schedule of CoreComm Incorporated
and subsidiaries is included in Item 14(d):
Schedule II--Valuation and Qualifying Accounts............................F-21
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
CoreComm Incorporated
We have audited the accompanying consolidated balance sheets of CoreComm
Incorporated (formerly Cellular Communications of Puerto Rico, Inc.) and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CoreComm Incorporated and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
San Juan, Puerto Rico
February 23, 1997
F-2
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
Assets 1996 1995
--------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,307,000 $ 8,050,000
Marketable securities 5,917,000 -
Accounts receivable--trade, less allowance for doubtful
accounts of $3,767,000 (1996) and $3,233,000 (1995) 20,034,000 17,929,000
Equipment inventory 2,912,000 6,388,000
Prepaid expenses and other current assets 3,022,000 2,600,000
--------------------------------------
Total current assets 34,192,000 34,967,000
Property, plant and equipment, net 97,945,000 75,769,000
Unamortized license acquisition costs 162,822,000 139,952,000
Deferred financing costs, less accumulated amortization
of $1,065,000 (1996) and $455,000 (1995) 4,118,000 4,706,000
Other assets, less accumulated amortization of
$723,000 (1996) and $1,471,000 (1995) 1,645,000 1,603,000
--------------------------------------
$ 300,722,000 $ 256,997,000
======================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 7,364,000 $ 5,874,000
Accrued expenses 10,889,000 10,895,000
Due to NTL Incorporated 102,000 -
Due to Cellular Communications, Inc. - 310,000
Interest payable 1,678,000 615,000
Deferred revenue 3,081,000 2,854,000
Current portion of long-term debt - 1,975,000
--------------------------------------
Total current liabilities 23,114,000 22,523,000
Long-term debt 115,000,000 90,000,000
Commitments and contingent liabilities
Minority interests - 322,000
Shareholders' equity:
Series preferred stock--$.01 par value; authorized 2,500,000
shares; issued and outstanding none - -
Common stock--$.01 par value; authorized 30,000,000 shares; issued
13,432,000 (1996) and 12,803,000 (1995) shares 134,000 128,000
Additional paid-in capital 226,160,000 210,646,000
(Deficit) (55,363,000) (60,477,000)
--------------------------------------
170,931,000 150,297,000
Treasury stock--at cost, 343,000 (1996)
and 207,000 (1995) shares (8,323,000) (6,145,000)
--------------------------------------
162,608,000 144,152,000
--------------------------------------
$ 300,722,000 $ 256,997,000
======================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Service revenue $119,839,000 $ 94,409,000 $55,900,000
Equipment revenue 13,979,000 14,259,000 11,241,000
-----------------------------------------------------------
133,818,000 108,668,000 67,141,000
-----------------------------------------------------------
Costs and expenses:
Cost of equipment sold 17,962,000 20,635,000 13,818,000
Operating expenses 15,214,000 10,207,000 8,501,000
Selling, general and administrative expenses 63,223,000 51,148,000 30,944,000
Depreciation of rental equipment 521,000 225,000 312,000
Depreciation expense 12,710,000 9,638,000 6,400,000
Amortization expense 6,187,000 5,794,000 5,212,000
-----------------------------------------------------------
115,817,000 97,647,000 65,187,000
-----------------------------------------------------------
Operating income 18,001,000 11,021,000 1,954,000
Other income (expense):
Interest income and other, net 646,000 358,000 867,000
Interest expense (8,181,000) (8,501,000) (7,305,000)
-----------------------------------------------------------
Income (loss) before income tax provision and
minority interests 10,466,000 2,878,000 (4,484,000)
Income tax provision (5,352,000) (4,007,000) (328,000)
-----------------------------------------------------------
Income (loss) before minority interests 5,114,000 (1,129,000) (4,812,000)
Minority interests - (322,000) -
-----------------------------------------------------------
Net income (loss) $ 5,114,000 $ (1,451,000) $(4,812,000)
===========================================================
Net income (loss) per common share $.36 $(.13) $(.49)
===========================================================
Weighted average number of common shares
used in computation of net income (loss) per
share including common stock equivalents 14,027,000 11,070,000 9,867,000
===========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------------------------- Paid-in --------------------------------
Shares Amount Capital (Deficit) Shares Amount
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 9,760,000 $98,000 $165,737,000 $(54,214,000)
Shares issued for acquisition 201,000 2,000 5,582,000
Exercise of stock options 39,000 391,000
Net loss for the year ended
December 31, 1994 (4,812,000)
----------------------------------------------------------------
Balance, December 31, 1994 10,000,000 100,000 171,710,000 (59,026,000)
Exercise of stock options 25,000 385,000
Conversion of Senior
Subordinated Notes 2,778,000 28,000 38,551,000
Common stock repurchased,
at cost (207,000) $(6,145,000)
Net loss for the year ended
December 31, 1995 (1,451,000)
-----------------------------------------------------------------------------------------------
Balance, December 31, 1995 12,803,000 128,000 210,646,000 (60,477,000) (207,000) (6,145,000)
Shares issued for interests
in cellular license 820,000 8,000 21,528,000
Exercise of stock options 16,000 129,000
Common stock repurchased,
at cost (343,000) (8,323,000)
Retirement of Treasury Stock (207,000) (2,000) (6,143,000) 207,000 6,145,000
Net income for the year ended
December 31, 1996 5,114,000
-----------------------------------------------------------------------------------------------
Balance, December 31, 1996 13,432,000 $134,000 $226,160,000 $(55,363,000) (343,000) $(8,323,000)
===============================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 5,114,000 $ (1,451,000) $ (4,812,000)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 19,418,000 15,657,000 11,924,000
Provision for losses on accounts receivable 7,520,000 6,603,000 2,579,000
Loss on sale of property, plant and equipment 371,000 416,000 34,000
Minority interests - 322,000 -
Interest paid to Cellular Communications
of Ohio, Inc. - (12,978,000) -
Changes in operating assets and liabilities net of effects
from business acquisitions:
Accounts receivable (9,625,000) (15,000,000) (6,848,000)
Equipment inventory 3,476,000 (4,163,000) (68,000)
Prepaid expenses (422,000) (1,484,000) (304,000)
Other assets (292,000) (461,000) (172,000)
Accounts payable 2,497,000 (2,400,000) 1,214,000
Accrued expenses (227,000) 5,004,000 2,534,000
Interest payable 1,063,000 (760,000) -
Deferred revenue 227,000 1,237,000 457,000
Due to Cellular Communications of Ohio, Inc. - 1,683,000 3,956,000
Due to Cellular Communications, Inc. (310,000) (4,000) 83,000
Due to NTL Incorporated 102,000 - -
------------------------------------------------------------------
Net cash provided by (used in) operating activities 28,912,000 (7,779,000) 10,577,000
Investing activities
Purchase of marketable securities (18,653,000) (2,058,000) (10,989,000)
Proceeds from maturities of marketable securities 12,736,000 11,057,000 11,913,000
Purchase of property, plant and equipment (36,564,000) (30,725,000) (17,097,000)
Acquisition of subsidiary, net of cash acquired - - (370,000)
Purchase of cellular license interests (5,811,000) - (8,000)
Purchase of other assets - - (251,000)
------------------------------------------------------------------
Net cash (used in) investing activities (48,292,000) (21,726,000) (16,802,000)
Financing activities
Proceeds from borrowings, net of financing costs 52,000,000 121,946,000 -
Principal payments (28,975,000) (37,000,000) -
Additional deferred financing costs (22,000) - (107,000)
Repayment of amount due to Cellular Communications of Ohio, Inc. - (47,942,000) -
Proceeds from exercise of stock options 129,000 385,000 391,000
Purchase of treasury stock (8,323,000) (6,145,000) -
Distribution to minority interests holders (1,172,000) - -
------------------------------------------------------------------
Net cash provided by financing activities 13,637,000 31,244,000 284,000
------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (5,743,000) 1,739,000 (5,941,000)
Cash and cash equivalents at beginning of year 8,050,000 6,311,000 12,252,000
------------------------------------------------------------------
Cash and cash equivalents at end of year $ 2,307,000 $ 8,050,000 $ 6,311,000
==================================================================
</TABLE>
F-6
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for interest exclusive of amounts
capitalized $ 7,118,000 $ 20,556,000 $ 3,350,000
Income taxes paid 7,239,000 620,000 -
Supplemental schedule of noncash investing activities:
Liabilities incurred to acquire property, plant and equipment 1,595,000 2,381,000 2,135,000
Common stock issued for acquisition of subsidiary - - 3,675,000
Debt assumed for acquisition of subsidiary - - 1,750,000
Common stock issued to acquire cellular license interests 21,536,000 - 1,909,000
Supplemental schedule of noncash financing activities:
Conversion of Senior Subordinated Notes, net of
unamortized deferred financing costs of $1,421,000 - 38,579,000 -
</TABLE>
See accompanying notes.
F-7
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
1. Organization and Nature of Operations
Cellular Communications of Puerto Rico, Inc. (the "Company") was incorporated on
May 18, 1988 as a wholly-owned subsidiary of Cellular Communications, Inc.
("CCI") to own and operate cellular telephone systems. On July 25, 1990, CCI and
AirTouch Communications, Inc. entered into a Merger and Joint Venture Agreement,
as amended, pursuant to which, on February 28, 1992, CCI distributed to its
stockholders all of the outstanding common stock of the Company.
In January 1997, the Company completed a corporate restructuring. A new entity
named CoreComm Incorporated ("CoreComm") was formed, and a subsidiary of
CoreComm was merged with and into the Company. Upon the merger, the Company
became a wholly-owned subsidiary of CoreComm and shareholders of the Company
became shareholders of CoreComm on a one for one basis.
The Company, through its subsidiaries, owns licenses to operate cellular
telephone and paging systems in Puerto Rico and in the U.S. Virgin Islands.
Based on service revenues, the predominant line of business is cellular
telephone services. The Company's business is currently dependent on the trends
in the use of cellular telephone and paging services and is subject to economic,
social, political and governmental conditions in Puerto Rico and the U.S. Virgin
Islands. The sale of cellular and paging services in each of the Company's
markets is becoming increasingly competitive. The Company previously had one
cellular competitor in each market, but in the near future it may face many
wireless competitors due to the introduction of broadband personal
communications services ("PCS") on frequencies recently auctioned by the Federal
Communications Commission ("FCC") and specialized mobile radio ("SMR") services
on existing SMR frequencies. At least one competitor is offering PCS services in
several of the Company's markets. Increased competition could result in pricing
pressure, which could contribute to lower revenues per customer and higher
customer acquisition costs.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-8
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries and those entities where the Company's interest is
greater than 50%. Significant intercompany accounts and transactions have been
eliminated in consolidation.
Reclassifications
Certain of the 1994 amounts have been reclassified to conform to the current
presentation.
License Acquisition Costs
The FCC grants the license to operate a cellular telephone system in a
Metropolitan Service Area or a Rural Service Area. Costs incurred to obtain FCC
licenses have been deferred and are being amortized by the straight-line method
over ten years. In connection with the purchase of license interests, the excess
of purchase price paid over the fair value of tangible assets acquired has been
classified as license acquisition costs which are amortized through charges to
operations by the straight-line method over 40 years.
Net Income (Loss) Per Share
Net income (loss) per share is computed based upon the weighted average number
of common shares outstanding during the periods, including common stock
equivalents in the net income per share computation. Common stock equivalents
and the shares issuable upon the conversion of the Convertible Senior
Subordinated Notes prior to conversion are excluded from the calculation of net
loss per share as their effect would be antidilutive.
Revenue Recognition
Service revenue is recognized at the time services are rendered. Equipment sales
are recorded when the equipment is shipped to the customer. Rental revenue is
billed and recognized on a monthly basis.
Cash Equivalents
Cash equivalents are short-term highly liquid investments purchased with a
maturity of three months or less. Cash equivalents were $288,000 and $6,881,000
at December 31, 1996 and 1995, respectively. At December 31, 1996 and 1995, cash
equivalents consisted primarily of money market instruments.
F-9
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Marketable Securities
Marketable securities are classified as available-for-sale, which are carried at
fair value. Unrealized holding gains and losses on securities, net of tax, are
carried as a separate component of shareholders' equity. The amortized cost of
debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in interest and other
income. Realized gains and losses and declines in value judged to be other than
temporary will be included in interest and other income. The cost of securities
sold or matured is based on the specific identification method. Interest on
securities is included in interest and other income.
Marketable securities at December 31, 1996 consist of U.S. Treasury securities
and obligations of U.S. government agencies. During the years ended December 31,
1996 and 1995, there were no realized gains or losses on sales of securities. As
of December 31, 1996, there were no unrealized gains or losses on securities.
All of the marketable securities as of December 31, 1996 had a contractual
maturity of less than one year.
Equipment Inventory
Equipment inventory is stated at the lower of cost (first-in, first-out method)
or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives are as follows: operating equipment--7 to 25 years, office
furniture and other equipment--1 to 5 years, and rental equipment--2 years.
Deferred Financing Costs
Deferred financing costs represent costs incurred relating to the issuance of
debt and are amortized over the term of the related debt.
Advertising
The Company expenses the cost of advertising as incurred. Advertising expense
for the years ended December 31, 1996, 1995 and 1994 was $3,025,000, $2,808,000
and $1,690,000, respectively.
F-10
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Significant Accounting Policies (continued)
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The Company adopted SFAS No. 121 in 1995, which had no material effect on
the Company's financial statements. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset, a loss is
recognized for the difference between the fair value and carrying value of the
asset.
Stock-Based Compensation
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its plans.
3. Unamortized License Acquisition Costs
Unamortized license acquisition costs consist of:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------
<S> <C> <C>
Deferred cellular license costs $ 5,935,000 $ 5,935,000
Excess of purchase price paid over the fair
market value of tangible assets acquired 189,320,000 161,123,000
-----------------------------
195,255,000 167,058,000
Accumulated amortization 32,433,000 27,106,000
=============================
$162,822,000 $139,952,000
=============================
</TABLE>
In July 1994, the Company acquired 100% of USVI Cellular Telephone Corporation
("USVI"), the owner of the non-wireline cellular system serving St. Thomas and
St. John in the U.S. Virgin Islands. The acquisition was in exchange for 150,000
shares of freely transferable Company common stock and cash of $335,000. The
shares were valued at $3,675,000, based on the fair market value of the
Company's common stock on the date of issuance. The Company also incurred
$202,000 in expenses. This acquisition has been accounted for as a purchase and,
accordingly, the net assets and results of operations of USVI have been included
in the
F-11
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Unamortized License Acquisition Costs (continued)
consolidated financial statements from the date of acquisition. The Company
assumed USVI liabilities aggregating $1,997,000 which exceeded the fair value of
the tangible assets acquired by $586,000. The $586,000 plus the aggregate
purchase price of $4,212,000 have been classified as license acquisition costs.
USVI intangible assets acquired of $1,779,000 are included in the deferred
cellular license costs component of license acquisition costs.
In October 1994, the Company acquired all of the assets of the non-wireline
cellular system serving St. Croix in the U.S. Virgin Islands. This acquisition
was in exchange for approximately 51,000 freely transferable shares of the
Company's common stock. The shares were valued at $1,909,000, based on the fair
market value of the Company's common stock on the date of issuance. The Company
also incurred $73,000 in expenses.
In February 1996, the Company acquired the remaining minority interests
aggregating approximately 6% in the San Juan Cellular Telephone Company in
exchange for approximately 820,000 shares of the Company's common stock. The
stock was valued at $21,536,000, the fair market value on the date of
acquisition. In addition, the San Juan Cellular Telephone Company made a special
cash distribution of $1,172,000 to the minority interest holders. The aggregate
purchase price of $21,536,000 plus expenses of $56,000 and the deficiency in net
assets acquired of $850,000 have been classified as license acquisition costs.
In November 1996, the Company acquired the remaining interests, aggregating 49%,
in Star Associates, Inc., the company which owns the FCC license for the
non-wireline cellular system in Adjuntas, Puerto Rico (RSA-2) for cash of
$5,755,000 including expenses.
F-12
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Property, Plant and Equipment
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------------
<S> <C> <C>
Land $ 2,027,000 $ 1,962,000
Operating equipment 97,513,000 73,152,000
Office furniture and other equipment 16,521,000 12,333,000
Rental equipment 1,174,000 498,000
Construction in progress 18,674,000 13,535,000
--------------------------------
135,909,000 101,480,000
Accumulated depreciation 37,964,000 25,711,000
--------------------------------
$ 97,945,000 $ 75,769,000
================================
</TABLE>
5. Accrued Expenses
Accrued expenses consists of:
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------------
<S> <C> <C>
Accrued compensation $ 1,005,000 $ 1,056,000
Accrued franchise, property and income taxes 4,246,000 5,354,000
Commissions payable 1,272,000 349,000
Accrued equipment purchases 502,000 280,000
Subscriber deposits 1,572,000 1,952,000
Other 2,292,000 1,904,000
--------------------------------
$10,889,000 $10,895,000
================================
</TABLE>
6. Long-Term Debt
In April 1995, the Company and one of its wholly-owned subsidiaries, CCPR
Services, Inc. ("Services"), entered into a $200,000,000 revolving credit
facility with various banks. A portion of the amount borrowed was used to repay
Cellular Communications of Ohio, Inc. ("CCI Ohio"). The line of credit was
available until March 31, 1999, on which date it would have converted into a
term loan with principal payments based on an amortization schedule until
September 30, 2003. The terms included the payment of interest each quarter at a
floating rate, which was, at the borrower's option, either (a) the higher of the
bank's base rate or the Federal Funds Rate plus 1/2%, (b) the London Interbank
Offering Rate or (c) the 936 Rate, plus, based on the ratio of the Company's
F-13
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
debt to cash flow and the floating rate in effect, either .25% to 1.875% or
1.25% to 2.875%. The effective rate on the Company's borrowings as of December
31, 1996 and 1995 was 7.01% and 7.23%, respectively. The terms also included an
unused commitment fee of 1/2% per annum which was payable quarterly. The
carrying amount of the bank loan at December 31, 1996 and 1995 approximated fair
value based on discounted cash flow analysis.
The Company incurred costs of $5,183,000 in connection with the revolving credit
facility which is included in deferred financing costs.
In January 1997, Services issued $200,000,000 principal amount 10% Senior
Subordinated Notes due 2007 (the "Notes") and received proceeds of $194,500,000
after discounts and commissions. The Notes are unconditionally guaranteed by the
Company. The Company and Services used approximately $116,000,000 of the
proceeds to repay the principal outstanding plus accrued interest and fees under
the bank loan. Deferred financing costs of approximately $4,000,000 were
written-off upon the repayment of the bank loan. In addition, Services made a
cash payment to the Company of $80,000,000 in exchange for a 21% interest in the
San Juan Cellular Telephone Company, and the Company distributed the $80,000,000
to CoreComm.
The Notes are due on February 1, 2007. Interest on the Notes is payable
semiannually commencing on August 1, 1997. The Notes are redeemable, in whole or
in part, at the option of Services at any time on or after February 1, 2002, at
a redemption price of 105% that declines annually to 100% in 2005, in each case
together with accrued and unpaid interest to the redemption date. The Indenture
contains certain covenants with respect to Services, the Company and certain
subsidiaries that limit their ability to, among other things, (i) incur
additional indebtedness, (ii) pay dividends or make other distributions or
restricted payments, (iii) create liens, (iv) sell assets, (v) enter into
mergers or consolidations or (vi) sell or issue stock of subsidiaries.
The Company had a $47,942,000 principal amount note payable to a subsidiary of
CCI, CCI Ohio, which was due and payable in full on July 31, 1996. The note
permitted the deferral of interest payments, at the Company's option, throughout
the term of the note. Interest was at a floating rate based on the interest rate
in effect under CCI Ohio's bank line of credit and term loan agreement. Interest
expense accrued for the years ended December 31, 1995 and 1994 was $1,683,000
and $3,956,000, respectively. In April 1995, the Company repaid the principal
and deferred interest due to CCI Ohio of $60,920,000.
In connection with license acquisitions, subsidiaries of the Company issued
promissory notes which were paid in full, together with accrued interest, on
their maturity dates in 1996.
F-14
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Related Party Transactions
CCI provided management, financial and legal services to the Company. Amounts
charged to the Company included direct costs where identifiable and allocated
corporate overhead based upon the amount of time incurred on Company business by
the common officers and employees of CCI and the Company. Amounts charged to the
Company included in general and administrative expenses during the years ended
December 31, 1996, 1995 and 1994 were $429,000, $458,000 and $456,000,
respectively. In August 1996, upon the merger of CCI with AirTouch
Communications, Inc., NTL Incorporated ("NTL") (formerly International CableTel
Incorporated) commenced providing management, financial and legal services to
the Company. NTL charged the Company for direct costs where identifiable and
allocated corporate overhead based upon the amount of time incurred on Company
business by the common officers and employees of NTL and the Company. The amount
charged to the Company included in general and administrative expenses in 1996
was $207,000. It is not practicable to determine the amount of expenses that
would have been incurred had the Company operated as an unaffiliated entity.
However, in the opinion of management of the Company, the allocation method is
reasonable.
In January 1997, CoreComm and NTL agreed to a change in NTL's fee for the
provision of management, financial and legal services. NTL will charge CoreComm
for direct costs where identifiable and a fixed percentage of its corporate
overhead beginning January 1, 1997.
8. Shareholders' Equity
Treasury Stock
In April 1996, the Company announced that its Board of Directors authorized the
repurchase of up to an additional 750,000 shares of the Company's Common Stock
through open market purchases as market conditions warrant. This repurchase plan
is in addition to a previously announced repurchase plan for up to 250,000
shares. As of December 31, 1996, the Company had repurchased 550,000 shares for
an aggregate of $14,468,000, of which 207,000 shares that cost an aggregate of
$6,145,000 were retired.
Conversion of Senior Subordinated Notes
In August 1992, the Company issued $40,000,000 principal amount 8 1/4%
Convertible Senior Subordinated Notes due August 1, 2000 (the "Convertible
Notes"). In 1995, primarily as a result of the Company's issuance of a notice of
redemption, the Convertible Notes were converted into approximately 2,778,000
shares of Common Stock. Unamortized deferred financing costs of $1,421,000 were
charged to equity upon the conversion. The net income per common share for 1995
assuming the conversion of the Convertible Notes at the beginning of 1995 would
have been $.03.
F-15
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Shareholders' Equity (continued)
Shareholder Rights Plan
On January 23, 1992, the Board of Directors approved the Rights Agreement, which
has become the CoreComm Rights Agreement. The Rights Agreement provides that
eight tenths of a Right will be issued with each share of Common Stock issued
(whether originally issued or from treasury) on or after February 28, 1992 and
prior to the occurrence of certain potential takeover events ("Rights
Distribution Date"). The Rights are not exercisable until the Rights
Distribution Date and will expire at the close of business on February 28, 2002
unless previously redeemed by CoreComm. When exercisable, each Right entitles
the owner to purchase from CoreComm 1/100 of a share of Series A Junior
Participating Preferred Stock ("Series A Preferred Stock") at a purchase price
of $100.
The Series A Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share and will be entitled to an
aggregate dividend of 100 times the dividend, if any, declared per share of
Common Stock. In the event of liquidation, the holders of Series A Preferred
Stock will be entitled to a minimum preferential liquidation payment of $1 per
share and will be entitled to an aggregate payment of 100 times the payment made
per share of Common Stock. Each share of Series A Preferred Stock will have 100
votes and will vote together with the Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are changed
or exchanged, each share of Series A Preferred Stock will be entitled to receive
100 times the amount received per share of Common Stock. The rights are
protected by customary antidilution provisions.
There are 80,000 shares of Series A Preferred Stock designated from the
2,500,000 authorized shares of Series Preferred Stock. No shares of Series A
Preferred Stock are issued or outstanding.
Stock Options
There are 1,848,000 shares of Common Stock reserved for issuance under the 1992
Stock Option Plan (the "Plan"). The Plan provides that incentive stock options
be granted at the fair market value of the Common Stock on the date of grant,
and nonqualified stock options be granted at not less than 85% of the fair
market value of the Common Stock on the date of grant. Options are exercisable
as to 20% of the shares subject thereto on the date of grant and become
exercisable as to an additional 20% of the shares subject thereto on each
January 1 thereafter, while the optionee remains an employee. Options will
expire ten years after the date of the grant.
F-16
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Shareholders' Equity (continued)
There are 295,000 shares of Common Stock reserved for issuance under the
Non-Employee Directors Stock Option Plan (the "Directors Plan"). The Directors
Plan provides that all options be granted at the fair market value of the Common
Stock on the date of grant. Options are exercisable as to 20% of the shares
subject thereto on the first anniversary of the date of grant and become
exercisable as to an additional 20% of the shares subject thereto on each
subsequent anniversary of the grant date, while the optionee remains a director
of CoreComm. Options will expire ten years after the date of the grant. The
Directors Plan provides for the automatic grant of options to purchase 7,500
shares to each member of the Board of Directors who is not an employee of
CoreComm in 1997 and 1998.
Pro forma information regarding net income (loss) and income (loss) per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1995: risk-free interest rates of 6.56% and 6.61%,
respectively, dividend yield of 0%, volatility factor of the expected market
price of the Company's common stock of .258 and a weighted-average expected life
of the option of 10 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Following is the
Company's pro forma information:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
---------------------------------
<S> <C> <C>
Pro forma income (loss) $ 3,467,000 $ (2,309,000)
Pro forma income (loss) per share $.25 ($0.21)
</TABLE>
F-17
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Stockholders' Equity (continued)
A summary of the Company's stock option activity and related information for the
years ended December 31, follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Exercise Number Exercise Number Exercise
of Options Price of Options Price of Options Price
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 2,180,000 $16.41 1,918,000 $14.13 1,269,000 $ 9.15
Granted 289,000 27.87 287,000 31.60 715,000 22.85
Exercised (16,000) 7.64 (25,000) 15.94 (39,000) 9.91
Forfeited 0 0.00 0 0.00 (27,000) 17.00
------------- ------------- -------------
Outstanding-end of year 2,453,000 $17.81 2,180,000 $16.41 1,918,000 $14.13
============= ============= =============
Exercisable at end of year 1,690,000 $14.06 1,317,000 $11.65 988,000 $ 8.80
============= ============= =============
</TABLE>
Weighted-average fair value of options, calculated using the Black-Scholes
option pricing model, granted during 1996 and 1995 is $15.07 and $17.14,
respectively.
The following table summarizes the status of the stock options outstanding and
exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
----------------------------------------------------------------- ----------------------------------
Weighted- Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices of Options Life Price of Options Price
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.08 to $0.64 301,000 5.0 Years $0.345 301,000 $0.345
$0.88 to $1.11 228,000 5.0 Years $0.939 228,000 $0.939
$11.40 to $15.20 447,000 5.2 Years $14.884 437,000 $14.887
$17.63 to $24.75 902,000 7.1 Years $21.766 567,000 $21.488
$27.25 to $32.00 575,000 8.8 Years $29.729 157,000 $30.260
-----------------------------------------------------------------------------------------------------
Total 2,453,000 1,690,000
=====================================================================================================
</TABLE>
In January 1997, the Company cancelled 198,000 options and 200,000 options from
the 1996 and 1995 grants, respectively, and granted 391,000 options at an
exercise price of $20.375 per share, the fair market value on the date of grant.
F-18
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ - $ - $ -
Puerto Rico and U.S. Virgin
Islands 4,555,000 4,007,000 328,000
-------------------------------------------------
Total current 4,555,000 4,007,000 328,000
-------------------------------------------------
Deferred:
Federal - - -
Puerto Rico 797,000 - -
-------------------------------------------------
Total deferred 797,000 - -
-------------------------------------------------
$5,352,000 $4,007,000 $328,000
=================================================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation and amortization $21,759,000 $17,150,000
Deferred tax assets:
Net operating loss carryforwards 27,125,000 25,322,000
Valuation allowance for deferred tax assets (6,163,000) (8,172,000)
------------------------------------
Net deferred tax assets 20,962,000 17,150,000
------------------------------------
Net deferred tax liabilities $ 797,000 $ -
====================================
</TABLE>
At December 31, 1996, the Company had net operating loss carryforwards of
$79,700,000 for federal income tax purposes that expire as follows: $3,800,000
in 2004, $3,900,000 in 2006, $20,400,000 in 2007, $26,400,000 in 2008,
$14,100,000 in 2009, $9,600,000 in 2010 and $1,500,000 in 2011.
F-19
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Pension Plan
Two subsidiaries of the Company have defined contribution plans covering all
employees who have completed six months of employment. The Company's matching
contributions are determined annually. Participants can make salary deferral
contributions of 1% to 20% of annual compensation not to exceed the maximum
allowed by law. The Company's expense for 1996, 1995 and 1994 was $168,000,
$134,000 and $97,000, respectively.
11. Leases
Total rent expense during the years ended December 31, 1996, 1995 and 1994 was
$3,085,000, $2,293,000 and $1,710,000, respectively.
Future minimum annual lease payments under noncancellable operating leases at
December 31, 1996 are: $3,603,000 (1997); $3,513,000 (1998); $3,291,000 (1999);
$2,603,000 (2000); $1,772,000 (2001) and $10,640,000 thereafter.
12. Commitment and Contingent Liabilities
As of December 31, 1996, the Company was committed to purchase approximately
$8,778,000 for cellular network and other equipment and for construction
services.
In 1992, the Company entered into an agreement which in effect provides for a
twenty year license to use a service mark which is also licensed to many of the
non-wireline cellular systems in the United States. The Company is required to
pay licensing and advertising fees, and to maintain certain service quality
standards. The total fees paid for 1996 were $202,000 which were determined by
the size of the Company's markets.
The Company is involved in various disputes, arising in the ordinary course of
business, which may result in pending or threatened litigation. The Company's
management expects no material adverse effect on the Company's financial
condition to result from these matters.
F-20
<PAGE>
CoreComm Incorporated (formerly Cellular Communications of Puerto Rico, Inc.)
and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- -------------------------------------------------------------------------------------------------------------------------------
Additions
------------------------------
(1) (2)
------------------------------
Charged to
Balance at Charged to Other
Beginning of Costs and Accounts- Deductions - Balance at
Description Period Expenses Describe Describe End of Period
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts $3,233,000 $7,520,000 $ - $(6,986,000)(a) $3,767,000
Year ended December 31, 1995:
Allowance for doubtful accounts $1,174,000 $6,603,000 $ - $(4,544,000)(a) $3,233,000
Year ended December 31, 1994:
Allowance for doubtful accounts $ 394,000 $2,579,000 $ - $(1,799,000)(b) $1,174,000
</TABLE>
(a) - Uncollectible accounts written off, net of recoveries.
(b) - Uncollectible accounts written off, net of recoveries and $77,000
allowance for doubtful accounts as of acquisition date of purchased
subsidiary.
F-21
<PAGE>
EXHIBIT 2
---------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
(a Delaware corporation)
and
CORECOMM INCORPORATED
(a Delaware corporation)
and
CORECOM SUB INC.
(a Delaware Corporation)
------------------------
Dated as of January 31, 1997
------------------------
---------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of January 31, 1997, by and among
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC., a Delaware corporation ("CCPR"),
CORECOMM INCORPORATED, a Delaware corporation and a wholly-owned subsidiary of
CCPR ("CoreComm"), and CORECOMM SUB INC., a Delaware corporation and a
wholly-owned subsidiary of CORECOMM ("CoreComm Sub").
This Agreement provides for the merger of CoreComm Sub with and into
CCPR (the "Merger"), which will be the surviving corporation, in accordance with
Section 251(g) of the General Corporation Law of the State of Delaware (the
"DGCL"), upon the terms and conditions set forth herein and in accordance with
the applicable provisions of the DGCL. The purpose of the Merger is to
implement a holding company organizational structure under which CoreComm would
be the holding company for CCPR's operating subsidiaries and CCPR would become a
direct wholly-owned subsidiary of CoreComm.
The respective Boards of Directors of CCPR, CoreComm and CoreComm Sub
have approved the Merger upon the terms and subject to the conditions set forth
herein.
Accordingly, in consideration of the mutual promises and agreements set
forth herein, and in order to set forth the terms and conditions of the
1
<PAGE>
Merger and the mode of carrying the same into effect, the parties hereby agree
as follows:
1. The Merger:
----------
1.1 The Merger. At the Effective Time (as defined in Section 1.3
----------
hereof), and subject to the terms and conditions of this Agreement and the DGCL,
CoreCom Sub shall be merged with and into CCPR in the Merger, the separate
corporate existence of CoreCom Sub shall thereupon cease, and CCPR shall be the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Surviving Corporation. At the Effective Time, CCPR shall
---------------------
continue its corporate existence under the laws of the State of Delaware and
shall thereupon and thereafter possess all rights, privileges, powers and
franchises and all property of CoreCom Sub and shall be subject to all debts,
liabilities and duties of CoreCom Sub, all as provided under the DGCL.
1.3 Effective Time of the Merger. The Merger shall become effective
----------------------------
and be consummated when the Surviving Corporation shall have caused to be filed
a certified copy of this Agreement with the Secretary of State of the State of
Delaware (the "Delaware Secretary of State") in accordance with the DGCL (the
"Effective Time"), as set forth in Section 3.4 hereof.
1.4 Certificate of Incorporation of the Surviving Corporation.
---------------------------------------------------------
Immediately following the Effective Time, the Certificate of Incorporation of
1
<PAGE>
CCPR, as amended and restated and in effect immediately prior to the Effective
Time, shall be restated as set forth in Exhibit B and as so amended and restated
shall thereafter continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until further amended or restated as
provided therein and under the DGCL.
1.5 By-Laws of the Surviving Corporation. The By-Laws of CCPR (as
------------------------------------
amended and restated effective December 4, 1991), as in effect immediately prior
to the Effective Time, shall continue in full force and effect as the By-Laws of
the Surviving Corporation until thereafter amended or repealed as provided
therein and under the DGCL.
1.6 Directors and Officers of the Surviving Corporation. At the
---------------------------------------------------
Effective Time, the directors and officers of the Surviving Corporation shall be
those persons listed on Exhibit A attached hereto, in the case of directors,
until their successors are elected and qualified and, in the case of officers,
to serve at the pleasure of the Board of Directors of the Surviving Corporation.
2. Conversion of Securities and Assumption of Certain Obligations.
--------------------------------------------------------------
2.1 Conversion of Securities. At the Effective Time, by virtue of the
------------------------
Merger and without any action on the part of CCPR, CoreComm, CoreCom Sub or the
holders of any securities of the foregoing corporations:
2
<PAGE>
2.1.1 Common Stock of CoreCom Sub. Each share of common stock,
---------------------------
par value $0.01 per share, of CoreCom Sub issued and outstanding immediately
prior to the Effective Time, including each share that is owned by CCPR or its
subsidiaries, shall be converted into one share of common stock, par value $0.01
per share, of the Surviving Corporation.
2.1.2 Common Stock of CCPR. Each share of common stock, par
--------------------
value $0.01 per share, of CCPR ("CCPR Common Stock") issued and outstanding or
held in its treasury immediately prior to the Effective Time shall be converted
into one share of common stock, par value $0.01 per share, of CoreComm
("CoreComm Common Stock"), and shall have the same designations, rights and
powers and preferences, and the qualifications, limitations and restrictions
thereof, as the CCPR Common Stock being converted. Each certificate representing
shares of CCPR Common Stock immediately prior to the Effective Time shall be
deemed, without the need for any exchange or transfer, to represent the same
number of shares of CoreComm Common Stock.
2.1.3 Common Stock of CoreComm. Each share of CoreComm Common
------------------------
Stock issued and outstanding immediately prior to the Effective Time shall
automatically be canceled and retired and shall cease to exist.
3
<PAGE>
2.1.4 CCPR Stock Options and Other Awards. CoreComm shall assume and
-----------------------------------
continue all the rights and obligations of CCPR under the 1992 Stock Option
Plan, the Employee Stock Purchase Plan, the Non-Employee Director Stock Option
Plan and all other stock option and employee benefit plans and agreements of
CCPR (collectively, the "Plans"). The outstanding options and other awards
assumed by CoreComm shall be exercisable upon the same terms and conditions as
under the Plans immediately prior to the Effective Time, except that, upon the
exercise of each such option or award, shares of CoreComm Common Stock shall be
issuable in lieu of each share of CCPR Common Stock issuable upon the exercise
thereof immediately prior to the Effective Time.
2.1.5 It is the intent of the parties hereto that CoreComm, as of
the Effective Time, be deemed a "successor issuer" for purposes of continuing
offerings under the Securities Exchange Act of 1934, as amended.
2.1.6 Effect on Rights. As a result of the share-for-share
----------------
conversion of CCPR Common Stock for CoreComm Common Stock pursuant to the Merger
and the adoption of the Rights Agreement dated as of January 24, 1992 between
CCPR and Continental Stock Transfer & Trust Company, as the Rights Agent, each
CCPR preferred stock purchase right will be converted into an identical
preferred stock purchase right of CoreComm.
4
<PAGE>
2.2 Retention of Certificates. Each outstanding certificate that
-------------------------
prior to the Effective Time represented share of CCPR Common Stock shall be
deemed, for all corporate purposes, to evidence ownership of the number of
shares of CoreComm Common Stock into which such shares of CCPR Common Stock have
been converted pursuant to Section 2.1.2 hereof.
2.3 CCPR Stock Transfer Books. At the Effective Time, the stock
-------------------------
transfer books for the shares of CCPR Common Stock which will be converted to
CoreComm Common Stock pursuant to Section 2.1 hereof shall be deemed closed, and
no transfer of such shares shall thereafter be made or consummated.
2.4 Other Agreements. At the Effective Time, CoreComm shall
----------------
assume any obligation of CCPR to deliver or make available shares of CCPR Common
Stock under any agreement or employee benefit plan not referred to in this
Section 2 to which CCPR or any of its subsidiaries is a party. Any reference to
CCPR Common Stock under any such agreement or employee benefit plan shall be
deemed to be a reference to CoreComm Common Stock and one share of CoreComm
Common Stock shall be issuable in lieu of each share of CCPR Common Stock
required to be issued by any such agreement or employee benefit plan, subject to
subsequent adjustment as provided in any such agreement or employee benefit
plan.
5
<PAGE>
3. Compliance with Section 251(g) of the DGCL. Prior to the
------------------------------------------
Effective Time, the parties hereto will take all steps necessary to comply with
Section 251(g) of the DGCL, including without limitation, the following:
3.1 Certificate of Incorporation and By-Laws of CoreComm. At the
----------------------------------------------------
Effective Time, the Certificate of Incorporation and By-Laws of CoreComm shall
be in the form of the Certificate of Incorporation and By-Laws of CCPR, as in
effect immediately prior to the Effective Time.
3.2 Directors and Officers of CoreComm. At the Effective Time, the
----------------------------------
he directors and officers of CCPR immediately prior to the Effective Time shall
be the directors and officers of CoreComm, in the case of directors, until their
successors are elected and qualified and, in the case of officers, to serve at
the pleasure of the Board of Directors of CoreComm.
3.3 Listing of CoreComm Common Stock. The CoreComm Common Stock
--------------------------------
to be issued and initially reserved for issuance pursuant to the transactions
contemplated herein shall have been approved for quotation, upon official notice
of issuance, by the Nasdaq National Market.
3.4 Filings. At the Effective Time, the Surviving Corporation
-------
shall cause a certified copy of this Agreement to be executed and filed with the
Delaware Secretary of State. At the Effective time, to the extent necessary to
effectuate the amendments to the certificates of incorporation of the Surviving
6
<PAGE>
Corporation and CoreComm contemplated by this Agreement, each of the Surviving
Corporation and CoreComm shall cause to be filed with the Delaware Secretary of
State such certificates or documents required to give effect thereto.
4. Miscellaneous.
-------------
4.1 Amendment. At any time prior to the Effective Time, the parties
---------
hereto may, to the extent permitted by the DGCL, by written agreement amend,
modify or supplement any provision of this Agreement.
4.2 Termination. This Agreement may be terminated and the Merger
-----------
abandoned by the Board of Directors or duly authorized committees thereof of
CCPR at any time prior to the filing of the certified copy of this Agreement
with the Delaware Secretary of State.
4.3 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
4.4 Headings. The headings set forth herein are for convenience only and
--------
shall not be used in interpreting the text of the section in which they appear.
4.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts which together shall constitute a single agreement.
7
<PAGE>
IN WITNESS WHEREOF, CCPR, CoreComm and CoreCom Sub, pursuant to the
approval and authority duly given by resolutions adopted by their respective
Boards of Directors, have caused this Agreement to be executed as of the date
first above written by their respective officers thereunto duly authorized.
CELLULAR COMMUNICATIONS OF
PUERTO RICO, INC.
By: /s/ Richard J. Lubasch
--------------------------------
Richard J. Lubasch
Senior Vice President-General Counsel
and Secretary
CORECOMM INCORPORATED
By: /s/ Richard J. Lubasch
--------------------------------
Richard J. Lubasch
Senior Vice President-General Counsel
and Secretary
CORECOM SUB INC.
By: /s/ Richard J. Lubasch
--------------------------------
Richard J. Lubasch
Senior Vice President-General Counsel
and Secretary
8
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
The undersigned, Assistant Secretary of CCPR, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies that the Agreement and Plan of Merger (the "Agreement") to which this
Certificate is attached has been executed on behalf of the Corporation by the
Senior Vice President-General Counsel and Secretary, on behalf of CoreCom Sub
Inc., a Delaware corporation, by the Senior Vice President-General Counsel and
Secretary, and on behalf of CoreComm Incorporated, a Delaware corporation, by
the Senior Vice President-General Counsel and Secretary. The Agreement has been
adopted by the Board of Directors of the Corporation pursuant to Section 251(g)
of the Delaware General Corporation Law and the conditions specified in the
first sentence of such subsection have been satisfied.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this 31st day of January, 1997.
/s/ Sandra Barnett
-------------------------------
Sandra Barnett
Assistant Secretary
9
<PAGE>
Exhibit A
---------
Directors and Officers of Cellular Communications of Puerto Rico, Inc.
----------------------------------------------------------------------
George S. Blumenthal Chief Executive Officer, Treasurer and Director
(Principal Executive Officer)
J. Barclay Knapp .... President and Director (Principal Operating and
Financial Officer)
Richard J. Lubasch... Senior Vice President--General Counsel, Secretary and
Director
Leigh Costikyan Wood Vice President--Operations
Gregg Gorelick ...... Vice President--Controller (Principal Accounting Officer)
Stephen M. Shapiro .. Senior Vice President--General Manager
Jose J. Davila ...... Vice President--Finance
10
<PAGE>
Exhibit B
---------
CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION
January 31, 1997
11
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
The undersigned, Richard J. Lusbasch and Sandra Barnett, certify that they
are the Senior Vice President-General Counsel and Assistant Secretary,
respectively, of Cellular Communications of Puerto Rico, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), and do hereby certify as follows:
(1) The name of the Corporation is Cellular Communications of Puerto Rico,
Inc.
(2) The name under which the Corporation was originally incorporated was
"EC Acquisition Corp., Inc.," and the original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on May 18, 1988.
(3) This Restated Certificate of Incorporation was duly adopted by
stockholder written consent in accordance with Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
(4) The text of the Certificate of Incorporation as amended hereby is
restated to read in its entity as follows:
FIRST: The name of the Corporation is CELLULAR COMMUNICATIONS OF
-----
PUERTO RICO, INC. (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
------
State of Delaware is 9 East Loockerman Street, in the City of Dover, County of
Kent. The name of its registered agent at the address is National Registered
Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
-----
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
<PAGE>
FOURTH: The total number of shares of stock which the Corporation shall
------
have the authority to issue is 1,000 shares of common stock, par value $0.01 per
share (the "Common Stock").
FIFTH: The business and affairs of the Corporation shall be managed by or
-----
under the direction of the Board of Directors. The number of directors of the
Corporation shall be as from time to time fixed by, or in the manner provided
in, the By-laws of the Corporation. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from office. Any vacancy on
the Board of Directors, howsoever resulting, may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy shall hold office for a term
that shall coincide with the term of the class to which such director shall have
been elected.
SIXTH: Any or all of the directors of the Corporation may be removed from
-----
office at any time, but only for cause and only by the affirmative vote of the
holders of a majority of the outstanding shares of the Corporation then entitled
to vote generally in the election of directors, considered for purposes of this
Article SIXTH as one class.
SEVENTH: Any action required or permitted to be taken at any annual or
-------
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly noticed and called, as
provided in the By-laws of the Corporation, and may not be taken by a written
consent of the stockholders pursuant to the GCL.
EIGHTH: Special meetings of the stockholders of the Corporation for any
------
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
NINTH: No director of the Corporation shall be personally liable to the
-----
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) pursuant to Section 174 of the
GCL or (iv) for
2
<PAGE>
any transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article NINTH shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
TENTH: In furtherance and not in limitation of the powers conferred by
-----
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the By-laws of the Corporation. In addition, the By-laws of the
Corporation may be adopted, repealed, altered, amended, or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
outstanding stock of the Corporation entitled to vote thereon.
ELEVENTH: Notwithstanding anything contained in this Certificate of
--------
Incorporation to the contrary, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Voting Stock, voting together
as a single class, shall be required to amend, repeal or adopt any provision
inconsistent with Articles FIFTH, SEVENTH, EIGHTH, NINTH and TENTH of this
Certificate of Incorporation.
TWELFTH: The Corporation reserves the right to repeal, alter, amend,
-------
or rescind any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
3
<PAGE>
THIRTEENTH: Any act or transaction by or involving the Corporation
----------
that requires for its adoption under the GCL or under this Certificate of
Incorporation the approval of the Corporation's stockholders shall, pursuant to
Section 251(g) of the GCL, require, in addition, the approval of the
stockholders of the Corporation's holding company, CoreComm Incorporated, or any
successor by merger, by the same vote as is required by the GCL and/or by the
Certificate of Incorporation of the Corporation.
IN WITNESS WHEREOF, Cellular Communications of Puerto Rico, Inc. has
caused its corporate seal to be hereunto affixed and this Restated Certificate
of Incorporation to be signed by Richard J. Lubasch, its Senior Vice
President-General Counsel and attested by Sandra Barnett, its Assistant
Secretary, this 31st day of January, 1997.
CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By: /s/ Richard J. Lubasch
-----------------------------
Richard J. Lubasch
Senior Vice President-General
[SEAL APPEARS HERE]
ATTEST:
- ---------------------
Sandra Barnett
Assistant Secretary
4
<PAGE>
EXHIBIT 3.1
State of Delaware
PAGE 1
Office of the Secretary of State
-----------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "CORECOMM INCORPORATED", FILED IN THIS OFFICE ON THE THIRTY-FIRST
DAY OF JANUARY, A.D. 1997, AT 8:35 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL APPEARS HERE] /s/ Edward J. Freel
--------------------------------------
Edward J. Freel, Secretary of State
2705605 8100 AUTHENTICATION: 8310649
971033190 DATE: 01-31-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 08:35 AM 01/31/1997
971033190 - 2705605
CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION
January 31, 1997
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
CORECOMM INCORPORATED
The undersigned, Richard J. Lubasch and Sandra Barnett, certify that
they are the Senior Vice President - General Counsel and Assistant Secretary,
respectively, of CoreComm Incorporated, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), and do hereby
certify as follows:
(1) The name of the Corporation is CoreComm Incorporated.
(2) The name under which the Corporation was originally incorporated
was "CoreCom Inc.," and the original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on January 16, 1997.
(3) This Restated Certificate of Incorporation was duly adopted by
stockholder written consent in accordance with Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
(4) The text of the Certificate of Incorporation as amended hereby is
restated to read in its entirety as follows:
FIRST: The name of the Corporation is CORECOMM INCORPORATED
-----
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
------
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
-----
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
<PAGE>
FOURTH: The total number of shares of stock which the Corporation shall
------
have the authority to issue is 32,500,000 consisting of 30,000,000 shares of
common stock, par value $0.01 per share (the "Common Stock"), and 2,500,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
Shares of the Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series, each of which class or series shall have
such distinctive designation or title as shall be fixed by the Board of
Directors of the Corporation (the "Board of Directors") prior to the issuance of
any shares thereof. Each such class or series of Preferred Stock shall have such
voting powers, full or limited, or no voting powers, and such preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in such
resolution or resolutions providing for the issue of such class or series of
Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Delaware.
FIFTH: The business and affairs of the Corporation shall be managed by or
-----
under the direction of the Board of Directors. The number of directors of the
Corporation shall be as from time to time fixed by, or in the manner provided
in, the By-laws of the Corporation. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class I
directors shall terminate on the date of the 1997 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on the
date of the 1998 annual meeting of stockholders and the term of the initial
Class III directors shall terminate on the date of the 1999 annual meeting of
stockholders. At each annual meeting of stockholders beginning in 1997,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as
2
<PAGE>
possible, and any additional directors of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors, howsoever resulting,
may be filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
shall hold office for a term that shall coincide with the term of the class to
which such director shall have been elected.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation or the resolution or resolutions
adopted by the Board of Directors pursuant to Article FOURTH applicable
thereto, and such directors so elected shall not be divided into classes
pursuant to this Article FIFTH unless expressly provided by such terms.
SIXTH: Subject to the rights, if any, of the holders of shares of
-----
Preferred Stock then outstanding, any or all of the directors of the Corporation
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation then entitled to vote generally in the election of directors,
considered for purposes of this Article SIXTH as one class.
SEVENTH: Any action required or permitted to be taken at any annual or
-------
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly noticed and called, as
provided in the By-laws of the Corporation, and may not
3
<PAGE>
be taken by a written consent of the stockholders pursuant to the GCL.
EIGHTH: Special meetings of the stockholders of the Corporation for any
------
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board of Directors or the President. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
NINTH:
-----
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-laws of the Corporation, and except as
otherwise expressly provided in Section B of this Article NINTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
Interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than sixty-six and two-thirds
percent (66-2/3%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock (as hereinafter defined), voting
together as a single class, excluding Voting Stock beneficially owned by any
Interested Stockholder or any Affiliate or Associate of such Interested
Stockholder. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage or separate class vote
may be specified, by law or in any agreement with any national securities
exchange or otherwise.
B. The provisions of Section A of this Article NINTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or any
other provision of this Certificate of Incorporation or the By-laws of the
Corporation, if all of the conditions specified in either of the following
Paragraph 1 or 2 are met:
1. The Business Combination shall have been approved by a
majority of the Continuing Directors (as hereinafter defined).
4
<PAGE>
2. All of the following conditions shall have been met:
a. the aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for
any share of Common Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of Common Stock
acquired by it (x) within the two-year period immediately prior to the
first public announcement of the proposed Business Combination (the
"Announcement Date") or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock; and
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested Stockholder
became an Interested Stockholder (the "Determination Date"), whichever
is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to the Common Stock.
b. The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock (as hereinafter defined), other
than Common Stock, shall be at least equal to the highest amount determined
under clauses (i), (ii) and (iii) below;
5
<PAGE>
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for
any share of such class or series of Capital Stock in connection with
the acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x) within the two-year
period immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Stockholder, whichever is
higher, in either case as adjusted for any subsequent stock split, stock
dividend subdivision or reclassification with respect to such class or
series of Capital Stock;
(ii) the Fair Market Value per share of such class or
series of Capital Stock on the Announcement Date or on the Determination
Date, whichever is higher, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock; and
(iii) (if applicable) the highest preferential amount
per share to which the holders of shares of such class or series of
Capital Stock would be entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation regardless of whether the Business Combination to be
consummated constitutes such an event.
The provisions of this Paragraph 2 shall be required to be met with respect to
every class or series of outstanding Capital Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Capital Stock.
c. The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect
6
<PAGE>
acquisition of beneficial ownership of shares of such class or series of Capital
Stock. If the consideration so paid for shares of any class or series of
Capital Stock varied as to form, the form of consideration for such class or
series of Capital Stock shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such class or series of
Capital Stock previously acquired by the Interested Stockholder.
d. After the Determination Date and prior to the consummation
of such Business Combination: (i) except as approved by a majority of the
Continuing Directors, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not cumulative)
payable in accordance with the terms of any outstanding Capital Stock; (ii)
there shall have been no reduction in the annual rate of dividends paid on the
Common Stock (except as necessary to reflect any stock split, stock dividend or
subdivision of the Common Stock), except as approved by a majority of the
Continuing Directors; (iii) there shall have been an increase in the annual rate
of dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless the failure so to increase
annual rate is approved by a majority of the Continuing Directors, and (iv) such
Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would not result in
any increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
e. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Act") (or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the Corporation at least 30 days prior to
the consummation of such Business Combination (whether or
7
<PAGE>
not such proxy or information statement is required to be mailed pursuant to
such Act or subsequent provisions). The proxy or information statement shall
contain on the first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Combination that the Continuing
Directors, or any of them, may choose to make and, if deemed advisable by a
majority of the Continuing Directors, an opinion of an investment banking firm
selected by a majority of the Continuing Directors as to the fairness (or
unfairness) of the terms of the Business Combination from a financial point of
view to the holders of the outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or Associates, such investment banking
firm to be paid a reasonable fee for its services by the Corporation.
f. Such Interested Stockholder shall not have made any
major change in the Corporation's business or equity capital structure without
the approval of a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this
Article NINTH:
1. The term "Business Combination" shall mean:
a. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii)
any other company (whether or not itself an Interested Stockholder) which is or
after such merger or consolidation would be an Affiliate or Associate of an
Interested Stockholder; or
b. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any assets,
securities or commitments of the Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder (except
for
8
<PAGE>
any arrangement, whether as employee, consultant or otherwise, other than as a
director, pursuant to which any Interested Stockholder or any Affiliate or
Associate thereof shall, directly or indirectly, have any control over or
responsibility for the management of any aspect of the business or affairs of
the Corporation, with respect to which arrangements the value tests set forth
below shall not apply), together with all other such arrangements (including all
contemplated future events), has an aggregate Fair Market Value and/or involves
aggregate commitments of $5,000,000 or more or constitutes more than 5 percent
of the book value of the total assets (in the case of transactions involving
assets or commitments other than capital stock) or 5 percent of the
stockholders' equity (in the case of transactions in capital stock) of the
entity in question (the "Substantial Part"), as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the stockholders of the Corporation would be required to approve or authorize
the Business Combination involving the assets, securities and/or commitments
constituting any Substantial Part; or
c. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the Corporation's
By-laws; or
d. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or Series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
e. any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses (a) to (d).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article FOURTH of
this
9
<PAGE>
Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital
Stock which by its terms may be voted on all matters submitted to stockholders
of the Corporation generally.
3. The term "person" shall mean any individual, firm, company or
other entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity who (a) is or has announced or publicly disclosed a plan
or intention to become the beneficial owner of Voting Stock representing ten
percent (10%) or more of the vote entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the
Corporation and at any time within the two-year period immediately prior to the
date in question was the beneficial owner of Voting Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Voting Stock: (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares
10
<PAGE>
of Capital Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of
shares of Capital Stock deemed to be outstanding shall include shares deemed
beneficially owned by such person through application of this Paragraph 5 of
Section C, but shall not include any other shares of Capital Stock that may be
issuable pursuant to an agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or otherwise.
6. The terms "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Act, as in effect on November 8, 1990 (the term
"registrant" in said Rule 12b-2 meaning in this case the Corporation).
7. "Subsidiary" means any company of which a majority of any class of
equity security is beneficially owned by the Corporation; provided, however,
that for the purposes of the definition of Interested Stockholder set forth in
Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company
of which a majority of each class of equity security is beneficially owned by
the Corporation.
8. The term "Continuing Director" means any member of the Board of
Directors of the Corporation, while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or representative of the
Interested Stockholder and was a member of the Board of Directors prior to the
time that the Interested Stockholder became an Interested Stockholder, and any
successor of a Continuing Director while such successor is a member of the Board
of Directors, who is not an Affiliate or Associate or representative of the
Interested Stockholder and is recommended or elected to succeed the Continuing
Director by a majority of Continuing Directors.
9. The term "Fair Market Value" means: (a) in the case of cash, the amount
of such cash; (b) in the case of stock, the hightest closing sale price during
the 30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock
11
<PAGE>
is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is listed or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System, in the pink sheets of the National Quotation Bureau or any
similar system then in use, or if no such quotations are available, the fair
market value on the date in question of a share of such stock as determined by a
majority of the Continuing Directors in good faith; and (c) in the case of
property other than cash or stock, the fair market value of such property on the
date in question as determined in good faith by a majority of the Continuing
Directors.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in Paragraphs 2.a. and 2.b. of Section B of this Article NINTH shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purpose of this Article NINTH, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
NINTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action (as hereinafter defined) is
with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate
or Associate of an Interested Stockholder, (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $5,000,000 or
more and (f) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such determination made
in good
12
<PAGE>
faith shall be binding and conclusive on all parties. The good faith
determination of a majority of the Continuing Directors on such matters shall
be conclusive and binding for all purposes of this Article NINTH.
E. Nothing contained in this Article NINTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions of
Section 5 of this Article NINTH shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. For the purposes of this Article NINTH, a Business Combination or any
proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article NINTH (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or a person who thereafter would become such if (1) after the
Interested Stockholder became such, the Proposed Action is proposed following
the election of any director of the Corporation who with respect to such
Interested Stockholder, would not qualify to serve as a Continuing Director or
(2) such Interested Stockholder, Affiliate, Associate or person votes for or
consents to the adoption of any such Proposed Action, unless as to such
Interested Stockholder, Affiliate, Associate or person a majority of the
Continuing Directors makes a good faith determination that such Proposed Action
is not proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person, based on information known to them after reasonable
inquiry.
H. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the By-laws of
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<PAGE>
the Corporation), any proposal to amend, repeal or adopt any provision of this
Certificate of Incorporation inconsistent with this Article NINTH which is
proposed by or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder shall require the affirmative vote of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock, voting together as a single class, excluding Voting Stock beneficially
owned by such Interested Stockholder; provided, however, that this Section H
shall not apply to, and such sixty-six and two-thirds percent (66-2/3%) vote
shall not be required for, any amendment, repeal or adoption unanimously
recommended by the Board of Directors if all of such directors are persons who
would be eligible to serve as Continuing Directors within the meaning of
Section C, Paragraph 8 of this Article NINTH.
TENTH: No director of the Corporation shall be personally liable to the
-----
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) pursuant to Section 174 of the
GCL or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article TENTH shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
--------
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the By-laws of the Corporation. In addition, the By-laws of the
Corporation may be adopted, repealed, altered, amended, or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the
outstanding stock of the Corporation entitled to vote thereon.
14
<PAGE>
TWELFTH: Notwithstanding anything contained in this Certificate of
-------
Incorporation to the contrary, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Voting Stock, voting together
as a single class, shall be required to amend, repeal or adopt any provision
inconsistent with Articles FIFTH, SEVENTH, EIGHTH, NINTH, TENTH and ELEVENTH of
this Certificate of Incorporation.
THIRTEENTH: The Corporation reserves the right to repeal, alter,
----------
amend, or rescind any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, CoreComm Incorporated has caused its corporate
seal to be hereunto affixed and this Restated Certificate of Incorporation to be
signed by Richard J. Lubasch, its Senior Vice President-General Counsel and
attested by Sandra Barnett, its Assistant Secretary, this 31st day of January,
1997.
CORECOMM INCORPORATED
By: /s/ Richard J. Lubasch
----------------------
Richard J. Lubasch
Senior Vice President-
General Counsel
[SEAL APPEARS HERE]
ATTEST:
/s/ Sandra Barnett
- ------------------
Sandra Barnett
Assistant Secretary
15
<PAGE>
EXHIBIT 3.2
BY-LAWS
Adopted January 21, 1997
<PAGE>
BY-LAWS
OF
CORECOMM INCORPORATED
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office of the
--------- -----------------
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of the stockholders for the
-----------------
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
---------------
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting
in accordance with these By-laws. Written notice of the annual meeting stating
the place, date and hour of the meeting shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting.
<PAGE>
Section 3. Special Meetings. Special meetings of stockholders, for any
--------- ----------------
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board of Directors or the President. Special meetings of stockholders may
not be called by any other person or persons. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder entitled
to vote at such meeting, and only such business as is stated in such notice
shall be acted upon thereat.
Section 4. Advance Notification of Business to be Transacted at
----------------------------------------------------
Stockholder Meetings. To be properly brought before the annual or any special
- --------------------
stockholders' meeting, business must be either (a) specified in the notice of
meeting (or any supplement or amendment thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual or any
special stockholders' meeting by a stockholder, the stockholder must have given
timely notice thereof in writing to the secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 75 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 90 days' notice or prior public disclosure of the date of the
meeting is given or made to be so received not later than the close of business
on the fifteenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made, whichever first occurs.
Such stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class, series and number of
shares of capital stock of the Corporation which are beneficially
2
<PAGE>
owned by the stockholder and (iv) any material interest of the stockholder in
such business.
Notwithstanding anything in these By-laws to the contrary, no business
shall be conducted at the annual or any special meeting except in accordance
with the procedures set forth in this Article II, Section 4, provided, however,
that nothing in this Section 5 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the meeting. The officer of
the Corporation presiding at the meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Article II, Section 4, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Section 5. Quorum. Except as otherwise provided by law or by the
---------
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted wich might have been transacted at
the meeting as originally noticed. 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
entitled to vote at the meeting.
Section 6. Voting. Unless otherwise required by law, the Certificate of
------
Incorporation or these By-laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Unless otherwise provided in
the Certificate of Incorporation, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for
3
<PAGE>
each share of the capital stock entitled to vote thereat held by such
stockholder. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
Section 7. List of Stockholders Entitled to Vote. The officer of the
--------- -------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten 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 of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
--------- ------------
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
---------
Section 1. Number and Election of Directors. Subject to the rights, if
--------------------------------
any, of holders of preferred stock of the Corporation, the Board of Directors
shall consist of not less than three nor more than fifteen members, the exact
number of which shall be fixed from time to time by the Board of Directors.
Except as provided in Section 3 of this Article III, directors shall be elected
by a plurality of the votes cast at Annual
4
<PAGE>
Meetings of Stockholders, and each director so elected shall hold office as
provided by Article FIFTH of the Certificate of Incorporation. Any director may
resign at any time upon written notice to the Corporation. Directors need not be
stockholders.
Section 2. Nomination of Directors. Only persons who are nominated in
--------- -----------------------
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation at the Annual Meeting may be made at such meeting by or at the
direction of the Board of Directors, by any committee or persons appointed by
the Board of Directors or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 2. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 75 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that less than 90 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the fifteenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class, series and
number of shares of capital stock of the Corporation which are beneficially
owned by the person and (iv) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to the Rules and Regulations of the Securities and Exchange
Commission under Section 14 of the Securities Exchange Act of 1934, as amended;
and (b) as to the stockholder giving the notice (i) the name and record address
of the stockholder and (ii) the class, series and number of shares of capital
stock of the Cor-
5
<PAGE>
poration which are beneficially owned by the stockholder. Such notice shall be
accompanied by the executed consent of each nominee to serve as a director if so
elected. The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a director of the Corporation.
No person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein. The officer of the
Corporation presiding at an Annual Meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting, and the defective nomination shall be
disregarded.
Section 3. Vacancies. Any vacancy on the Board of Directors, howsoever
--------- ---------
resulting, may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy shall hold office for a term that shall coincide with the term of
the class to which such director shall have been elected.
Section 4. Duties and Powers. The business of the Corporation shall be
--------- -----------------
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
Section 5. Meetings. The Board of Directors of the corporation may hold
--------- --------
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the President or by a majority of the
Board of Directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, or personally or by telephone,
telegram, telex or similar means of communication on twenty-four (24) hours'
6
<PAGE>
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
Section 6. Quorum; Action of the Board of Directors. Except as may be
----------------------------------------
otherwise specifically provided by law, the Certificate of Incorporation or
these By-laws, at all meetings of the Board of Directors, a majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. 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 7. Action by Written Consent. 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 the members of the Board of Directors 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 of Directors or
committee.
Section 8. Meetings by Means of Conference Telephone. Members of the
--------- -----------------------------------------
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
Section 9. Committees. The Board of Directors may, by resolution passed
--------- ----------
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. 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 any such committee. In the absence or disqualification
of a member of a committee, and in the
7
<PAGE>
absence of a designation by the Board of Directors of an alternate member to
replace the absent or disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. Any committee, to the extent allowed by law and provided in the
resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Unless the Board of Directors or such committee
shall otherwise provide, regular and special meetings and other actions of any
shall be governed by the provisions of this Article III applicable to meetings
and actions of the Board of Directors. Each committee shall keep regular
minutes and report to the Board of Directors when required.
Section 10. Fees and Compensation. Directors and members of committees
---------- ---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 11. Interested Directors. No contract or transaction between
---------- --------------------
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (a) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less that a quorum; or (b) the material facts as to
his or their relationship or inter-
8
<PAGE>
est and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (c) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
--------
Section 1. General. The officers of the Corporation shall be chosen by
--------- -------
the Board of Directors and shall be a President, one or more Vice Presidents, a
Secretary and a Treasurer. The Board of Directors, in its discretion, may also
choose a Chairman of the Board of Directors (who must be a director) and
Assistant Secretaries, Assistant Treasurers and other officers. Such officers as
the Board of Directors may choose shall perform such duties and have such powers
as from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers. Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
--------- --------
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation, who shall be subject to the control of the Board of Directors and
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors, and all officers of the Corporation shall hold office until their
successors are chosen and qualified,
9
<PAGE>
or until their earlier resignation or removal. Any officer elected by the Board
of Directors may be removed at any time by the Board of Directors with or
without cause. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
--------- ------------------------------------------
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE V
STOCK
-----
Section 1. Form of Certificates. Every holder of stock in the
--------- --------------------
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (a) by the Chairman of the Board of Directors, the President or a
Vice President and (b) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (a) a
--------- ----------
transfer agent other than the Corporation or its employee or (b) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall
10
<PAGE>
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
--------- -----------------
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
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 his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
--------- ---------
transferrable in the manner prescribed by law and in these By-laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
--------- -----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meet-
11
<PAGE>
ing; provided, however, that the Board of Directors may fix a new record date
for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
--------- -----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
ARTICLE VI
NOTICES
-------
Section 1. Notices. Whenever written notice is required by law, the
--------- -------
Certificate of Incorporation or these By-laws, to be given to any director or
stockholder, such notice may be given by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written notice
may also be given personally or by telegram, telex, cable or facsimile
transmission.
Section 2. Waivers of Notice. Whenever any notice is required by law,
--------- -----------------
the Certificate of Incorporation or these By-laws, to be given to any director
or stockholder, a waiver thereof in writing, signed, by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE 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
12
<PAGE>
special meeting pursuant to law. Dividends may be paid in cash, in property or
in shares of capital stock. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for any proper purpose, and the Board of Directors may modify or abolish any
such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
--------- -------------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
--------- -----------
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
--------- --------------
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
---------------
The Corporation shall indemnify to the full extent authorized or permitted
by law (as now or hereafter in effect) any person made, or threatened to be
made, a defendant or witness to any action, suit or proceeding (whether civil or
criminal or otherwise) by reason of the fact that he, his testator or intestate,
is or was a director or officer of the Corporation or by reason of the fact that
such director or officer, at the request of the Corporation, is or was serving
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, in any capacity.
13
<PAGE>
ARTICLE IX
AMENDMENTS
----------
These By-laws may be altered, amended or repealed, in whole or in part, or
new By-laws may be adopted by either the affirmative vote of the holders of
sixty-six and two-thirds percent (66-2/3%) of the outstanding capital stock of
the Corporation entitled to vote thereon or by the Board of Directors.
14
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+ EXHIBIT 4.1 +
+ COUNTERSIGNED AND REGISTERED: +
+ CONTINENTAL STOCK TRANSFER & TRUST COMPANY +
+ TRANSFER AGENT +
+ AND REGISTRAR +
+ +
+ BY +
+ +
+ AUTHORIZED OFFICER +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
- --------------------------------------------------------------------------------
[SEAL APPEARS HERE]
NUMBER SHARES
- --------------- ---------------
COM
- --------------- ---------------
CORECOMM INCORPORATED
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE THE LEGEND ON THE SEE REVERSE FOR
REVERSE OF THIS CERTIFICATE CERTAIN DEFINITIONS
CUSIP 21868N 10 6
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT SPECIMEN
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
CORECOMM INCORPORATED
CERTIFICATE OF STOCK
transferable on the books of the Corporation by the holder hereof in person or
by a duly authorized attorney upon surrender of this certificate properly
endorsed.
This certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
/s/ Signature appears here /s/ Signature appears here
[CORECOMM INCORPORATED SEAL APPEARS HERE]
SECRETARY PRESIDENT
- --------------------------------------------------------------------------------
<PAGE>
CoreComm Incorporated
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between the Corporation
and Continental Stock Transfer & Trust Company (the "Rights Agent") dated
as of January 24, 1992, as amended as of January 31, 1997 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Corporation.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Corporation will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associates thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws of regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT--
TEN ENT--as tenants by the entireties ...........Custodian.........
JT TEN --as joint tenants with right (Gift) (Minor)
of survivorship and not as under Uniform Gifts to Minors
tenants in common Act..................
(State)
Additional abbreviations may also be used though not in the above list.
For value received,________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
--------------------------------------
________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)
________________________________________________________________________
________________________________________________________________________
__________________________________________________________________shares
of the capital stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_______________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated_______________
___________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed:
______________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 4.2
AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT
Amendment No. 1, dated as of January 31, 1997 (the "Amendment"), between
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC., a Delaware corporation (the
"Company"), and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a New York
corporation (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into a Rights Agreement,
dated as of January 24, 1992 (the "Rights Agreement"); and
WHEREAS, the Distribution Date (as defined in the Rights Agreement) has
not occurred, and that accordingly, the Company and the Rights Agent hereby
amend the Rights Agreement in accordance with Section 27 thereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth in the Rights Agreement and this Amendment, the parties hereby agree as
follows:
Section 1. Amendment to Definition of "Acquiring Person." Section 1(a)
---------------------------------------------
of the Rights Agreement is amended to add the following sentence after the last
sentence thereof: Notwithstanding the foregoing, neither CoreComm Incorporated
nor any of its Affiliates shall become an Acquiring Person as a result of the
execution of the Agreement and Plan of Merger, dated as of January 31, 1997, by
and among CoreComm Incorporated, CoreCom Sub Inc. and the Company (the "Merger
Agreement") or the consummation of the Merger (as defined in the Merger
Agreement) pursuant to the terms of the Merger Agreement.
Section 2. Rights Agreement as Amended. The term "Agreement" as used in
---------------------------
the Rights Agreement shall be deemed to refer to the Rights Agreement as amended
hereby. The foregoing amendments shall be effective as of the date hereof and,
except as set forth herein, the Rights Agreement shall remain in full force and
effect and shall be otherwise unaffected hereby.
Section 3. Counterparts. This Amendment may be executed in any number of
------------
counterparts, and each of such counterparts shall for all purposes be deemed an
original, but all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
Section 4. Governing Law. This Amendment shall be deemed to be a
-------------
contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within such State.
Section 5. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
Attest: CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
[SIGNATURE] By [SIGNATURE]
- ---------------------------- -------------------------------------
Name: Name: George S. Blumenthal
Title: Title: Chief Executive
Officer and Treasurer
Attest: CONTINENTAL STOCK
TRANSFER & TRUST COMPANY
as Rights Agent
By
- ---------------------------- -------------------------------------
Name: Name:
Title: Title:
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
Attest: CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By
- ---------------------------- -------------------------------------
Name: Name: George S. Blumenthal
Title: Title: Chief Executive
Officer and Treasurer
Attest: CONTINENTAL STOCK
TRANSFER & TRUST COMPANY
as Rights Agent
[/s/ SIGNATURE APPEARS HERE] By [SIGNATURE APPEARS HERE]
- ---------------------------- -------------------------------------
Name: [NAME APPEARS HERE] Name: [NAME APPEARS HERE]
Title: VP Title: Pres.
3
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of January 24, 1992 (the "Agreement"), between
Cellular Communications of Puerto Rico, Inc., a Delaware corporation (the
"Company"), and Continental Stock Transfer & Trust Company, a New York
corporation (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Cellular Communications, Inc., a Delaware corporation ("CCI") of which
the Company is a wholly owned subsidiary, entered into a certain Restated
Agreement and Plan of Merger and Joint Venture Organization dated as of December
14, 1990 (the "Merger Agreement"). Pursuant to the Merger Agreement, CCI is
obligated to sell in a third party transaction or, alternatively, distribute pro
rata to its stockholders, 100 percent of the capital stock of PRCO and to use
best efforts to obtain all the regulatory approvals necessary to consummate such
a transaction or distribution prior to January 6, 1992.
WHEREAS, the Board of Directors of CCI has put forth a plan calling for the
proposed distribution (the "Stock Distribution") by CCI to the holders of
redeemable participating preferred stock, par value of $.01 per share and CCI
Common Stock, par value of $.O1 per share (collectively, the "CCI Stock") of CCI
of all the issued and outstanding common stock, par value of $.O1 per share
("PRCO Common Stock") of the Company owned by CCI immediately prior to the Stock
Distribution; and
WHEREAS, the Board of Directors of the Company wishes to provide for the
issuance of one Right (as such number may be hereinafter adjusted pursuant to
Section ll(p) hereof) for each share of PRCO Common Stock issued on or after the
date of the Stock Distribution (whether originally issued or delivered from the
Company's treasury) and prior to the Distribution Date, each Right initially
representing the right to purchase one one-hundredth of a share of Series A
Junior Participating Preferred
5
<PAGE>
Stock of the Company having the rights, powers and preferences set forth in the
form of Certificate of Designation, Preferences and Rights attached hereto as
Exhibit A, upon the terms and subject to the conditions hereinafter set forth
(the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following
-------------------
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall, after the date of Stock
Distribution, be the Beneficial Owner of 15% or more of the shares of PRCO
Common Stock then outstanding, but shall not include the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and in effect on the date of this
Agreement (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or Associates, directly
or indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement
arrangement or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or otherwise;
provided, however, that a Person shall not
- --------
6
<PAGE>
be deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section
ll(i) hereof in connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided, however, that
--------
a Person shall not be deemed the "Beneficial Owner". of, or to "beneficially
own," any security under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
7
<PAGE>
(iii) which are beneficially owned, directly or indirectly, by any other Person
(or any Affiliate or Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring, holding
voting (except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (c)) or disposing of any voting securities
of the Company; Provided, however, that nothing in this paragraph (c) shall
cause a person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired through
such person's participation in good faith in a firm commitment underwriting
until the expiration of forty days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New York City
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
(f) "Person" shall mean any individual, firm corporation, partnership or other
entity.
(g) "PRCO Common Stock" shall mean the common stock, par value $.01 per share,
of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Preferred Stock" shall mean
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shares of Series A Junior Participating Preferred Stock, stated value $1.00 per
share, of the Company, and, to the extent that there are not a sufficient number
of shares of Series A Junior Participating Preferred Stock authorized to permit
the full exercise of the Rights, any other series of Preferred Stock, stated
value $1.00 per share, of the Company designated for such purpose containing
terms substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
(i) "Section 11(a)(ii) Event" shall mean any event described in Section
ll(a)(ii) hereof.
(j) "Section 13 Event" shall mean any event described in clauses (x), (y) or (z)
of Section 13(a) hereof.
(k) Stock Acquisition Date. shall mean the first date of public announcement
(which, for purposes of this definition, shall include, without limitation, a
report filed pursuant to Section 13(d) under the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become such.
(1) "Subsidiary" shall mean, with reference to any Person, any corporation of
which an amount of voting securities sufficient to elect at least a majority of
the directors of such corporation is beneficially owned, directly or indirectly,
by such Person, or otherwise controlled by such Person.
(m) "Triggering Event" shall mean any Section ll(a)(ii) Event or any Section 13
Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights
---------------------------
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the Distribution Date also be
the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
9
<PAGE>
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the earlier of (i) the Close of Business on the tenth day after the
Stock Acquisition Date, or (ii) the Close of Business on the tenth business day
(or such later date as the Board shall determine) after the date that a tender
or exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursusht to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of PRCO Common Stock
then outstanding (the earlier of (i) and (ii) being herein referred to as the
Distribution Date), (x) the Rights will be evidenced (subject to the provisions
of paragraph (b) of this Section 3) by the certificates for PRCO Common Stock
registered in the names of the holders of the PRCO Common Stock (which
certificates for PRCO Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
PRCO Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of PRCO Common Stock as of the Close
of Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more right certificates, in substantially the
form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for
each share of PRCO Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
PRCO Common Stock has been made pursuant to Section ll(p) hereof, at the time of
distribution of the Right Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As
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<PAGE>
of and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) With respect to certificates for PRCO Common Stock outstanding as of the
date of the Stock Distribution, until the Distribution Date, the Rights will be
evidenced by such certificates for PRCO Common Stock and the registered holders
of PRCO Common Stock shall also be the registered holders of the associated
Rights. Until the earlier of the Distribution Date or the Expiration Date (as
such term is defined in Section 7 hereof), the transfer of any certificates
representing shares of PRCO Common Stock in respect of which Rights have been
issued shall also constitute the transfer of the Rights associated with such
shares of PRCO Common Stock.
(c) Rights shall be issued in respect of all shares of PRCO Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
date of the Stock Distribution but prior to the earlier of the Distribution Date
or the Expiration Date. Certificates representing such shares of PRCO Common
Stock shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between Cellular Communications Holdings,
Inc. (the "Company") and Continental Stock Transfer & Trust Company (the Rights
Agent") dated as of December __, 1991 (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is on file
at the principal offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The Company
will mail to the holder of this certificate a copy of the Rights Agreement, as
in effect on the date of mailing, without charge promptly after receipt of a
written request therefor.
11
<PAGE>
Under certain circumstances set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an Acquiring Person or any
Affiliate or Associates thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i} the Distribution Date or (ii) the Expiration Date, the Rights
associated with PRCO Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of PRCO Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with PRCO Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof} shall each be substantially in
the form set forth in Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the date of
the Stock Distribution and on their face shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-hundredth of a share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise
12
<PAGE>
of each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22 hereof
that represents Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) hereof, and any Rights Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were beneficially owned
by a Person who was or became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person (as such terms are defined in the Rights Agreement).
Accordingly, this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section 7(e) of such
Agreement.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its President or any Vice President, either manually or
by facsimile signature, and shall
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<PAGE>
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split UP, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b], Section 7(e) and Section 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of one one-hundredths of a share of
14
<PAGE>
Preferred Stock (or, following a Triggering Event, PRCO Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
15
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights; Termination.
- -------------------
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) the Close of Business on the date
which is ten years from the date of the Stock Distribution (the "Final
Expiration Date"), or (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof (the earlier of (i) and (ii) being herein referred to as
the "Expiration Date"). Notwithstanding anything in this Agreement to the
contrary, this Agreement will terminate on June 1, 1992 (or such later date as
shall be determined by resolution of the Board of Directors of the Company prior
to such date) and thereafter be of no further effect and no Rights shall be
issued hereunder in the event that the Stock Distribution has not theretofore
occurred.
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be [$ ], and
shall be subject to adjustment from time to time as provided in Sections 11 and
13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per
16
<PAGE>
one one-hundredth of a share of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the total
number of one one-hundredths of a share of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) if the Company shall have elected to deposit the total
number of shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a share of
Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section ll(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including PRCO Common Stock)
of the Company, pay cash and/or distribute other property pursuant to Section
ll(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be
17
<PAGE>
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall exercise less
than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and after
the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned
by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Right pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
18
<PAGE>
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
---------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The Company
---------------------------------------------
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued shares of Preferred Stock (and, following the
occurrence of a Triggering Event, out of its authorized and unissued shares of
PRCO Common Stock and/or other securities or out of its authorized and issued
shares held in its treasury), the number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event, PRCO Common Stock and/or other
securities) that, as provided in this Agreement
19
<PAGE>
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, PRCO Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Section 11(a)(ii)
Event on which the consideration to be delivered by the Company upon exercise of
the Rights has been determined in accordance with Section 11(a)(iii) hereof, a
registration statement under the Securities Act of 1933 (the "Act."), with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and {iii} cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine
20
<PAGE>
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, PRCO
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-hundredths of a share of Preferred
Stock (or PRCO Common Stock and/or other securities, as the case may be) upon
the exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or PRCO Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidenting Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-hundredths of a share of Preferred Stock (or PRCO Common Stock and/or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time
21
<PAGE>
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
---------------------------
certificate for a number of one one-hundredths of a share of Preferred Stock (or
PRCO Common Stock and/or other securities, as the case may be) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or PRCO Common
Stock and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
PRCO Common Stock and/or other securities, as the case may be) transfer books of
the Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Stock (or PRCO
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
--------------------------------------------------------------------
Rights. The Purchase Price, the number and kind of shares covered by each Right
- ------
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of the Stock
Distribution (A) declare a dividend
22
<PAGE>
on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this
Section ll(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Preferred Stock or capital stock, as the case may be, issuable on such date,
shall be proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the Purchase Price
then in effect, the aggregate number and kind of shares of Preferred Stock or
capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, he would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both this Section ll(a)(i) and Section ll(a)(ii) hereof, the
adjustment provided for in this Section ll(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section ll(a)(ii)
hereof.
(ii) In the event any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the
23
<PAGE>
terms of any such plan), alone or together with its Affiliates and Associates,
shall, at any time after the date of the Stock Distribution, become the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
unless the event causing the 15% threshold to be crossed is a transaction set
forth in Section 13(a) hereof, or is an acquisition of shares of PRCO Common
Stock pursuant to a tender offer or an exchange offer for all outstanding shares
of PRCO Common Stock at a price and on terms determined by at least a majority
of the members of the Board of Directors who are not officers of the Company and
who are not representatives, nominees, Affiliates or Associates of an Acquiring
Person after receiving advice from one or more investment banking firms, to be
(a) at a price which is fair to stockholders (taking into account all factors
which such members of the Board deem relevant including, without limitation,
prices which could reasonably be achieved if the Company or its assets were sold
on an orderly basis designed to realize maximum value) and (9b) otherwise in the
best interests of the Company and its stockholders, then, promptly following the
occurrence of any such event, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-hundredths of a share of Preferred Stock, such number of
shares of PRCO Common Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of one one-
hundredths of a share of Preferred Stock for which a Right war exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be
24
<PAGE>
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d) hereof) per share of PRCO Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of PRCO Common Stock which are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section ll(a), the Company shall (A)
determine the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of the applicable Purchase
Price, (l) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred Stock, which the
Board has deemed to have essentially the same value or economic rights as shares
of PRCO Common Stock (such shares of preferred stock being referred to as
"Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value (less the amount of any reduction in the Purchase Price),
where such aggregate value has been determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the Board;
provided, however, that if the Company shall not have made adequate provision
to deliv-
25
<PAGE>
er value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, shares of PRCO Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. For purposes of the preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase Price. If the Board
determines in good faith that it is likely that sufficient additional shares of
PRCO Common Stock could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a}(ii)
Trigger Date, in order that the Company may seek shareholder approval for the
authorization of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder approval for such
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
26
<PAGE>
public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this
Section ll(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of PRCO Common Stock on the Section
ll(a)(ii) Trigger Date and the per share or per unit value of any PRCO
Common Stock Equivalent shall be deemed to equal the Current Market
Price per share of PRCO Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to Section ll(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription
27
<PAGE>
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Shares of Preferred Stock owned by or held for the
account of the, Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness' cash {other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock and the denominator of which shall be such current
market price (as determined pursuant to Section ll(d) hereof) per share of
28
<PAGE>
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder, other than computations
made pursuant to Section ll(a)(iii) hereof, the Current Market Price per share
of PRCO Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such PRCO Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section ll(a)(iii) hereof, the Current Market
Price per share of PRCO Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such PRCO Common Stock for the
ten (10) consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of PRCO
Common Stock is determined during a period following the announcement by the
issuer of such PRCO Common Stock of (A) a dividend or distribution on such PRCO
Common Stock payable in shares of such PRCO Common Stock or securities
convertible into shares of such PRCO Common Stock (other than the Rights), or
(B) any subdivision, combination or reclassification of such PRCO Common Stock,
and the exdividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification shall not have occurred
prior to the commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale
29
<PAGE>
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of PRCO Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system, with
respect to securities listed on the principal national securities exchange on
which the shares of PRCO Common Stock are listed or admitted to trading or, if
the shares of PRCO Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Quotation or the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if on any such date the shares of PRCO Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in PRCO Common Stock selected by the
Board. If on any such date no market maker is making a market in PRCO Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of PRCO Common Stock
are listed or admitted to trading is open for the transaction of business or, if
the shares of PRCO Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If PRCO Common Stock is not
publicly held or not so listed or traded, Current Market Price per share shall
mean the fair value per share as determined in good faith by the Board, whose
determina-
30
<PAGE>
tion shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
a (ii) For the purpose of any computation hereunder, the Current Market Price
per share of Preferred Stock shall be determined in the same manner as set forth
above for PRCO Common Stock in clause (i) of this Section ll(d) (other than the
last sentence thereof). If the Current Market Price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred Stock is
not publicly held or listed or traded in a manner described in clause (i) of
this Section ll(d), the Current Market Price per share of Preferred Stock shall
be conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to PRCO Common Stock occurring after the date of
this Agreement) multiplied by the Current Market Price per share of PRCO Common-
Stock. If neither PRCO Common Stock nor the Preferred Stock is publicly held or
so listed or traded, Current Market Price per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of a Unit shall be equal to the Current Market Price of one
share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section ll(e)
- --------
are not required to be made shall be carried forward and taken into account in
any subsequent
31
<PAGE>
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of PRCO Common Stock or other
share or one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the dated the transaction which mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent an practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment
made to the Purchase Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one one-hundredths of a share of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in Section
11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y)
32
<PAGE>
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase
Price to adjust the number of Rights, in lieu of any adjustment in the number
of one one-hundredths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section ll(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued,
33
<PAGE>
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the number
of one one-hundredths of a share of Preferred Stock issuable upon the exercise
of the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-hundredth of a share and the
number of one one-hundredth of a share which were expressed in the initial
Rights Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one one-
hundredths of a share of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable such number of one one-hundredths of a share of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in
the Purchase 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 the issuance
to the holder of any Right exercised after such record date the number of one
one-hundredths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or secu-
34
<PAGE>
rities upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company
shall be entitled to make such reductions in the Purchase Price, in addition to
those adjustments expressly required by this Section 11, as and to the extent
that in their good faith judgment the Board of Directors of the Company shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the current market price, (iii) issuance wholly for cash of
shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in in a transaction which complies with Section ll(o)
hereof)' (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section ll(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer)' in one
transaction, or a series of related transactions, assets or earning power
aggregating 50% or more of the assets, cash flow or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section ll(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of
35
<PAGE>
Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date, it will
not, except as permitted by Section 23 or Section 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the event
that the Company shall at any time after the date of the Stock Distribution and
prior to the Distribution Date (i) declare a dividend on the outstanding shares
of PRCO Common Stock payable in shares of PRCO Common Stock, (ii) subdivide the
outstanding shares of PRCO Common Stock, or (iii) combine the outstanding shares
of PRCO Common Stock into a smaller number of shares, the number of Rights
associated with each share of PRCO Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of PRCO Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of PRCO
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of PRCO Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of PRCO Common Stock outstanding immediately following
the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever
----------------------------------------------------------
an adjustment is made as provided in Section 11 and Section 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent, and with each transfer agent for the Preferred Stock
and PRCO Common Stock, a copy of such certificate,
36
<PAGE>
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of PRCO Common Stock) in accordance with Section 26 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
--------------------------------------------------------------
Power.
-----
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section ll(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
ll(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of PRCO Common Stock shall be changed into
or exchanged for stock or other securities of any other Person or cash or any
other property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets, cash flow or earning power
aggregating 50% or more of the assets, cash flow or earning power of the Company
and its Subsidiaries (taken as a whole) to any Person or Persons (other than the
Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section ll(o) hereof), then, and in each such case (except
as may be contemplated by Section 13(d) hereof), proper provision shall be made
so that: (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
traceable shares of Common Stock of the Principal Party (as such term is here-
37
<PAGE>
inafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredth
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Princlpal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y) of the first
sentence of Section 13(a),
38
<PAGE>
the Person that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z) of the first
sentence of Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- --------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, sale or
transfer unless the Principal Party shall have a sufficient number of authorized
shares of its Common Stock which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will
39
<PAGE>
(i) prepare and file a registration statement under the Act, with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial statements for
the Principal Party and each of its Affiliates which comply in all respects with
the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section 13 shall
not be applicable to a transaction described in subparagraphs (x) and (y) of
Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of PRCO Common Stock pursuant to a tender offer or exchange
offer for all outstanding shares of PRCO Common Stock which complies with the
provisions of Section 11(a)(ii)(B) hereof (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of PRCO Common Stock offered
in such transaction is not less than the price per share of PRCO Common Stock
paid to all holders of shares of PRCO Common Stock whose shares were purchased
pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of shares of PRCO Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon con-
40
<PAGE>
summation of any such transaction contemplated by this Section 13(d), all Rights
hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section ll(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of thin Section l4(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Quotation Bureau or NASDAQ or such other system then in use or, if on any such
date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors of the Company. If on
any such date no such market maker is making a market in the Rights the fair
value of the Rights on
41
<PAGE>
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of PRCO Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of PRCO Common Stock. In lieu of fractional shares of PRCO Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of PRCO Common Stock. For
purposes of this Section l4(c), the current market value of one share of PRCO
Common Stock shall be the closing price of one share of PRCO Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional
42
<PAGE>
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
PRCO Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the PRCO Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights Certificate (or, prior
to the Distribution Date, of PRCO Common Stock), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of PRCO Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and
43
<PAGE>
Section 7(f) hereof, the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated PRCO Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Rights Certificates or the associated PRCO Common
Stock certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent, subject
to the last sentence of Section 7(e) hereof, shall be required to be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
--------
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
hundredths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or
44
<PAGE>
other actions affecting stockholders (except as provided in Section 24 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for PRCO Common Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Chance of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolida-
45
<PAGE>
tion to which the Rights Agent or any successor Rights Agent shall be a party,
or any corporation succeeding to the corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, however, that such
--------
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights 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 Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult
46
<PAGE>
with legal counsel (who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights
Agent shall deem it necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person and the determination
of "current market price") be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman
of the Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence, bad
faith or willful misconduct.
Id) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or execution
of any Rights Certificate (except its countersignature thereof) nor shall it be
responsible for any breach by the Company of any covenant or
47
<PAGE>
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of PRCO Common Stock or Preferred
Stock to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of PRCO Common Stock or Preferred Stock will, when so issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from the Chairman of the
Board, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of the
Rights Agent may buy, sell or deal in any of the Rights 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 Rights Agent under this
Aqreement. Nothing herein shall preclude the Rights
48
<PAGE>
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect or
misconduct; provided, however, reasonable care was exercised in the selection
--------
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of its rights if there shall
be reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights Agent
for exercise or transfer, the certificate attached to the form of assignment or
form of election to purchase, as the case may be, has either not been completed
or indicates an affirmative response to clause 1 and/or 2 thereof, the Rights
Agent shall not take any further action with respect to such requested exercise
of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights
----------------------
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in writing mailed to the Company, and to each transfer
agent of PRCO Common Stock and Preferred Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. The Company
may remove the Rights Agent or any successor Rights. Agent upon thirty (30)
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of PRCO Common Stock and
Preferred Stock, by
49
<PAGE>
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of New York), in good standing, having a principal office in the State of
New York, which is authorized under such laws to exercise corporate trust powers
and is subject to supervision or examination by federal or state authority and
which has at the tlme of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
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. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
50
<PAGE>
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
------------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of PRCO Common Stock following the Distribution Date and prior
to the redemption or expiration of the Rights, the Company (a) shall, with
respect to shares of PRCO Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
--------
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its option, at any time prior
to the earlier of (i) the Close of Business on the tenth day following the Stock
Acquisition Date, or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $.0l per Right, as
such amount may be appropriately adjusted to reflect any stock
51
<PAGE>
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired. The
Company may, at its option, pay the Redemption Price in cash, shares of PRCO
Common Stock (based on the "current market price", as defined in Section
11(d)(i) hereof, of PRCO Common Stock at the time of redemption) or any other
form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. Promptly after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for PRCO Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any time and
from time to time after the first occurrence of a Section ll(a)(ii) Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that become void pursuant to the provision of the Section
7(e) hereof) for shares of PRCO Common Stock or PRCO Common Stock Equivalents,
52
<PAGE>
or any combination thereof, at an exchange ratio of one share of PRCO Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of shares of PRCO Common Stock and/or
PRCO Common Stock Equivalents equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or any
-------- -------
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their latest addresses as they appear upon the registry books
of the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of exchange will state the method by which the exchange of the
shares of PRCO Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In the event that the number of shares of PRCO Common Stock which are
authorized by the Company's Certificate of Incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit any exchange of Rights as contemplated in accordance
with this Section 24, the Company may, at its option, take all such action as
may be necessary to authorize additional shares of PRCO Common Stock for
issuance upon exchange of the Rights.
53
<PAGE>
(d) The Company shall not be required to issue fractions of shares of PRCO
Common Stock or to distribute certificates which evidence fractional shares of
PRCO Common Stock. In lieu of such fractional shares of PRCO Common Stock, the
Company shall pay to the registered holders of Rights with regard to which such
fractional shares of PRCO Common Stock would otherwise be issuable an amount in
cash equal to the same fraction of the value of a whole share of PRCO Common
Stock. For purposes of this Section 24, the value of a whole share of PRCO
Common Stock shall be the closing price (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24, and the value of any common
stock equivalent shall be deemed to have the same value as the common stock on
such date.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the Distribution Date,
(i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the company), or(ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of 50% or more of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)
54
<PAGE>
hereof), or (v) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participatlon therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.
(b) In case any of the events set forth in Section ll(a)(ii) hereof shall occur,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Rights Certificate, to the extent feasible and
in accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section ll(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Stock shall be deemed thereafter to refer to Common Stock
and/or, if appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to be given
-------
or made by the Rights Agent or by the holder of any Rights Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
55
<PAGE>
Cellular Communications of
Puerto Rico, Inc.
150 East 58th Street, 24th Floor
New York, New York 10155
Attention: Richard J. Lubasch, Esq.
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Continental Stock Transfer & Trust Company
72 Reade Street
New York, New York
Attention: Chairman of the Board
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
--------------------------
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. Notwithstanding the foregoing, or any other
provision of this Agreement, the Board of Directors of the Company may, prior to
the Stock Distribution, amend this Agreement to adjust the Purchase Price. From
and after the Distribution Date and subject to the penultimate sentence of this
Section 27, the Company and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein
56
<PAGE>
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Right are
not then redeemable, or (B) any other time period unless such lengthening is for
the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one-one-hundredths of a share of Preferred Stock for
which a Right is exercisable Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of PRCO Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement by or
----------
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For all
---------------------------------------------------------
purposes of this Agreement, any calculation of the number of shares of PRCO
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of PRCO Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the Company shall
57
<PAGE>
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board to any liability to the holders of
the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of PRCO Common stock) 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 Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of PRCO Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
--------
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the
58
<PAGE>
purpose or effect of this Agreement, the right of redemption set forth in
Section 23 hereof shall be reinstated and shall not expire until the Close of
Business on the tenth day following the date of such determination by the Board
of Directors.
Section 32. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. 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 34. Descrintive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By /s/ Sandra Brown By /s/ Richard J. Bubasch
--------------------------- --------------------------------
Name: Sandra Brown Name: Richard J. Lubasch
Title: Assistant Secretary Title: Senior Vice President,
General Counsel
Attest: CONTINTENTAL STOCK
TRANSFER & TRUST COMPLY
By /s/ Michael Nelson By /s/ Fred Bernstein
--------------------------- --------------------------------
Names: Michael Nelson Name: Fred Bernsteln
Title: Title:
60
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
We, Richard J. Lubasch and Sandra Brown, Senior Vice President and Assistant
Secretary, of Cellular Communications of Puerto Rico, Inc, a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of the said Corporation, the said Board of
Directors on January 23, 1992, adopted the following resolution creating a
series of 80,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of
this Corporation in accordance with the provisions of its Restated Certificate
of Incorporation, a series of Preferred Stock of the Corporation be and it
hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be designated
----------------------
as "Series A Junior Participating Preferred Stock" and the number of shares
constituting such series shall be 80,000.
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Participating Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly divi-
61
<PAGE>
tion if applicable, shall continue to be entitled to elect the whole number of
Directors until the holders of Preferred Stock shall have exercised their right
to elect two (2) Directors voting as a class, after the exercise of which right
(x) the Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the Board of
Directors may (except as provided in paragraph (C)(ii) of this Section 3) be
filled by vote of a majority of the remaining Directors theretofore elected by
the holders of the class of stock which elected the Director whose office shall
have become vacant. References in this paragraph (C) to Directors elected by the
holders of a particular class of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (a) the right of the
holders of Preferred Stock as a class to elect Directors shall cease, (y) the
term of any Directors elected by the holders of Preferred Stock as a class shall
terminate, and (z) the number of Directors shall be such number as may be
provided for in the certificate of incorporation or By-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or By-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking say corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions payable on
the Series A Junior Participating Preferred Stock as provided in Section 2
62
<PAGE>
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares
of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series A
Junior Participating Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such
63
<PAGE>
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior Participating
-----------------
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation
--------------------------------------
(voluntary or otherwise), Dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
$100 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately
adjusted as set forth in subparagraph C below to reflect such events as stock
splits, stock dividends and recapitalizations
64
<PAGE>
with respect to the Common Stock) (such number in clause (ii), the readjustment
Number"). Following the payment of the full amount of the Series A Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series A Junior Participating Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the date of the
Stock Distribution (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into
--------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series A
Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share
65
<PAGE>
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time after the date of the Stock Distribution (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. No Redemption. The shares of Series A Junior Participating Preferred
-------------
Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank
-------
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series. shall provide otherwise.
Section 10. Amendment. The Restated Certificate of Incorporation of the
---------
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating Preferred Stock may
-----------------
be issued in fractions of a share which shall entitle the holder, in proportion
to such holders fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Participating Preferred Stock.
66
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 24th day of
January, 1992.
---------------------------
Richard J. Lubasch
Senior Vice President,
General Counsel
Attest:
- ------------------------
Sandra Brown
Assistant Secretary
67
<PAGE>
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER , 200 OR EARLIER IF REDEEMED BY THE COMPANY. THE
-------- -
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.
Rights Certificate
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
This certifies that , or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of December , 1991 (the "Rights
--
Agreement"), between Cellular Communications of Puerto Rico, Inc., a Delaware
corporation (the "Company"), and Continental Stock Transfer & Trust Company, a
New York corporation (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 P.M. (New York City time) on , 200 at the office
---------- -
68
<PAGE>
or offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-assessable share of Series
A Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of [$ ] per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Purchase Price
per share set forth above, are the number and Purchase Price as of [ , 199 ],
based on the Preferred Stock as constituted at such date. The Company reserves
the right to require prior to the occurrence of a Triggering Event (as such term
is defined in the Rights Agreement) that a number of Rights be exercised so that
only whole shares of Preferred Stock will be issued".
Upon the occurrence of a Section ll(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Right
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreements), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section ll(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made
69
<PAGE>
for a full description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the holders of the
Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the specific circumstances
set forth in the Rights Agreement. Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right at any time prior to the earlier of the close of
business on (i) the tenth day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement), and (ii) the Final
Expiration Date.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything
70
<PAGE>
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or, to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and its
corporate seal.
Dated as of January , 1992
ATTEST: CELLULAR COMMUNICATIONS OF
PUERTO RICO, INC.
_________________________ By _________________________
Secretary Title:
Countersigned:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By____________________________
Authorized Signature
71
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
--------------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------------------------
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: , 19
-------- --
--------------------------------
Signature
Signature Guaranteed:
72
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: , 19 ----------------------------------
----------- -- Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
73
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.:
The undersigned hereby irrevocably elects to exercise
---------------------
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19
-------- --
----------------------------------------
Signature
Signature Guaranteed:
74
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: , 19
----------- -- --------------------------------
Signature
Signature Guaranteed:
NOTICE
------
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
75
<PAGE>
Exhibit 4.3
================================================================================
EXECUTION COPY
--------------
CCPR SERVICES, INC.,
as Issuer
and
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.,
as Guarantor
and
THE CHASE MANHATTAN BANK,
as Trustee
________________________________________
SERIES A AND SERIES B
10% SENIOR SUBORDINATED NOTES DUE 2007
________________________________________
___________________
INDENTURE
DATED AS OF January 31, 1997
___________________
================================================================================
<PAGE>
This Indenture, dated as of January 31, 1997, is among CCPR Services, Inc.,
a Delaware corporation ("Services" or the "Issuer"), Cellular Communications of
Puerto Rico, Inc., a Delaware corporation ("CCPR" or the "Guarantor") and The
Chase Manhattan Bank, a New York corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the holders of Services' 10% Series A Senior
Subordinated Notes due 2007 (the "Series A Notes") and Services' 10% Series B
Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Administrative Headquarters Lease" means the lease and leasehold
improvement for Services' administrative headquarters that are being constructed
in Guaynabo, Puerto Rico.
"Administrative Services Agreement" means that certain Administrative
Services Agreement by and among Services, CCPR and CoreComm as in effect on the
Issue Date.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
"Agent" means any Registrar, Paying Agent or co-registrar.
"Annualized Operating Cash Flow" on any date, means with respect to any
Person, the Operating Cash Flow for the Reference Period multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the Transaction
Date (after giving pro forma effect to the incurrence of such Indebtedness)
divided by (ii) the aggregate amount of Annualized Operating Cash Flow of such
Person (determined on a pro forma basis after giving effect to all acquisitions
or dispositions of businesses made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
acquisition or disposition had occurred at the beginning of such Reference
Period); provided, that for purposes of such computation, in calculating
Annualized Operating Cash Flow and consolidated Indebtedness, (a) the
transaction giving rise to the need to calculate the Annualized Operating Cash
Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first
day of the Reference Period; (b) the incurrence of any Indebtedness during the
Reference Period or subsequent thereto and on or prior to the Transaction Date
(and the application of the proceeds therefrom to the extent used to retire
Indebtedness or to acquire businesses) will be assumed to have occurred (on a
pro forma basis) on the first day of such Reference Period; (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the Transaction Date had been
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the applicable rate for the entire period; and (d) all members of the
consolidated group of such Person on the Transaction Date that were acquired
during the Reference Period shall be deemed to be members of the consolidated
group of such Person for the entire Reference Period. When the foregoing
definition is used in connection with Services, CCPR and the Restricted
Subsidiaries, references to a Person in the foregoing definition shall be deemed
to refer to CCPR and references to Subsidiaries in the foregoing definition
shall be deemed to refer to Services and the Restricted Subsidiaries.
"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.
"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 Services or CCPR, as
applicable, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest of such Person if such Person is a partnership.
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's
and in each case maturing within one year after the date of acquisition and
(iii) investments in money market funds substantially all of whose assets
comprise securities of the types described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the assets
of Services or CCPR, on a consolidated basis, in one transaction or a series of
related transactions, if, immediately after giving effect to such transaction,
any "person" or "group" (as such terms are used for purposes of Sections 13 (d)
and 14 (d) of the Exchange Act, whether or not applicable), other than an
Excluded Person or Excluded Group, is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly
or indirectly, of more than 50% of the equity of the transferee, (ii) any
"person" or "group" (as such terms are used for purposes of Sections 13 (d) and
14 (d) of the Exchange Act, whether or not applicable), other than an Excluded
Person or Excluded Group, is or becomes the "beneficial owner" (as such term is
used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or
indirectly, of more than 50% of the equity of Services or CCPR then outstanding
normally entitled to vote in elections of directors, or (iii) during any period
of 12 consecutive months after the Issue Date, individuals who at the beginning
of any such 12-month period constituted the Board of Directors of Services or
CCPR (together with any new directors whose election by such Board or whose
nomination for election by the shareholders of Services or CCPR was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason, other than as a
result of an authorized reduction in the number of directors that constitute the
Board of Directors, to constitute a majority of the Board of Directors of
Services or CCPR then in office at the time of such determination.
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"Change of Control Triggering Event" shall mean the occurrence of both a
Change of Control and a Rating Decline.
"Company" means CCPR and its Subsidiaries, including Services.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to the Capitalized Lease Obligations) of such Person and
its consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, and
(b) the amount of dividends accrued or payable by such Person or any of its
consolidated Subsidiaries in respect of preferred stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's Wholly
Owned Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by Services or CCPR, as the case may be, to be the rate of
interest implicit in such Capitalized Lease Obligation in accordance with GAAP
and (y) interest expense attributable to any Indebtedness represented by the
guaranty by such Person or a Subsidiary of such Person of an obligation of
another Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed. When the foregoing definition is used in connection
with Services, CCPR and the Restricted Subsidiaries, references to a Person in
the foregoing definition shall be deemed to refer to CCPR and references to
Subsidiaries in the foregoing definition shall be deemed to refer to Services
and the Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its consolidated Subsidiaries for such period
determined (on a consolidated basis) in accordance with GAAP, adjusted to
exclude (only to the extent included in computing such net income (or loss) and
without duplication) (i) all extraordinary gains and losses and gains and losses
that are nonrecurring (including as a result of Asset Sales outside the ordinary
course of business), (ii) the net income, if positive, of any Person, that is
not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together with all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period, (iii) except as provided in the
definition of "Annualized Operating Cash Flow Ratio," the net income (or loss)
of any Subsidiary acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (iv) the net income, if positive, of
any Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or any agreement or instrument applicable to such
Subsidiary. When the foregoing definition is used in connection with Services,
CCPR and the Restricted Subsidiaries, references to a Person in the foregoing
definition shall be deemed to refer to CCPR and references to Subsidiaries in
the foregoing definition shall be deemed to refer to Services and the Restricted
Subsidiaries.
"Corporate Trust Office" shall be at the address of the Trustee specified
in Section 12.02 hereof or such other address as to which the Trustee may give
notice to Services.
"Credit Agreement" means, at any time of determination, the credit facility
or loan agreement designated by Services to be the "Credit Agreement," as
amended, modified, renewed, refunded, replaced or refinanced in whole or in part
from time to time, which at no time will exceed $75 million. There can only be
one such credit facility or loan agreement designated to be the "Credit
Agreement" at any one time.
"Cumulative Interest Expense" means Consolidated Interest Expense of the
Company for the period beginning on February 1, 1997, through and including the
end of the last fiscal quarter preceding the date of any proposed Restricted
Payment.
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"Cumulative Operating Cash Flow" means Operating Cash Flow of the Company
for the period beginning on February 1, 1997, through and including the end of
the last fiscal quarter preceding the date of any proposed Restricted Payment.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Definitive Note" means a Note registered in the name of the Holder thereof
and issued in accordance with Section 2.06 hereof, substantially in the form of
Exhibit A-1 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, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) any other Senior Debt permitted under this Indenture,
the principal amount of which is $5 million or more and that has been designated
by Services as "Designated Senior Debt."
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of any event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the date that is 91
days after the Stated Maturity of the Notes; provided that Capital Stock will
not be deemed to be Disqualified Capital Stock if it may only be so redeemed or
repurchased solely in consideration of Qualified Capital Stock of Services or
CCPR.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Group" means a "group" (as such term is used in Sections 13 (d)
and 14 (d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of Services or CCPR
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a majority
of the voting power of the Capital Stock "beneficially owned" (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) by such group.
"Excluded Person" means (i) George S. Blumenthal, (ii) J. Barclay Knapp,
(iii) a Permitted Designee of Mr. Blumenthal or Mr. Knapp and (iv) CoreComm and
any Subsidiary or successor thereto.
"Existing Indebtedness" means Indebtedness of Services, CCPR or the
Restricted Subsidiaries in existence and outstanding on the Issue 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 ("FASB") or, if FASB ceases to exist,
any successor thereto; provided, however, that for purposes of determining
compliance with covenants in this Indenture, "GAAP" means such generally
accepted accounting principles as in effect as of the Issue Date.
"Global Note" means the Rule 144A Global Note, the IAI Global Note and the
Regulation S Global Note.
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"Global Note Legend" means the legend set forth in Section 2.06(g)(ii) to
be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means CCPR's guarantee under this Indenture.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or to financial institutions, which obligations are not being contested in good
faith and for which appropriate reserves have been established) those incurred
in the ordinary course of its business that would constitute ordinarily a trade
payable to trade creditors, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under Interest Swap and Hedging Obligations;
(c) all liabilities of others of the kind described in the preceding clauses (a)
or (b) that such Person has guaranteed or that is otherwise its legal liability
or which are secured by any assets or property of such Person and all
obligations to purchase, redeem or acquire any Capital Stock; (d) all
Disqualified Capital Stock of such Person and all preferred stock of such
Person's Subsidiaries; and (e) any and all deferrals, renewals, extensions,
refinancing and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c) or (d) or this clause (e), whether or not
between or among the same parties; provided that the outstanding principal
amount at any date of any Indebtedness issued with original issue discount is
the face amount of such Indebtedness less the remaining unamortized portion of
the original issue discount of such Indebtedness at such date.
"IAI Global Note" means the Global Note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with and registered in the name of the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount of the Notes
sold to Institutional Accredited Investors.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Brothers Inc and Wasserstein Perella & Co., Inc.
"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.
"Interest Swap and Hedging Obligations" means any obligations of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For purposes of
this Indenture, the amount of such obligations shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such obligation had terminated at the
end of such fiscal quarter, and in making such determination, if any agreement
relating to such obligation provides for the netting of amounts payable by and
to such Person thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case, the amount of
such obligations shall be the net amount so determined, plus any premium due
upon default by such Person.
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"Investment" by any Person in any other Person means, without duplication,
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such Person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of such other Person or any agreement to make any
such acquisition; (b) the making by such Person of any deposit with, or advance,
loan or other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension; (c) the entering into by
such Person of any guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of Services or CCPR of any Person to be an
Unrestricted Subsidiary. For purposes of Section 4.05 hereof, (i) "Investment"
shall include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by Services, CCPR or any of the
Restricted Subsidiaries at the time any such Investment is made; provided that,
for purposes of this sentence, the fair market value of net assets in excess of
$5,000,000 shall be as determined by an independent appraiser of national
reputation.
"Investment Grade" means BBB or higher by S&P or Baa3 or higher by Moody's
or the equivalent of such ratings by S&P or Moody's. In the event that Services
shall be permitted to select any other Rating Agency, the equivalent of such
ratings by such Rating Agency shall be used.
"Issue Date" means the date of the first issuance of the Notes under this
Indenture.
"Junior Indebtedness" means Indebtedness of Services that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in all respects.
"Letter of Transmittal" means the letter of transmittal to be prepared by
Services and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Legal Holiday" means a Saturday, a Sunday or a day on which commercial
banks in The City of New York or at a place of payment are authorized or
required by law, regulation or executive order to remain closed.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to Sections 4.13, 4.14 and 6.02 hereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents
received by Services, CCPR and the Restricted Subsidiaries in respect of an
Asset Sale (including upon the conversion to cash and Cash Equivalents of (A)
any note or installment receivable at any time or (B) any other property as and
when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent such cash and Cash Equivalents
are received within one year after such Asset Sale), less the sum of (i) all
reasonable out-of-pocket fees, commissions and other expenses incurred in
connection with such Asset Sale, including the
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amount (estimated in good faith by the Board of Directors of Services or CCPR,
as the case may be) of income, franchise, sales and other applicable taxes
required to be paid by Services, CCPR or any Restricted Subsidiary in connection
with such Asset Sale and (ii) the aggregate amount of cash so received which is
used to retire any existing Senior Debt of Services or CCPR or Indebtedness of
the Restricted Subsidiaries, as the case may be, which is required to be repaid
in connection with such Asset Sale or is secured by a Lien on the property or
assets of Services, CCPR or any of the Restricted Subsidiaries, as the case may
be.
"Net Pops" of any Person with respect to any System means the Pops of the
area served by such System multiplied by the direct and/or indirect percentage
interest of such Person in the entity licensed or designated to receive an
authorization by the Federal Communications Commission or another appropriate
governmental regulatory authority to construct or operate a System in that area.
"Net Proceeds" means the aggregate net proceeds (including the fair market
value of non-cash proceeds constituting equipment or other assets of a type
generally used in a Related Business in an amount reasonably determined by the
Board of Directors of Services or CCPR for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Non-Recourse Restricted Subsidiary" means any Person that would otherwise
be a Restricted Subsidiary of Services or CCPR but is designated as a Non-
Recourse Restricted Subsidiary in a resolution of the Board of Directors of
Services or CCPR, so long as no portion of the Indebtedness or any other
obligation (contingent or otherwise) of such Person (i) is guaranteed by
Services, CCPR or any of the Subsidiaries, (ii) is recourse to or obligates
Services, CCPR or any of the Subsidiaries in any way or (iii) subjects any
property or asset of Services, CCPR or any of the Subsidiaries, directly or
indirectly, contingently or otherwise, to the satisfaction of any portion of
such Indebtedness or other obligations.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against Services in a bankruptcy
case under Federal bankruptcy law), penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable pursuant to the terms of
the documentation governing any Indebtedness.
"Offer" means a Change of Control Offer pursuant to Section 4.13 hereof or
an Asset Sale Offer pursuant to Section 4.14 hereof.
"Offering Memorandum" means the Offering Memorandum of Services, dated
January 28, 1997, relating to the Notes.
"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 Services or
CCPR, as applicable, by two Officers of Services or CCPR, as applicable, one of
whom must be the principal executive officer, the principal financial officer,
the treasurer or the principal accounting officer of Services or CCPR, as
applicable, that meets the requirements of Section 12.05 hereof.
"Operating Cash Flow" of any Person means (a), with respect to any period,
the Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions for
income taxes
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for such period for such Person and its consolidated Subsidiaries, (ii)
depreciation, amortization and other non-cash charges of such Person and its
consolidated Subsidiaries and (iii) Consolidated Interest Expense of such Person
for such period, determined, in each case, on a consolidated basis for such
Person and its consolidated Subsidiaries in accordance with GAAP, less (c) the
amount of all cash payments made during such period by such Person and its
Subsidiaries to the extent such payments relate to non-cash charges that were
added back in determining Operating Cash Flow for such period or for any prior
period. When the foregoing definition is used in connection with Services, CCPR
and the Restricted Subsidiaries, references to a Person in the foregoing
definition shall be deemed to refer to CCPR and references to Subsidiaries in
the foregoing definition shall be deemed to refer to Services and the Restricted
Subsidiaries.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to Services, CCPR, any Subsidiary
of Services or CCPR or the Trustee.
"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).
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a Permitted
Holder, his estate, heirs, executor, administrator, committee or other personal
representative or (iv) any Person so long as a Permitted Holder owns at least
50% of the voting power of all classes of the voting stock of such Person.
"Permitted Holders" means George S. Blumenthal, J. Barclay Knapp and their
Permitted Designees.
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in Services, CCPR or a Restricted Subsidiary (other than a Non-
Recourse Restricted Subsidiary); (iii) Investments in a Person substantially all
of whose assets are of a type generally used in a Related Business (an "Acquired
Person") if, as a result of such Investments, (A) the Acquired Person
immediately thereupon becomes a Restricted Subsidiary (other than a Non-Recourse
Restricted Subsidiary) or (B) the Acquired Person immediately thereupon either
(1) is merged or consolidated with or into Services, CCPR or any of the
Restricted Subsidiaries (other than a Non-Recourse Restricted Subsidiary) and
the surviving Person is Services, CCPR or a Restricted Subsidiary (other than a
Non-Recourse Restricted Subsidiary) or (2) transfers or conveys all or
substantially all of its assets to, or is liquidated into, Services, CCPR or any
of the Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary); (iv) Investments in accounts and notes receivable acquired in the
ordinary course of business; (v) any securities received in connection with an
Asset Sale (other than those of a Non-Recourse Restricted Subsidiary) and any
investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of a
Person, all or substantially all of whose assets are of a type used in a Related
Business, that complies with Section 4.14 hereof; (vi) any Investment pursuant
to the terms of the agreements described in or referred to in the Offering
Memorandum under the caption "Reorganization" or "Certain Relationships and
Related Transactions," as such agreements were in effect on the Issue Date;
(vii) any guarantee issued by a Restricted Subsidiary in respect of Senior Debt,
or in respect of Indebtedness described in Section 4.07(b)(ix), in each case
incurred in compliance with this Indenture; (viii) advances and prepayments for
asset purchases in the ordinary course of business in a Related Business of
Services, CCPR or a Restricted Subsidiary; (ix) Investments in Non-Recourse
Restricted Subsidiaries with the proceeds of contributions irrevocably and
unconditionally received without restriction by Services from CCPR; and (x)
customary loans or advances made in the ordinary course of business to officers,
directors or employees of Services, CCPR or any of the Restricted Subsidiaries
for travel, entertainment and moving and other relocation expenses.
"Permitted Junior Securities" means Equity Interests in Services or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to this
Indenture.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of Services or
8
<PAGE>
CCPR in accordance with GAAP; (c) statutory liens of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business provided that (i) the
underlying obligations are not overdue for a period of more than 30 days and
(ii) such Liens are being contested in good faith and by appropriate proceedings
and adequate reserves with respect thereto are maintained on the books of
Services or CCPR in accordance with GAAP; (d) Liens securing the performance of
bids, trade contracts (other than borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (e) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the property, subject thereto (as such property is
used by Services, CCPR or any of the Restricted Subsidiaries) or interfere with
the ordinary conduct of the business of Services, CCPR or any of the Restricted
Subsidiaries; (f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto; (g) pledges or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security legislation; (h) Liens
in favor of the Trustee arising under this Indenture; (i) Liens securing Senior
Debt that was incurred in accordance with Section 4.07; (j) Liens securing
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary or is merged with or into Services, CCPR or a Restricted Subsidiary,
provided that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation thereof,
and do not extend to any other assets; (k) Liens arising from Purchase Money
Indebtedness permitted under this Indenture; (l) Liens securing Refinancing
Indebtedness incurred to refinance any Indebtedness that was previously so
secured in a manner no more adverse to the Holders of the Notes than the terms
of the Liens securing such refinanced Indebtedness; and (m) Liens in favor of
Services, CCPR or a Wholly Owned Restricted Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, limited liability company, unincorporated association,
governmental regulatory entity, country, state or political subdivision thereof,
trust, municipality or other entity.
"Pops" means the estimate of the population of an area as derived from the
most recent Rand McNally Commercial Atlas or if such statistics are no longer
printed in the Rand McNally Commercial Atlas or the Rand McNally Commercial
Atlas is not published, such other recognized source of such information.
"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 as otherwise
permitted by the provisions of this Indenture.
"Purchase Agreement" means that certain purchase agreement dated January
28, 1997 by and among Services, CCPR and the Initial Purchasers.
"Purchase Money Indebtedness" means Indebtedness of Services, CCPR or the
Restricted Subsidiaries incurred in connection with the purchase of property or
assets for the business of Services, CCPR or the Restricted Subsidiaries,
provided, that the recourse of the lenders with respect to such Indebtedness is
limited solely to the property or assets so purchased without further recourse
to either Services, CCPR or any of the Restricted Subsidiaries.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Rating Agencies" means (i) S&P and (ii) Moody's and (iii) if S&P or
Moody's or both shall not make a rating of the Notes publicly available, a
nationally recognized securities rating agency or agencies, as the case may be,
selected by Services, which shall be substituted for S&P or Moody's or both, as
the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and
D (or equivalent successor categories); and (iii) the equivalent of any such
category of S&P or Moody's used by another Rating Agency. In determining
whether the rating of the Notes has decreased by one or
9
<PAGE>
more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and
3 for Moody's; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g. with respect to S&P, a decline in a rating from BB to
BB-, as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means that date which is 90 days prior to the earlier of (x)
a Change of Control and (y) public notice of the occurrence of a Change of
Control or the intention by Services or CCPR to effect a Change of Control.
"Rating Decline" shall mean the occurrence on, or within six months after,
the date of public notice of the occurrence of a Change of Control or the
intention by Services to effect a Change of Control (which period shall be
extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade by any of the Rating Agencies) of any of
the following events: (a) in the event the Notes are rated by both Moody's and
S&P on the Rating Date as Investment Grade, the rating of the Notes by either
Rating Agency shall be below Investment Grade, (b) in the event the Notes are
rated by either, but not both, of the Rating Agencies on the Rating Date as
Investment Grade, the rating of the Notes by such Rating Agency shall be below
Investment Grade, or (c) in the event the Notes are rated below Investment Grade
by both Rating Agencies on the Rating Date, the rating of the Notes by either
Rating Agency shall be decreased by one or more gradations (including gradations
within Rating Categories as well as between Rating Categories).
"Reference Period" with regard to any Person means the last full fiscal
quarter of such Person for which financial information (which Services and CCPR,
as the case may be, shall use their best efforts to compile in a timely manner)
in respect thereof is available ended on or immediately preceding any date upon
which any determination is to be made pursuant to the terms of the Notes or this
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference (or if such Indebtedness
or Disqualified Capital Stock does not require cash payments prior to maturity
or is otherwise issued at a discount, the original issue price of such
Indebtedness or Disqualified Capital Stock), not to exceed the sum of (x) the
lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing, (y) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such Indebtedness and (z) all other customary fees and expenses of Services,
CCPR or such Restricted Subsidiary reasonably incurred in connection with such
refinancing; provided, that (A) Refinancing Indebtedness issued by any
Restricted Subsidiary shall only be used to Refinance outstanding Indebtedness
or Disqualified Capital Stock of such Restricted Subsidiary, (B) Refinancing
Indebtedness shall (x) not have a Weighted Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the Notes than was the Indebtedness or
Disqualified Capital Stock to be refinanced and (C) such Refinancing
Indebtedness shall have no installments of principal (or redemption payment)
scheduled to come due earlier than the scheduled maturity of any installment of
principal (or redemption payment) of the Indebtedness or Disqualified Capital
Stock to be so refinanced which was scheduled to come due prior to the Stated
Maturity of the Notes.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of January 31, 1997 by and among Services, CCPR and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
10
<PAGE>
"Regulation S Permanent Global Note" means a permanent global note that is
deposited with and registered in the name of the Depositary or its nominee,
representing a series of Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global note
that is deposited with and registered in the name of the Depositary or its
nominee, representing a series of Notes sold in reliance on Regulation S.
"Related Business" means any business directly related to the ownership,
development, operation or acquisition of communications or media systems or
services.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any trust
in which any Person described in clause (i) above have a beneficial interest.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Responsible Officer" means, when used with respect to the Trustee, any
officer within the Corporate Trust Department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note that bears the Private
Placement Legend.
"Restricted Global Note" means the Rule 144A Global Note, the IAI Global
Note and the Regulation S Global Note, each of which shall bear the Private
Placement Legend.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of such Person or any Subsidiary
of such Person, (ii) any payment on account of the purchase, redemption or other
acquisition or retirement for value, or any payment in respect of any amendment
(in anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any shares of Capital Stock of such Person
or any Subsidiary of such Person held by Persons other than such Person or any
of its Restricted Subsidiaries, (iii) any defeasance, redemption, repurchase or
other acquisition or retirement for value, or any payment in respect of any
amendment (in anticipation of or in connection with any such retirement,
acquisition or defeasance) in whole or in part, of any Indebtedness of Services
or CCPR (other than the scheduled repayment thereof at maturity and any
mandatory redemption or mandatory repurchase thereof pursuant to the terms
thereof) by such Person or a Subsidiary of such Person that is subordinate in
right of payment to the Notes (other than in exchange for Refinancing
Indebtedness permitted to be incurred under this Indenture and except for any
such defeasance, redemption, repurchase, other acquisition or payment in respect
of Indebtedness held by any Restricted Subsidiary) and (iv) any Investment
(other than a Permitted Investment); provided, however, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on shares of Capital Stock of Services, CCPR or any Restricted
Subsidiary solely in shares of Qualified Capital Stock, (ii) any dividend,
distribution or other payment to Services, CCPR, or any dividend to any of the
Restricted Subsidiaries by any of the Subsidiaries, (iii) any dividend,
distribution or other payment by any Restricted Subsidiary on shares of its
Capital Stock that is paid pro rata to all holders of such Capital Stock and
(iv) the purchase, redemption or other acquisition or retirement for value of
shares of Capital Stock of any Restricted Subsidiary (other than Non-Recourse
Restricted Subsidiaries) held by Persons other than Services, CCPR or any of the
Restricted Subsidiaries.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" means any Subsidiary of CCPR or any future
subsidiary of Services which at the time of determination is not an Unrestricted
Subsidiary. The Board of Directors of CCPR or Services, as the case may be, may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if,
immediately before and after giving effect to such designation, there would
exist no Default or Event of Default and CCPR or Services, as
11
<PAGE>
the case may be, could incur at least $1.00 of Indebtedness pursuant to Section
4.07(a) hereof, on a pro forma basis taking into account such designation.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 144A Global Note" means a permanent global note that is deposited
with and registered in the name of the Depositary or its nominee, representing a
series of Notes sold in reliance on Rule 144A or another exemption from the
registration requirements of the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"S&P" means Standard & Poor's Rating Group and its successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means all Indebtedness of Services or CCPR (including, with
respect to the Credit Agreement, all Obligations thereunder), including interest
thereon, whether outstanding on the Issue Date or thereafter incurred, other
than (a) Indebtedness that is expressly subordinated or junior in right of
payment to any Indebtedness of Services or CCPR, (b) Indebtedness represented
by Disqualified Capital Stock, (c) any liability for federal, state, local or
other taxes owed or owing by Services or CCPR, (d) Indebtedness of Services or
CCPR to any Subsidiary of Services or CCPR or any Affiliate of Services or CCPR
(other than Purchase Money Indebtedness constituting at least 75% but not more
than 100% of the cost of wireless cellular communication system equipment and
other related fixed assets, incurred in compliance with Section 4.07 hereof),
(e) trade payables and (f) Indebtedness incurred in violation of this Indenture.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of the
net book value of the assets of CCPR, Services and the Restricted Subsidiaries
on a consolidated basis.
"Stated Maturity" means the date fixed for the payment of any principal or
premium pursuant to this Indenture and the Notes, including the Maturity Date,
upon redemption, acceleration, Asset Sale Offer, Change of Control Offer or
otherwise.
"Strategic Equity Investor" means any company, or a controlled Affiliate of
any company, which is engaged principally in a cable or telecommunications
business; provided, however, that a Strategic Equity Investor shall not include
(x) any Subsidiary of CCPR or Services or (y) any Person that is an Affiliate of
CCPR or Services.
"Subsidiary" with respect to any Person, means (i) a corporation at least
fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"System" means a wireless communications system.
"Tax Sharing Agreement" means that certain Tax Sharing Agreement by and
among Services, CCPR and the Restricted Subsidiaries as in effect on the Issue
Date.
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Unrestricted Definitive Note" mean a Definitive Note that does not bear
the Private Placement Legend.
"Unrestricted Global Note" means one or more Global Notes that do not and
are not required to bear the Private Placement Legend and are deposited with and
registered in the name of the Depositary or its nominee.
"Unrestricted Subsidiary" shall mean any Subsidiary of CCPR or any future
Subsidiary of Services that, at the time of determination, shall be an
Unrestricted Subsidiary (as designated by the Board of Directors of CCPR or
Services, as the case may be, as provided below). The Board of Directors of
CCPR or Services, as the case may be, may designate any Subsidiary of CCPR or
Services, as the case may be, (including any newly acquired or newly formed
Subsidiary at or prior to the time it is so formed or acquired) to be an
Unrestricted Subsidiary if (a) no Default or Event of Default is existing or
will occur as a consequence thereof, (b) such Subsidiary does not own any
Capital Stock of, or own or hold any Lien on any property or asset of, Services,
CCPR or any Restricted Subsidiary that is not a Subsidiary of the Subsidiary to
be so designated and (c) such Subsidiary and each of its Subsidiaries has not at
the time of designation, and does not thereafter, create, incur, issue, assume,
guarantee, or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any property or assets
of Services, CCPR or any of the Restricted Subsidiaries (except that such
Subsidiary and its Subsidiaries may guarantee the Notes); provided that either
(A) the Subsidiary to be so designated has total assets of $1,000 or less or (B)
if such Subsidiary has assets greater than $1,000, that such designation would
be permitted under Section 4.05 hereof. Each such designation shall be
evidenced by filing with the Trustee a certified copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
"Wholly Owned" means, with respect to a Subsidiary of Services or CCPR, (i)
a Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more other
Wholly Owned Subsidiaries of such Person, or (ii) any entity other than a
corporation in which such Person, directly or indirectly, owns not less than 99%
of the Capital Stock of such entity.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Acceleration Notice"............................. 6.02
"Accredited Investors"............................ 2.01
"Additional Guarantee"............................ 4.15
"Additional Guarantor"............................ 4.15
"Asset Sale"...................................... 4.14
"Asset Sale Offer"................................ 4.14
"Asset Sale Offer Amount"......................... 4.14
"Asset Sale Offer Period"......................... 3.09
"Asset Sale Offer Price".......................... 4.14
"Asset Sale Payment Date"......................... 3.09
"Asset Sale Purchase Date"........................ 3.09
"Cedel Bank"...................................... 2.01
</TABLE>
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<TABLE>
<S> <C>
"Covenant Defeasance"............................. 8.03
"Change of Control Offer"......................... 4.13
"Change of Control Payment"....................... 4.13
"Change of Control Payment Date".................. 4.13
"Custodian"....................................... 6.01
"DTC"............................................. 2.03
"Euroclear"....................................... 2.01
"Event of Default"................................ 6.01
"Global Note Holder".............................. 2.01
"Institutional Accredited Investors".............. 2.01
"Legal Defeasance"................................ 8.02
"Other Indebtedness".............................. 4.15
"Paying Agent".................................... 2.03
"Payment Blockage Notice"......................... 10.03
"Purchase Date"................................... 3.09
"Registrar"....................................... 2.03
"Related Person Transaction"...................... 4.08
"Strategic Equity Investor"....................... 3.07
"Trustee Expenses"................................ 6.08
</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. Any terms
incorporated by reference 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 therein.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has the meaning
assigned to it under GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
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 Exhibits A-1 and A-2 attached 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 issued in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof. The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and
Services, CCPR and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
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(a) Global Notes. Series A Notes offered and sold to (i) QIBs in reliance
on Rule 144A, (ii) Institutional Accredited Investors that are not QIBs, and
(iii) accredited investors as defined in Rule 501(a)(4), (5) or (6) under the
Securities Act ("Accredited Investors"), shall be issued initially in the form
of the Rule 144A Global Note which, in each case, shall be deposited on behalf
of the purchasers of the Series A Notes represented thereby with the Depositary
or its nominee at its New York office, and registered in the name of the
Depositary or a nominee of the Depositary (the "Global Note Holder"), duly
executed by Services and authenticated by the Trustee as hereinafter provided.
The aggregate principal amount of the Rule 144A Global Notes may from time to
time be increased or decreased by adjustments made on the records of the Trustee
and the Depositary or its nominee, as the case may be, in connection with
transfers of interest as hereinafter provided.
Series A Notes offered and sold in reliance on Regulation S as provided in
the Purchase Agreement shall be issued initially in the form of the Regulation S
Temporary Global Note and shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Trustee, at its New York office, as custodian
for the Depositary, and registered in the name of the Depositary or the nominee
of the Depositary for the accounts of designated agents holding on behalf of
Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel Bank")
duly executed by Services and authenticated by the Trustee as hereinafter
provided. The "40-day restricted period" (as defined in Regulation S) shall be
terminated upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein pursuant to another exemption from registration
under the Securities Act and who will take delivery of a beneficial ownership
interest in a Rule 144A Global Note, all as contemplated by Section 2.06(b)(ii)
hereof), and (ii) an Officers' Certificate from Services. Following the
termination of the 40-day restricted period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with the transfer of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges, redemptions and
transfers of interest. Any endorsement of a Global Note to reflect the amount
of any increase or decrease in the 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.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by the Holders through
Euroclear or Cedel Bank.
Except as set forth in Section 2.06 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to Rule
144A Global Notes and the Regulation S Permanent Global Notes deposited with or
on behalf of the Depositary.
Services shall execute and the Trustee shall, in accordance with this
Section 2.01(b), authenticate and deliver the Global Notes that (i) shall be
registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
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Participants shall have no rights either under this Indenture with respect
to any Global Note held on their behalf by the Depositary or by the Trustee as
custodian for the Depositary or under such Global Note, and the Depositary may
be treated by Services, the Trustee and any agent of Services or the Trustee as
the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent Services, the
Trustee or any agent of Services or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Definitive Notes. Notes issued in certificated form shall be
substantially in the form of Exhibits A-1 and A-2 attached hereto (but without
including the text referred to in footnotes 1 and 2 thereto).
Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for Services by manual or facsimile
signature. Services' 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 an
authorized signatory of the Trustee, and the Trustee's signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.
The form of Trustee's certificate of authentication to be borne by the Notes
shall be substantially as set forth in Exhibits A-1 and A-2 hereto.
The Trustee shall, upon a written order of Services signed by two Officers
directing the Trustee to authenticate the Notes and certifying that all
conditions precedent to the issuance of the Notes contained herein have been
complied with, authenticate Notes for original issuance up to an aggregate
principal amount stated in paragraph 4 of the Notes (the aggregate principal
amount of outstanding Notes may not exceed that amount at any time, except as
provided in Section 2.07 hereof).
The Trustee may appoint an authenticating agent acceptable to Services to
authenticate Notes. Unless limited by the terms of such appointment, 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 Services or an Affiliate of Services.
Section 2.03. Registrar and Paying Agent.
Services shall maintain an office or agency (the "Registrar") where Notes
may be presented for registration of transfer or for exchange and an office or
agency (the "Paying Agent") where Notes may be presented for payment. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
Services 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. Services may change any Paying
Agent or Registrar without prior notice to any Holder. Services shall notify in
writing the Trustee and the Trustee shall notify the Holders in writing of the
name and address of any Agent not a party to this Indenture. If Services fails
to appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. Services shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, and such agreement shall
incorporate the TIA's provisions and implement the provisions of this Indenture
that relate to such Agent.
Services initially appoints The Depository Trust Company ("DTC") to act as
Depositary with respect to the Global Notes.
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Services initially appoints the Trustee as the Registrar and Paying Agent
and to act as Note Custodian with respect to the Global Notes. Services
initially appoints the Trustee to act as the Registrar and Paying Agent with
respect to the Definitive Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
Services shall require each Paying Agent other than the Trustee to agree in
writing that the Paying Agent will hold in trust for the Holders' benefit or the
Trustee all money the Paying Agent holds for redemption or purchase of the Notes
or for the payment of principal of, or premium, if any, or interest on, or
Liquidated Damages, if any, with respect to the Notes, and will promptly notify
the Trustee of any Default by Services in providing the Paying Agent with
sufficient funds to (i) purchase Notes tendered pursuant to an Offer (ii) redeem
Notes called for redemption, or (iii) make any payment of principal, premium,
interest or Liquidated Damages, if any, due on the Notes. While any such
Default continues, the Trustee may require the Paying Agent to pay all money it
holds to the Trustee and to account for any funds disbursed. Services at any
time may require the Paying Agent to pay all money it holds to the Trustee and
to account for any funds disbursed. Upon payment over to the Trustee, the
Paying Agent (if other than Services or any of its Subsidiaries) shall have no
further liability for the money it delivered to the Trustee. If Services or any
of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the Holders' benefit or the Trustee all money it holds
as Paying Agent.
Section 2.05. Holder lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, Services 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 that sets forth the names and addresses of, and
the aggregate principal amount of Notes held by, each Holder, and Services shall
otherwise comply with Section 312(a) of the TIA.
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 Services for Definitive Notes if (i) Services 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
Services within 120 days after the date of such notice from the Depositary or
(ii) Services 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; provided that in no event shall the
Regulation S Temporary Global Note be exchanged by Services for Definitive Notes
prior to (x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903. 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
in writing. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.07 and 2.11 hereof. Every Note authenticated
and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to Section 2.07 or 2.11 hereof, shall in the form of, and
shall be, a Global Note of like tenor. 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 procedures of the Depositary therefor. 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. The Trustee shall have no obligation to ascertain the Depositary's
compliance with any such restrictions on transfer or exchange. Transfers and
exchanges of beneficial interests in the Global Notes also shall
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require 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 only
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; provided, however,
that prior to the expiration of the Restricted Period transfers of
beneficial interests in the Regulation S Temporary Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). 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 transfers of beneficial interests in a Global Note to
Persons who take 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 the specified 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 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
(B) (1) above; provided that in no event shall Definitive Notes be issued
upon the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant
to Rule 903 under the Securities Act. Upon an Exchange Offer by Services
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 of Beneficial Interests to Another Restricted 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 another Restricted Global Note if the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the Rule 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Permanent Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver (x) a certificate in the form of Exhibit B hereto, including
the certifications in item (3)(d) thereof, (y) to the extent required
by item (3)(d) of Exhibit B hereto, an Opinion of Counsel from the
transferee or the transferor in form reasonably acceptable to Services
and the Registrar to the effect that such transfer is in compliance
with the
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Securities Act and such beneficial interest is being transferred in
compliance with any applicable blue sky securities laws of any State
of the United States and (z) if the transfer is being made to an
Institutional Accredited Investor and effected pursuant to an
exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144 under the Securities Act or Rule 904 a
certificate from the transferee in the form of Exhibit D hereto.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note.
Beneficial interests in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in the Unrestricted Global Note or
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the Unrestricted Global 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 under the
Securities Act) of Services;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement (as defined in the Registration Rights
Agreement).
(C) any such transfer is effected by a Participating Broker-
Dealer (as defined in the Registration Rights Agreement) pursuant to
the Exchange Offer Registration Statement (as defined in the
Registration Rights Agreement) in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following (all of which may be
submitted by facsimile):
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
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)(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 the Unrestricted Global Note, a certificate
from such transferor 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, that the restrictions on exchange or transfer
contained herein and in the Private Placement Legend are not required
in order to maintain compliance with the Securities Act, and such
beneficial interest is being exchanged or transferred in compliance
with any applicable blue sky securities laws of any State of the
United States.
If any such transfer or exchange is effected pursuant to
subparagraph (B) or (D) above at a time when an Unrestricted Global Note
has not yet been issued, Services shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, Services shall
execute and the Trustee shall authenticate and deliver to the Depositary
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 any Restricted Global Note.
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(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note or
to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon receipt by the Registrar of
the following documentation (all of which may be submitted by facsimile):
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
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
from such transferor in the form of 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 904, a
certificate from such transferor in the form of Exhibit B hereto,
including the certifications in item (2) thereof;
(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 from such transferor in the form of 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, (1) a certificate from
such transferor in the form of Exhibit B hereto, including the
certifications in item (3)(d) thereof, (2) a certificate from the
transferee to the effect set forth in Exhibit D hereof and, (3) to the
extent required by item (3)(d) of Exhibit B hereto, an Opinion of
Counsel from the transferee or the transferor reasonably acceptable to
Services and the Registrar to the effect that such transfer is in
compliance with the Securities Act and such beneficial interest is
being transferred in compliance with any applicable blue sky
securities laws of any State of the United States;
(F) if such beneficial interest is being transferred to
Services or any of its Subsidiaries, a certificate from such
transferor in the form of 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 from such transferor in the form of 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 Services shall execute and the Trustee shall authenticate and deliver
to the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Definitive Notes issued in exchange for
beneficial interests in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall be registered in such names and in such authorized
denominations as the Holder shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. Definitive Notes 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 Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
(A) exchanged for a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant
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to Rule 903 or (B) transferred to a Person who takes delivery thereof in
the form of a Definitive Note prior to the conditions set forth in clause
(A) above or unless the transfer is pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Notwithstanding Section 2.06(c)(i), 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, 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 under the
Securities Act) of Services;
(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 (all of which may be
submitted by facsimile):
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
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 a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such transferor 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 Services and
the Registrar, to the effect that such exchange or transfer is in
compliance with the Securities Act, that the restrictions on exchange
transfer contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities Act, and
such beneficial interest in a Restricted Global Note is 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 of
this Section 2.06(c)(iii), 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 Services shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions an
Unrestricted Definitive Note in the appropriate principal amount.
(iv) If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii), 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 Services shall execute
and the Trustee shall authenticate and deliver to the Person designated in
the instructions a Definitive Note in the appropriate principal amount.
Definitive Notes issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iv) and 2.06(c)(iii) shall be registered in such names
and in such authorized denominations
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as the Holder shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. Definitive Notes
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iv) and Section 2.06(c)(iii) shall not bear the Private Placement
Legend. Beneficial interests in an Unrestricted Global Note cannot be
exchanged for a Definitive Note bearing the Private Placement Legend or
transferred to a Person who takes delivery thereof in the form of a
Definitive Note bearing the Private Placement Legend.
(d) Transfer or Exchange of Definitive Notes for Beneficial Interests in
Global Notes.
(i) If any Holder of Restricted Definitive Notes proposes to
exchange such Notes for a beneficial interest in a Restricted Global Note
or to transfer such 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 (all of which
may be submitted by facsimile):
(A) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes 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 item (2)(b) thereof;
(B) if such Restricted Definitive Notes are being transferred
to a QIB in accordance with Rule 144A, a certificate from such
transferor in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Notes are being transferred
to a Non-U.S. Person in an offshore transaction in accordance with
Rule 904, a certificate from such transferor in the form of Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Notes are 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 from such transferor in the form of Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Notes are 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, (1) a certificate
from such transferor in the form of Exhibit B hereto, including the
certifications in item (3)(d) thereof, (2) a certificate from the
transferee in the form of Exhibit D hereto and, (3) to the extent
required by item (3)(d) of Exhibit B, an Opinion of Counsel from the
transferee or the transferor reasonably acceptable to Services and the
Registrar to the effect that such transfer is in compliance with the
Securities Act and such Definitive Notes are being transferred in
compliance with any applicable blue sky securities laws of any State
of the United States;
(F) if such Restricted Definitive Notes are being transferred
to Services 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 Notes are 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 Notes, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the Rule 144A Global Note, in the case of clause (C) above, the
appropriate Regulation S Global Note, and in all other cases, the IAI
Global Note.
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(ii) A Holder of Restricted Definitive Notes may exchange such Notes
for a beneficial interest in the Unrestricted Global Note or transfer such
Restricted Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in the 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 (as defined in
the Registration Rights Agreement) or (3) a Person who is an affiliate
(as defined in Rule 144 of the Securities Act) of Services;
(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 (all of which may be
submitted by facsimile):
(1) if the Holder of such Restricted 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;
(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 transferor 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 Services and
the Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act, that the restrictions on exchange
or 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 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 Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) A Holder of Unrestricted Definitive Notes may exchange such
Notes for a beneficial interest in the Unrestricted Global Note or transfer
such Definitive Notes to a Person who takes delivery thereof in the form of
a beneficial interest in the Unrestricted Global Note. Upon receipt of a
written request for such an exchange or transfer, the Trustee shall cancel
the Unrestricted Definitive Notes 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,
Services shall issue and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, Services shall execute and the Trustee shall
authenticate and deliver to the Depositary 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. 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
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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, 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 904, then
the transferor must 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 (x) a certificate in the form of
Exhibit B hereto, including the certifications in item (3)(d) thereof,
(y) to the extent required by item (3)(d) of Exhibit B hereto, an
Opinion of Counsel in form reasonably acceptable to Services and the
Registrar to the effect that such transfer is in compliance with the
Securities Act and such beneficial interest is being transferred in
compliance with any applicable blue sky securities laws of any State
of the United States and (z) if the transfer is being made to an
Institutional Accredited Investor and effected pursuant to an
exemption from the registration requirements of the Securities Act
other than Rule 144A, Rule 144 under the Securities Act or Rule 904, a
certificate from the transferee in the form of Exhibit D hereto.
(ii) Restricted Definitive Notes may be exchanged by any Holder
thereof for an Unrestricted Definitive Note or transferred to Persons who
take 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, 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 under the
Securities Act) of Services;
(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 (all of which may be
submitted by facsimile):
(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 transferor 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 Services to the
effect that such exchange or transfer is
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<PAGE>
in compliance with the Securities Act, that the restrictions on
exchange or 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 Registration Rights Agreement, Services 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 under
the Securities Act) of Services and accepted for exchange in the Exchange Offer
and (ii) 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 Services shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Restricted
Definitive Notes so accepted 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:
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH SERVICES OR ANY AFFILIATE OF SERVICES WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO SERVICES OR TO THE GUARANTOR, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),(2),(3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS
25
<PAGE>
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE LAWS, SUBJECT TO SERVICES'
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
DELIVERY BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE OF A TRANSFER
NOTICE, THE FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE, AND, IN THE
CASE OF THE FOREGOING CLAUSE (E), DELIVERY BY THE TRANSFEROR OF A LETTER OF
REPRESENTATION SIGNED BY SUCH TRANSFEREE, THE FORM OF WHICH MAY BE OBTAINED
FROM THE TRUSTEE. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of 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:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE 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 SHALL ACT AS THE
DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY SERVICES AND THE
REGISTRAR. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(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,
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<PAGE>
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 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, Services
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon Services' 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 Services 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, 4.13, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange 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 Services, 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) Services 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 as defined in paragraph 1 of the Notes.
(vi) Prior to due presentment for the registration of a transfer or
exchange of any Note, the Trustee, any Agent and Services 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 Services 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.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered by the Holder to the Trustee or
Services, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, Services shall issue and the Trustee,
upon the receipt of an Officers' Certificate, shall authenticate a replacement
Note if the Trustee's requirements are met. If the Trustee or Services requires
it, the Holder must supply an indemnity bond that is sufficient in the judgment
of the Trustee and Services to protect Services, the Trustee, any Agent or any
authenticating agent from any loss
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<PAGE>
that any of them may suffer if a Note is replaced. Services and the Trustee may
charge for their expenses in replacing a Note. Every replacement Note is an
additional Obligation of Services and shall be entitled to all benefits of this
Indenture equally and ratably with other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes the Trustee has
authenticated except for those it has cancelled, those delivered to it for
cancellation, those representing reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section 2.08 as not outstanding.
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 a bona
fide purchaser holds the replaced Note.
If the entire principal of, and premium, if any, and accrued interest on,
and Liquidated Damages, if any, with respect to any Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest and
Liquidated Damages, if any, on it cease to accrue.
Subject to Section 2.09 hereof, a Note does not cease to be outstanding
because Services or an Affiliate of Services holds the Note.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by
Services or an Affiliate 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 Responsible
Officer of the Trustee knows are so owned shall be so disregarded.
Notwithstanding the foregoing, Notes that Services or an Affiliate offers to
purchase or acquires pursuant to an Offer, exchange offer, tender offer or
otherwise shall not be deemed to be owned by Services or an Affiliate until
legal title to such Notes passes to Services or such Affiliate, as the case may
be.
Section 2.10. Temporary Notes.
Until Definitive Notes are ready for delivery, Services may prepare and
execute and the Trustee shall authenticate and deliver temporary Notes.
Temporary Notes shall be substantially in the form of Definitive Notes but may
have variations that Services considers appropriate for temporary Notes.
Without unreasonable delay, Services shall prepare and the Trustee, upon receipt
of Services' written order signed by two Officers which shall specify the amount
of temporary Notes to be authenticated and the date on which the temporary Notes
are to be authenticated, shall authenticate Definitive Notes and deliver them in
exchange for temporary Notes. Until such exchange, Holders of temporary Notes
shall be entitled to the same rights, benefits and privileges as Definitive
Notes.
Section 2.11. Cancellation.
Services at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange, replacement, payment
(including all Notes called for redemption and all Notes accepted for payment
pursuant to an Offer) or cancellation, and the Trustee shall cancel all such
Notes and shall destroy all cancelled Notes (subject to the Exchange Act's
record retention requirements) and deliver a certificate of their destruction to
Services unless by written order, signed by two Officers of Services, Services
shall direct that cancelled Notes be returned to it. Services may not issue new
Notes to replace any Notes that have been paid or that have been cancelled by
the Trustee or that have been delivered to the Trustee for cancellation. If
Services or an Affiliate acquires any Notes (other than by redemption or
pursuant to an Offer), such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Notes unless and until such
Notes are delivered to the Trustee for cancellation.
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<PAGE>
Section 2.12. Defaulted Interest.
If Services 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 Holders on a subsequent special record
date, in each case at the rate provided in the Notes and in Section 4.01 hereof.
Services shall fix or cause to be fixed each such special record date and
payment date. As early as practicable but at least 15 days prior to the special
record date, Services (or the Trustee, in the name of and at the expense of
Services) shall mail to Holders a notice that states the special record date,
the related payment date and the amount of interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders of
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in Section
316(c) of the TIA.
Section 2.14. Cusip Number.
A "CUSIP" number shall be printed on the Notes, and the Trustee shall use
the CUSIP number in notices of redemption, purchase or exchange as a convenience
to Holders, provided that any such notice may state that no representation is
made as to the correctness or accuracy of the CUSIP number printed in the notice
or on the Notes and that reliance may be placed only on the other identification
numbers printed on the Notes. Services shall promptly notify the Trustee of any
change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If Services elects to redeem Notes pursuant to Section 3.07 hereof, it
shall furnish to the Trustee, at least 30 days prior to the redemption date and
at least 60 days prior to the date that notice of the redemption is to be mailed
by Services to Holders (or such shorter time as may be acceptable to the
Trustee), an Officers' Certificate stating that Services has elected to redeem
Notes pursuant to Section 3.07(a) or 3.07(b) hereof, as the case may be, the
date notice of redemption is to be mailed to Holders, the redemption date, the
aggregate principal amount of Notes to be redeemed, the redemption price for
such Notes and the amount of accrued and unpaid interest on and Liquidated
Damages, if any, with respect to such Notes as of the redemption date. If the
Trustee is not the Registrar, Services shall, concurrently with delivery of its
notice to the Trustee of a redemption, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may rely) setting forth the name
of, and the aggregate principal amount of Notes held by, each Holder.
If Services is required to offer to purchase Notes pursuant to Section 4.13
or 4.14 hereof, it shall furnish to the Trustee, at least ten Business Days
before notice of the Offer is to be mailed to Holders (or such shorter time as
may be acceptable to the Trustee), an Officers' Certificate setting forth that
the Offer is being made pursuant to Section 4.13 or 4.14 hereof, as the case may
be, the date upon which such purchase will occur (the "Purchase Date"), the
maximum principal amount of Notes Services is offering to purchase pursuant to
the Offer, the purchase price for such Notes, and the amount of accrued and
unpaid interest on and Liquidated Damages, if any, with respect to such Notes as
of the Purchase Date.
Services will also provide the Trustee with any additional information that
the Trustee reasonably requests in connection with any redemption or Offer.
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<PAGE>
Section 3.02. Selection of Notes to be Redeemed or Purchased.
If less than all Notes are to be redeemed or if less than all Notes
tendered pursuant to an Offer are to be accepted at any time, selection of Notes
for redemption or acceptance shall 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 other method as the Trustee deems fair and appropriate, provided that
no Notes with a principal amount of $1,000 or less shall be redeemed or
purchased in part. Notes and portions thereof selected by the Trustee shall be
in amounts of $1,000 or whole multiples of $1,000. If any Note is to be
redeemed or purchased in part only, the notice of redemption or Offer that
relates to such Note shall state the portion of the principal amount thereof to
be redeemed or purchased. A new Note in principal amount equal to the
unredeemed or unaccepted portion thereof shall be issued in the name of the
Holder thereof upon cancellation of the original Note. On and after the
redemption date, interest shall cease to accrue on Notes or portions thereof
called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption date,
Services shall mail by first class mail a notice of redemption to each Holder of
Notes or portions thereof that are to be redeemed.
The notice shall identify the Notes or portions thereof to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price for the Notes and separately stating the
amount of unpaid and accrued interest on, and Liquidated Damages,
if any, with respect to, such Notes as of the date of redemption;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Notes 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 will be
issued upon cancellation of the original Note;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent before the close of business on the redemption date
to collect the redemption price for, and any accrued and unpaid
interest on, and Liquidated Damages, if any, with respect to such
Notes;
(6) that, unless Services defaults in making such redemption payment,
interest (including Liquidated Damages, if any) on Notes called
for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(8) the CUSIP number; provided that no representation is made as to
the correctness or accuracy of the CUSIP number listed in such
notice and printed on the Notes.
At Services' request, the Trustee shall (at Services' expense) give the
notice of redemption in Services' name at least 30 but not more than 60 days
before a redemption; provided, however, that Services shall deliver to the
Trustee, at least 45 days prior to the redemption date and at least 10 days
prior to the date that notice of the redemption is to be mailed to Holders, an
Officers' Certificate that (i) requests the Trustee to give notice of the
redemption to Holders (or such shorter time as may be acceptable to the
Trustee), (ii) sets forth the information to be provided to Holders in the
notice of redemption, as set forth in the preceding paragraph, (iii) states that
Services
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<PAGE>
has elected to redeem Notes pursuant to Section 3.07(a) or 3.07(b) hereof, as
the case may be, and (iv) sets forth the aggregate principal amount of Notes to
be redeemed and the amount of accrued and unpaid interest and Liquidated
Damages, if any, thereon as of the redemption date. If the Trustee is not the
Registrar, Services shall, concurrently with any such request, cause the
Registrar to deliver to the Trustee a certificate (upon which the Trustee may
rely) setting forth the name of, the address of, and the aggregate principal
amount of Notes held by, each Holder.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become due
and payable on the redemption date at the redemption price set forth in the
Note. Upon surrender to the Trustee or Paying Agent, such Notes called for
redemption shall be paid at the redemption price (which shall include accrued
interest thereon and Liquidated Damages, if any, to the redemption date) but
installments of interest, the maturity of which is on or prior to the redemption
date, shall be payable to Holders of record at the close of business on the
relevant record dates.
Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, Services shall deposit with the Trustee
or with the Paying Agent money sufficient to pay the redemption price of, and
accrued interest on, and Liquidated Damages, if any, with respect to all Notes
to be redeemed on that date. The Trustee or the Paying Agent shall return to
Services any money that Services deposited with the Trustee or the Paying Agent
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, and Liquidated Damages, if any, with respect to all Notes to be
redeemed.
If Services complies with the preceding paragraph, interest and Liquidated
Damages, if any, on the Notes to be redeemed will cease to accrue on such Notes
on the applicable redemption date, whether or not such Notes are presented for
payment. If a Note is redeemed on or after an interest record date but on or
prior to the related interest payment date, then any accrued and unpaid interest
and Liquidated Damages, if any, shall be paid to the Person in whose name such
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 Services to comply with the preceding paragraph, interest will
be paid on the unpaid principal, premium, if any, interest and Liquidated
Damages, if any, from the redemption date until such principal, premium,
interest and Liquidated Damages, if any, is paid, at the rate of interest
provided in the Notes and Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, Services shall issue and
the Trustee shall authenticate for the Holder at Services' expense a new Note
equal in principal amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption Provisions.
(a) Except as provided below, Services shall not have the right to redeem
any Notes prior to February 1, 2002. On or after February 1, 2002, Services
will have the right to redeem all or any part of the Notes in cash at the
redemption prices (expressed as a percentage of the aggregate principal amount
thereof) set forth below, in each case plus accrued and unpaid interest and
Liquidated Damages, if any, to the applicable redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on an Interest Payment Date that is on or prior to the redemption date) if
redeemed during the 12-month period beginning February 1, of the years indicated
below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 105.000%
2003 103.333%
2004 101.667%
2005 and thereafter 100.000%
</TABLE>
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<PAGE>
(b) In addition, in the event of the first to occur prior to February 1,
2000 of (i) a public offering by Services or CCPR of Capital Stock (other than
Disqualified Stock) for gross proceeds of $50 million or more or (ii) a sale or
series of related sales by Services or CCPR of its Common Stock to one or more
Strategic Equity Investors in a transaction not involving a Change of Control
for an aggregate purchase price of $35 million or more (a "Strategic Equity
Investor Sale"), Services may, at its option, use all or any portion of the net
proceeds thereof to redeem up to a maximum of 33-1/3% of the original aggregate
principal amount at maturity of the Notes at a redemption price equal to 109% of
the principal amount of the Notes plus accrued and unpaid interest and
Liquidated Damages, if any (determined at the date of redemption); provided,
however, that such redemption may be effected only to the extent that not less
than 66-2/3% of the original aggregate principal amount at maturity of the Notes
shall remain outstanding immediately after such redemption. Any such redemption
may be effected only once and must be effected upon not less than 30 nor more
than 60 days notice given within 30 days following such public equity offering
or the most recent such sale to a Strategic Equity Investor, as the case may be,
provided, however, that if as a result of the same transaction, Services is
required to make an Asset Sale Offer, pursuant to Section 4.14 hereof,
concurrently with its making of a Strategic Equity Investor Sale, Services shall
make the Asset Sale Offer no later than 30 days following such Strategic Equity
Investor Sale and, if such Asset Sale Offer is made, any redemption from the
Strategic Equity Investor Sale must be effected upon not less than 30 nor more
than 60 days' notice given within 30 days following the consummation of the
Asset Sale Offer.
Section 3.08. Mandatory Purchase Provisions.
Except as set forth under Sections 4.13 and 4.14 hereof, Services shall not
be required to make mandatory redemption or sinking fund payments with respect
to the Notes.
Section 3.09. Offer to Purchase by Application of Net Cash Proceeds From an
Asset Sale.
(a) In the event that, pursuant to Section 4.14(a)(1)(A) hereof, or until
the accumulated Net Cash Proceeds from an Asset Sales, that are not applied in
accordance with Section 4.14(a)(1)(B) hereof exceeds $5 million, Services shall
be required to commence an Asset Sale Offer and it shall follow the procedures
specified below.
(b) 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 "Asset Sale Offer Period").
Not later than five Business Days after the termination of the Asset Sale Offer
Period (the "Asset Sale Purchase Date"), Services shall apply the Asset Sale
Offer Amount, plus an amount equal to accrued and unpaid interest to purchase
the principal amount of Notes properly tendered pursuant to this Section 3.09
or, if less than the Asset Sale Offer Amount has been tendered, all Notes
tendered in response to the Asset Sale Offer at the Asset Sale Offer Price.
Payment for any Notes so purchased shall be made in the same manner as interest
payments are made.
(c) Services shall comply with any tender offer rules under the Exchange
Act which may then be applicable, including, to the extent applicable, Section
14(e) and Rule 14e-1, in connection with any offer required to be made by
Services to repurchase the Notes as a result of an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this Section 3.09, Services shall comply with the applicable
securities laws or regulations and shall not be deemed to have breached its
obligations hereunder by virtue thereof.
(d) 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.
(e) Upon the commencement of an Asset Sale Offer, Services shall send, by
first class mail, a notice to the Trustee and each of the Holders. 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:
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(i) that the Asset Sale Offer is being made pursuant to Section
3.09 and Section 4.14 hereof and that all Notes validly tendered will be
accepted for payment on a pro rata basis;
(ii) the Asset Sale Offer Price and the date of purchase which shall
be a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Asset Sale Payment Date");
(iii) that any Note not tendered will continue to accrete or accrue
interest, as the case may be, pursuant to its terms;
(iv) that, unless Services defaults in the payment of the Asset Sale
Offer Price, any Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest, on and after the Asset Sale Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Asset Sale Offer will be required to surrender the Note, with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Asset Sale Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Asset Sale Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such 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; provided, however, that each Note purchased and each
new Note issued shall be in a principal amount at maturity of $1,000 or
integral multiple thereof.
(f) On or prior to the Asset Sale Payment Date, Services shall (i) accept
for payment on a pro rata basis Notes or portions thereof tendered pursuant to
the Asset Sale Offer, (ii) deposit with the Paying Agent money sufficient to pay
the Asset Sale Offer Price of all Notes or portions thereof so accepted and
(iii) deliver, or cause to be delivered, to the Trustee all Notes or portions
thereof so accepted together with an Officers' Certificate specifying the Notes
or portions thereof accepted for payment by Services in accordance with the
terms of this Section 3.09. The Paying Agent shall promptly mail to Holders of
Notes so accepted, payment in an amount equal to the Asset Sale Offer Price and
the Trustee shall promptly authenticate and mail or deliver to such Holder a new
Note in a principal amount equal to any unpurchased portion of the Note
surrendered; provided, however, that each Note purchased and each new Note
issued shall be in a principal amount at maturity of $1,000 or integral multiple
thereof. Services will notify the Holders of the Notes of the results of the
Asset Sale Offer as soon as practicable after the Asset Sale Payment Date. Any
Note not so accepted shall be promptly mailed or delivered by Services to the
Holder thereof. For purposes of this Section 3.09, the Trustee shall act as the
Paying Agent.
(g) 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. No repurchase of Notes under this Section
3.09 shall be deemed to be a redemption of Notes.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
Services shall pay the principal of, and premium, if any, and accrued and
unpaid interest on and Liquidated Damages, if any, with respect to the Notes on
the dates and in the manner provided in the Notes. Holders of Notes
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must surrender their Notes to the Paying Agent to collect principal payments.
Principal of, premium, if any, and accrued and unpaid interest, and Liquidated
Damages, if any, shall be considered paid on the date due if the Paying Agent
(other than Services, CCPR or any of the Subsidiaries), the Global Note Holder
or each Holder that has specified an account, holds, as of 12:00 noon New York
City time, money Services deposited in immediately available funds designated
for and sufficient to pay in cash all principal of, premium, if any, and accrued
and unpaid interest on, and Liquidated Damages, if any, then due; provided that,
to the extent that the Holders have not specified accounts, such amounts shall
be considered paid on the date due if Services mails a check for such amounts on
such date. The Paying Agent shall return to Services, no later than five days
following the date of payment, any money (including accrued interest) that
exceeds the amount of principal, premium, if any, accrued and unpaid interest,
and Liquidated Damages, if any, paid on the Notes. Services 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, Services shall not later than 3 Business Days prior to the date that
any payment of Liquidated Damages is due, (i) deliver an 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.
To the extent lawful, Services shall pay interest (including post-petition
interest) on (i) overdue principal and premium at the rate equal to 1% per annum
in excess of the then applicable interest rate on the Notes, compounded semi-
annually and (ii) overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate as set forth in
clause (i), compounded semi-annually.
Section 4.02. Reports.
Whether or not required by the rules and regulations of the SEC, so long as
any Notes are outstanding, Services and CCPR shall deliver to each Holder,
within 15 days after they are or would have been required to file such with the
SEC, annual and quarterly financial statements substantially equivalent to
financial statements that would have been included in reports filed with the
SEC, if Services or CCPR were subject to the requirements of Section 13 or 15(d)
of the Exchange Act, including, with respect to annual information only, a
report thereon by Services and CCPR, or Services' or CCPR's certified
independent public accountants as such would be required in such reports to the
SEC, and in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required. In
addition, whether or not required by the rules and regulations of the SEC,
Services and CCPR will file a copy of all such information and reports with the
SEC for public availability (unless the SEC will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, Services and CCPR have agreed that, for so long as
any Notes remain outstanding, they 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. Services
also shall comply with the other provisions of TIA Section 314(a).
The financial information to be distributed to Holders of Notes shall be
filed with the Trustee and mailed to the Holders at their addresses appearing in
the register of Notes maintained by the Registrar.
Services and the Guarantor shall provide the Trustee with a sufficient
number of copies of all reports and other documents and information that the
Trustee may be required to deliver to the Holders under this Section 4.02.
So long as not contrary to the then current recommendations of the American
Institute of Certified Public Accountants, the financial statements delivered
pursuant to Section 4.02 hereof shall be accompanied by a written statement of
Services' and CCPR's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) 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 either
Services or CCPR has violated Section 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11,
4.13, 4.14, 4.17 or any provisions of Article 5 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.
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Section 4.03. Compliance Certificate.
(a) Services and CCPR shall deliver to the Trustee, within 120 days after
the end of each fiscal year of Services and CCPR, an Officers' Certificate
stating that (i) a review of the activities of Services, CCPR and their
respective Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether Services
and CCPR have kept, observed, performed and fulfilled their obligations under
this Indenture, (ii) further stating, as to each such Officer signing such
certificate, that, to the best of his or her knowledge, Services and CCPR have,
in all material respects, kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and are not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action Services
or CCPR has taken or proposes to take with respect thereto) and (iii) 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, premium, if any, and
accrued and unpaid interest on, and Liquidated Damages, if any, with respect to
the Notes are prohibited or if such event has occurred, a description of the
event and what action Services or CCPR is taking or proposes to take with
respect thereto.
(b) Services and CCPR 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 Services and CCPR is taking or proposes to take with
respect thereto.
Section 4.04. Stay, Extension and Usury Laws.
Services and CCPR covenant (to the extent that it may lawfully do so) that
they will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that might affect the covenants
or the performance of this Indenture and the Notes; and Services and CCPR (to
the extent they may lawfully do so) hereby expressly waive all benefit or
advantage of any such law, and covenant that they will not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.05. Restricted Payments.
After the Issue Date, Services and CCPR shall not, and shall not permit any
of the Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, if, immediately prior or after giving effect thereto:
(a) a Default or an Event of Default would exist;
(b) CCPR could not incur at least $1.00 of additional Indebtedness
pursuant to the Annualized Operating Cash Flow Ratio provision set forth in
the second paragraph of Section 4.07 hereof; or
(c) the aggregate amount of all Restricted Payments made by
Services, CCPR and the Restricted Subsidiaries, including such proposed
Restricted Payment (if not made in cash, then the fair market value of any
property used therefor) from and after the Issue Date and on or prior to
the date of such Restricted Payment, shall exceed the sum of (i) the excess
of (A) Cumulative Operating Cash Flow over (B) the product of 1.5 times
Cumulative Interest Expense, plus (ii) the aggregate Net Proceeds received
by Services or CCPR from the sale (other than to a Subsidiary of Services
or CCPR) of its Qualified Capital Stock after the Issue Date and on or
prior to the date of such Restricted Payment, plus (iii) the amount by
which Indebtedness of Services, CCPR or any Restricted Subsidiary is
reduced on CCPR's balance sheet upon the conversion or exchange (other than
by a Subsidiary) subsequent to the Issue Date of any Indebtedness of
Services, CCPR or any Restricted Subsidiary convertible or exchangeable for
Capital Stock (other than Capital Stock that is redeemable) of Services or
CCPR (less the amount of any cash or other property distributed by
Services, CCPR or any Restricted Subsidiary upon conversion or exchange),
plus (iv) to the extent not otherwise included in clauses (i), (ii) or
(iii) above, an amount equal
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to the net reduction in Investments in Unrestricted Subsidiaries resulting
from payments of dividends, repayment of loans or advances, or other
transfers of assets, in each case to Services, CCPR or any Wholly Owned
Restricted Subsidiary of Services or CCPR from Unrestricted Subsidiaries,
or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary,
the amount of Investments previously made by Services, CCPR and any
Restricted Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in clause (b) or
(c) of the immediately preceding paragraph shall not prohibit (i) the use of an
aggregate of up to $100 million to be used for Restricted Payments made to
CoreComm not otherwise permitted by this Section 4.05, (ii) the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the provision
of this Indenture, (iii) the redemption, defeasance, repurchase or other
acquisition or retirement of any Indebtedness or Capital Stock of Services, CCPR
or the Restricted Subsidiaries either in exchange for or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of Services or
CCPR) of Qualified Capital Stock (in the case of any redemption, defeasance,
repurchase or other acquisition or retirement of any Junior Indebtedness or
Capital Stock of Services, CCPR or the Restricted Subsidiaries) or Junior
Indebtedness (in the case of any redemption, defeasance, repurchase or other
acquisition or retirement of any Indebtedness of Services, CCPR or the
Restricted Subsidiaries) of Services or CCPR, (iv) any payments to CoreComm made
pursuant to the Administrative Services Agreement and (v) any payments made
pursuant to the Tax Sharing Agreement.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this Section 4.05, 100% of
the amounts expended under clauses (i) through (v) of the immediately preceding
paragraph shall be deducted.
Section 4.06. Line of Business.
Neither Services, CCPR nor any of the Restricted Subsidiaries shall
directly or indirectly engage in any line or lines of business activity other
than that which, in the reasonable, good faith judgment of the Board of
Directors of Services or CCPR, is a Related Business.
Section 4.07. Incurrence of Additional Indebtedness.
(a) After the Issue Date, Services and CCPR shall not, and shall not
permit any of the Restricted Subsidiaries to, directly or indirectly, issue,
create, incur, assume, guaranty or otherwise become directly or indirectly
liable, for (including, as a result of an acquisition or otherwise, become
responsible for contingently or otherwise, individually or collectively, to
"incur" or as appropriate an "incurrence") any Indebtedness. Neither the accrual
of interest (including the issuance of "pay in kind" securities or similar
instruments in respect of such accrued interest) pursuant to the terms of
Indebtedness incurred in compliance with this Section 4.07, nor the accretion of
original issue discount, nor the mere extension of the maturity of any
Indebtedness shall be deemed to be an incurrence of Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, Services, CCPR and the
Restricted Subsidiaries may incur Indebtedness if CCPR's Annualized Operating
Cash Flow Ratio, after giving effect to the incurrence of such Indebtedness,
would have been less than 6.5 to 1.
(b) If there exists no Default or Event of Default immediately prior and
subsequent thereto, the provisions of Section 4.07(a) hereof shall not apply to
the incurrence of (i) Senior Debt by Services, CCPR or any of the Restricted
Subsidiaries pursuant to the Credit Agreement, (ii) guarantees of the Senior
Debt permitted under or required by the Credit Agreement and the Guarantees
permitted under or required by this Indenture, (iii) Indebtedness by Services,
CCPR or any of the Restricted Subsidiaries constituting Existing Indebtedness,
reduced by repayments of and permanent reductions in commitments in satisfaction
of the Net Cash Proceeds application requirement set forth in Section 4.14
hereof and by repayments and permanent reductions in amounts outstanding
pursuant to scheduled amortizations and mandatory prepayments in accordance with
the terms thereof, (iv)
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Indebtedness of Services evidenced by the Notes and Indebtedness of CCPR
evidenced by the Guarantee, (v) Indebtedness between Services, CCPR and any
Restricted Subsidiary or between Restricted Subsidiaries, (vi) Indebtedness
under the Administrative Headquarters Lease, (vii) Capitalized Lease Obligations
and Purchase Money Indebtedness in an aggregate amount or aggregate principal
amount, as the case may be, outstanding at any time not to exceed in the
aggregate $10 million, provided that in the case of Purchase Money Indebtedness,
such Indebtedness shall not constitute less than 75% nor more than 100% of the
cost (determined in accordance with GAAP) to Services, CCPR or such Restricted
Subsidiary of the property purchased or leased with the proceeds thereof, (viii)
Indebtedness of Services, CCPR or any Restricted Subsidiary arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of Services, CCPR or the Restricted
Subsidiaries pursuant to such agreements, in any case incurred in connection
with the acquisition or disposition of any business, assets or Restricted
Subsidiary to the extent none of the foregoing results in the obligation to
repay an obligation for money borrowed by any Person and are limited in
aggregate amount to no greater than 10% of the fair market value of such
business, assets or Restricted Subsidiary so acquired or disposed of, (ix) any
guarantee by any Restricted Subsidiary of any (A) Senior Debt incurred in
compliance with this Section 4.07 or (B) Indebtedness incurred pursuant to
clause (xi) of this paragraph, (x) Indebtedness of Services, CCPR or any
Restricted Subsidiary under standby letters of credit or reimbursement
obligations with respect thereto incurred in the ordinary course of business and
consistent with industry practices limited in aggregate amount to $2.5 million
at any one time outstanding, (xi) Indebtedness of Services or CCPR (other than
Indebtedness permitted by clauses (i) through (x) or (xii) hereof) not to exceed
$10 million at any one time outstanding and (xii) Refinancing Indebtedness
incurred to extend, renew, replace or refund Indebtedness permitted under
clauses (i), (iii) (as so reduced in amount), (iv) and (xi) of this paragraph.
(c) Indebtedness of any Person that is not a Restricted Subsidiary (or
that is a Non-Recourse Restricted Subsidiary designated to be a Restricted
Subsidiary, but no longer a Non-Recourse Restricted Subsidiary), which
Indebtedness is outstanding at the time such Person becomes such a Restricted
Subsidiary or is merged with or into or consolidated with Services, CCPR or a
Restricted Subsidiary shall be deemed to have been incurred, as the case may be,
at the time such Person becomes such a Restricted Subsidiary or is merged with
or into or consolidated with Services, CCPR or a Restricted Subsidiary.
(d) For purposes of determining compliance with this Section 4.07, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories described in Section 4.07(b) hereof or is entitled to be incurred
pursuant to Section 4.07(a) hereof, Services and CCPR shall, in their sole
discretion, classify such item of Indebtedness in any manner that complies with
this Section 4.07 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.
Section 4.08. Transactions With Related Persons.
After the Issue Date, Services and CCPR shall not, and shall not permit any
of the Restricted Subsidiaries or Unrestricted Subsidiaries to, enter into any
contract, agreement, arrangement or transaction with any Related Person (each a
"Related Person Transaction"), or any series of Related Person Transactions,
except for transactions made in good faith, the terms of which are (i) fair and
reasonable to Services, CCPR or such Subsidiary, as the case may be, and (ii) at
least as favorable as the terms which could be obtained by Services, CCPR or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis with Persons who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of $1
million must first be approved by a majority of the Board of Directors of
Services or CCPR, as the case may be, who are disinterested in the subject
matter of the transaction pursuant to a resolution of the Board of Directors, or
(b) with respect to any Related Person Transaction or series of Related Person
Transactions (i) where there are no members of the Board of Directors who are
disinterested in the subject matter of a transaction otherwise subject to clause
(a) hereof or (ii) with an aggregate value in excess of $5 million, Services or
CCPR, as the case may be, must first obtain a favorable written opinion from a
financial advisor of national reputation who is not an Affiliate of Services,
CCPR or the Subsidiaries as to the fairness from a financial point of view of
such transaction to Services, CCPR or such Subsidiary, as the case may be.
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Notwithstanding the foregoing, the following shall not constitute Related
Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of Services, CCPR or any of the Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement, or
transaction solely between or among Services, CCPR and any of the Restricted
Subsidiaries or between or among Restricted Subsidiaries, (iii) any Restricted
Payment of the type described by clauses (i) and (ii) of the definition thereof
made to all stockholders on a pro rata basis and not prohibited by Section 4.05
hereof, (iv) any payment made pursuant to the Tax Sharing Agreement, (v) any
payment made pursuant to the Administrative Services Agreement and (vi) any
transaction pursuant to an agreement described in or referred to in the Offering
Memorandum under the caption "The Restructuring" as in effect on the Issue Date.
Section 4.09. Liens.
Services and CCPR shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to incur or suffer to exist any Lien (other
than Permitted Liens) upon any of their property or assets, whether now owned or
hereafter acquired.
Section 4.10. Compliance With Laws, Taxes.
Services and CCPR shall, and shall cause each of the Restricted
Subsidiaries to, comply with all statutes, laws, ordinances, or government rules
and regulations to which it is subject, the non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
condition, financial or otherwise, of Services, CCPR and the Restricted
Subsidiaries taken as a whole.
Services and CCPR shall, and shall cause each of the Restricted
Subsidiaries to, pay prior to delinquency all material taxes, assessments and
governmental levies, except those contested in good faith by appropriate
proceedings.
Section 4.11. Restrictions On Subsidiary Dividends.
(a) So long as any of the Notes are outstanding, Services and CCPR shall
not, and shall not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, assume or suffer to exist any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to pay dividends or make
other distributions on the Capital Stock of any Restricted Subsidiary or pay or
satisfy any obligation to Services, CCPR or any of the Restricted Subsidiaries
or otherwise transfer assets or make or pay loans or advances to Services, CCPR
or any of the Restricted Subsidiaries.
(b) The foregoing provisions shall not restrict encumbrances and
restrictions existing as of the date of determination under (i) this Indenture,
the Guarantee and the Notes, (ii) any Existing Indebtedness, (iii) the Credit
Agreement, (iv) any applicable law or any governmental or administrative
regulation or order, (v) Refinancing Indebtedness permitted under this
Indenture, provided that the restrictions contained in the instruments governing
such Refinancing Indebtedness are no more restrictive in the aggregate than
those contained in the instruments governing the Indebtedness being refinanced
immediately prior to such refinancing, (vi) restrictions with respect solely to
a Restricted Subsidiary imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary, provided such
restrictions apply solely to the Capital Stock or assets being sold of such
Restricted Subsidiary, (vii) restrictions contained in any agreement relating to
the financing of the acquisition of a Person or real or tangible personal
property after the Issue Date which are not applicable to any Person or
property, other than the Person or property so acquired and which were not put
in place in anticipation of or in connection with such acquisition or (viii) any
agreement (other than those referred to in clause (vii)) of a Person acquired by
Services, CCPR or a Restricted Subsidiary, which restrictions existed at the
time of acquisition.
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into the ordinary course of
business, consistent with past practices nor (b) Liens on assets securing
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Senior Debt, shall in and of themselves be considered a restriction on the
ability of the applicable Restricted Subsidiary to transfer such agreement or
assets, as the case may be.
Section 4.12. Maintenance of Office or Agencies.
Services shall maintain in The City of New York an office or an agency
(which may be an office of any Agent) where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
Services in respect of the Notes and this Indenture may be served. Services
shall give prompt written notice to the Trustee of any change in the location of
such office or agency. If at any time Services 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.
Services 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 matter relieve Services of
its obligation to maintain an office or agency in The City of New York for such
purposes. Services 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.
Services hereby designates the Corporate Trust Office of the Trustee
located at 450 West 33rd Street, New York, New York 10001 as one such office or
agency of Services in accordance with this Section 4.12 and Section 2.03 hereof.
Section 4.13. Offer to Repurchase Upon Change of Control Triggering Event.
(a) Upon the occurrence of a Change of Control Triggering Event, each
Holder shall have the right to require Services to repurchase its Notes in cash
pursuant to the offer described in this Section 4.13 (the "Change of Control
Offer") at a purchase price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest thereon and Liquidated Damages, if any, to the date
of purchase (the "Change of Control Payment").
(b) Services is not required to make a Change of Control Offer following a
Change of Control Triggering Event if a third party makes a Change of Control
Offer that would be in compliance with the provisions described in this Section
4.13 if such offer were made by Services and such third party purchases the
Notes validly tendered and not withdrawn. Services' Board of Directors shall
not have the ability unilaterally to waive Services' obligation to repurchase
the Notes in the event of a highly leveraged transaction.
(c) Within 30 days following the Change of Control Triggering Event,
Services shall mail a notice to the Trustee and each Holder stating: (i) that a
Change of Control Triggering Event has occurred, that the Change of Control
Offer is being made pursuant to Section 4.13 hereof and that all Notes validly
tendered will be accepted for payment; (ii) the purchase price and the date of
purchase (which shall be a Business Day no earlier than 30 days nor 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
pursuant to its terms; (iv) that unless Services defaults in the payment of the
Change of Control Payment, any Note accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest on and after the Change of
Control Payment Date; (v) that Holders electing to have any Note or portion
thereof purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such 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;
provided, however, that each Note purchased and each new Note issued shall be in
a principal amount of $1,000 or integral multiples thereof.
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(d) On the Change of Control Payment Date, Services shall, to the extent
lawful: (i) accept for payment Notes or portions thereof properly tendered
pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered to the Trustee, all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by Services. The
Paying Agent shall promptly mail, to the Holders of Notes so accepted, payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered; provided, however, that each
Note purchased and each new Note issued shall be in a principal amount of $1,000
or integral multiples thereof. Services will notify the Holders of the Notes of
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date. For purposes of this Section 4.13, the
Trustee shall act as Paying Agent.
(e) Services shall comply with all applicable laws, rules and regulations
including, if applicable, Regulation 14E under the Exchange Act and the rules
thereunder and all other applicable Federal and state securities laws in the
event that a Change of Control Triggering Event occurs and Services is required
to repurchase the Notes pursuant to this Section 4.13, and Services and CCPR may
modify a Change of Control Offer to the extent necessary to effect such
compliance.
Section 4.14. Asset Sales and Sales of Restricted Subsidiary Stock.
(a) After the Issue Date, Services and CCPR shall not, and shall not
permit any of the Restricted Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of their property, businesses or assets, including by merger
or consolidation, and including any sale or other transfer or issuance of any
Capital Stock of any Restricted Subsidiary, whether by Services, CCPR or a
Restricted Subsidiary (an "Asset Sale"), unless:
(1) (A) within 360 days after the date of such Asset Sale, an amount
equal to the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied to make the Asset Sale Offer (as defined below)
in accordance with the terms of this Indenture and to the redemption
of other Indebtedness of Services and CCPR ranking on a parity with
the Notes from time to time outstanding with similar provisions
requiring Services and CCPR to make an offer to purchase or to redeem
such Indebtedness with the proceeds from asset sales, pro rata in
proportion to the respective principal amounts (or accreted values in
the case of Indebtedness issued with an original issue discount) of
the Notes and such other Indebtedness then outstanding or to the
repurchase of the Notes and such other Indebtedness pursuant to an
irrevocable, unconditional offer (the "Asset Sale Offer") to
repurchase such Indebtedness at a purchase price (the "Asset Sale
Offer Price") of 100% of the principal amount thereof in the case of
the Notes or 100% of the principal amount (or accreted value in the
case of Indebtedness issued with an original issue discount) plus, in
each case, accrued interest and Liquidated Damages, if any, to the
date of payment, or
(B) within 330 days of such Asset Sale, the Asset Sale Offer Amount
is (i) invested (or committed, pursuant to a binding commitment
subject only to reasonable, customary closing conditions, to be
invested, and in fact is so invested, within an additional 120 days)
in tangible assets and property (other than notes, obligations or
securities), which in the good faith, reasonable judgment of the Board
of Directors of Services or CCPR, as the case may be, are of a type
used in a Related Business, or Capital Stock of a Person (which, if
such Person becomes a Subsidiary of Services or CCPR, by virtue of
such Asset Sale, shall initially be designated a Restricted
Subsidiary) all or substantially all of whose assets and property (in
the good faith, reasonable judgment of the Board of Directors of
Services or CCPR, as the case may be) are of a type used in a Related
Business (provided that, with respect to such Capital Stock, all of
the requirements of the last proviso of clause (v) of the following
paragraph (b) shall have been satisfied) or (ii) used to retire Senior
Debt,
(2) with respect to any transaction or related series of transactions of
securities, property or assets with an aggregate fair market value in
excess of $1,000,000, at least 75% of the value of consideration for the
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assets disposed of in such Asset Sale, excluding (a) Senior Debt (and any
Refinancing Indebtedness issued to refinance any such Indebtedness) assumed
by a transferee which assumption permanently reduces the amount of
Indebtedness outstanding on the Issue Date and permitted to have been
incurred pursuant to Section 4.07 hereof (including that in the case of a
revolver or similar arrangement that makes credit available, such
commitment is permanently reduced by such amount), (b) Purchase Money
Indebtedness secured exclusively by the assets subject to such Asset Sale
which is assumed by a transferee and (c) marketable securities that are
promptly converted into cash or Cash Equivalents, consists of cash or Cash
Equivalents, provided that any cash or Cash Equivalents received within 12
months following any such Asset Sale upon conversion of any property or
assets (other than in the form of cash or Cash Equivalents) received in
consideration of such Asset Sale shall be applied promptly in the manner
required of Net Cash Proceeds of any such Asset Sale as set forth above,
(3) no Default or Event of Default shall occur or be continuing after
giving effect to, on a pro forma basis, such Asset Sale, and
(4) the Board of Directors of Services or CCPR, as the case may be,
determines in good faith that Services, CCPR or such Restricted Subsidiary,
as applicable, would receive fair market value in consideration of such
Asset Sale.
(b) Notwithstanding the foregoing provisions of the prior paragraph:
(i) Services, CCPR and the Restricted Subsidiaries may, in the
ordinary course of business, convey, sell, lease, transfer, assign or
otherwise dispose of assets acquired and held for resale in the ordinary
course of business;
(ii) Services, CCPR and the Restricted Subsidiaries may convey,
sell, lease, transfer, assign or otherwise dispose of assets pursuant to
and in accordance with Article 5 hereof;
(iii) Services, CCPR and the Restricted Subsidiaries may sell or
dispose of damaged, worn out or other obsolete property in the ordinary
course of business so long as such property is no longer necessary for the
proper conduct of the business of Services, CCPR or such Restricted
Subsidiary, as applicable;
(iv) Services, CCPR and the Restricted Subsidiaries may convey,
sell, lease, transfer, assign or otherwise dispose of assets to Services,
CCPR or any of the Restricted Subsidiaries; and
(v) Services, CCPR and the Restricted Subsidiaries may, in the
ordinary course of business (or, if otherwise than in the ordinary course
of business upon receipt of a favorable written opinion by a financial
advisor of national reputation who is not an Affiliate of Services, CCPR or
any of the Subsidiaries as to the fairness from a financial point of view
to Services, CCPR or such Restricted Subsidiary of the proposed
transaction), exchange all or a portion of its property, businesses or
assets that are outside the Commonwealth of Puerto Rico and represent not
more than 5.0% of the aggregate Net Pops of Services, CCPR and the
Restricted Subsidiaries as of the Issue Date for property, business or
assets which, or Capital Stock of a Person all or substantially all of
whose assets, are of a type used in a wireless communications business
(provided that such Person shall initially be designated a Restricted
Subsidiary if such Person becomes a Subsidiary of Services or CCPR by
virtue of such Asset Sale), or a combination of any such property,
businesses or assets, or Capital Stock of such a Person and cash or Cash
Equivalents; provided that (i) there shall not exist immediately prior or
subsequent thereto a Default or an Event of Default, (ii) a majority of the
independent directors of the Board of Directors of Services or CCPR, as the
case may be, shall have approved a resolution of the Board of Directors
that such exchange is fair to Services, CCPR or such Restricted Subsidiary,
as the case may be, and (iii) any cash or Cash Equivalents received
pursuant to any such exchange shall be applied in the manner applicable to
Net Cash Proceeds from an Asset Sale as set forth pursuant to the
provisions of the immediately preceding paragraph of this Section 4.14, and
(iv) the Net Pops so received in the exchange should be at least equal to
the Net Pops so exchanged; provided, further that any Capital Stock of a
Person received in an Asset Sale pursuant to
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this clause (iv) shall be owned directly by Services, CCPR or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person already
owned by Services, CCPR and the Restricted Subsidiaries, shall constitute a
majority of the voting power and Capital Stock of such Person, unless
Services or CCPR has received a binding commitment from such Person (or the
direct or indirect parent of such Person) that such Person (or the direct
or indirect parent of such Person) will distribute to Services or CCPR in
cash an amount equal to CCPR's Annualized Operating Cash Flow (determined
as of the date of such Asset Sale) attributable to the property, business
or assets of Services, CCPR and the Restricted Subsidiaries exchanged in
connection with such Asset Sale during each consecutive 12-month period
subsequent to such Asset Sale (unless and until Services or CCPR shall have
sold of such Capital Stock).
Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to Section
4.05 hereof, without giving effect to clause (i) of the second paragraph
thereof, shall not be deemed to be Asset Sales.
Section 4.15. Guarantees of Services' Indebtedness by Restricted Subsidiaries.
In the event that any Restricted Subsidiary, directly or indirectly,
guarantees any Indebtedness of Services other than the Notes (the "Other
Indebtedness"), Services and CCPR shall cause such Restricted Subsidiary to
deliver to the Trustee a supplemental indenture (in substantially the same form
of Exhibit F, hereto) pursuant to which such Restricted Subsidiary (the
"Additional Guarantor") shall concurrently guarantee Services' Obligations under
this Indenture and the Notes (the "Additional Guarantee") to the same extent
that such Restricted Subsidiary guaranteed Services' Obligations under the Other
Indebtedness (including waiver of subrogation, if any), provided that if such
Other Indebtedness is Senior Debt, the Additional Guarantee shall be
subordinated in right of payment to the guarantee of such Other Indebtedness, as
provided by Article 10 hereof, and such Additional Guarantee shall be on the
same terms and subject to the same conditions as the initial Guarantee given by
CCPR under this Indenture. Each Additional Guarantee shall by its terms provide
that the Additional Guarantor making such Additional Guarantee will be
automatically and unconditionally released and discharged from its obligations
under such Additional Guarantee upon the release or discharge of the guarantee
of the other Indebtedness that resulted in the creation of such Additional
Guarantee, except a discharge or release by, or as a result of, any payment
under the guarantee of such Other Indebtedness by such Additional Guarantor.
Section 4.16. No Senior Subordinated Indebtedness.
Services shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinated or junior in
right of payment to any Senior Debt of Services and senior in any respect in
right of payment to the Notes, and CCPR shall not incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinated
or junior in right of payment to its Senior Debt and senior in any respect in
right of payment to the Guarantee.
Section 4.17. Status As Investment Company.
Services, CCPR and the Restricted Subsidiaries shall not become
"investment companies" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets.
Services and CCPR shall not consolidate with or merge with or into another
Person, or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets (computed on a consolidated basis), whether in a
single transaction or a series of related transactions, to another Person or
group of affiliated Persons, unless (i) either (a) Services or CCPR, as
applicable, is the continuing entity or (b) the resulting, surviving or
transferee entity is a corporation organized under the laws of the United
States, any state thereof, the District of Columbia or the
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Commonwealth of Puerto Rico and expressly assumes by supplemental indenture all
of the obligations of Services or CCPR in connection with the Notes, the
Guarantee and this Indenture, as applicable; (ii) no Default or Event of Default
shall exist or shall occur immediately after giving effect on a pro forma basis
to such transaction; (iii) except in a case of a merger of Services or CCPR with
or into one or more Wholly Owned Restricted Subsidiaries of Services or CCPR,
immediately after giving effect to such transaction on a pro forma basis, the
consolidated resulting surviving or transferee entity would immediately
thereafter be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Annualized Operating Cash Flow Ratio provision set forth in
Section 4.07 hereof and (iv) Services or CCPR shall have delivered to the
Trustee an Officers' Certificate confirming compliance with the requirements of
this Section 5.01, provided, however, that this Section 5.01 shall not prohibit
any merger or consolidation between Services and CCPR.
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
Services or CCPR in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or with which or into Services or CCPR
is merged or to which such sale, assignment, transfer, lease, conveyance or
other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, Services or CCPR under this Indenture with
the same effect as if such successor has been named as Services or CCPR herein;
provided, however, that neither Services, CCPR nor any such successor
corporation shall be released from its Obligation to pay the principal of,
premium, if any, and accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(i) the failure by Services to pay any installment of interest or
Liquidated Damages, if any, on the Notes as and when the same
becomes due and payable and the continuance of any such failure
for 30 days, whether or not prohibited by Article 10 hereof;
(ii) the failure by Services to pay all or any part of the principal
of, or premium on, if any, the Notes when and as the same
becomes due and payable at maturity, redemption, by
acceleration or otherwise, including, without limitation,
payment of the Change of Control Payment or the Asset Sale
Offer Price, whether or not prohibited by Article 10 hereof;
(iii) the failure by Services or CCPR to observe or perform any other
covenant or agreement contained in the Notes, the Guarantee or
this Indenture and, subject to certain exceptions, the
continuance of such failure for a period of 30 days after
written notice is given to Services or CCPR, as the case may
be, by the Trustee or to Services or CCPR, as the case may be,
and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes outstanding;
(iv) in existence when Services, CCPR or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it
in an involuntary case,
(C) consents to the appointment of a Custodian (as
hereinafter defined) of it or for all or substantially
all of its property, or
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(D) makes a general assignment for the benefit of its
creditors;
(v) in existence when a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against Services, CCPR or any Significant
Subsidiary in an involuntary case,
(B) appoints a Custodian of Services, CCPR or any Significant
Subsidiary or for all or substantially all of the
property Services, CCPR or any Significant Subsidiary, or
(C) orders the liquidation of Services, CCPR or any
Significant Subsidiary,
and any such order or decree remains unstayed and in effect for
60 days;
(vi) (A) a default in any Indebtedness (other than the Credit
Agreement) of Services, CCPR or any of the Restricted
Subsidiaries with an aggregate principal amount in excess of $5
million (1) resulting from the failure to pay principal or
interest (in the case of an interest default or a default in
the payment of principal other than at its stated maturity,
after the expiration of the applicable grace period) when due
or (2) as a result of which the maturity of such Indebtedness
has been accelerated prior to its stated maturity, or (B) a
default in the Credit Agreement (with an aggregate principal
amount in excess of $5 million outstanding with respect
thereto) (1) resulting from the failure to pay principal at
maturity or (2) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity;
(vii) final unsatisfied judgments not covered by insurance
aggregating in excess of $5 million, at any one time rendered
against Services, CCPR or any of the Restricted Subsidiaries
and not stayed, fully bonded, discharged, paid or vacated
within 60 days; and
(viii) except as permitted by this Indenture, the Guarantee shall be
held in any final judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and
effect or CCPR, or any Person acting on behalf of CCPR, shall
deny or disaffirm its obligations under its Guarantee.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
Section 6.02. Acceleration.
(a) If an Event of Default occurs and is continuing (other than an Event
of Default specified in Sections 6.01(iv) and (v) hereof, relating to Services,
CCPR or any Restricted Subsidiary, then in every such case, unless the principal
of all of the Notes shall have already become due and payable, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by notice in writing to Services (and to the Trustee if
given by Holders) specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), may declare the principal
of, premium, accrued and unpaid interest and Liquidated Damages, if any, on all
of the Notes to be due and payable, and the same (i) shall become immediately
due and payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or five Business Days after receipt
by Services and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If an
Event of Default specified in Sections 6.01(iv) and (v) above, relating to
Services, CCPR or any Significant Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Restricted Subsidiary occurs, all principal and accrued interest thereon shall
be
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immediately due and payable on all outstanding Notes without any declaration or
other act on the part of the Trustee or the Holders.
(b) In the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in Section 6.01(vi) hereof, the declaration of
acceleration of the Notes shall be automatically annulled if holders of
Indebtedness described in Section 6.01(vi) hereof have rescinded the declaration
of acceleration in respect of such Indebtedness within 30 days of the date of
such declaration and if (i) the annulment of the acceleration of the Notes would
not conflict with any judgment or decree of a court of competent jurisdiction,
and (ii) all existing Events of Default, except nonpayment of principal or
interest on the Notes that became due solely because of the acceleration of the
Notes, have been cured or waived. The Holders of a majority in aggregate
principal amount of Notes by notice to the Trustee may rescind such acceleration
and its consequences if all existing Events of Default, other than the non-
payment of the principal of, premium, interest and Liquidated Damages, if any,
on the Notes which have become due solely by such acceleration, have been cured
or waived.
(c) 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 Services with the
intention of avoiding payment of the premium that Services would have had to pay
if Services then had elected to redeem the Notes pursuant to Section 3.07
hereof, 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 February 1, 2002, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of Services with the
intention of avoiding the prohibition on redemption of the Notes prior to
February 1, 2002, then the premium payable for purposes of this paragraph for
each of the years beginning on February 1 of the years set forth below shall be
as set forth in the following table, expressed as a percentage of the amount
that would otherwise be due but for the provisions of this paragraph, plus
accrued interest, if any, to the date of payment:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1997..................................................... 110.00%
1998..................................................... 109.00%
1999..................................................... 108.00%
2000..................................................... 107.00%
2001..................................................... 106.00%
2002..................................................... 105.00%
</TABLE>
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 of, premium, if any, or any
accrued and unpaid interest on, or Liquidated Damages, if any, with respect to
the Notes or to enforce the performance of any provision of the Notes, the
Guarantee or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of all Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under this Indenture, except a continuing Default or Event of
Default in the payment of the principal of, premium, if any, interest on, and
Liquidated Damages, if any, with respect to, such Notes, or a Default with
respect to any covenant or provision of this Indenture or the Notes which cannot
be modified or amended without the consent of each Holder of each outstanding
Note affected. 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
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purpose of this Indenture; provided that no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it by this Indenture. 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 or would
involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder gives to the Trustee written notice of a continuing Event
of Default;
(b) the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders offer and, if requested, provide to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee
a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Holders may not enforce this Indenture, except as provided herein.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium, if any, and any accrued and
unpaid interest on, and Liquidated Damages, if any, with respect to a Note, on
or after a respective due date expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective date, shall not be
impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against Services for (i) the principal,
premium and Liquidated Damages, if any, and interest remaining unpaid on the
Notes, (ii) interest on overdue principal and premium, if any, and, to the
extent lawful, interest, and (iii) 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 ("Trustee Expenses").
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for Trustee Expenses) and the Holders allowed in any
judicial proceeding relative to Services (or any other obligor upon the Notes),
its creditors or its property and
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shall be entitled and empowered to collect, receive and distribute to Holders
any money or other property payable or deliverable on any such claims and each
Holder authorizes any Custodian in any such judicial proceeding to make such
payments to the Trustee, and if the Trustee shall consent to the making of such
payments directly to the Holders any such Custodian is hereby authorized to make
such payments directly to the Holders, and to pay to the Trustee any amount due
to it hereunder for Trustee Expenses, and any other amounts due the Trustee
under Section 7.07 hereof. To the extent that the payment of any such Trustee
Expenses, 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 which 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
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07 hereof;
Second: to holders of Senior Debt to the extent required by Article 10
hereof;
Third: to Holders for amounts due and unpaid on the Notes for principal,
premium and Liquidated Damages, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and payable on
the Notes for principal, premium and Liquidated Damages, if any, and interest,
respectively; and
Fourth: to Services 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.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07
hereof, or a suit by Holders of more than 10% in aggregate principal amount of
the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default occurs and is continuing, the Trustee shall (i)
exercise the rights and powers vested in it by this Indenture, and (ii) use the
same degree of care and skill in exercising such rights and powers as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this
Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of Section 7.01(b)
hereof;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a
direction it receives pursuant to Sections 6.02, 6.04 and 6.05
hereof.
(d) Whether or not expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (e) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture unless
the Trustee receives indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money it receives
except as the Trustee may agree in writing with Services. Money the Trustee
holds in trust need not be segregated from other funds except to the extent
required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may rely on any document it believes to be genuine and to
have been signed or presented by the proper Person. The Trustee shall not be
obligated to investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may reasonably
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 advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(c) The Trustee may act through agents or attorneys and shall not be
responsible for any misconduct or negligence of any agent or attorney appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers.
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 Services, CCPR or an Affiliate of
Services or CCPR with the same rights it would have if it were not Trustee.
However, if 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, all in accordance with the TIA. Any Agent may do the same with like
rights. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
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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, the Guarantee or the Notes, it shall
not be accountable for Services' use of the proceeds from the Notes or for any
money paid to Services or upon Services' direction under any provisions hereof,
it shall not be responsible for the use or application of any money any Paying
Agent other than the Trustee receives, and it shall not be responsible for any
statement or recital herein or any statement in the Notes, the Guarantee or any
other document furnished or issued in connection with the sale of the Notes or
pursuant to this Indenture, other than its certificate of authentication.
Section 7.05. Notice to Holders of Defaults and Events of Default.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of or premium, if any or
interest on any Note (including any failure to redeem Notes called for
redemption or any failure to purchase Notes tendered pursuant to an Offer that
are required to be purchased by the terms of this Indenture), 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 Holders' interests.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with May 15, 1997, the Trustee
shall mail to all Holders a brief report dated as of such reporting date that
complies with, and to the extent is required under, Section 313 of the TIA.
Commencing at the time this Indenture is qualified under the TIA, a copy of
each report at the time of its mailing to Holders shall be filed with the SEC
and each national securities exchange on which the Notes are listed. Services
shall notify the Trustee when and if the Notes are listed on any national
securities exchange.
Section 7.07. Compensation and Indemnity.
Services shall pay to the Trustee (in its capacities as Trustee, Paying
Agent and/or Registrar) from time to time reasonable compensation for its
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. Services shall reimburse the
Trustee upon request for all reasonable disbursements, advances, fees and
expenses it incurs or makes 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.
Services shall indemnify and hold harmless the Trustee (in its capacities
as Trustee, Paying Agent and/or Registrar) against any and all losses,
liabilities or expenses the Trustee incurs arising out of or in connection with
the acceptance or administration of its duties under this Indenture, except for
any expense or indemnity against any loss or liability the Trustee incurs
through negligence or bad faith. The Trustee shall notify Services promptly of
any claim for which it may seek indemnity. Failure by the Trustee to so notify
Services shall not relieve Services of its Obligations hereunder. Services
shall defend the claim and the Trustee shall reasonably cooperate in the
defense. The Trustee may have one separate counsel and Services shall pay the
reasonable fees and expenses of such counsel. Services need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
Services' Obligations under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure Services' payment of its Obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Notes on all money or property the
Trustee holds or collects, except such money or property held in trust to
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pay principal of, premium, if any, and any accrued and unpaid interest on, and
Liquidated Damages, if any, with respect to 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(iv) or (v) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute administrative expenses under any Bankruptcy
Law.
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 and be discharged from the trust hereby created by
so notifying Services in writing. The Holders of a majority in principal amount
of the then outstanding Notes may remove the Trustee by so notifying the Trustee
and Services in writing. Services may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10 hereof;
(ii) 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;
(iii) a Custodian or public officer takes charge of the Trustee or its
property; or
(iv) 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, Services shall promptly appoint a successor Trustee,
provided that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may appoint a successor Trustee to replace any successor
Trustee appointed by Services.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, Services or the
Holders of at least 10% in aggregate principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder 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 Services. 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 appointment to Holders. The
retiring Trustee shall promptly transfer all property it holds as Trustee to the
successor Trustee, provided all sums owing to the retiring 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,
Services' Obligations under Section 7.07 hereof shall continue for the retiring
Trustee's benefit with respect to expenses and liabilities it incurred prior to
being replaced.
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.
The Trustee shall at all times (i) be a corporation organized and doing
business under the laws of the United States of America, of any state thereof,
or the District of Columbia authorized under such laws to exercise corporate
trustee power, (ii) be subject to supervision or examination by federal or state
authority, (iii) have a combined capital and surplus of at least $10,000,000 as
set forth in its most recent published annual report of condition, and (iv)
satisfy the requirements of Sections 310(a)(1), (2) and (5) of the TIA. The
Trustee is subject to section 310(b) of the TIA.
Section 7.11. Preferential Collection of Claims Against Services.
The Trustee is subject to section 311(a) of the TIA, excluding any creditor
relationship listed in section 311(b) of the TIA. A Trustee who has resigned or
been removed shall be subject to section 311(a) of the TIA to the extent
indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
Services 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 and the
Guarantee upon compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon Services' exercise under Section 8.01 hereof of the option applicable
to this Section 8.02, each of Services and the Guarantor 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
and the Guarantee on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means
that Services and the Guarantor shall be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding Notes and the Guarantee,
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 of this Section 8.02, and to have satisfied all its other
obligations under such Notes and the Guarantee and this Indenture (and the
Trustee, on demand of and at the expense of Services, 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 payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
such Notes when such payments are due or on the redemption date, as the case may
be, from the trust referred to in Section 8.04(a) hereof, (b) Services'
obligations with respect to such Notes under Article 2 and Section 4.12 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee under this
Indenture and Services' obligations in connection therewith, (d) Services'
rights to redeem Notes under Section 3.07 hereof and (e) the provisions of this
Article 8. Subject to compliance with this Article 8, Services may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof. Services' Obligations in Sections 7.07, 8.05 and
8.06 shall survive.
Section 8.03. Covenant Defeasance.
Upon Services' exercise under Section 8.01 hereof of the option applicable
to this Section 8.03, Services and Guarantor shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.05, 4.06, 4.07, 4.08,
4.09, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17, 5.01 and 11.01 hereof and any
future covenant added to this Indenture with respect to the outstanding Notes
and the Guarantee on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes and the Guarantee
shall thereafter be deemed not "outstanding" for the purposes of
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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 and the Guarantee shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes and the Guarantee, Services, CCPR or the
Subsidiaries 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 and
Guarantee shall be unaffected thereby. In addition, upon Services' exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(iii), (vi) through (viii) 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 and the Guarantee:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) Services must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, (i) cash in United
States dollars, (ii) non-callable Government Securities which
through the scheduled payment of principal, premium, if any,
interest and liquidated damages, if any, in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of payment, cash in United States dollars or
(iii) a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and
discharge 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 Services 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, Services
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming
that (A) Services has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date
hereof, 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 shall not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance
and shall be subject to federal income tax on the same amounts,
in the same manner and at the same time as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, Services
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 shall not recognize
income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and shall 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 has occurred and is continuing on
the date of such deposit or insofar as Sections 6.01(iv) and (v)
hereof are concerned, at any time in the period ending on the
91st day after the date of deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of
such period);
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(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument
including, without limitation, the Credit Agreement to which
Services, CCPR or any of the Subsidiaries is a party or by which
Services, CCPR or any of the Subsidiaries is bound;
(f) Services shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day after the date of
the deposit, the trust funds shall not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(g) Services shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Services
with the intent of preferring the Holders of Notes over the other
creditors of Services with the intent of defeating, hindering,
delaying or defrauding any other creditors of Services or others;
(h) Services shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with;
and
(i) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably required.
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 Services 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, interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by applicable law.
Services 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 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to Services from time to time upon the written request of
Services and be relieved of all liability with respect to any money or non-
callable Government Securities held by it as provided in Section 8.04 hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are
in excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Services.
Any money deposited with the Trustee or any Paying Agent, or then held by
Services, in trust for the payment of the principal of, premium, if any,
interest or Liquidated Damages, if any, on any Note and remaining unclaimed for
one year after such principal, and premium, if any, or interest or Liquidated
Damages, if any, has become due and payable shall be paid to Services on its
written request or (if then held by Services) shall be discharged from such
trust; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to Services for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust
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money, and all liability of Services 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 Services 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 shall be
repaid to Services.
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 obligations of Services and the Guarantor under this
Indenture, the Notes and the Guarantee 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 Services or the Guarantor makes any payment of principal of,
premium, if any, interest or Liquidated Damages, if any, on any Note following
the reinstatement of its obligations, Services or the Guarantor 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
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders.
Notwithstanding Section 9.02 hereof, Services, CCPR and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
Holder (a) to cure any ambiguity, defect or inconsistency; (b) to provide for
uncertificated Notes in addition to or in place of certificated Notes; (c) to
provide for the assumption by a successor corporation of Services' Obligations
to the Holders in the event of a merger, consolidation or disposition pursuant
to Article 5 hereof; (d) to comply with SEC's requirements to effect or maintain
the qualification of this Indenture under the TIA; (e) to provide for additional
guarantee with respect to the Notes; or (f) to make any change that does not
materially adversely affect any Holder's legal rights under this Indenture.
No amendment may be made to any provision of Article 10 that would
adversely affect the rights of any holder of Senior Debt then outstanding unless
the holders of such Senior Debt (or their Representative) consent to such
change.
Upon Services' request, after receipt by the Trustee of a resolution of the
Board of Directors authorizing the execution of any amended or supplemental
indenture and the documents described in Section 9.06 hereof, the Trustee shall
join with Services and CCPR 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 contained in any
such amended or supplemental indenture, but the Trustee shall not be obligated
to enter into an amended or supplemental indenture that affects its own rights,
duties or immunities under this Indenture or otherwise.
Section 9.02. Amendments and Supplements Requiring Consent of Holders.
Subject to Section 6.07 hereof and Section 10.13, Services, CCPR and the
Trustee may amend or supplement this Indenture or the Notes with the consent of
the Holders of at least a majority in principal amount 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 Event of Default (other than a payment Default) 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 of the then outstanding Notes
(including consents obtained in connection with a tender offer or exchange offer
for Notes).
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Upon Services' request and after receipt by the Trustee of a resolution of
the Board of Directors authorizing the execution of any supplemental indenture,
evidence of the Holders' consent, and the documents described in Section 9.06
hereof, the Trustee shall join with Services and CCPR 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 not be obligated
to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplemental
indenture or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment, supplemental indenture or waiver under
this Section 9.02 becomes effective, Services shall mail to each Holder affected
thereby a notice briefly describing the amendment supplement or waiver. Any
failure of Services to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplemental indenture or waiver.
Subject to Sections 6.02, 6.04 and 6.07 hereof, the Holders of a majority
in aggregate principal amount of the Notes then outstanding may waive compliance
in a particular instance by Services or CCPR with any provision of this
Indenture, the Notes or the Guarantee. However, without the consent of each
Holder affected, an amendment, supplement or waiver may not (with respect to any
Note or Guarantee held by a non-consenting Holder): (i) change the Stated
Maturity of or the Change of Control Purchase Date or the Asset Sale Offer
Period on any Note, or reduce the principal amount thereof or the rate (or
extend the time for payment) of interest thereon or any premium payable upon the
redemption or purchase thereof, or change the place of payment where, or the
coin or currency in which, any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption,
on or after the date of redemption), or reduce the Change of Control Payment or
the Asset Sale Offer Price or alter the redemption provisions or the provisions
of Section 4.13 hereof in a manner adverse to the Holders, or (ii) reduce the
percentage in principal amount of the outstanding Notes, the consent of whose
Holders is required for any such amendment, supplemental indenture or waiver
provided for in this Indenture, or (iii) modify any of the waiver provisions,
except to increase any required percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each outstanding Note affected thereby. In addition, any amendment
to the provisions of Article 10 or Section 11.04 hereof will require the consent
of the Holders of at least 75% in aggregate principal amount of the Notes then
outstanding if such amendment would adversely affect the rights of Holders of
Notes.
Section 9.03. Compliance with TIA.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amendment or supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same Indebtedness as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder or subsequent Holder may revoke the consent as to
his or her Note or portion of a Note if the Trustee receives the notice of
revocation before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Notes have consented to the amendment or waiver.
Services may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders of Notes entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders of Notes at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders of Notes after such record
date. No consent shall be valid or effective for more than 90 days after such
record date unless consents from Holders of the principal amount of Notes
required hereunder for such
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amendment, supplement or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment or waiver becomes effective in accordance with its
terms, it shall bind every Holder, unless it is of the type described in any of
clauses (i) through (viii) of Section 9.02 hereof. In such case, the amendment
or waiver shall bind each Holder who has consented to it and every subsequent
Holder of a Note that evidences the same debt as the consenting Holder's Note.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may (at Services' expense) place an appropriate notation about
an amendment, supplement or waiver on any Note thereafter authenticated.
Services 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 Protected.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplemental indenture does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing such amendment
or supplemental indenture, the Trustee shall be entitled to receive and, subject
to Section 7.01 hereof, shall be fully protected in relying upon, an Officers'
Certificate and Opinion of Counsel as conclusive evidence that such amendment or
supplemental indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon Services
and CCPR in accordance with its terms. Services and CCPR may not sign an
amendment or supplemental indenture until the Board of Directors approves it.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
Services and CCPR agree, and each Holder by accepting a Note agrees, that
the payment of principal of, premium, interest and Liquidated Damages, if any,
on the Notes shall be subordinated in right of payment, to the extent and in the
manner provided in this Article 10 and Article 11, to the prior payment in full
in cash or Cash Equivalents of all Obligations with respect to Senior Debt,
whether outstanding on the date hereof or thereafter incurred, and that the
subordination is for the benefit of the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of Services or CCPR, as the case may be,
in a liquidation or dissolution of Services or CCPR, as the case may be, or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to Services, CCPR or their respective properties, an assignment for the
benefit of creditors or any marshalling of Services' or CCPR's assets and
liabilities:
(a) the holders of Senior Debt will be entitled to receive payment in full
in cash or Cash Equivalents of all Obligations due in respect of such Senior
Debt (including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Debt, whether or not such interest is
allowable as a claim in any such proceeding) before the Holders shall be
entitled to receive any payment with respect to the Notes or the Guarantee
(except that Holders may receive (i) Permitted Junior Securities and any other
Permitted Junior Securities issued in exchange for any Permitted Junior
Securities and (ii) payments and other distributions made from the defeasance
trust created pursuant to Article 8 hereof); and
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<PAGE>
(b) until all Obligations with respect to Senior Debt are paid in full in
cash or Cash Equivalents, any distribution to which the Holders would be
entitled but for this Article 10 shall be made to the holders of Senior Debt
(except that Holders may receive (i) Permitted Junior Securities and any other
Permitted Junior Securities issued in exchange for any Permitted Junior
Securities and any securities issued in exchange for Senior Debt and (ii)
payments and other distributions made from the defeasance trust created pursuant
to Article 8 hereof).
Section 10.03. Default on Designated Senior Debt.
Services and CCPR may not make any payment upon or in respect of the Notes
or the Guarantee (except that Holders may receive (i) Permitted Junior
Securities and any other Permitted Junior Securities issued in exchange for any
Permitted Junior Securities and (ii) payments and other distributions made from
the defeasance trust created pursuant to Article 8 hereof and except for Capital
Stock of Services or a successor entity that is not Disqualified Capital Stock
of Services or such Successor entity) or make any deposit to the defeasance
trust created pursuant to Article 8 hereof if:
(i) a default in the payment of the principal of, premium, if any, or
interest on Designated Senior Debt occurs and is continuing; or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders (or the Representatives) of the
Designated Senior Debt as to which such default relates to accelerate
its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from Services, CCPR or the holders or
Representatives of Designated Senior Debt. If the Trustee receives
any such Payment Blockage Notice, no subsequent payment blockage
period shall be commenced for purposes of this Section 10.03 unless
and until (i) 360 days have elapsed since the initial effectiveness of
the immediately prior Payment Blockage Notice; provided that if any
Payment Blockage Notice is delivered by the holders of Designated
Senior Debt other than Senior Debt under the Credit Agreement, the
holders of Senior Debt under the Credit Agreement may give another
Payment Blockage Notice within such 360 day period so long as the
total number of days during which a Payment Blockage Notice is in
effect during such 360 day period does not exceed 179 days and (ii)
all scheduled payments of principal, premium, if any, interest and
Liquidated Damages, if any, on the Notes that have come due have been
paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to
the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default has been cured or waived for a
period of not less than 90 consecutive days.
Services and CCPR may and shall resume payments on the Notes or the
Guarantee, as applicable:
(a) in the case of a payment default described in clause (i) above,
upon the date on which such default is cured or waived, and
(b) in case of a nonpayment default described in clause (ii) above,
the earlier of the date on which such nonpayment default is cured
or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated.
Section 10.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default,
Services shall promptly notify the Representative of any Senior Debt of the
acceleration.
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Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder
has actual knowledge that such payment is prohibited by this Article 10 such
payment shall be held by the Trustee or such Holder, in trust for the benefit
of, and shall be paid forthwith over and delivered, upon written request to, the
holders of Senior Debt as their interest may appear or their Representative
under the indenture or other agreement (if any) pursuant to which Senior Debt
may have been issued, as their interest may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or Services or
any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10 except if such payment is made as a result
of the willful misconduct or bad faith of the Trustee.
Section 10.06. Notice by Services.
Services shall promptly notify the Trustee and the Paying Agent of any
facts known to Services that would cause a payment of any Obligations with
respect to the Notes to violate this Article 10, but failure to give such notice
shall not affect the subordination of the Notes to the Senior Debt as provided
in this Article 10 except if such payment is made as a result of the willful
misconduct or bad faith of the Trustee.
Section 10.07. Subrogation.
After all Senior Debt is paid in full in cash or Cash Equivalents and until
the Notes are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness pari passu with the Notes) to the rights of holders
of Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders is not, as between
Services and Holders, a payment by Services on the Senior Debt.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of the Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(i) impair, as between Services and the Holders, the obligation of
Services, which is absolute and unconditional, to pay principal of,
premium, if any, interest and Liquidated Damages, if any, on the
Notes in accordance with their terms;
(ii) affect the relative rights of Holders and creditors of Services
other than their rights in relation to holders of Senior Debt; or
(iii) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or an Event of Default, subject to the
rights of holders of Senior Debt to receive distributions and
payments otherwise payable to Holders.
If Services fails because of this Article 10 to pay principal of, premium,
if any, interest or Liquidated Damages, if any, on a Note on the due date, the
failure is nevertheless a Default or an Event of Default.
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Section 10.09. Subordination May Not Be Impaired by Services.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be prejudiced or impaired by any act
or failure to act by Services or any Holder or by the failure of Services or any
Holder to comply with this Indenture.
Without in any way limiting the generality of the foregoing paragraph, the
holders of the Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Holders to the holders of Senior Debt, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time or payment of,
or renew or alter, Senior Debt or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding; provided, however, that any
such alteration shall not (A) increase the amount of Senior Debt outstanding in
a manner prohibited by this Indenture or (B) otherwise violate Section 4.07
hereof; (b) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (c) release any Person liable in
any manner for the collection of Senior Debt; provided, however, that any such
sale, exchange, release or other transaction shall not violate Section 4.09
hereof; and (d) exercise or refrain from exercising any rights against Services
or any other Person; provided, however, that in no event shall any such actions
limit the right of the Holder to take any action to accelerate the maturity of
the Notes in accordance with the provisions set forth in Article 6 or to pursue
any rights or remedies against the parties to this Indenture under this
Indenture or under applicable laws if the taking of such action does not
otherwise violate the terms of this Article.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of Services referred to in this
Article 10, the Trustee and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction or upon any certificate of
such Representative or of the liquidating trustee or agent or other Person
making any distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Debt and other Indebtedness of Services, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee or Paying Agent shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee or Paying Agent, and the Trustee and the Paying
Agent may continue to make payments on the Notes, unless the Trustee or Paying
Agent shall have received at its Corporate Trust Office at least five Business
Days prior to the date of such payment written notice that the payment of any
Obligations with respect to the Notes would violate this Article 10. Only
Services or a Representative may give the notice. Nothing in this Article 10
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder by its acceptance thereof authorizes and directs the Trustee on
the Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article 10, and appoints the
Trustee to act as the Holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in Section 6.09 hereof at least 30
days before the expiration of the time to file such claim, a Representative of
the Designated Senior Debt is hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Notes.
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Section 10.13. Amendments.
Any amendment to the provisions of this Article 10 shall require the
consent of the Holders of at least 75% in aggregate principal amount of Notes
then outstanding if such amendment would adversely affect the rights of the
Holders of Notes.
ARTICLE 11
GUARANTEE OF NOTES
Section 11.01. Guarantee.
CCPR hereby fully and unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes and the Obligations of Services hereunder and thereunder, that: (a)
the principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes will be promptly paid in full when due, subject to any applicable
grace period, whether at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal, premium, if any, (to the extent permitted by
law) interest on any interest, if any, and Liquidated Damages, if any, on the
Notes, and all other payment Obligations of Services to the Holders or the
Trustee hereunder or thereunder will be promptly paid in full and performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
Obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at Stated Maturity, by acceleration, redemption or
otherwise. Failing payment when so due of any amount so guaranteed or any
performance so guaranteed for whatever reason, CCPR will be obligated to pay or
perform the same immediately. An Event of Default under this Indenture or the
Notes shall constitute an Event of Default under the Guarantee, and shall
entitle the Holders to accelerate the Obligations of CCPR hereunder in the same
manner and to the same extent as the Obligations of Services. CCPR hereby
agrees that its Obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
with respect to any provisions hereof or thereof, the recovery of any judgment
against Services, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of CCPR.
CCPR hereby waives diligence, presentment, demand of payment, filing of claims
with a court in the event of insolvency or bankruptcy of Services, any right to
require a proceeding first against Services, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the Obligations contained in the Notes and this
Indenture. If any Holder or the Trustee is required by any court or otherwise to
return to Services, CCPR, or any Note Custodian, Trustee, liquidator or other
similar official acting in relation to either Services or CCPR, any amount paid
by either to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. CCPR
agrees that it shall not be entitled to, and hereby waives, any right of
subrogation in relation to the Holders in respect of any Obligations guaranteed
hereby until payment in full of the Obligations hereunder. CCPR further agrees
that, as between CCPR, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article 6 for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such Obligations as provided in
Article 6 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by CCPR for the purpose of this Guarantee.
Section 11.02. Execution and Delivery of the Guarantee.
To evidence its Guarantee set forth in Section 11.01 hereof, CCPR hereby
agrees that a notation of such Guarantee substantially in the form of Exhibit E
hereof shall be endorsed by an Officer of CCPR by manual or facsimile signature
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of CCPR by an Officer of CCPR.
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CCPR hereby agrees that its Guarantee set forth in Section 11.01 hereof
shall remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Guarantee.
If an Officer whose signature is on this Indenture or on the Guarantee no
longer holds that office at the time the Trustee authenticates the Note on which
a Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Guarantee (in existence on or
after the date hereof) set forth in this Indenture on behalf of CCPR.
Section 11.03. "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by Services and be then acting hereunder, the term "Trustee" as used
in this Article 11 shall in each case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article 11 in place of the Trustee.
Section 11.04. Subordination of Guarantee.
The obligations of CCPR under its Guarantee pursuant to this Article 11
shall be junior and subordinated to the Senior Debt of CCPR on the same basis as
the Notes are junior and subordinated to Senior Debt of Services. For the
purposes of the foregoing sentence, the Trustee and the Holders of Notes shall
have the right to receive and/or retain payments by CCPR only at such times as
they may receive and/or retain payments in respect of Notes pursuant to this
Indenture, including Article 10 hereof. In the event that the Trustee or any
Holder shall have received any payment that is prohibited by the foregoing
sentence, such payment shall be paid over and delivered forthwith to the holders
of the Senior Debt remaining unpaid, to the extent necessary to pay in full all
Senior Debt in accordance with Article 10 hereof.
Each Holder of a Note by its acceptance thereof (a) agrees to and shall be
bound by the provisions of this Section 11.04, (b) authorizes and directs the
Trustee in its behalf to take such actions as may be necessary and appropriate
to effectuate the subordination so provided and (c) appoints the Trustee its
attorney-in-fact for any and all such purposes.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts with the
duties imposed by operation of Section 318(c) of the TIA, the imposed duties
shall control.
Section 12.02. Notices.
Any notice or communication by Services, CCPR or the Trustee to the other
is duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address set forth below:
If to Services or CCPR:
CCPR Services, Inc.
110 East 59th Street
New York, New York 10022
Attention: Chief Financial Officer
Telecopier No.: (212) 906-8497
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with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Thomas Kennedy, Esq.
Telecopier No.: (212) 735-3637
If to the Trustee:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Department
Services, CCPR 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; the date receipt is acknowledged, if mailed by registered or
certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class mail
to his or her address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If Services or CCPR mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to Section 312(b) of the TIA with other
Holders with respect to their rights under this Indenture, the Guarantee or the
Notes. Services, CCPR, the Trustee, the Registrar and any other Person shall
have the protection of Section 312(c) of the TIA.
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Services or CCPR to the Trustee to take
any action under this Indenture, Services or CCPR shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set forth
in Section 12.05 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 complied with; and
(b) an Opinion of Counsel (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent provided for in this Indenture relating
to the proposed action have been complied with.
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Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to Section 314(a)(4) of the TIA) shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such Person, he 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 complied with; and
(4) a statement as to whether, in such Person's opinion, such condition or
covenant has been complied with.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. Legal Holidays.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 12.08. No Recourse Against Others.
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future of Services or CCPR or any successor entity shall have
any personal liability for any Obligations of Services or CCPR or any successor
entity under the Notes, the Guarantee or this Indenture, by reason of his or its
status as such stockholder, employee, officer or director. Each Holder by
accepting a Note waives and releases all such liability, and such waiver and
release is part of the consideration for the issuance of the Notes.
Section 12.09. Counterparts.
This Indenture 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.
Section 12.10. Variable Provisions.
Services initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.
The first compliance certificate to be delivered by Services and CCPR to
the Trustee pursuant to Section 4.03 hereof shall be for the fiscal year ending
on December 31, 1997.
Section 12.11. Governing Law.
The internal laws of the State of New York shall govern this Indenture and
the Notes, without regard to the conflict of laws provisions thereof.
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Section 12.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of Services or any of its Subsidiaries, and no other indenture, loan
or debt agreement may be used to interpret this Indenture.
Section 12.13. Successors.
All agreements of Services in this Indenture and the Notes shall bind its
successor. All agreements of the Trustee in this Indenture shall bind its
successor. All agreements of the Guarantor in this Indenture and the Guarantee
shall bind its successor.
Section 12.14. Severability.
If any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 12.15. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
[SIGNATURE PAGE FOLLOWS]
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CCPR SERVICES, INC.
By: /s/ Richard J. Lubasch
------------------------------------
Name: Richard J. Lubasch
Title: Senior Vice President-General
Counsel and Secretary
Attest:
_________________
Name:
Title:
CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By: /s/ Richard J. Lubasch
-------------------------------------
Name: Richard J. Lubasch
Title: Senior Vice President-General
Counsel and Secretary
Attest:
_________________
Name:
Title:
THE CHASE MANHATTAN BANK
as Trustee
By: ________________________________
Name:
Title:
Attest:
_________________
Name:
Title:
<PAGE>
CCPR SERVICES, INC.
By:____________________________________
Name: Richard J. Lubasch
Title: Senior Vice President-General
Counsel and Secretary
Attest:
_________________
Name:
Title:
CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By:_____________________________________
Name: Richard J. Lubasch
Title: Senior Vice President-General
Counsel and Secretary
Attest:
_________________
Name:
Title:
THE CHASE MANHATTAN BANK
as Trustee
By: /s/ F. J. Grippo
_____________________________________
Name: F. J. Grippo
Title: Vice President
Attest:
/s/ Andrew M. Deck
- -----------------
Name: ANDREW M. DECK
Title: Senior Trust Officer
<PAGE>
EXHIBIT A-1
(Face of Note)
10% Series A/B Senior Subordinated Note due 2007
No. $__________
CUSIP No.
CCPR SERVICES, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars (or such lesser or greater amount as disclosed on Schedule A
hereof) on February 1, 2007.
Record Dates: January 15 and July 15.
Interest Payment Dates: February 1 and August 1.
CCPR SERVICES, INC.
By:______________________________
Name:
Title:
Trustee's Certificate of Authentication
Dated: ___________, 1997
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE CHASE MANHATTAN BANK
as Trustee
By:_____________________________
(Authorized Officer)
A1-1
<PAGE>
(Back of Note)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE 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 SHALL ACT AS THE DEPOSITARY UNTIL A
SUCCESSOR SHALL BE APPOINTED BY SERVICES AND THE REGISTRAR. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN./1/
-
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION AND SUBJECT TO COMPLIANCE WITH
OTHER APPLICABLE LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH SERVICES OR ANY AFFILIATE OF SERVICES WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE"), ONLY (A) TO SERVICES OR TO THE GUARANTOR, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT
TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1),(2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND OTHERWISE IN COMPLIANCE WITH
OTHER APPLICABLE LAWS, SUBJECT TO SERVICES' AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND DELIVERY BY THE TRANSFEROR TO THE COMPANY AND
THE TRUSTEE OF A TRANSFER NOTICE, THE FORM OF WHICH MAY BE OBTAINED FROM THE
TRUSTEE AND, IN THE CASE OF THE FOREGOING CLAUSE (E), DELIVERY BY THE TRANSFEROR
OF A LETTER OF REPRESENTATION SIGNED BY SUCH TRANSFEREE, THE FORM OF WHICH MAY
BE OBTAINED
__________________
/1/. This paragraph should be included only if the Note is issued in global
form.
A1-2
<PAGE>
FROM THE TRUSTEE. THE LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE./2/
-
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. CCPR Services, Inc., a Delaware corporation ("Services"),
promises to pay interest on the principal amount of the Notes at the rate and in
the manner specified below. Interest on the Notes will accrue at 10% per annum
from the date this Note is issued until maturity. Services will pay Liquidated
Damages, if any, pursuant to Section 5 of the Registration Rights Agreement
referred to below. Interest and Liquidated Damages, if any, will be payable
semiannually in cash in arrears on February 1 and August 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 on which interest has been paid or, if no interest has been paid,
from the date of original issuance; provided that the first Interest Payment
Date shall be August 1, 1997. Services shall pay interest (including post-
petition interest in any proceeding under Bankruptcy Law) on overdue principal
and premium, if any, from time to time on demand at the rate of 1% per annum in
excess of the interest rate then in effect and shall pay interest on overdue
installments of interest (including post-petition interest in any proceeding
under Bankruptcy Law) and Liquidated Damages, if any, (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. Services will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
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 shall be payable as to principal, premium, if any, interest and
Liquidated Damages, if any, at the office or agency of Services maintained for
such purpose within the City and State of New York, or, at the option of
Services, payment of interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders; provided that payment by
wire transfer of immediately available funds shall be required with respect to
principal of, and interest, premium and Liquidated Damages, if any, on, all
Global Notes and all other Notes the Holders of which shall have provided
written wire transfer instructions to Services 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. The Chase Manhattan Bank (the "Trustee")
will initially act as the Paying Agent and Registrar. Services may appoint
additional paying agents or co-registrars, and change the Paying Agent, any
additional paying agent, the Registrar or any co-registrar without prior notice
to any Holder. Services, CCPR or any of their Subsidiaries may act in any such
capacity.
4. INDENTURE. Services issued the Notes under an Indenture, dated as of
January 31, 1997 (the "Indenture"), among Services, CCPR 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 (S)(S) 77aaa-77bbbb), as in effect on the date of the Indenture (the
"Trust Indenture Act"). The Notes are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders are referred to the
Indenture and the Trust Indenture Act for a statement of such terms. The Notes
are senior subordinated obligations of Services limited to $200,000,000 in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph 5(b)
below, Services shall not have the right to redeem any Notes prior to February
1, 2002. On or after February 1, 2002, Services will have the right
___________________
/2/. This paragraph should be removed upon the exchange of Series A Notes for
Series B Notes in the Exchange Offer or upon the registration of the Series A
Notes pursuant to the terms of the Registration Rights Agreement.
A1-3
<PAGE>
to redeem all or any part of the Notes in cash at the redemption prices
(expressed as a percentage of the aggregate principal amount thereof) set forth
below, in each case plus accrued and unpaid interest and Liquidated Damages, if
any, to the applicable redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on an Interest
Payment Date that is on or prior to the redemption date) if redeemed during the
12-month period beginning February 1, of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002.................................................. 105.000%
2003.................................................. 103.333%
2004.................................................. 101.677%
2005 and thereafter................................... 100.000%
</TABLE>
(b) In addition, in the event of the first to occur prior to February 1,
2000 of (i) a public offering by Services or CCPR of Capital Stock (other than
Disqualified Stock) for gross proceeds of $50 million or more or (ii) a sale or
series of related sales by Services or CCPR of its Common Stock to one or more
Strategic Equity Investors in a transaction not involving a Change of Control
for an aggregate purchase price of $35 million or more (a "Strategic Equity
Investor Sale"), Services may, at its option, use all or any portion of the net
proceeds thereof to redeem up to a maximum of 33 1/9%of the original aggregate
principal amount at maturity of the Notes at a redemption price equal to 109% of
the principal amount of the Notes plus accrued and unpaid interest and
Liquidated Damages, if any, (determined at the redemption date); provided,
however, that such redemption may be effected only to the extend that not less
than 66 2/3% of the original aggregate principal amount at maturity of the Notes
shall remain outstanding immediately after such redemption. Any such redemption
may be effected only once and must be effected upon not less than 30 nor more
than 60 days notice given within 30 days following such public equity offering
or the most recent such sale to a Strategic Equity Investor, as the case may be,
provided, however, that if as a result of the same transaction, Services is
required to make an Asset Sale Offer, pursuant to Section 4.14 of the Indenture,
concurrently with its making of a Strategic Equity Investor Sale, Services shall
make the Asset Sale Offer no later than 30 days following such Strategic Equity
Investor Sale and, if such Asset Sale Offer is made, any redemption from the
Strategic Equity Investor Sale must be effected upon not less than 30 nor more
than 60 days' notice given within 30 days following the consummation of the
Asset Sale Offer.
(c) In the case of a partial redemption, the Trustee shall select the
Notes or portions thereof for redemption on a pro rata basis or in such other
manner as it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
6. MANDATORY REDEMPTION. Except as set forth under Sections 4.13 and
4.14 of the Indenture, Services shall not be required to make any mandatory
redemption or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change
of Control Triggering Event, each Holder shall have the right to require
Services to repurchase its Notes in cash pursuant to the offer described in
Section 4.13 of the Indenture at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages,
if any, to the date of purchase. Within 30 days following any Change of Control
Triggering Event, Services shall mail a notice to the Trustee and each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If Services, CCPR or any Restricted Subsidiary consummates one or more
Asset Sales and does not use all of the Net Cash Proceeds from such Asset Sales
as provided in Section 4.14 of the Indenture, Services will be required, under
certain circumstances, to utilize the Net Cash Proceeds from such Asset Sales to
offer (an "Asset Sale Offer") to purchase Notes at a purchase price in cash
equal to 100% of the principal amount of the Notes plus accrued interest and
Liquidated Damages, if any, to the date of payment. If the Net Cash Proceeds
are insufficient to purchase all Notes tendered pursuant to any Asset Sale
Offer, the Trustee shall select the Notes to be purchased in accordance with the
terms of Article 3 of the Indenture.
A1-4
<PAGE>
(c) Holders may tender all or, subject to paragraph 8 below, any portion
of their Notes in a Change of Control Offer or Asset Sale Offer by completing
the form below entitled "OPTION OF HOLDER TO ELECT PURCHASE."
(d) Services shall comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with an
offer required to be made by Services to repurchase the Notes as a result of a
Change of Control Triggering Event or an Asset Sale. To the extent that the
provisions of any securities laws or regulations conflict with provisions of the
Indenture, Services shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Indenture by virtue thereof.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase. Notes
may be redeemed or purchased in part, but only in whole multiples of $1,000
unless all Notes held by a Holder are to be redeemed or purchased. On or after
any date on which Notes are redeemed or purchased, interest and Liquidated
Damages, if any, ceases to accrue on the Notes or portions thereof called for
redemption or accepted for purchase on such date.
9. SUBORDINATION. The Notes and Guarantee are subordinated in right of
payment, to the extent and in the manner provided in Article 10 and Section
11.04 of the Indenture, to the prior payment in full in cash or Cash Equivalents
of all Senior Debt, which includes all Indebtedness of Services or CCPR
(including, with respect to the Credit Agreement, all Obligations thereunder),
including interest thereon, whether outstanding on the Issue Date or thereafter
incurred, other than (a) Indebtedness that is expressly subordinated or junior
in right of payment to any Indebtedness of Services or CCPR, (b) Indebtedness
represented by Disqualified Capital Stock, (c) any liability for federal, state,
local or other taxes owed or owing by Services or CCPR, (d) Indebtedness of
Services or CCPR to any Subsidiary of Services or CCPR or any Affiliate of
Services or CCPR (other than Purchase Money Indebtedness constituting at least
75% but not more than 100% of the cost of wireless cellular communication system
equipment and other related fixed assets, incurred in compliance with Section
4.07 of the Indenture), (e) trade payables and (f) Indebtedness incurred in
violation of the Indenture. Services and CCPR agree, and each Holder by
accepting a Note consents and agrees, to the subordination provided in the
Indenture and authorizes the Trustee to give it effect.
10. GUARANTEE. Services' payment obligations under the Notes are fully
and unconditionally guaranteed by CCPR. The Guarantee will be subordinated to
the prior payment in full of all Senior Debt of CCPR and the amounts for which
CCPR will be liable under the guarantee issued from time to time with respect to
Senior Debt.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples thereof. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. Holders seeking to transfer or exchange their Notes may be
required, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any Note
or portion of a Note selected for redemption except 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 Business Days before a selection of
Notes to be redeemed or between a record date and the next succeeding Interest
Payment Date.
12. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
13. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount 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 Event of Default (other than a payment Default) or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the
A1-5
<PAGE>
Holders of a majority in aggregate 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 any Holder, the Indenture or the Notes may be
amended to: (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 by a successor corporation of Services'
Obligations to the Holders in the event of a merger, consolidation or
disposition pursuant to Article 5 of the Indenture; (d) to comply with SEC's
requirements to effect or maintain the qualification of the Indenture under the
TIA; (e) to provide for additional guarantee with respect to the Notes or (f) to
make any change that does not materially adversely affect any Holder's legal
rights under the Indenture. Any amendment to the provisions of Article 10 or
Section 11.04 of the Indenture will require the consent of the Holders of at
least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Notes. Certain
amendments require the consent of each Holder adversely affected.
14. DEFAULTS AND REMEDIES. Events of Default include: (i) the failure by
Services to pay any installment of interest or Liquidated Damages, if any, on
the Notes as and when the same becomes due and payable and the continuance of
any such failure for 30 days, whether or not prohibited by Article 10 of the
Indenture; (ii) the failure by Services to pay all or any part of the principal,
or premium, if any, on the Notes when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Change of Control Payment or the Asset Sale Offer
Price, whether or not prohibited by Article 10 of the Indenture; (iii) the
failure by Services or CCPR to observe or perform any other covenant or
agreement contained in the Notes, the Guarantee or the Indenture and, subject to
certain exceptions, the continuance of such failure for a period of 30 days
after written notice is given to Services or CCPR, as the case may be, by the
Trustee or to Services or CCPR, as the case may be, and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes outstanding;
(iv) certain events of bankruptcy or insolvency involving Services, CCPR or any
Restricted Subsidiary that is a Significant Subsidiary; (v) (1) a default in any
Indebtedness (other than the Credit Agreement) of Services, CCPR or any of the
Restricted Subsidiaries with an aggregate principal amount in excess of $5
million (a) resulting from the failure to pay principal or interest (in the case
of an interest default or a default in the payment of principal other than at
its stated maturity, after the expiration of the applicable grace period) when
due or (b) as a result of which the maturity of such Indebtedness has been
accelerated prior to its stated maturity, or (2) a default in the Credit
Agreement (with an aggregate principal amount in excess of $5 million
outstanding with respect thereto) (a) resulting from the failure to pay
principal at maturity or (b) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity; (vi) final
unsatisfied judgments not covered by insurance aggregating in excess of $5
million, at any one time rendered against Services, CCPR or any of the
Restricted Subsidiaries and not stayed, fully bonded, discharged, paid or
vacated within 60 days; and (vii) except as permitted by the Indenture, the
Guarantee shall be held in any final judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or CCPR, or
any Person acting on behalf of CCPR, shall deny or disaffirm its obligations
under its Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes then outstanding may declare
all the Notes to be immediately due and payable by notice in writing to Services
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Credit Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under the Credit Agreement or five Business
Days after receipt by Services and the Representative under the Credit Agreement
of such Acceleration Notice but only if such Event of Default is then
continuing. 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 aggregate principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of all 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 the principal of, premium, if any, and interest on, and Liquidated
Damages, if any, with respect to such Notes, which
A1-6
<PAGE>
may only be waived with the consent of each Holder of Notes affected. Services
must furnish an annual compliance certificate to the Trustee.
15. TRUSTEE DEALINGS WITH SERVICES. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for Services, CCPR or any of their Affiliates, and may otherwise deal with
Services, CCPR or any of their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS. No direct or indirect stockholder,
employee, officer or director, as such, past, present or future of Services or
CCPR or any successor entity shall have any personal liability for any
Obligations of Services or CCPR or any successor entity under the Notes, the
Guarantee or the Indenture, by reason of his or its status as such stockholder,
employee, officer or director. Each Holder by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transfer Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement, dated as of January 31, 1997, among Services,
CCPR and the Initial Purchasers (the "Registration Rights Agreement").
18. 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 Services in accordance with Section 5.01
of the Indenture, the successor corporation formed by such consolidation or with
which or into Services is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, Services under the
Indenture with the same effect as if such successor has been named as Services
under the Indenture; provided, however, that neither Services nor any successor
corporation shall be released from its Obligation to pay the principal of,
premium, if any, and accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to the Notes.
19. GOVERNING LAW. The internal laws of the state of New York shall
govern the Indenture and the Notes without regard to the conflict of laws
provisions thereof.
20. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
21. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Services has caused
CUSIP numbers to be printed on the Notes and have directed the Trustee to 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 printed on the Notes.
Services will furnish to any Holder upon written request and without charge
a copy of the Indenture. Request may be made to:
CCPR Services, Inc.
110 East 59th Street
New York, NY 10022
Attention: Chief Financial Officer
A1-7
<PAGE>
Assignment Form
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's Social Security or tax I.D. No.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of Services. The agent may
substitute another to act for such agent._______________________________________
Date:_______________
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Security)
By:__________________________
Notice: To be executed by an executive officer
Signature Guarantee:/***/_________________________
_____________________
/***/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A1-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Security purchased by Services pursuant
to Section 4.13 or 4.14 of the Indenture, check the box below:
[_] Section 4.13 [_] Section 4.14
If you want to elect to have only part of this Security purchased by
Services pursuant to Section 4.13 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: _____________ Your Signature:_________________________________
(Sign exactly as your name appears on the
Security)
By:_____________________
Notice: To be executed by an executive officer
Tax Identification No.:____________
Signature Guarantee:/*/___________________________
___________________
/*/ Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A1-9
<PAGE>
SCHEDULE A
SCHEDULE OF EXCHANGES OR TRANSFERS FOR DEFINITIVE NOTES OR ANOTHER NOTE/2/
The following exchanges or transfers of a part of this Global Note for
Definitive Notes or another Global Note have been made:
<TABLE>
<CAPTION>
====================================================================================================================
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
or Transfer
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
</TABLE>
______________________
2. To be included only if the Note is issued in global form.
A1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
10% Series A/B Senior Subordinated Note due 2007
No. $__________
CUSIP No.
CCPR SERVICES, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars (or such lesser or greater amount as disclosed on Schedule A
hereof) on February 1, 2007.
Record Dates: January 15 and July 15.
Interest Payment Dates: February 1 and August 1.
CCPR SERVICES, INC.
By:______________________________
Name:
Title:
Trustee's Certificate of Authentication
Dated: ___________, 1997
This is one of the [Global]
Notes referred to in the
within-mentioned Indenture:
THE CHASE MANHATTAN BANK
as Trustee
By:_____________________________
(Authorized Officers)
(Back of Regulation S Temporary Global Note)
A2-1
<PAGE>
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE 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. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO SERVICES OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN./1/
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION AND SUBJECT TO COMPLIANCE WITH OTHER APPLICABLE LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH SERVICES OR ANY AFFILIATE OF SERVICES WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION
DATE"), ONLY (A) TO SERVICES OR TO THE GUARANTOR, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),(2),(3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND OTHERWISE IN COMPLIANCE WITH OTHER APPLICABLE
LAWS, SUBJECT TO SERVICES' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
1. This paragraph should be included only if the Note is issued in global
form.
A2-2
<PAGE>
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND DELIVERY BY THE TRANSFEROR TO THE COMPANY
AND THE TRUSTEE OF A TRANSFER NOTICE, THE FORM OF WHICH MAY BE OBTAINED
FROM THE TRUSTEE AND, IN THE CASE OF THE FOREGOING CLAUSE (E), DELIVERY BY
THE TRANSFEROR OF A LETTER OF REPRESENTATION SIGNED BY SUCH TRANSFEREE, THE
FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE. THE LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE./2/
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. CCPR Services, Inc., a Delaware corporation ("Services"),
promises to pay interest on the principal amount of the Notes at the rate and in
the manner specified below. Interest on the Notes will accrue at 10% per annum
from the date this Note is issued until maturity. Services will pay Liquidated
Damages, if any, pursuant to Section 5 of the Registration Rights Agreement
referred to below. Interest and Liquidated Damages, if any, will be payable
semiannually in cash in arrears on February 1 and August 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 on which interest has been paid or, if no interest has been paid,
from the date of original issuance; provided that the first Interest Payment
Date shall be August 1, 1997. Services shall pay interest (including post-
petition interest in any proceeding under Bankruptcy Law) on overdue principal
and premium, if any, from time to time on demand at the rate of 1% per annum in
excess of the interest rate then in effect and shall pay interest on overdue
installments of interest (including post-petition interest in any proceeding
under Bankruptcy Law) and Liquidated Damages, if any, (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.
Until this Regulation S Temporary Global Note is exchanged for one or more
Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to
receive payments of interest hereon; until so exchanged in full, this Regulation
S Temporary Global Note shall in all other respects be entitled to the same
benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. Services will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the January 15 or July
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 shall be payable as to principal, premium, if any, interest and
Liquidated Damages, if any, at the office or agency of Services maintained for
such purpose within the City and State of New York, or, at the option of
Services, payment of interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders; provided that payment by
wire transfer of immediately available funds shall be required with respect to
principal of, and interest, premium and Liquidated Damages, if any, on, all
Global Notes and all other Notes the Holders of which shall have provided
written wire transfer instructions to Services 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. The Chase Manhattan Bank (the "Trustee")
will initially act as the Paying Agent and Registrar. Services may appoint
additional paying agents or co-registrars, and change the Paying Agent, any
additional paying agent, the Registrar or any co-registrar without prior notice
to any Holder. Services, CCPR or any of their Subsidiaries may act in any such
capacity.
____________________
2. This paragraph should be removed upon the exchange of Series A Notes for
Series B Notes in the Exchange Offer or upon the registration of the Series A
Notes pursuant to the terms of the Registration Rights Agreement.
A2-3
<PAGE>
4. INDENTURE. Services issued the Notes under an Indenture, dated as of
January 31, 1997 (the "Indenture"), among Services, CCPR 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 (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the
"Trust Indenture Act"). The Notes are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders are referred to the
Indenture and the Trust Indenture Act for a statement of such terms. The Notes
are senior subordinated obligations of Services limited to $200,000,000 in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION. (a) Except as described in paragraph 5(b)
below, Services shall not have the right to redeem any Notes prior to February
1, 2002. On or after February 1, 2002, Services will have the right to redeem
all or any part of the Notes in cash at the redemption prices (expressed as a
percentage of the aggregate principal amount thereof) set forth below, in each
case plus accrued and unpaid interest and Liquidated Damages, if any, to the
applicable redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on an Interest Payment Date that is
on or prior to the redemption date) if redeemed during the 12-month period
beginning February 1, of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 105.000%
2003 103.333%
2004 101.677%
2005 and thereafter 100.000%
</TABLE>
(b) In addition, in the event of the first to occur prior to February 1,
2000 of (i) a public offering of by Services or CCPR of Capital Stock (other
than Disqualified Stock) for gross proceeds of $50 million or more or (ii) a
sale or series of related sales by Services or CCPR of its Common Stock to one
or more Strategic Equity Investors in a transaction not involving a Change of
Control for an aggregate purchase price of $35 million or more (a "Strategic
Equity Investor Sale"), Services may, at its option, use all or any portion of
the net proceeds thereof to redeem up to a maximum of 33-1/3% of the original
aggregate principal amount at maturity of the Notes at a redemption price equal
to 109% of the principal amount of the Notes plus accrued and unpaid interest
and Liquidated Damages, if any, (determined at the redemption date); provided,
however, that such redemption may be effected only to the extend that not less
than 66-2/3% of the original aggregate principal amount at maturity of the Notes
shall remain outstanding immediately after such redemption. Any such redemption
may be effected only once and must be effected upon not less than 30 nor more
than 60 days notice given within 30 days following such public equity offering
or the most recent such sale to a Strategic Equity Investor, as the case may be,
provided, however, that if as a result of the same transaction, Services is
required to make an Asset Sale Offer, pursuant to Section 4.14 of the Indenture,
concurrently with its making of a Strategic Equity Investor Sale, Services shall
make the Asset Sale Offer no later than 30 days following such Strategic Equity
Investor Sale and, if such Asset Sale Offer is made, any redemption from the
Strategic Equity Investor Sale must be effected upon not less than 30 nor more
than 60 days' notice given within 30 days following the consummation of the
Asset Sale Offer.
(c) In the case of a partial redemption, the Trustee shall select the
Notes or portions thereof for redemption on a pro rata basis or in such other
manner as it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
6. MANDATORY REDEMPTION. Except as set forth under Sections 4.13 and
4.14 of the Indenture, Services shall not be required to make any mandatory
redemption or sinking fund payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDERS. (a) Upon the occurrence of a Change
of Control Triggering Event, each Holder shall have the right to require
Services to repurchase its Notes in cash pursuant to the offer described in
Section 4.13 of the Indenture at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages,
if any, to the date of purchase. Within 30 days following any Change of Control
Triggering Event, Services shall mail a notice to the Trustee and each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
A2-4
<PAGE>
(b) If Services, CCPR or any Restricted Subsidiary consummates one or more
Asset Sales and does not use all of the Net Cash Proceeds from such Asset Sales
as provided in Section 4.14 of the Indenture, Services will be required, under
certain circumstances, to utilize the Net Cash Proceeds from such Asset Sales to
offer (an "Asset Sale Offer") to purchase Notes at a purchase price equal to
100% of the principal amount of the Notes plus accrued interest and Liquidated
Damages, if any, to the date of payment. If the Net Cash Proceeds are
insufficient to purchase all Notes tendered pursuant to any Asset Sale Offer,
the Trustee shall select the Notes to be purchased in accordance with the terms
of Article 3 of the Indenture.
(c) Holders may tender all or, subject to paragraph 8 below, any portion
of their Notes in a Change of Control Offer or Asset Sale Offer by completing
the form below entitled OPTION OF HOLDER TO ELECT PURCHASE."
(d) Services shall comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with an
offer required to be made by Services to repurchase the Notes as a result of a
Change of Control Triggering Event or an Asset Sale. To the extent that the
provisions of any securities laws or regulations conflict with provisions of the
Indenture, Services shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Indenture by virtue thereof.
8. NOTICE OF REDEMPTION OR PURCHASE. Notice of an optional redemption or
an Offer will be mailed to each Holder at its registered address at least 30
days but not more than 60 days before the date of redemption or purchase. Notes
may be redeemed or purchased in part, but only in whole multiples of $1,000
unless all Notes held by a Holder are to be redeemed or purchased. On or after
any date on which Notes are redeemed or purchased, interest and Liquidated
Damages, if any, ceases to accrue on the Notes or portions thereof called for
redemption or accepted for purchase on such date.
9. SUBORDINATION. The Notes and Guarantee are subordinated in right of
payment, to the extent and in the manner provided in Article 10 and Section
11.04 of the Indenture, to the prior payment in full in cash or Cash Equivalents
of all Senior Debt, which includes all Indebtedness of Services or CCPR
(including, with respect to the Credit Agreement, all Obligations thereunder),
including interest thereon, whether outstanding on the Issue Date or thereafter
incurred, other than (a) Indebtedness that is expressly subordinated or junior
in right of payment to any Indebtedness of Services or CCPR, (b) Indebtedness
represented by Disqualified Capital Stock, (c) any liability for federal, state,
local or other taxes owed or owing by Services or CCPR, (d) Indebtedness of
Services or CCPR to any Subsidiary of Services or CCPR or any Affiliate of
Services or CCPR (other than Purchase Money Indebtedness constituting at least
75% but not more than 100% of the cost of wireless cellular communication system
equipment and other related fixed assets, incurred in compliance with Section
4.07 of the Indenture), (e) trade payables and (f) Indebtedness incurred in
violation of the Indenture. Services and CCPR agree, and each Holder by
accepting a Note consents and agrees, to the subordination provided in the
Indenture and authorizes the Trustee to give it effect.
10. GUARANTEE. Services' payment obligations under the Notes are fully
and unconditionally guaranteed by CCPR. The Guarantee will be subordinated to
the prior payment in full of all Senior Debt of CCPR and the amounts for which
CCPR will be liable under the guarantee issued from time to time with respect to
Senior Debt.
11. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples thereof. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. Holders seeking to transfer or exchange their Notes may be
required, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any Note
or portion of a Note selected for redemption except 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 Business Days before a selection of
Notes to be redeemed or between a record date and the next succeeding Interest
Payment Date.
12. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
A2-5
<PAGE>
13. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following
paragraphs, the Indenture and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate principal amount 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 Event of Default (other than a payment 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 aggregate 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 any Holder, the Indenture or the Notes may be
amended to: (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 by a successor corporation of Services'
Obligations to the Holders in the event of a merger, consolidation or
disposition pursuant to Article 5 of the Indenture; (d) to comply with SEC's
requirements to effect or maintain the qualification of the Indenture under the
TIA; (e) to provide for additional guarantee with respect to the Notes or (f) to
make any change that does not materially adversely affect any Holder's legal
rights under the Indenture. Any amendment to the provisions of Article 10 or
Section 11.04 of the Indenture will require the consent of the Holders of at
least 75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the rights of Holders of Notes. Certain
amendments require the consent of each Holder adversely affected.
14. DEFAULTS AND REMEDIES. Events of Default include: (i) the failure by
Services to pay any installment of interest or Liquidated Damages, if any, on
the Notes as and when the same becomes due and payable and the continuance of
any such failure for 30 days, whether or not prohibited by Article 10 of the
Indenture; (ii) the failure by Services to pay all or any part of the principal,
or premium, if any, on the Notes when and as the same becomes due and payable at
maturity, redemption, by acceleration on or otherwise, including, without
limitation, payment of the Change of Control Payment or the Asset Sale Offer
Price, whether or not prohibited by Article 10 of the Indenture; (iii) the
failure by Services or CCPR to observe or perform any other covenant or
agreement contained in the Notes, the Guarantee or the Indenture and, subject to
certain exceptions, the continuance of such failure for a period of 30 days
after written notice is given to Services or CCPR, as the case may be, by the
Trustee or to Services or CCPR, as the case may be, and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes outstanding;
(iv) certain events of bankruptcy or insolvency involving Services, CCPR or any
Restricted Subsidiary that is a Significant Subsidiary; (v) (1) a default in any
Indebtedness (other than the Credit Agreement) of Services, CCPR or any of the
Restricted Subsidiaries with an aggregate principal amount in excess of $5
million (a) resulting from the failure to pay principal or interest (in the case
of an interest default or a default in the payment of principal other than at
its stated maturity, after the expiration of the applicable grace period) when
due or (b) as a result of which the maturity of such Indebtedness has been
accelerated prior to its stated maturity, or (2) a default in the Credit
Agreement (with an aggregate principal amount in excess of $5 million
outstanding with respect thereto) (a) resulting from the failure to pay
principal at maturity or (b) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity; (vi) final
unsatisfied judgments not covered by insurance aggregating in excess of $5
million, at any one time rendered against Services, CCPR or any of the
Restricted Subsidiaries and not stayed, fully bonded, discharged, paid or
vacated within 60 days; and (vii) except as permitted by the Indenture, the
Guarantee shall be held in any final judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or CCPR, or
any Person acting on behalf of CCPR, shall deny or disaffirm its obligations
under its Guarantee.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes then outstanding may declare
all the Notes to be immediately due and payable by notice in writing to Services
and the Trustee specifying the respective Event of Default and that it is a
"notice of acceleration" (the "Acceleration Notice"), and the same (i) shall
become immediately due and payable or (ii) if there are any amounts outstanding
under the Credit Agreement, shall become immediately due and payable upon the
first to occur of an acceleration under the Credit Agreement or five Business
Days after receipt by Services and the Representative under the Credit Agreement
of such Acceleration Notice but only if such Event of Default is then
continuing. 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 aggregate principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any
A2-6
<PAGE>
trust or power. The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of all 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 the principal of, premium, if any, and interest on,
and Liquidated Damages, if any, with respect to such Notes, which may only be
waived with the consent of each Holder of Notes affected. Services must furnish
an annual compliance certificate to the Trustee.
15. TRUSTEE DEALINGS WITH SERVICES. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for Services, CCPR or any of their Affiliates, and may otherwise deal with
Services, CCPR or any of their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS. No direct or indirect stockholder,
employee, officer or director, as such, past, present or future of Services or
CCPR or any successor entity shall have any personal liability for any
Obligations of Services or CCPR or any successor entity under the Notes, the
Guarantee or the Indenture, by reason of his or its status as such stockholder,
employee, officer or director. Each Holder by accepting a Note waives and
releases all such liability, and such waiver and release is part of the
consideration for the issuance of the Notes.
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transfer Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement, dated as of January 31, 1997, among Services,
CCPR and the Initial Purchasers (the "Registration Rights Agreement").
18. 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 Services in accordance with Section 5.01
of the Indenture, the successor corporation formed by such consolidation or with
which or into Services is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, Services under the
Indenture with the same effect as if such successor has been named as Services
under the Indenture; provided, however, that neither Services nor any successor
corporation shall be released from its Obligation to pay the principal of,
premium, if any, and accrued and unpaid interest on, and Liquidated Damages, if
any, with respect to the Notes.
19. GOVERNING LAW. The internal laws of the state of New York shall
govern the Indenture and the Notes without regard to the conflict of laws
provisions thereof.
20. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
21. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (=Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, Services has caused
CUSIP numbers to be printed on the Notes and have directed the Trustee to 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 printed on the Notes.
Services will furnish to any Holder upon written request and without charge
a copy of the Indenture. Request may be made to:
A2-7
<PAGE>
CCPR Services, Inc.
110 East 59th Street
New York, NY 10022
Attention: Chief Financial Officer
A2-8
<PAGE>
Assignment Form
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's Social Security or tax I.D. No.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of Services. The agent may
substitute another to act for such agent._______________________________________
Date:________________
Your Signature:________________________________________
(Sign exactly as your name appears on the face of this
Security)
By:_____________________
Notice: To be executed by an executive officer
Signature Guarantee:/*/________________________________
____________________
/*/ Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-9
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Security purchased by Services pursuant
to Section 4.13 or 4.14 of the Indenture, check the box below:
[_] Section 4.13 [_] Section 4.14
If you want to elect to have only part of this Security purchased by
Services pursuant to Section 4.13 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $___________
Date: _____________ Your Signature:_________________________________
(Sign exactly as your name appears on the
Security)
By:____________________
Notice: To be executed by an executive officer
Tax Identification No.:____________________
Signature Guarantee:/*/
__________________
/*/ Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A2-10
<PAGE>
SCHEDULE A
SCHEDULE OF EXCHANGES OR TRANSFERS FOR DEFINITIVE NOTES OR ANOTHER NOTE/2/
The following exchanges or transfers of a part of this Global Note for
Definitive Notes or another Global Note have been made:
<TABLE>
<CAPTION>
======================================================================================================================
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Date of Exchange Principal Amount of Principal Amount of following such decrease Trustee or Note
or Transfer this Global Note this Global Note (or increase) Custodian
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
======================================================================================================================
</TABLE>
________________________
2. To be included only if the Note is issued in global form.
A2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
CCPR Services, Inc.
110 East 59th Street
New York, NY 10022
Attention: Chief Financial Officer
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Corporate Trust Department
Re: 10% Series A Senior Subordinated Notes due 2007 of CCPR Services, Inc.
----------------------------------------------------------------------
Reference is hereby made to the Indenture, dated as of January 31, 1997
(the "Indenture"), between CCPR Services, Inc., as issuer ("Services"), Cellular
--------- --------
Communications of Puerto Rico, Inc., as guarantor ("CCPR") and The Chase
----
Manhattan Bank, 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 BOOK-ENTRY INTERESTS IN THE
---------------------------------------------------------------------
RULE 144A GLOBAL NOTE OR DEFINITIVE NOTES 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 book-entry
interests or Definitive Notes are being transferred to a Person that the
Transferor reasonably believes is purchasing the book-entry interests or
Definitive Notes 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 book-entry interest
or Definitive Note will be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Rule 144A Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS IN THE
---------------------------------------------------------------------
REGULATION S GLOBAL NOTE OR DEFINITIVE NOTES 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 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, (iii) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act and (iv) if the
proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred Book-Entry Interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the
B-1
<PAGE>
Private Placement Legend printed on the Regulation S 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 BOOK-ENTRY
-----------------------------------------------------------------
INTERESTS IN THE IAI GLOBAL NOTE OR DEFINITIVE NOTES 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 book-
entry interests in Restricted Global Notes and Definitive Notes bearing the
Private Placement Legend 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 Services or any Subsidiary;
or
(c) [_] such Transfer is being effected pursuant to an effective registration
statement under 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 under the Securities Act or Rule
904, and the Transferor hereby further certifies that the Transfer complies with
the transfer restrictions applicable to book-entry interests in a Restricted
Global Note or Definitive Notes bearing the Private Placement Legend and the
requirements of the exemption claimed, which certification is supported by (x)
if such Transfer is in respect of a principal amount of Notes at the time of
Transfer of $100,000 or more, a certificate executed by the Transferee in the
form of Exhibit D to the Indenture, or (y) if such Transfer is in respect of a
principal amount of Notes at the time of transfer of less than $100,000, (1) a
certificate executed by the Transferee in the form of Exhibit D to the Indenture
and (2) 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 (i) such Transfer is in compliance with the Securities Act and (ii) such
Transfer complies 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 book-entry interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF BOOK-ENTRY INTERESTS IN THE
---------------------------------------------------------------------
UNRESTRICTED GLOBAL NOTE OR IN DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE
- ----------------------------------------------------------------------------
PLACEMENT LEGEND.
- ----------------
(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 book-entry interests or Definitive
Notes will no longer be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Global Notes, on
Definitive Notes bearing the Private Placement Legend 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 book-entry interests or
Definitive Notes will no longer be subject to the
B-2
<PAGE>
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Definitive Notes bearing the Private Placement
Legend 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 book-entry interests or
Definitive Notes will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Definitive Notes bearing the Private Placement Legend and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of Services and CCPR.
_____________________________________
[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) [_] Book-entry interests in the:
(i) [_] 144A Global Note (CUSIP _________________________), or
(ii) [_] Regulation S Global Note (CUSIP ______________________), or
(iii)[_] IAI Global Note (CUSIP _________________________________); or
(b) [_] Restricted Definitive Notes.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] Book-entry interests in the:
(i) [_] 144A Global Note (CUSIP ______________________________), or
(ii) [_] Regulation S Global Note (CUSIP __________________________), or
(iii)[_] IAI Global Note (CUSIP _____________________________ ); or
(iv) [_] Unrestricted Global Note (CUSIP _______________________________);
or
(b) [_] Restricted Definitive Notes; or
(c) [_] Unrestricted Definitive Notes that do not bear the Private
Placement Legend, in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
CCPR Services, Inc.
110 East 59th Street
New York, NY 10022
Attention: Chief Financial Officer
The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Corporate Trust Department
Re: 10% Series A Senior Subordinated Notes due 2007 of CCPR Services,
-----------------------------------------------------------------
Inc.
----
(CUSIP ________________________________________)
Reference is hereby made to the Indenture, dated as of January 31,
1997 (the "Indenture"), between CCPR Services, Inc., as issuer (the "Services"),
--------- --------
Cellular Communications of Puerto Rico, Inc., as guarantor ("CCPR") and The
----
Chase Manhattan Bank, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
____________________________________, (the "Holder") 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 Holder hereby certifies that:
- ---------
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BOOK-ENTRY INTERESTS IN
RESTRICTED GLOBAL NOTES FOR DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE
PLACEMENT LEGEND OR BOOK-ENTRY INTERESTS IN UNRESTRICTED GLOBAL NOTES.
(a) [_] CHECK IF EXCHANGE IS FROM BOOK-ENTRY IN RESTRICTED GLOBAL NOTES
---------------------------------------------------------------
INTEREST TO BOOK-ENTRY INTEREST IN UNRESTRICTED GLOBAL NOTES. In connection
- ------------------------------------------------------------
with the Exchange of the Holder's book-entry interest in Restricted Global Notes
for book-entry interests in Unrestricted Global Notes in an equal principal
amount, the Holder hereby certifies (i) the book-entry interests in Unrestricted
Global Notes are being acquired for the Holder'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 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 book-entry interests in
Unrestricted Global Notes are being acquired in compliance with any applicable
blue sky securities laws of any State of the United States.
(b) [_] CHECK IF EXCHANGE IS FROM BOOK-ENTRY INTEREST IN RESTRICTED
-----------------------------------------------------------
GLOBAL NOTES TO DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND.
- ------------------------------------------------------------------------------
In connection with the Exchange of the Holder's book-entry interests in
Restricted Global Notes for Definitive Notes that do not bear the Private
Placement Legend, in an equal principal amount the Holder hereby certifies (i)
the Definitive Notes are being acquired for the Holder'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 Notes are
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTES TO BOOK-
-------------------------------------------------------------
ENTRY INTERESTS IN UNRESTRICTED GLOBAL NOTES. In connection with the Holder's
- --------------------------------------------
Exchange of Restricted Definitive Notes for book-entry interests in Unrestricted
Global Notes in an equal principal amount, the Holder hereby certifies (i) the
book-entry interests in Unrestricted Global Notes are being acquired for the
Holder's own account without transfer, (ii)
C-1
<PAGE>
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 book-entry interests in
Unrestricted Global Notes are 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 NOTES TO
--------------------------------------------------------
DEFINITIVE NOTES THAT DO NOT BEAR THE PRIVATE PLACEMENT LEGEND. In connection
- --------------------------------------------------------------
with the Holder's Exchange of a Restricted Definitive Note for Definitive Notes
that do not bear the Private Placement Legend in an equal principal amount, the
Holder hereby certifies (i) the Definitive Notes that do not bear the Private
Placement Legend are being acquired for the Holder'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 Notes are
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 BOOK-ENTRY INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BOOK-ENTRY INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BOOK-ENTRY INTERESTS IN RESTRICTED
------------------------------------------------------------
GLOBAL NOTES TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- ------------------------------------------
the Holder's restricted book-entry interest for Restricted Definitive Notes with
an equal principal amount, the Holder hereby certifies (i) the Restricted
Definitive Notes are being acquired for the Holder'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
Restricted Definitive Notes issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Notes and in the Indenture and the Securities Act.
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTES TO BOOK-
-------------------------------------------------------------
ENTRY INTERESTS IN RESTRICTED GLOBAL NOTES. In connection with the Exchange of
- ------------------------------------------
the Holder's Restricted Definitive Note for book-entry interests in Restricted
Global Notes in the [CHECK ONE] [_] Rule 144A Global Note, [_] Regulation S
Global Note, [_] IAI Global Note in an equal principal amount, the Holder hereby
certifies (i) the Definitive Notes are being acquired for the Holder's own
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Definitive Note 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 book-entry interests 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.
This certificate and the statements contained herein are made for your
benefit and the benefit of Services and CCPR.
______________________________________
[Insert Name of Holder]
By:___________________________________
Name:
Title:
Dated: ___________, _____
C-2
<PAGE>
EXHIBIT D
CCPR SERVICES, Inc.
110 East 59th Street
New York, NY 10022
In connection with our proposed purchase of $200,000,000 aggregate
principal amount of the 10% Series A Senior Subordinated Notes due 2007 (the
"Notes") of CCPR Services, Inc. (the "Issuer"), we confirm that:
1. We understand that the Notes have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
sold except as permitted in the following sentence. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
Notes to offer, sell or otherwise transfer such Notes prior to the date
which is three years after the later of the date of original issuance of
the Notes and the last date on which the Issuer or any affiliate of the
Issuer was the owner of such Note (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the Issuer, (b) pursuant to a
registration statement which has been declared effective under the
Securities Act, (c) so long as the Notes are eligible for resale pursuant
to Rule 144A under the Securities Act, to a person we reasonably believe is
a qualified institutional buyer under Rule 144A (a "QIB") that purchases
for its own account or for the account of a QIB and to whom notice is given
that the transfer is being made in reliance on Rule 144A, (d) pursuant to
offers and sales to non-U.S. persons that occur outside the United States
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is
acquiring Notes for its own account or for the account of an institutional
"accredited investor" for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or (f) pursuant to any other available exemption from
the registration requirements of the Securities Act and otherwise in
compliance with applicable laws, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property
of such investor account or accounts be at all times within our or their
control and to compliance with any applicable state securities laws. The
foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes
is proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Trustee,
which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that is
acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. We acknowledge on our own behalf and on
behalf of any investor account for which we are purchasing Notes that the
Issuer and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Restriction Termination Date of the Notes
pursuant to clause (d), (e) or (f) above to require the delivery of an
opinion of counsel, certifications and/or other information satisfactory to
each of them.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under Securities Act) purchasing
for our own account or for the account of such an institutional "accredited
investor," and we are acquiring the Notes for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution
in violation of the Securities Act or the securities laws of any State of
the United States or any other applicable jurisdiction; provided that the
disposition of our property and the property of any accounts for which we
are acting as fiduciary shall remain at all times within our control, and
we 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 were are acting are each able to
bear the economic risk of our or its investment for an indefinite period
and we have received a copy of the Offering Memorandum and acknowledge that
we have had access to such financial and other information, and have been
afforded the opportunity to ask such questions of representatives of the
Issuer and receive answers thereto, as we deem necessary in connection with
our decision to purchase Notes.
D-1
<PAGE>
3. We are acquiring the Notes purchased by us for our own account or for
one or more accounts as to each of which we exercise sole investment discretion.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
Very truly yours,
___________________________
Name of Purchaser
By: _______________________
Date: _____________________
Upon transfer the Notes would be registered in the name of the new
beneficial owner as follows:
Name: _____________________
Address: __________________
Taxpayer ID Number: _______
D-2
<PAGE>
EXHIBIT E
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
Cellular Communications of Puerto Rico, Inc., a Delaware corporation
(the "Guarantor," which term includes any successor [or additional Guarantor]
under the Indenture (the "Indenture") referred to in the Note upon which this
notation is endorsed), (i) has fully and unconditionally guaranteed (a) the due
and punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes, whether at maturity, by acceleration,
redemption or otherwise, (b) the due and punctual payment of interest on the
overdue principal, premium, if any, (to the extent permitted by law) interest on
any interest, if any, and Liquidated Damages, if any, on the Notes, (c) the due
and punctual performance of all other payment obligations of Services to the
Holders or the Trustee, all in accordance with the terms set forth in the
Indenture or the Notes, and (d) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, subject to any applicable grace period, whether at stated maturity,
by acceleration, redemption or otherwise and (ii) has agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Guarantee. Capitalized
terms used herein have the meanings assigned to them in the Indenture unless
otherwise indicated.
This Guarantee shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
The obligations of the Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and the Indenture are expressly subordinated
to the extent set forth in Article 10 and Section 11.04 of the Indenture and
reference is hereby made to such Indenture for the precise terms of such
subordination.
This Guarantee shall be governed by the internal laws of the State of
New York, without regard to conflict of laws provisions thereof.
Cellular Communications of Puerto Rico, Inc.
By: ________________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
Supplemental Indenture (this "Supplemental Indenture"), dated as of
_____________, ____, between _________________________ (the "Additional
Guarantor"), CCPR Services, Inc., a Delaware corporation ("Services"), Cellular
Communications of Puerto Rico, Inc., a Delaware corporation ("CCPR") and The
Chase Manhattan Bank, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S E T H
WHEREAS, Services and CCPR have heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of January 31, 1997, providing
for the issuance of an aggregate principal amount of $200,000,000 of 10% Series
A and Series B Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 4.15 of the Indenture provides that under certain
circumstances Services and CCPR are required to cause the Additional Guarantor
to execute and deliver to the Trustee a supplemental indenture pursuant to which
the Additional Guarantor shall unconditionally guarantee all of Services'
Obligations under the Indenture and the Notes pursuant to a guarantee (the
"Additional Guarantee") on the terms and conditions of the Guarantee by CCPR in
Article 11 of the Indenture and on the other terms and conditions set forth
herein; and
WHEREAS, pursuant to Section 9.01(e) of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto mutually covenant and agree for the equal and ratable benefit of the
holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture including, without
limitation, the subordination provisions of Article 10 thereof.
2. Agreement to Guarantee. The Additional Guarantor hereby agrees,
jointly and severally with all other guarantors, to guarantee Services'
Obligations under the Indenture and the Notes on the terms and subject to the
conditions set forth herein and in Article 11 of the Indenture and to be bound
by all other applicable provisions of the Indenture.
3. Release of Additional Guarantor. In the event that the holders of
Services' Other Indebtedness which is guaranteed by the Additional Guarantor
release the Additional Guarantor from its guarantee in respect of such Other
Indebtedness, except a discharge or release by or as a result of any payment
under the guarantee of such Other Indebtedness by the Additional Guarantor, the
Additional Guarantor shall be automatically and unconditionally released and
discharged from its obligations under this Additional Guarantee; provided
however, if, after such release, any guarantee under such Other Indebtedness is
subsequently reincurred or reinstated, then such Additional Guarantor
reincurring or reinstating such guarantee under such Other Indebtedness shall
execute and reinstate its Additional Guarantee hereunder.
Upon receipt of an Officers' Certificate, the Trustee shall execute
any documents reasonably requested by Services, CCPR or the Additional Guarantor
in order to evidence the release of such Additional Guarantor from its
obligations under the Additional Guarantee.
4. No Recourse Against Others. No direct or indirect stockholder,
employee, officer or director, as such, past, present or future of Services,
CCPR or the Additional Guarantor or any successor entity shall have any personal
liability for any Obligations of Services, CCPR or the Additional Guarantor or
any successor entity under the Additional Guarantee, by reason of his or its
status as such stockholder, employee, officer or director.
F-1
<PAGE>
Each Holder by accepting a Note waives and releases all such liability, and such
waiver and release is part of the consideration for the issuance of the Notes.
5. Governing Law. The internal laws of the State of New York shall
govern this Supplemental Indenture, without regard to the conflict of laws
provisions thereof.
6. Counterparts. This Supplemental Indenture 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.
7. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
[Additional Guarantor]
By:_____________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
CCPR Services, Inc.
By:_____________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
F-2
<PAGE>
Cellular Communications of Puerto Rico, Inc.
By:_____________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
The Chase Manhattan Bank
as Trustee
By:_____________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
F-3
<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)......................................................... 12.03
(c)......................................................... 12.03
313 (a)......................................................... 7.06
(b)(1)...................................................... 10.03
(b)(2)...................................................... 7.07
(c)......................................................... 7.06;12.02
(d)......................................................... 7.06
314 (a)......................................................... 4.04;12.02
(b)......................................................... 10.02
(c)(1)...................................................... 12.04
(c)(2)...................................................... 12.04
(c)(3)...................................................... N.A.
(d)......................................................... 10.03, 10.04
(e)......................................................... 12.07
(f)......................................................... N.A.
315 (a)......................................................... 7.01
(b)......................................................... 7.05,12.02
(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)......................................................... 2.13
317 (a)(1)...................................................... 6.08
(a)(2)...................................................... 6.09
(b)......................................................... 2.04
318 (a)......................................................... 12.01
(b)......................................................... N.A.
(c)......................................................... 12.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
v
<PAGE>
TABLE OF CONTENTS
<TABLE>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C>
Section 1.01. Definitions............................................................... 1
Section 1.02. Other Definitions.........................................................13
Section 1.03. Incorporation by Reference of Trust Indenture Act.........................14
Section 1.04. Rules of Construction.....................................................14
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating...........................................................14
Section 2.02. Execution and Authentication..............................................16
Section 2.03. Registrar and Paying Agent................................................16
Section 2.04. Paying Agent to Hold Money in Trust.......................................17
Section 2.05. Holder Lists..............................................................17
Section 2.06. Transfer and Exchange.....................................................17
Section 2.07. Replacement Notes.........................................................27
Section 2.08. Outstanding Notes.........................................................28
Section 2.09. Treasury Notes............................................................28
Section 2.10. Temporary Notes...........................................................28
Section 2.11. Cancellation..............................................................28
Section 2.12. Defaulted Interest........................................................29
Section 2.13. Record Date...............................................................29
Section 2.14. CUSIP Number..............................................................29
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee........................................................29
Section 3.02. Selection of Notes to be Redeemed or Purchased............................30
Section 3.03. Notice of Redemption......................................................30
Section 3.04. Effect of Notice of Redemption............................................31
Section 3.05. Deposit of Redemption Price...............................................31
Section 3.06. Notes Redeemed in Part....................................................31
Section 3.07. Optional Redemption Provisions............................................31
Section 3.08. Mandatory Purchase Provisions.............................................32
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes..........................................................33
Section 4.02. Reports...................................................................34
Section 4.03. Compliance Certificate....................................................35
Section 4.04. Stay, Extension and Usury Laws............................................35
Section 4.05. Restricted Payments.......................................................35
Section 4.06. Line of Business..........................................................36
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4.07. Incurrence of Additional Indebtedness.....................................36
Section 4.08. Transactions With Related Persons.........................................37
Section 4.09. Liens.................................................................... 38
Section 4.10. Compliance With Laws, Taxes...............................................38
Section 4.11. Restrictions On Subsidiary Dividends......................................38
Section 4.12. Maintenance of Office or Agencies.........................................39
Section 4.13. Offer to Repurchase Upon Change of Control Triggering Event...............39
Section 4.14. Asset Sales and Sales of Restricted Subsidiary Stock......................40
Section 4.15. Guarantees of Services' Indebtedness by Restricted Subsidiaries...........42
Section 4.16. No Senior Subordinated Indebtedness.......................................42
Section 4.17. Status As Investment Company..............................................42
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation or Sale of Assets...................................42
Section 5.02. Successor Corporation Substituted.........................................43
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.........................................................43
Section 6.02. Acceleration..............................................................44
Section 6.03. Other Remedies............................................................45
Section 6.04. Waiver of Past Defaults...................................................45
Section 6.05. Control by Majority.......................................................46
Section 6.06. Limitation on Suits.......................................................46
Section 6.07. Rights of Holders to Receive Payment......................................46
Section 6.08. Collection Suit by Trustee................................................46
Section 6.09. Trustee May File Proofs of Claim..........................................46
Section 6.10. Priorities................................................................47
Section 6.11. Undertaking for Costs.....................................................47
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.........................................................47
Section 7.02. Rights of Trustee.........................................................48
Section 7.03. Individual Rights of Trustee..............................................48
Section 7.04. Trustee's Disclaimer......................................................49
Section 7.05. Notice to Holders of Defaults and Events of Default.......................49
Section 7.06. Reports by Trustee to Holders.............................................49
Section 7.07. Compensation and Indemnity................................................49
Section 7.08. Replacement of Trustee....................................................50
Section 7.09. Successor Trustee by Merger, Etc..........................................50
Section 7.10. Eligibility; Disqualification.............................................50
Section 7.11. Preferential Collection of Claims Against Services........................51
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
<S> <C>
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance..................51
Section 8.02. Legal Defeasance and Discharge............................................51
Section 8.03. Covenant Defeasance.......................................................51
Section 8.04. Conditions to Legal or Covenant Defeasance................................52
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions............................................53
Section 8.06. Repayment to Services.....................................................53
Section 8.07. Reinstatement.............................................................54
ARTICLE 9
AMENDMENTS
Section 9.01. Amendments and Supplements Permitted Without Consent of Holders...........54
Section 9.02. Amendments and Supplements Requiring Consent of Holders...................54
Section 9.03. Compliance with TIA.......................................................55
Section 9.04. Revocation and Effect of Consents.........................................55
Section 9.05. Notation on or Exchange of Notes..........................................56
Section 9.06. Trustee Protected.........................................................56
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate..................................................56
Section 10.02. Liquidation; Dissolution; Bankruptcy......................................56
Section 10.03. Default on Designated Senior Debt.........................................57
Section 10.04. Acceleration of Notes.....................................................57
Section 10.05. When Distribution Must Be Paid Over.......................................58
Section 10.06. Notice by Services........................................................58
Section 10.07. Subrogation...............................................................58
Section 10.08. Relative Rights...........................................................58
Section 10.09. Subordination May Not Be Impaired by Services.............................59
Section 10.10. Distribution or Notice to Representative..................................59
Section 10.11. Rights of Trustee and Paying Agent........................................59
Section 10.12. Authorization to Effect Subordination.....................................59
Section 10.13. Amendments................................................................60
ARTICLE 11
GUARANTEE OF NOTES
Section 11.01. Guarantee.................................................................60
Section 11.02. Execution and Delivery of the Guarantee...................................60
Section 11.03. "Trustee" to Include Paying Agent.........................................61
Section 11.04. Subordination of Guarantee................................................61
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls..............................................61
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 12.02. Notices...................................................................61
Section 12.03. Communication by Holders with Other Holders...............................62
Section 12.04. Certificate and Opinion as to Conditions Precedent........................62
Section 12.05. Statements Required in Certificate or Opinion.............................62
Section 12.06. Rules by Trustee and Agents...............................................63
Section 12.07. Legal Holidays............................................................63
Section 12.08. No Recourse Against Others................................................63
Section 12.09. Counterparts..............................................................63
Section 12.10. Variable Provisions.......................................................63
Section 12.11. Governing Law.............................................................63
Section 12.12. No Adverse Interpretation of Other Agreements.............................63
Section 12.13. Successors................................................................64
Section 12.14. Severability..............................................................64
Section 12.15. Table of Contents, Headings, Etc..........................................64
Exhibit A-1 Form of Note.............................................................A-1
Exhibit A-2 Form of Regulation S Temporary Global Note...............................A-2
Exhibit B Form of Certificate of Transfer............................................B
Exhibit C Form of Certificate of Exchange............................................C
Exhibit D Form of Certificate to be Delivered by Institutional
Accredited Investors.......................................................D
Exhibit E Form of Notation on Note Relating to Guarantee.............................E
Exhibit F Form of Supplemental Indenture.............................................F
</TABLE>
iv
<PAGE>
Exhibit 4.4
EXECUTION COPY
================================================================================
___________________
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 31, 1997
___________________
by and among
CCPR SERVICES, INC.
CELLULAR COMMUNICATIONS OF PUERTO RICO, INC.
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
WASSERSTEIN PERELLA SECURITIES, INC.
================================================================================
<PAGE>
This Registration Rights Agreement (the "Agreement") is made and entered
---------
into as of January 31, 1997, by and among CCPR Services, Inc., a Delaware
corporation ("Services"), Cellular Communications of Puerto Rico, Inc., a
Delaware corporation ("CCPR") and Donaldson, Lufkin & Jenrette Securities
----
Corporation, Salomon Brothers Inc, and Wasserstein Perella Securities, Inc.
(collectively, the "Initial Purchasers"), who have agreed to purchase
------------------
$200,000,000 principal amount of Services' 10% Series A Senior Subordinated
Notes due 2007 (the "Series A Notes") pursuant to the Purchase Agreement (as
--------------
defined below).
This Agreement is made pursuant to the Purchase Agreement, dated January
28, 1997 (the "Purchase Agreement"), by and among Services, CCPR and the Initial
------------------
Purchasers. In order to induce the Initial Purchasers to purchase the Series A
Notes, Services and CCPR have agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 9 of
the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Broker-Dealer Transfer Restricted Notes: Series B Notes (as defined below)
---------------------------------------
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 Services, CCPR or any of their affiliates).
Business Day: Any day except a Saturday, Sunday or other day in the City
------------
of New York, or in the city of the corporate trust office of the Trustee, on
which banks are authorized to close.
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
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 Exchange
Offer 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 Services 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 Series A Notes, each Interest
--------------------
Payment Date.
<PAGE>
Effectiveness Target Date: As defined in Section 5.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by Services under the Act of the Series B
--------------
Notes pursuant to the Exchange Offer Registration Statement pursuant to which
Services offers the Holders of all outstanding Transfer Restricted Notes the
opportunity to exchange all such outstanding Transfer Restricted Notes held by
such Holder for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Notes 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 (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act, (ii) certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3), and
(7) of Regulation D under the Act and (iii) to non-U.S. persons outside the
United States in reliance upon Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
-------
Indenture: The Indenture, dated as of the Closing Date, among Services,
---------
CCPR and The Chase Manhattan Bank of New York, as trustee (the "Trustee"),
-------
pursuant to which the Notes are 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.
---------------------
Liquidated Damages: As defined in Section 5 hereof.
------------------
NASD: National Association of Securities Dealers, Inc.
----
Notes: The Series A Notes and the Series B Notes.
-----
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, 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 Services relating to
----------------------
(a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Notes
2
<PAGE>
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
------------------------
Transfer Restricted Notes.
Series B Notes: Services' 10% Series B Senior Subordinated Notes due 2007
--------------
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 Notes: Each Series A 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 disposed of in accordance with
a Shelf Registration Statement, (c) the date on which such Note is disposed of
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act or is saleable pursuant to Rule 144(k)
under the Act.
Underwritten Registration or Underwritten Offering: A registration in
------------------------- ---------------------
which securities of Services are sold to an underwriter for reoffering to the
public.
2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) The securities entitled to the benefits of this Agreement are the
Transfer Restricted Notes.
(b) A Person is deemed to be a holder of Transfer Restricted Notes (each, a
"Holder") whenever such Person owns Transfer Restricted Notes.
------
3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with), Services and CCPR shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 120 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use their reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 160 days after the Closing 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)
3
<PAGE>
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
Transfer Restricted Notes and to permit sales of Broker-Dealer Transfer
Restricted Notes by Restricted Broker-Dealers as contemplated by Section 3(c)
below.
(b) Services and CCPR shall use their reasonable 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. Services and CCPR 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. Services and CCPR shall use their reasonable best efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 Business Days thereafter.
(c) Services and CCPR shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Transfer Restricted Notes
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 Transfer
Restricted Notes (other than Transfer Restricted Notes acquired directly from
Services) pursuant to the Exchange Offer; provided, 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 Notes by Restricted Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Notes held by any such Broker-Dealer except to the extent required by
the Commission as a result of a change in policy after the date of this
Agreement.
(d) Services and CCPR shall use their 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 Notes
by Restricted Broker-Dealers, and to ensure that such Registration Statement
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the date on which the Exchange Offer is Consummated.
(e) Services and CCPR shall promptly provide sufficient copies of the
latest version of such Prospectus included in the Exchange Offer Registration
Statement to such Restricted Broker-Dealers upon request, and in no event later
than two days after such request, at any time during such one-year period in
order to facilitate such sales.
4
<PAGE>
4. SHELF REGISTRATION
(a) Shelf Registration. If (i) Services and CCPR are not required to file
------------------
an Exchange Offer Registration Statement or to Consummate the Exchange Offer
with respect to the Series B Notes because the Exchange Offer is not permitted
by applicable law or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with) or (ii) if any Holder of Transfer
Restricted Notes shall notify Services or CCPR within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder is prohibited by
applicable 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 Services, CCPR or one of their affiliates,
then Services and CCPR shall
(x) use their best efforts to cause to be filed 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") on or prior to the earliest to occur of
----------------------------
(1) the 30th day after the date on which Services determines that it is not
required to file the Exchange Offer Registration Statement, (2) the 30th
day after the date on which Services or CCPR receives notice from a Holder
of Transfer Restricted Securities as contemplated by clause (ii) above, and
(3) the 160th day after the Closing Date (such earliest date being the
"Shelf Filing Deadline"), which Shelf Registration Statement shall provide
---------------------
for resales of all Transfer Restricted Securities the Holders of which
shall have provided the information required pursuant to Section 4(b)
hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 30th
day after the Shelf Filing Deadline.
Services and CCPR shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least three years following the Closing Date or such
shorter period ending when all Transfer Restricted Securities covered by such
Shelf Registration Statement have been sold in the manner set forth and as
contemplated by such Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Notes may
- ----------------------------
include any of its Transfer Restricted Notes in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to Services or
CCPR in writing, within 20 Business Days after receipt of a request therefor,
such information as Services or CCPR may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Notes shall be
entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each
5
<PAGE>
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to Services or CCPR all information required to be disclosed in
order to make the information previously furnished to Services or CCPR by such
Holder not materially misleading.
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
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 immediately effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then Services and CCPR hereby
--------------------
jointly and severally agree to pay to each Holder of Transfer Restricted Notes
so affected, during the first 90-day period immediately following the occurrence
of such Registration Default, liquidated damages (the "Liquidated Damages") in
------------------
an amount equal to $.05 per week per $1,000 principal amount of Transfer
Restricted Notes held by such Holder for so long as the Registration Default
continues. The amount of Liquidated Damages payable to each Holder shall
increase by an additional $.05 per week per $1,000 principal amount of Transfer
Restricted Notes held by such Holder for each subsequent 90-day period up to a
maximum of $.25 per week per $1,000 principal amount of Transfer Restricted
Notes held by such Holder. All accrued Liquidated Damages shall be paid to
Record Holders by Services or CCPR by wire transfer of immediately available
funds or by federal funds check on each Damages Payment Date, as provided in the
Indenture. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of Liquidated Damages
with respect to such Transfer Restricted Securities will cease.
All accrued Liquidated Damages shall be paid by Services or CCPR to Holders
of record in the same manner in which payments of interest are made pursuant to
the Indenture. All obligations of Services and CCPR set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Note at
the time such security ceases to be a Transfer Restricted Note shall survive
until such time as all such obligations with respect to such security shall have
been satisfied in full.
6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, Services and CCPR shall comply with all of the provisions of Section 6(c)
below, shall use their reasonable best efforts to effect such exchange and to
permit the sale of Broker-Dealer Transfer Restricted Notes 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 Services
and CCPR there is a substantial question as to whether the
6
<PAGE>
Exchange Offer is permitted by applicable federal law, Services and CCPR
hereby agree to seek oral interpretive advice or other favorable decision,
including a no-action letter, from the Commission allowing Services and
CCPR to Consummate an Exchange Offer for such Series A Notes. Services and
CCPR hereby agree to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, Services and CCPR
hereby agree 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 staff, (B) delivering to the Commission
staff an analysis prepared by counsel to Services and CCPR 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;
provided, however, that Services and CCPR shall not be required to take
commercially unreasonable action in connection with the foregoing.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Notes shall furnish, upon the request of Services and CCPR, prior to the
Consummation of the Exchange Offer, a written representation to Services
and CCPR (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 Services or CCPR (or that if it is such an affiliate,
it will comply with the registration and prospectus delivery requirements
of the Act to the extent applicable), (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. In addition, all such Holders of Transfer
Restricted Notes shall otherwise reasonably cooperate with Services and
CCPR in preparations for the Exchange Offer. 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 Services, CCPR or any of their affiliates.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, Services and CCPR shall provide a supplemental letter to the
Commission (A) stating that Services and CCPR are registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
-----
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
---------------------------- ------------------
Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter
--------
obtained pursuant to clause (i) above, (B) including a representation that
neither Services nor CCPR has 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 Services' and CCPR's information
and belief, each Holder participating in the Exchange Offer is acquiring
the Series B Notes in its ordinary course
7
<PAGE>
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) including any other undertaking or representation
reasonably 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, Services and CCPR shall comply with all the provisions
of Section 6(c) below and shall use their reasonable best efforts to effect such
registration to permit the sale of the Transfer Restricted Notes being sold in
accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to Services or CCPR pursuant to Section
4(b) hereof), and pursuant thereto Services and CCPR 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 Notes 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 Notes (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 Notes by Restricted Broker-Dealers), Services and CCPR shall:
(i) use their reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation thereunder,
financial statements of CCPR) 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 Notes during the
period required by this Agreement, Services and CCPR 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 either clause (A) or (B), use their reasonable 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; provided, however, that
Services and CCPR may allow the Shelf Registration Statement to fail to be
effective or usable for a period of up to 60 days during the three-year
period of effectiveness required by Section 4 hereof, but in no event for
any period in excess of 30 consecutive days, if (1) the board of directors
of Services or CCPR determines in good faith that it is in the best
interests of Services or CCPR not to disclose the existence of or facts
surrounding any proposed or pending material corporate transaction
involving Services or CCPR and (2) Services or CCPR notify the Holders
within two Business Days after such determination by the board of
directors; provided, further, however, that the three-year period referred
to in Section 4 hereof shall be extended by the number of days during which
the Shelf Registration Statement was not effective or usable pursuant to
the foregoing;
(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 period set forth in
Section 3 or 4 hereof, as applicable, or such shorter period as will
terminate when all Transfer Restricted Notes covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and
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as so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424 and 430A, 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 Notes 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 Notes under state securities or Blue Sky laws, Services
and CCPR shall use their reasonable best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(iv) furnish to the Initial Purchasers, each selling Holder named in
any Registration Statement or Prospectus and 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, upon request, 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 Services and CCPR 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 Notes 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;
(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, and, if requested
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<PAGE>
by a selling Holder, make Services' and CCPR's representatives available
for discussion of such document and other customary due diligence matters,
and include such information in such document prior to the filing thereof
as such selling Holders or underwriter(s), if any, reasonably may request;
(vi) subject to the execution of customary confidentiality
agreements, make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such selling Holders or any of such underwriter(s), all financial and other
records, pertinent corporate documents and properties of Services and CCPR
and cause their 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;
(vi) 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 Notes, information with respect to
the principal amount of Transfer Restricted Notes being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Notes to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after Services or CCPR is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) cause the Transfer Restricted Notes covered by the Registration
Statement to be rated with the appropriate rating agencies, if so requested
by the Holders of a majority in aggregate principal amount of Notes covered
thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and 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 exhibits (including exhibits incorporated therein by
reference);
(x) 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
Holders or underwriter(s) reasonably may request; Services and CCPR hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Notes covered by the Prospectus or any amendment or supplement
thereto;
(xi) to 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 Notes pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any selling Holder of Transfer Restricted Notes included in
such registration or underwriter in
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connection with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement and, whether or not an underwriting
agreement is entered into and whether or not the registration is an
Underwritten Registration, Services and CCPR shall:
(A) furnish, to each selling Holder and each underwriter, if
any, in such substance and scope as they may reasonably request and as
are customarily made by issuers to underwriters in primary
underwritten offerings, upon the date of, and, if applicable, upon the
date of the Consummation of the Exchange Offer and, if applicable, the
effectiveness of the Shelf Registration Statement:
(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
Services and CCPR by (x) the President or any Vice President and
(y) a principal financial or accounting officer of Services and
CCPR, confirming, as of the date thereof, the matters set forth
in paragraphs (a) through (c) of Section 9 of the Purchase
Agreement and such other similar matters as the Holders and/or
underwriter(s) 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
Services and CCPR, covering matters similar to those set forth in
paragraphs (e), (f) and (g) of Section 9 of the Purchase
Agreement and such other matter as the Holders may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with directors,
officers and other representatives of Services and CCPR and
representatives of the independent public accountants for
Services and CCPR in connection with the preparation of the
applicable Registration Statement and has considered the matters
required to be stated therein and the statements concluded
therein, although such counsel is not passing upon and does not
assume responsibility for, the accuracy, completeness or fairness
of such statements and has made no independent check or
verification thereof; and that such counsel advises such Holders,
on the basis of the foregoing (relying as to materiality to a
large extent upon facts provided to such counsel by officers and
other representatives of Services), no facts have come to such
counsel's attention which led it 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, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact
necessary to make the statements contained therein, in light of
the circumstances under which they were made, 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 or contains an untrue statement of a
material fact or omitted or omits to state a material fact
necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel need express no
opinion or belief with respect to the financial statements and
related notes and other financial, statistical and accounting
data included in
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any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from
Services' and CCPR's independent accountants, in the customary
form and covering matters of the type customarily covered in
comfort letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 9(i) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, 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 or the underwriter(s), 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 Services and CCPR pursuant to this clause
(xi).
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 Services and CCPR contemplated
in (A)(1) above cease to be true and correct, Services or CCPR shall so
advise the underwriter(s), if any, and selling Holders promptly and if
requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Notes,
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 Notes under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s), if any, may
reasonably request and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Notes covered by the applicable Registration
Statement; provided, however, that neither Services nor CCPR shall 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;
(xiii) 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 Services 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 Services for cancellation;
(xiv) in connection with any sale of Transfer Restricted Notes that
will result in such securities no longer being Transfer Restricted Notes,
cooperate with the selling Holders and the
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<PAGE>
underwriter(s), if any, to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Notes to be sold and not
bearing any restrictive legends; and to register such Transfer Restricted
Notes 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 Notes;
(xv) use their reasonable best efforts to cause the disposition of
the Transfer Restricted Notes 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 Notes, subject to the proviso contained in clause (xi) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, use their reasonable best efforts to 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 Notes, 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;
(xvii) provide a CUSIP number for all Transfer Restricted Notes not
later than the effective date of a Registration Statement covering such
Transfer Restricted Notes and provide the Trustee under the Indenture with
printed certificates for the Transfer Restricted Notes which are in a form
eligible for deposit with The Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their reasonable 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 Notes to consummate the disposition of such Transfer Restricted
Notes;
(xix) otherwise use their reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to their security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xx) 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 their reasonable best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
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<PAGE>
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by Services are then listed if requested by the
Holders of a majority in aggregate principal amount of Series A Notes or
the managing underwriter(s), if any; and
(xxii) 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 Note that, upon receipt of any notice from Services or CCPR
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 Notes 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)(xvi) hereof, or until it is advised in writing by
Services or CCPR that the use of the Prospectus may be resumed (the "Advice"),
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by Services or
CCPR, each Holder will deliver to Services or CCPR (at Services' or CCPR's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Notes that was
current at the time of receipt of either such notice. In the event Services or
CCPR 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)(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.
7. REGISTRATION EXPENSES
(a) All expenses incident to the Services' or CCPR's performance of or
compliance with this Agreement will be borne by Services and CCPR, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including filings
made by any Initial Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B 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 Services and CCPR and, subject to Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all application and
filing fees in connection with listing 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
Services and CCPR (including the expenses of any special audit and comfort
letters required by or incident to such performance).
Services and CCPR will bear their internal expenses (including, without
limitation, all salaries and expenses of their officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by Services or CCPR.
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(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), Services and CCPR will
reimburse the Initial 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
Latham & Watkins or such other counsel as may 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.
8. INDEMNIFICATION
(a) Services and CCPR, jointly and severally, agree to indemnify and
hold each of the Holders and each person, if any, who controls or is under
common control with any of the Holders within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act harmless from and against any
and all losses, claims, damages, liabilities, actions or judgments (including,
without limiting the foregoing, the reasonable legal and other expenses incurred
in connection with any action, suit or proceeding or any claim asserted) caused
by any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement or Prospectus, or any amendment or
supplement thereto, or arise out of or are caused by 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, provided, however, that
Services and CCPR will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission (i) in
reliance upon and in conformity with written information furnished to Services
or CCPR by any Holder specifically for use therein or (ii) made in a preliminary
Prospectus, if a copy of the final Prospectus (as amended or supplemented, if
Services or CCPR shall furnish the amendment or supplement thereto) was not sent
or given by or on behalf of the Holders to the person asserting any such loss,
claim or liability, if required by law so to have been delivered, at or prior to
the written confirmation of the sale of the Notes as required by the Securities
Act and the final Prospectus (as so amended or supplemented) would have
corrected in all material respects such untrue statement or omission.
(b) In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought against any Holder or
any person controlling such Holder, based upon any Registration Statement or
Prospectus or any amendment or supplement thereto and with respect to which
indemnity may be sought against Services or CCPR, such Holder or any person
controlling such Holder shall promptly notify Services or CCPR in writing and
Services or CCPR shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Holder and payment of all reasonable
fees and expenses. Such Holder or any such controlling person shall have the
right to employ separate counsel in any such action or proceeding and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at such Holder's expense or at the expense of any such controlling
person unless (i) the employment of such counsel has been specifically
authorized in writing by Services or CCPR, (ii) neither Services nor CCPR has
assumed the defense and employed counsel reasonably satisfactory to such Holder
within a reasonable time after notice of commencement of such action, or (iii)
the named parties to any such action or proceeding (including any impleaded
parties) include both a Holder or such controlling person and Services or CCPR
and such Holder or such controlling person shall have been advised in writing by
such counsel (with a copy to Services or CCPR) that there may be one or more
legal defenses available to such Holder or such controlling person which
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<PAGE>
are different from or additional to those available to Services or CCPR (in
which case Services and CCPR shall not have the right to assume the defense of
such action or proceeding on behalf of such Holder or on behalf of such
controlling person, it being understood, however, that Services and CCPR shall
not, in connection with any one such action or separate but substantially
similar or related actions 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) for the Holders and such controlling persons, which firm shall be
designated in writing by the Holders, and that all such fees and expenses shall
be reimbursed as they are incurred upon written request and presentation of
reasonably satisfactory invoices) . Services and CCPR shall not be liable for
any settlement of any such action effected without the written consent of
Services or CCPR, which shall not be unreasonably withheld, but if settled with
the written consent of Services or CCPR or if there is a final judgment for the
plaintiff, Services and CCPR agree to indemnify and hold harmless such Holder
and any such controlling person from and against any loss or liability by reason
of such settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is a party
and indemnity has 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 proceeding.
(c) Each Holder agrees, severally but not jointly, to indemnify and
hold harmless Services, CCPR and their respective directors, officers, and any
person controlling Services or CCPR 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 Services or CCPR to each Holder, but only with reference to
information relating to such Holder furnished in writing by or on behalf of such
Holder expressly for use in any Registration Statement or Prospectus or any
supplement or amendment to any thereof. In case any action shall be brought
against Services, CCPR or any of their directors, any such officers, or any such
controlling person based on any Registration Statement or Prospectus and in
respect of which indemnity may be sought against any or all of the Holders, such
Holders shall have the rights and duties given to Services and CCPR (except that
if Services or CCPR as provided in Section 8(b) hereof shall have assumed the
defense thereof such Holders 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 such Holder's expense), and Services, CCPR
and their directors, any such officers, and any such controlling person shall
have the rights and duties given to the Holders by Section 8(b) hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each 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 and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by Services and CCPR on the one hand and
the Holders on the other from the sale of the Series A Notes, 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 Services and CCPR
on the one hand and the Holders on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by Services and CCPR on the one
hand and the Holders on the other hand shall be deemed to be in the same
proportions as the total proceeds from the offering of the Series A Notes (net
of underwriting discounts and commissions but before deducting expenses)
received by Services and CCPR, and the total proceeds received by such
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Holder upon its sale of the Series A Notes, respectively. The relative fault of
Services and CCPR on the one hand and the Holders 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 to state a material fact
relates to information supplied by Services and CCPR or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments 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.
Services, CCPR and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) 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.
Notwithstanding the provisions of this Section 8(d), in no event shall any
Holder be required to contribute any amount in excess of the amount received by
such Holder with respect to the sale of its Series A Notes exceeds 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 Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(d) are several and not
joint and are in proportion to the respective underwriting obligations
hereunder.
(e) The obligations of Services and CCPR under this Section 8 shall be
in addition to any liability that Services and CCPR may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any of the Holders within the meaning of the Securities Act; and the obligations
of the Holders under this Section 8 shall be in addition to any liability that
each respective Holder may otherwise have and shall extend, upon the same terms
and conditions, to each director and officer of Services and CCPR and to each
person, if any, who controls Services or CCPR within the meaning of the
Securities Act.
9. RULE 144A
Services and CCPR hereby agree with each Holder, for so long as any
Transfer Restricted Notes remain outstanding, to make available, upon request of
any Holder of Transfer Restricted Notes, to any Holder or beneficial owner of
Transfer Restricted Notes in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Notes 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 Notes pursuant to
Rule 144A.
10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Notes on the
basis provided in customary underwriting arrangements entered into in connection
therewith and (b) completes and executes all reasonable
17
<PAGE>
questionnaires, powers of attorney, lock-up letters and other documents required
under the terms of such underwriting arrangements.
11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Notes covered by a Shelf Registration
Statement who desire to do so may sell such Transfer Restricted Notes in an
Underwritten Offering. In any such Underwritten Offering, the investment banker
or investment bankers and manager or managers that will administer such offering
will be selected by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Notes included in such offering. Such investment
bankers and managers must be reasonably satisfactory to Services and CCPR and
are referred to herein as the "underwriters."
12. MISCELLANEOUS
(a) Remedies. Services and CCPR agree that monetary damages (including the
--------
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it 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. Services and CCPR will not, on or after
--------------------------
the date of this Agreement, enter into any agreement with respect to their
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither Services
nor CCPR have 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 Services' or CCPR's securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Services and CCPR 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 Services or CCPR have obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Notes. 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 Notes subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
18
<PAGE>
(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 Services or CCPR:
CCPR Services, Inc.
110 East 59th Street, 26th Floor
New York, NY 10022
Telecopier No.: (212) 752-1157
Attention: Chief Financial Officer
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 735-2000
Attention: Thomas H. Kennedy, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if 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 Notes; 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 Notes 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.
19
<PAGE>
(k) Entire Agreement. This Agreement together with the other Operative
----------------
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by Services and CCPR with
respect to the Transfer Restricted Notes. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
[Signature Page Follows]
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Very truly yours,
CCPR SERVICES, INC.
By: /s/ Richard J. Lubasch
-----------------------------------------
Name: Richard J. Lubasch
Title: Senior Vice President-General Counsel
and Secretary
CELLULAR COMMUNICATIONS OF
PUERTO RICO, INC.
By: /s/ Richard J. Lubasch
-----------------------------------------
Name: Richard J. Lubasch
Title: Senior Vice President-General Counsel
and Secretary
Accepted and Agreed to:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
WASSERSTEIN PERELLA SECURITIES, INC.
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: ________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Very truly yours,
CCPR SERVICES, INC.
By: ___________________________________
Name:
Title:
CELLULAR COMMUNICATIONS OF
PUERTO RICO, INC.
By: ___________________________________
Name:
Title:
Accepted and Agreed to:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
WASSERSTEIN PERELLA SECURITIES, INC.
By: Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Michael J. Connelly
-------------------------
Name: Michael J. Connelly
Title: Managing Director
<PAGE>
EXHIBIT 10.2
Tax Sharing Agreement
THIS AGREEMENT, dated as of January 31, 1997, by and among
CoreComm Incorporated, a Delaware corporation ("New CCI"), Cellular
Communications of Puerto Rico, Inc., a Delaware corporation and wholly-owned
subsidiary of New CCI ("CCPR"), and CCPR Services, Inc., a Delaware corporation
and wholly-owned subsidiary of CCPR ("Services").
WHEREAS, CCPR was the common parent of an affiliated group (the
"Group") of domestic corporations (as such terms are defined in Section 1504(a)
of the Internal Revenue Code of 1986, as amended) (the "Code") and has
included Services in its consolidated Federal income tax returns relating to
all taxable periods ending before the formation of New CCI ("Pre-New CCI
Periods");
WHEREAS, New CCI has become the common parent of the Group in a
reverse acquisition defined in Reg. (S)1.1502-75(d)(3) and, as such, will
include CCPR and Services and their respective subsidiaries in its consolidated
Federal income tax return for all taxable periods for which NEW CCI is in
existence ("Affiliation Periods"); and
WHEREAS, the parties wish that this Tax Sharing Agreement set
forth the agreement among NEW CCI, CCPR and Services and their respective
subsidiaries with respect to the allocation and settlement of the Federal,
state, local and foreign taxes of the Group attributable to Affiliations Periods
and Pre-New CCI Periods.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
1. Filing of Returns. With respect to each Affiliation Period,
-----------------
New CCI shall file, and CCPR and Services shall agree to join in the filing of,
consolidated Federal income tax returns on behalf of the Group. CCPR and
Services shall execute and file such consents, elections and other documents as
New CCI reasonably requests with respect to the filing of the Group's
consolidated Federal income tax returns, and shall, consistent with paragraph 4
hereof, timely provide to New CCI such information as may necessary for the
filing of
<PAGE>
such returns or for the determination of amounts due under this Tax Sharing
Agreement. CCPR shall file, or cause to be filed, all Federal, state, local and
foreign tax returns with respect to all periods for which CCPR and/or Services
is not includable on a tax return of New CCI (including without limitation with
respect to Pre-New CCI Periods), and Services shall file such returns, consents
and elections as CCPR reasonably requests in connection therewith.
2. Tax Payments.
------------
(a) Time and Manner of Payment. Except as otherwise provided
--------------------------
herein, CCPR will pay to New CCI, and Services will pay to CCPR, the amount due
New CCI and CCPR, respectively, as determined under Section 2(b) below, and New
CCI will pay to CCPR, and CCPR will pay to Services, the amount due CCPR and
Services, respectively, as determined under Section 2(c) below, no later than
five days prior to the due date for the filing of any Federal income tax return
of the Group; provided, however, that no later than five days prior to each
estimated Federal income tax payment date or March 15 extension date of the
Group for which the Group actually incurs a Federal income tax liability, CCPR
shall pay to New CCI the minimum amount required to be paid to avoid the
imposition of any penalties or additions to tax under the Code, and Services
shall pay to CCPR the minimum amount required to be paid to avoid the imposition
of any penalties or additions to tax under the Code assuming CCPR were the
common parent of the Group, in each case, determined on the same basis as the
total amount due under Section 2(b). The amount of any overpayment or
underpayment pursuant to this Section 2(a) shall be credited against, or added
to, as the case may be, the amount otherwise required to be paid for the period
within which the amount of such overpayment or underpayment first becomes
reasonably ascertainable. The settlements may be satisfied by check, wire
transfer or through intercompany accounts as the parties may mutually agree.
(b) Amount Due to New CCI and CCPR. To the extent CCPR has
------------------------------
"Separate Company Tax Liability" for an Affiliation Period, CCPR shall pay New
CCI in the time and manner described in Section 2(a). To the extent Services
has "Separate Company Tax Liability" for an Affiliation Period or a Pre-New CCI
Period, Services
2
<PAGE>
shall pay CCPR in the time and manner described in Section 2(a). "Separate
Company Tax Liability" for any Affiliation Period or Pre-New CCI Period shall be
the amount, if any, of the Federal income tax liability (including, without
limitation, liability for any penalty, fine, additions to tax, interest, minimum
tax and other items applicable to CCPR or Services, as the case may be, in
connection with the determination of CCPR's or Services' tax liability) which
CCPR or Services, as the case may be, would have incurred if CCPR or Services,
as the case may be, had filed a separate Federal income tax return for such
period, except that no carryforward or carryback of losses or credits shall be
allowed.
Separate Company Tax Liability shall be determined by New CCI (with the
cooperation and assistance of CCPR and Services) in a manner consistent with (i)
general tax accounting principles, (ii) the Code and the regulations thereunder
and (iii) so long as a reasonable legal basis exists therefor, prior custom and
practice. In addition, transactions or items between CCPR and New CCI, Services
and New CCI, CCPR and Services, or between other members of the Group that are
deferred under the Federal income tax return shall also be deferred for purposes
of this Tax Sharing Agreement until such time as they are restored or otherwise
triggered into income under the Code or regulations. In the event CCPR or
Services owns subsidiaries that are members of the Group, Separate Company Tax
Liability for each Affiliation Period and Pre-New CCI Period shall be computed
on a deemed consolidated basis as if CCPR or Services, as the case may be, were
the common parent of an affiliated group of domestic corporations (within the
meaning of Section 1504(a) of the Code) consisting of itself and its includable
subsidiaries (a "Hypothetical Subsidiary Group"). For purposes of this Tax
Sharing Agreement, CCPR's Hypothetical Subsidiary Group shall include, without
limitation, Services, to the extent CCPR owns the requisite percentage of
Services' outstanding stock in order for Services to constitute a member of a
consolidated group under the Code. Each of CCPR and Services shall be entitled
to cause members of their Hypothetical Subsidiary Group to reimburse each of
them for amounts due New CCI or CCPR, respectively, to the extent such members'
income created an obligation for payments under this Tax Sharing Agreement.
3
<PAGE>
(c) Amount Due to CCPR and Services. In the event CCPR (or CCPR's
-------------------------------
Hypothetical Subsidiary Group, if applicable) does not have Separate Company Tax
Liability for an Affiliation Period, but instead incurs net losses or credits
for such period, New CCI shall pay CCPR in the time and manner prescribed in
Section 2(a) hereof the amount by which the Group's Federal income tax liability
for such period is actually reduced by reason of the actual use of such losses
or credits in the Group's Federal income tax return. CCPR shall immediately
remit to Services the portion of such amount that CCPR received from New CCI
that New CCI reasonably determines to be by reason of the use of Services' (or
Services' Hypothetical Subsidiary Group, if applicable) losses or credits in the
Group's Federal income tax return.
In the event CCPR (or CCPR's Hypothetical Subsidiary Group, if
applicable) incurs any tax losses or tax credits that, as permitted under the
Code and Regulations, are carried back or forward to one or more Affiliation
Periods, New CCI shall pay CCPR an amount equal to the amount by which the
Group's Federal income tax liability is actually reduced by reason of the actual
use of such carried-over losses or credits in the Group's Federal income tax
return. Any payment from New CCI to CCPR required on account of such carryover
shall be paid within 15 days of the date the benefit of the carryover is
realized by New CCI by reason of the receipt of a refund or credit of taxes.
CCPR shall immediately remit to Services the portion of such amount that CCPR
received from New CCI that New CCI reasonably determines to be by reason of the
use of Services' (or Services' Hypothetical Subsidiary Group, if applicable)
carried-over losses or credits in the Group's Federal income tax return.
Notwithstanding the foregoing, CCPR and Services and their respective
subsidiaries will relinquish the carryback of any net operating losses under
Section 172(b)(3) of the Code (or any successor provision) from or to
Affiliation Periods unless New CCI expressly agrees to such carryback; further,
CCPR and Services will not be entitled to any payments under this Tax Sharing
Agreement or otherwise if either of it or its subsidiary sustains losses or
credits in taxable periods that are eligible to be carried back to Affiliation
Periods, unless (a) New CCI, in its sole and absolute discretion, elects to file
a claim for refund with respect to such carryback items
4
<PAGE>
or agrees to permit CCPR or Services to file such claim, (b) New CCI actually
receives a refund or credit of taxes with respect thereto (in which event, any
other provision herein notwithstanding, CCPR and Services shall be entitled to
the amount determined in the previous paragraph including any interest actually
paid by the taxing authority attributable thereto less the amount reasonably
determined by New CCI to be equal to the present value (using the then
applicable short-term Federal rate under the Code as the discount rate) of any
tax benefit of the Group that may be deferred or eliminated and any future
increase in tax liability of the Group that may be incurred because of such
carryback) and (c) New CCI is indemnified by CCPR and Services in a form
satisfactory to New CCI for its costs and expenses incurred in pursuing such
refund (which costs shall be paid by CCPR and Services regardless of whether any
refund is obtained). Any subsequent adjustment to a loss or credit carryback
shall be treated as an adjustment to tax liability in Section 3 below.
(d) Paying Agent. New CCI agrees to make all required payments to
------------
the Internal Revenue Service ("IRS") of the consolidated Federal income tax
liability, if any, of the Group with respect to Affiliation Periods. CCPR
agrees to make all required payments to the IRS of the consolidated Federal
income tax liability, if any, of the Group with respect to Pre-New CCI Periods.
3. Adjustments to Tax Liability. If the consolidated Federal income tax
----------------------------
liability of the Group or any of its members is adjusted for any taxable period
for any reason other than a loss or credit carryback to the extent already
provided for in Section 2(c), whether by means of an amended return, judicial
decision, claim for refund or tax audit by the IRS, Separate Company Tax
Liability or the amount of tax benefits realized by the Group by reason of the
use of CCPR's or CCPR's Hypothetical Subsidiary Group's losses or credits shall
be recomputed to give effect to such adjustment, and the amount of any payments
due under Section 2 hereof shall be appropriately adjusted. Any additional
payment between New CCI and CCPR, or between CCPR and Services, required by
reason of such recomputed Separate Company Tax Liability or Group tax benefits
shall include an allocable share of any refunded interest received from the IRS,
if applicable, or deficiency interest, penalties
5
<PAGE>
and additions to tax, if applicable (such allocable share of refunded interest
or deficiency interest, penalties and additions to tax shall be paid or charged,
respectively, to CCPR or Services, as appropriate, to the extent such amount
relates to (a) reduced Group tax liability due to decreased Separate Company Tax
Liability or increased Group tax benefits resulting from increased use of CCPR
or Services, as appropriate, losses or credits, on the one hand, or (b)
increased Group tax benefits resulting from increased use of CCPR or Services,
as appropriate, losses or credits, on the hand, or (b) increased Group tax
liability due to increased Separate Company Tax Liability or decreased Group tax
benefits arising from decreased use of CCPR or Services, as appropriate, losses
or credits, on the other hand).
Any payments to be paid to or by Services or CCPR under this Section 3
shall be made on or before the earliest to occur of (i) a decision by a court of
competent jurisdiction that is not subject to further judicial review (by appeal
or otherwise) and has become final, (ii) the expiration of the time for (a)
filing a claim for refund or (b) instituting suit in respect of a claim for
refund disallowed in whole or in part by the IRS or for which in the IRS took no
action, (iii) the execution of a closing agreement under Section 7121 of the
Code or the acceptance by the IRS or its counsel of an offer in compromise under
Section 7122 of the Code (or any successor provisions) except as to reserved
matters specified therein, (iv) the expiration of 30 days after (a) IRS
acceptance of a Waiver of Restrictions on Assessment and Collection of
Deficiency in Tax on Overassessment on Internal Revenue Form 870 or 870-AD (or
any successor comparable form) except as to reserved matters specified therein,
or (b) the expiration of the ninety-day period after receipt of the statutory
notice of deficiency resulting in immediate assessment, unless within such 30
days New CCI notifies CCPR of its intent to attempt recovery of any relevant
amounts paid under the waiver by filing a timely claim for refund or CCPR has
requested New CCI attempt recovery of relevant amounts paid and complied with
and subject to paragraph 7 hereof, (v) the expiration of the statute of
limitations with respect to the relevant period or (vi) any other event the
parties reasonably agree is a final determination of the tax liability at issue.
4. Books and Records. New CCI, CCPR and Services agree that the
-----------------
preparation of the Federal income
6
<PAGE>
and other tax returns, amended returns, claims for refund or IRS examination or
litigation relating to the foregoing may require the use of records and
information that is within the exclusive possession and control of any of New
CCI, CCPR and Services. New CCI, CCPR and Services will provide such records,
information and assistance (which may include making employees of any of the
foregoing entities available to provide additional information and explanation
material hereunder) as are requested by New CCI, CCPR or Services, as the case
may be, during regular business hours, in connection with any of the
developments described in the preceding sentence; provided, however, that CCPR
and Services shall provide New CCI with all information within their respective
control necessary to enable New CCI to file the Group consolidated Federal
income tax return for each Affiliation Period as soon as practicable (but in no
event later than five months) after the last day of such Affiliation Period, and
on the date the Group Federal income tax returns that include CCPR and Services
are filed, New CCI shall provide each of CCPR and Services with those portions
of such returns relating to each of them. Each of the parties agrees that it
shall retain, until the expiration of the applicable statute of limitations
(including extensions), copies of any tax returns for any Affiliation Periods
and for any other periods that might be subject to adjustment under this Tax
Sharing Agreement, and supporting work schedules and other records or
information that may be relevant to the tax returns of the parties hereto, and
that it will not destroy or otherwise dispose of such records and information
without providing the other party with a reasonable opportunity to review and
copy or take possession of such records and information.
5. Assignment. This Tax Sharing Agreement shall not be assignable by
----------
either party hereto without the prior consent of the other party hereto. The
rights and obligations hereunder of the parties shall be binding on and inure to
the benefit of the parties and their respective successors and permitted
assigns. This Agreement shall be binding upon each corporation in which CCPR or
Services owns, directly or indirectly, stock meeting the requirements of Section
1504(a)(2) of the Code, whether or not CCPR or Services owns stock in such
corporation upon the execution of this Agreement or at any time during
Affiliation Periods, and CCPR and Services
7
<PAGE>
shall cause each such corporation as soon as practicable to assent formally to
the terms hereof. Except as herein otherwise specifically provided, nothing in
this Tax Sharing Agreement shall confer any right or benefit upon any person or
entity other than the parties hereto and their respective successors and
permitted assigns.
6. Disputes. Any dispute concerning the interpretation of a Section
--------
or amount of payment due under this Tax Sharing Agreement shall be resolved by
an independent accounting firm of national reputation selected by New CCI, whose
judgment shall be conclusive and binding on the parties and who shall act in
consultation with New CCI's tax counsel.
7. Tax Controversies. If any party receives notice of a tax
-----------------
examination, audit or challenge involving amounts subject to this Tax Sharing
Agreement, such party shall timely notify the other party of the information and
shall provide the other party a written copy of any relevant letters, forms or
schedules received from the IRS or otherwise in its possession and shall provide
notice and information relating to all material proceedings in connection
therewith. In any audit conference or other proceeding with the IRS or in any
judicial proceedings concerning the determination of the Federal income tax
liabilities of the Group or any of its members, including CCPR or Services, the
Group and each of its members shall be represented by persons selected by New
CCI. Except as otherwise expressly provided in the succeeding paragraph, the
settlement and terms of settlement of any issues relating to such proceeding
shall be in the sole discretion of New CCI, and CCPR and Services hereby appoint
New CCI as their agent for the purpose of proposing and concluding any such
settlement. Notwithstanding anything to the contrary in this Tax Sharing
Agreement, in no event shall New CCI be obligated to file any amended returns or
claims for refund with respect to Affiliation Periods.
So long as any proposed deficiency involves a tax issue of CCPR or
Services, New CCI shall contest such issue to the extent requested in writing
by CCPR or Services and shall permit CCPR and Services, at their expense, to
participate in all conferences and meetings with taxing authorities with respect
to the issue; provided, however, that if (and so long as) the controversy
8
<PAGE>
also involves a tax issue of New CCI or member of the Group other than CCPR or
Services (whether for the taxable year in question or another taxable year), or
if CCPR and Services shall disagree as to forum or settlement, New CCI shall be
entitled to the choice of forum for the proceedings and shall have the right to
make any decision as to settlement of the contest or any issue; further, in no
event shall New CCI be required to take any action requested by CCPR or Services
unless and until (a) CCPR or Services, as applicable, shall have given New CCI
an indemnity in a form satisfactory to New CCI for any liability, expense or
loss arising out of or relating to CCPR or Services issues involved in the
dispute or contest (including, without limitation, all out-of-pocket expenses,
costs, losses, reasonable legal, accounting, engineers' and like professional
fees, disbursements, penalties, interest and additions to tax relating to such
issues, but excluding any in-house expense of New CCI incurred for the purpose
of monitoring the CCPR or Services issues), (b) CCPR or Services, as applicable,
has delivered to New CCI an opinion of independent tax counsel (which counsel
shall be reasonably acceptable to New CCI)to the effect that it is more likely
than not that New CCI, CCPR or Services will prevail on the CCPR or Services
issue under dispute and (c) if such contest is to be conducted in a manner
requiring payment of a proposed tax deficiency, CCPR or Services, as applicable,
shall have advanced to New CCI on an interest-free basis an amount attributable
to the issue, together with any required interest or penalties.
8. State and Local Taxes. To the extent appropriate, all provisions
---------------------
of this Tax Sharing Agreement shall apply with the same force and effect to any
state or local income tax liabilities that are computed with a combined,
consolidated or unitary method by the parties; provided that appropriate
adjustments shall be made to the provisions hereof, including computation of
Separate Company Tax Liability, with respect to any period within an Affiliation
Period or Pre-New CCI Period during which CCPR, Services or either of their tax
items were not included on a return of New CCI or other members of the Group, or
were included on a return of members of the Group other than New CCI.
9
<PAGE>
9. Representations and Warranties. As an inducement to enter into this
------------------------------
Tax Sharing Agreement, each party represents to and agrees with the others that:
(a) it is a corporation duly organized, validity existing and in
god standing under the laws of the state of its incorporation and has all
requisite corporate power to own, lease and operate its properties, to carry on
its business as presently conducted and to carry out the transactions
contemplated by this Tax Sharing Agreement;
(b) it has duly and validly taken all corporate action necessary
to authorize the execution, delivery and performance of this Tax Sharing
Agreement and the consummation of the transaction contemplated hereby;
(c) this Tax Sharing Agreement has been duly executed and delivered
by it and constitutes its legal, valid and binding obligation enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally from time to time
in effect, and subject to equitable limitations on the availability of the
remedy of specific performance); and
(d) none of the execution and delivery of this Tax Sharing
Agreement, or the compliance with any of the provisions of this Tax Sharing
Agreement will (i) conflict with or result in a breach of any provision of its
corporate charter or bylaws, (ii) breach, violate or result in a default under
any of the terms of any agreement or other instrument or obligation to which it
is a party or by which it or any of its properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to it or affecting any of its properties or assets.
10. Miscellaneous.
-------------
(a) Injunction. The parties acknowledge that irreparable damage
----------
would occur in the event that any of the provisions of this Tax Sharing
Agreement was not performed in accordance with its specific terms or was
10
<PAGE>
otherwise breached. The parties hereto shall be entitled to an injunction or
injunction, to prevent breaches of the provisions of this Tax Sharing Agreement
and to enforce specifically the terms and provisions hereof in any court having
jurisdiction, such remedy being in addition to any other remedy to which they
may be entitled at law or equity.
(b) Severability. If any term, provision, covenant or restriction of this
------------
Tax Sharing Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable. In the event that any such term, provision, covenant or
restriction is held to be invalid, void or unenforceable, the parties hereto
shall use their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
(c) Further Assurances. Subject to the provisions hereof, the parties
------------------
hereto shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Tax Sharing Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions
hereof, each of the parties shall, in connection with entering this Tax Sharing
Agreement, perform its obligations hereby and take any and all actions relating
hereto, comply with all applicable laws, regulations order, and decrees, obtain
all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission or
similar authority and promptly provide the parties with all such information as
they may reasonably request in order to be able to comply with the provisions of
this sentence.
11
<PAGE>
(d) Parties in Interest. Except as herein otherwise
-------------------
specifically provided, nothing in this Tax Sharing Agreement express or implied
is intended to confer any right or benefit upon any person, firm or corporation
other than the parties and their respective successors and permitted assigns.
(e) Waivers, etc. No failure or delay on the part of the
------------
parties in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Tax Sharing
Agreement nor consent to any departure by the parties therefrom shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
(f) Setoff. All payments to be made by any party under this Tax
------
Sharing Agreement shall be made without setoff, counterclaim or withholding, all
of which are expressly waived.
(g) Change of Law. If, due to any change in applicable law or
-------------
regulations or the interpretation thereof by any court of law or other governing
body having jurisdiction subsequent to the date of this Tax Sharing Agreement,
performance of any provision of this Tax Sharing Agreement or any transaction
contemplated thereby shall become impracticable or impossible, the parties
hereto shall use heir best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
provision.
(h) Confidentiality. Subject to any contrary requirement of
---------------
law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under, any provision of this Tax Sharing
Agreement; provided, however, that
12
<PAGE>
such obligation to maintain confidentiality shall not apply to information which
(x) at the time of disclosure was in the public domain not as a result of acts
by the receiving party or (y) was in the possession of the receiving party at
the time of disclosure.
(i) Headings. Descriptive headings are for convenience only and
--------
shall not control or affect the meaning or construction of any provision of this
Tax Sharing Agreement.
(j) Counterparts. For the convenience of the parties, any number of
------------
counterparts of this Tax Sharing Agreement may be executed by the parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original instrument.
(k) Governing Law. This Tax Sharing Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Delaware, without
regard to its conflict-of-law provisions.
(l) Effect of Agreement. This Tax Sharing Agreement shall supersede
-------------------
any other tax sharing arrangement or agreement in effect among the parties.
Nothing in this Tax Sharing Agreement is intended to change or otherwise affect
any election made by or on behalf of the Group with respect to the calculation
of earnings and profits under Section 1552 of the Code.
(m) Interest. Any payment required to be made hereunder and not made
--------
when due shall bear interest at the rate per annum determined, from time to
time, by the prevailing average borrowing rate of the party required to make
payment.
(n) Unforecability. Notwithstanding anything herein to the contrary,
--------------
in the event any payments by Services or CCPR, respectively, to CCPR or New CCI,
respectively (in either case, the "Shareholder"),pursuant to Section 2 or
Section 3 hereof, would cause any member of the Group to become liable for
Puerto Rico income tax or withholding of income tax at source, or other taxes,
then the Shareholder shall have no right to receive payments under Section 2 or
Section 3 hereof, as the case may be; further, in the event payments are
-------
erroneously made by Services or CCPR to its Shareholder,
13
<PAGE>
such payments shall constitute a non-interest bearing loan between Services or
CCPR, as applicable, and its Shareholder.
(o) Term of Agreement. This Tax Sharing Agreement shall become
-----------------
effective as of the date first above written and, except as otherwise expressly
provided herein, the respective covenants of the parties contained herein shall
continue in full force and effect indefinitely.
(p) Notice. All notices, consents, requests, instructions,
------
approvals and other communications provided for herein shall be validly given,
made or served, if in writing and delivered personally, by telegram or sent by
registered mail, postage prepaid to:
New CCI at: CoreComm Incorporated
110 East 59th Street, 26th Floor
New York, NY 10022
Attention: Richard J. Lubasch
CCPR at: Cellular Communications
of Puerto Rico, Inc.
110 East 59th Street, 26th Floor
New York, NY 10022
Attention: Richard J. Lubasch
Services at: CCPR Services, Inc.
110 East 59th Street, 26th Floor
New York, NY 10022
Attention: Richard J. Lubasch
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 10(p).
14
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed, and their respective corporate seals to be affixed hereto,
all as of the date first above written.
CORECOMM INCORPORATED
By: /s/ Signature appears here
----------------------------------------
CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By: /s/ Signature appears here
----------------------------------------
CCPR SERVICES, INC.
By: /s/ Signature appears here
----------------------------------------
15
<PAGE>
EXHIBIT 10.7
AGREEMENT
---------
This Agreement (the "Agreement") is made and entered into as of
January 31, 1997, by and among Cellular Communications of Puerto Rico, Inc., a
Delaware corporation (the "Assignor"), and CCPR Services, Inc., a Delaware
corporation ("Assignee").
Recitals
--------
WHEREAS, Assignor owns a 86.232% interest as a partner in San Juan
Cellular Telephone Company, a general partnership (the "Partnership") which
holds the license from the Federal Communications Commission and the Puerto Rico
Telephone Regulatory Commission to operate the nonwireline Block A cellular
communications system for the San Juan-Caguas, Puerto Rico Metropolitan
Statistical Area.
WHEREAS, Assignee owns a 6.146% interest as a partner in the
Partnership.
WHEREAS, the Assignor wishes to sell and assign 21.0% of its interest
(the "Interest") to Assignee pursuant and subject to the terms and conditions of
this Agreement.
WHEREAS, in consideration of the continuation of the Partnership and the
rights of the partners thereunder, it is acknowledged that the Interest is being
transferred to the Assignee at fair market value.
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, and subject to all conditions set forth herein, the parties agree as
follows:
1. Assignment of Interest: Pursuant to Section 9.1(a) of the
Partnership's Partnership Agreement (the "Partnership Agreement"), on the
Closing Date (as defined in Section 3), Assignor shall assign and transfer to
Assignee all of Assignor's right, title and interest to the Interest, free and
clear of all encumbrances, liens, pledges, charges, claims, security interests
and liabilities ("Liens") other than those expressly assumed herein by Assignee.
The assignment shall include, with-
<PAGE>
out being limited to, the Interest, including the associated capital account in
the Partnership and all related rights with regard to Partnership voting,
profits, losses and distributions.
2. Consideration. In consideration for the assignment contemplated
-------------
by this Agreement, Assignee shall pay $80,000,000 to Assignor on the Closing
Date, by official bank check, cashier's check or electronic transfer of funds.
3. Closing Date and Place. The closing of the transactions
----------------------
contemplated by this Agreement (the "Closing") shall occur as soon as
practicable after the execution of this Agreement and the satisfaction of the
conditions set forth in Section 7 hereof (with such date referred to as the
"Closing Date"). The Closing shall take place at the offices of Latham &
Watkins, 885 Third Avenue, New York, New York 10022.
4. Assumption of Assignor's Obligations. Assignee shall assume and
------------------------------------
be bound on the Closing Date to perform all of the obligations, terms, covenants
and conditions of the Assignor under the Partnership Agreement, whether arising
before or after the Closing Date, with respect to the Interest assigned.
5. Mutual Representations and Warranties. Assignee and Assignor
-------------------------------------
represent and warrant to the other that: (a) Each (if not a natural person) is
duly formed, validly existing, and in good standing under the state and local
laws to which it is subject; (b) Each has the right, power and unconditional
authority, and has taken all necessary action, to execute, deliver, and fully
perform its obligations under this Agreement; (c) This Agreement is binding and
enforceable against the warranting party; and (d) The execution, delivery and
performance of the obligations under this Agreement (i) do not constitute a
material violation, breach or default under any law, regulation, ordinance,
judgment, order, agreement, charter, articles or certificate of incorporation,
by-laws, or other instrument or obligation to which the warranting party is
subject, and (ii) will not result in the imposition of any Liens on the Interest
assigned.
6. Assignor's Representations and Warranties. Assignor represents
-----------------------------------------
and warrants to Assignee that (a)
2
<PAGE>
Assignor is the lawful owner of the Interest; and (b) Assignor will assign the
Interest to Assignee free and clear of any and all Liens of any nature
whatsoever, except for the obligations expressly assumed herein by Assignee.
7. Conditions to Closing. The following are conditions precedent
---------------------
to each party's obligation to close the transactions contemplated by this
Agreement:
(a) All required authorizations, orders, grants, consents,
permissions or approvals ("Approvals") of any governmental entity with
jurisdiction over the transactions contemplated by this Agreement
("Governmental Agencies") shall have been received and shall remain in effect;
(b) The other party's representations and warranties shall be
true and correct, and the other party shall have performed all of its covenants
and obligations due to be performed as of the Closing Date in accordance with
this Agreement; and
(c) The consummation of the transactions contemplated by this
Agreement shall not be in violation of any law, rule or regulation.
8. Governmental Filings. Each of the parties hereto shall use its
--------------------
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective such
transactions, including, without limitation, using its reasonable best efforts
to obtain all Approvals of Governmental Agencies as are required for the
consummation of such transactions and to fulfill the conditions to the
Agreement.
9. Indemnification by Assignor. Assignee and its affiliates shall
---------------------------
be indemnified and held harmless by the Assignor against any and all losses,
expenses, damages, injuries, judgments, claims and liabilities, including
reasonable attorney's fees and litigation expenses, arising from (a) Assignor's
ownership of its Interest prior to the Closing; (b) any material
misrepresentation, breach of warranty, or nonperformance of any obligation
hereunder on the part of Assignor; (c) any other act or
3
<PAGE>
omission on the part of Assignor, its agents or representatives in connection
with its Interest or the Partnership; or (d) any agreement, commitment,
obligation, or other liability of Assignor in connection with its Interest or
the Partnership which Assignee does not expressly and specifically assume either
hereunder or in writing prior to the Closing.
10. Indemnification by Assignee. Assignor shall be indemnified and
---------------------------
held harmless by Assignee against any and all losses, expenses, damages,
injuries, judgment, claims and liabilities, including reasonable attorney's
fees and litigation expenses, arising from (a) Assignee's ownership of the
Interest; (b) any material misrepresentation, breach of warranty, or
nonperformance of any obligation hereunder on the part of Assignee; or (c) any
other act or omission on the part of Assignee or its affiliates in connection
with its interest in the Partnership.
11. Continuing Effectiveness. Each party's representations shall be
------------------------
true and correct, and each party's warranties and indemnifications shall be in
full force and effect on the date that the party executes this Agreement and, to
the extent the same are applicable at closing, on the Closing Date as if made on
the Closing Date. Each party's representations, warranties and indemnifications
shall survive the Closing Date and shall be fully actionable and enforceable
thereafter.
12. Expenses. Assignee and Assignor shall each bear their own legal
--------
and other fees and expenses associated with the preparation, execution and
consummation of this Agreement and the filing and prosecution of any required
Governmental Agency submissions.
13. Notices. All notices or other communications to parties under
-------
this Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by cable, telegram,
telex or other standard form of telecommunications, or by registered or
certified mail or Federal Express delivery, postage prepaid, return receipt
requested, addressed as follows:
If to Assignor:
4
<PAGE>
Cellular Communications
of Puerto Rico, Inc.
c/o Richard J. Lubasch
110 East 59th Street
26th Floor
New York, New York 10022
If to Assignee:
CCPR Services, Inc.
c/o Richard J. Lubasch
110 East 59th Street
26th Floor
New York, New York 10022
With copies to:
Skadden, Arps, Slate,
Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Thomas H. Kennedy
14. Governing Law. This Agreement shall be interpreted, enforced and
-------------
governed in accordance with the laws of New York (without regard to the
provisions thereof on the conflict of laws).
15. Binding Effect. This Agreement shall bind and benefit the
--------------
parties, their representatives, and their permitted assignees and successors in
interest. However, no right or obligation herein may be assigned or delegated by
a party, either directly or indirectly by transfer of control, without the prior
written consent of the other party. This Agreement may be assigned by a party
without the other party's consent to a corporation controlled by the assigning
party or the assigning party's controlling principals, provided that the
assigning party remains obligated hereunder.
16. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties governing this transaction. No prior agreement or
representation, whether verbal or written, shall have any forces or effect. This
Agreement may be modified, superseded or canceled only in writing signed by each
of the parties to be affected.
5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
first date above written.
CELLULAR COMMUNICATIONS
OF PUERTO RICO, INC.
By: [SIGNATURE APPEARS HERE]
--------------------------------
CCPR SERVICES, INC.
By: [SIGNATURE APPEARS HERE]
--------------------------------
6
<PAGE>
CORECOMM INCORPORATED Exhibit 11
CALCULATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Weighted Average Number of Shares
---------------------------------------------------------
Total Year Ended Year Ended Year Ende
Description of Issuance Outstanding 31-Dec-96 31-Dec-95 31-Dec-94
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01/01/94 Common Stock 9,759,772 9,759,772 9,759,772 9,759,772
01/12/94 Common Stock 125 125 125 121
01/12/94 Common Stock 4,250 4,250 4,250 4,110
02/18/94 Common Stock 83 83 83 72
03/18/94 Common Stock 625 625 625 493
03/30/94 Common Stock 8,500 8,600 8,500 6,427
04/28/94 Common Stock 486 486 486 329
05/10/94 Common Stock 6,252 6,252 6,252 4,025
05/20/94 Common Stock 7,875 7,875 7,875 4,854
05/20/94 Common Stock 834 834 834 514
06/08/94 Common Stock 83 83 83 47
06/30/94 Common Stock 150,000 150,000 150,000 75,676
07/06/94 Common Stock 208 208 208 101
07/28/94 Common Stock 125 125 125 53
08/19/94 Common Stock 208 208 208 76
10/19/94 Common Stock 51,429 51,429 51,429 10,286
10/26/94 Common Stock 513 513 513 93
11/30/94 Common Stock 236 236 236 20
12/14/94 Common Stock 2,500 2,500 2,500 116
12/30/94 Common Stock 6,511 6,511 6,511 18
01/12/95 Common Stock 6,813 6,813 6,589
02/02/95 Common Stock 1,945 1,945 1,769
02/23/95 Common Stock 521 521 444
04/05/95 Treasury Stock (25,000) (25,000) (18,493)
04/06/95 Treasury Stock (25,000) (25,000) (18,425)
04/06/95 Common Stock 1,200 1,200 884
04/07/95 Treasury Stock (18,000) (18,000) (13,216)
04/07/95 Treasury Stock (4,000) (4,000) (2,937)
04/10/95 Treasury Stock (10,000) (10,000) (7,260)
04/11/95 Treasury Stock (10,000) (10,000) (7,233)
04/12/95 Treasury Stock (8,000) (8,000) (5,764)
05/18/95 Common Stock 3,500 3,500 2,177
06/01/95 Common Stock 3,125 3,125 1,824
06/17/95 Common Stock 1,388 1,388 757
07/12/95 Common Stock 3,125 3,125 1,473
07/24/95 Common Stock 83,333 83,333 36,530
07/28/95 Common Stock 1,388 1,388 583
08/04/95 Common Stock 2,685,398 2,685,398 1,118,231
08/04/95 Common Stock 168 168 77
08/07/95 Common Stock 9,522 9,622 3,809
08/18/95 Treasury Stock (50,000) (50,000) (18,493)
08/21/95 Common Stock 521 521 188
09/26/95 Treasury Stock (20,000) (20,000) (8,260)
09/28/95 Treasury Stock (25,000) (25,000) (6,438)
09/29/95 Treasury Stock (5,000) (5,000) (1,274)
10/12/95 Treasury Stock (7,000) (7,000) (1,534)
02/07/96 Common Stock 820,404 735,225
02/13/96 Common Stock 2,084 1,833
02/27/96 Common Stock 3,500 2,945
03/06/96 Common Stock 513 257
03/12/96 Common Stock 5,555 4,462
04/23/96 Treasury Stock (15,000) (10,328)
04/24/96 Treasury Stock (53,000) (36,347)
04/25/96 Treasury Stock (25,000) (17,077)
04/26/96 Treasury Stock (35,000) (23,811)
04/29/96 Treasury Stock (25,000) (16,803)
04/30/96 Treasury Stock (12,500) (8,367)
05/01/96 Treasury Stock (5,000) (3,333)
05/02/96 Treasury Stock (22,500) (14,939)
06/10/96 Common Stock 642 302
06/11/96 Common Stock 3,000 1,664
09/20/96 Common Stock 1,042 280
11/06/96 Common Stock 42 6
11/01/96 Common Stock (15,000) (2,459)
11/04/96 Common Stock (35,000) (5,451)
11/05/96 Common Stock (6,000) (765)
11/12/96 Common Stock (25,000) (3,347)
11/27/96 Common Stock (25,000) (2,322)
12/06/96 Common Stock (15,000) (1,025)
12/23/96 Common Stock (20,000) (437)
12/24/96 Common Stock (2,500) (48)
12/26/96 Common Stock (7,500) (102)
----------------------------------------------------------------
Weighted average number
of common shares 13,089,064 13,195,605 11,069,633 9,867,143
----------------------------------------------------------------
Net affect of dilutive
stock options 831,437
----------------------------------------------------------------
Total 13,089,064 14,027,042 11,069,633 9,867,143
----------------------------------------------------------------
Net income (loss) $5,114,000 ($1,451,000) ($4,812,143)
----------------------------------------------
Net loss per common share $0.36 ($0.13) ($0.49)
----------------------------------------------
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF
CORECOMM INCORPORATED
All of the corporations listed below were incorporated in Delaware except where
otherwise noted:
Cellular Communications of Puerto Rico, Inc.
CCPR Paging, Inc.
CCPR Services, Inc.
Cellular Communications of Arecibo, Inc.
Cellular Ponce, Inc. (Texas corporation)
Mayaquez Cellular Telephone Co., Inc. (South Carolina corporation)
Aguadilla Cellular Telephone Company, Inc.
CCI PR RSA, Inc.
SJCT, Inc.
San Juan Cellular Telephone Company (District of Columbia partnership)
Gamma Communications (Louisiana partnership)
Merrimack Telecommunications Corporation (Florida corporation)
Star Associates, Inc.
USVI Cellar Telephone Corporation
CCPR of the Virgin Islands, Inc.
USVI Paging, Inc.
CCPR Panama, Inc.
CCPR Wireless Cable, Inc
Norwich Communications, Inc.
CCPR PCS, Inc.
CoreComm Teleco, Inc.
CoreComm New York, Inc.
CoreComm Pennsylvania, Inc.
CoreComm Virginia, Inc.
CoreComm New Jersey, Inc.
CoreComm Maryland, Inc.
CoreComm Delaware, Inc.
CoreComm Massachussets, Inc.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-54794, No. 33-54796, No. 33-54798, No. 33-95274, and No. 33-
95276) of CoreComm Incorporated (formerly Cellular Communications of Puerto
Rico, Inc. (the "Company")) of our report dated February 23, 1997, with respect
to the consolidated financial statements of the Company included in the Annual
Report (Form 10-K) for the year ended December 31, 1996.
ERNST & YOUNG LLP
San Juan, Puerto Rico
March 27, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,307,000
<SECURITIES> 5,917,000
<RECEIVABLES> 23,801,000
<ALLOWANCES> (3,767,000)
<INVENTORY> 2,912,000
<CURRENT-ASSETS> 3,022,000
<PP&E> 135,909,000
<DEPRECIATION> (37,964,000)
<TOTAL-ASSETS> 300,722,000
<CURRENT-LIABILITIES> 23,114,000
<BONDS> 115,000,000
0
0
<COMMON> 134,000
<OTHER-SE> 162,474,000
<TOTAL-LIABILITY-AND-EQUITY> 300,722,000
<SALES> 13,979,000
<TOTAL-REVENUES> 133,818,000
<CGS> 17,962,000
<TOTAL-COSTS> 33,176,000
<OTHER-EXPENSES> 63,223,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,181,000
<INCOME-PRETAX> 10,466,000
<INCOME-TAX> 5,352,000
<INCOME-CONTINUING> 5,114,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,114,000
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
