PROSPECTUS SUPPLEMENT
(To Prospectus dated September 23, 1998)
3,678,612 Shares
Common Stock
Commonwealth Telephone Enterprises, Inc.
Commonwealth Telephone Enterprises, Inc., a Pennsylvania corporation (the
"Company"), is distributing to holders of record of shares of its Common Stock,
par value $1.00 per share (the "Common Stock"), and to holders of record of
shares of its Class B Common Stock, par value $1.00 per share (the "Class B
Stock", and collectively with the Common Stock, the "Company Stock"),
transferable subscription rights (the "Rights") to subscribe for and purchase
additional shares of the Common Stock for a price of $21.25 per share (the
"Subscription Price"). Each shareholder will receive one Right for every five
shares of Company Stock held as of the close of business on September 25, 1998
(the "Record Date"). No fractional Rights or cash in lieu thereof will be
distributed or paid by the Company. The number of Rights distributed by the
Company to each record holder (a "Holder") of Company Stock will be rounded up
to the nearest whole number. Rights holders may purchase one share of Common
Stock for each whole Right held (the "Basic Subscription Privilege"). Each
Right also carries the right to subscribe (the "Oversubscription Privilege") at
the Subscription Price for shares of Common Stock that are not otherwise
purchased pursuant to the exercise of the Basic Subscription Privilege. See
"The Rights Offering--Subscription Privileges--Oversubscription Privilege." The
Rights will be evidenced by transferable certificates. Once a holder has
exercised any Rights, such exercise may not be revoked except under certain
limited circumstances. See "The Rights Offering -- No Revocation." The
distribution of the Rights and sale of the shares offered hereby is referred to
herein as the "Rights Offering."
The Rights will expire at 5:00 p.m., New York City time, on October 23,
1998, unless extended (as it may be extended, the "Expiration Date").
Shareholders who do not exercise their Rights will relinquish the value
inherent in the Rights. Accordingly, shareholders are strongly urged to
exercise their Rights. See "Risk Factors -- Dilution in Connection with Rights
Offerings" in the accompanying Prospectus.
In order to ensure that all shares offered hereby (the "Underlying
Shares") are sold, the Company has entered into a Rights Exercise Agreement
dated as of the date hereof (the "Rights Exercise Agreement") among the
Company, Level 3 Telecom Holdings, Inc., a Delaware corporation ("LTTH"),
Walter Scott, Jr., James Q. Crowe and David C. McCourt. Messrs. Scott, Crowe
and McCourt are referred to herein as the "Committed Individuals" and, together
with LTTH, are referred to herein as the "Committed Holders". As of the date
hereof, LTTH owns 7,690,261 shares of Common Stock, representing 48.27% of the
outstanding Common Stock, and 1,190,061 shares of Class B Stock, representing
48.37% of the outstanding Class B Stock. LTTH will receive 1,776,065 Rights in
respect of the shares of Company Stock it owns, and such Rights represent
48.28% of the total Rights to be distributed. Pursuant to the Rights Exercise
Agreement, LTTH has agreed with the Company to exercise the Basic Subscription
Privilege in respect of the Rights it receives. The Committed Individuals own
in aggregate 38,063 shares of Company Stock and will receive in the aggregate
7,613 Rights. Pursuant to the Rights Exercise Agreement, the Committed
Individuals have agreed to exercise the Basic Subscription Privilege in respect
of their Rights and to exercise the Oversubscription Privilege in respect of an
aggregate of 1,894,934 additional shares. The commitments by the Committed
Holders under the Rights Exercise Agreement ensure that the Rights Offering
will be completed consistent with the Company's recapitalization plan as
previously approved by the Internal Revenue Service. The opportunity to
exercise the Oversubscription Privilege is available to all holders of Rights
on the same terms. The Committed Holders will pay the same Subscription Price
for Underlying Shares they purchase as will any other person exercising Rights.
If the Committed Holders exercise their Rights and the Oversubscription
Privilege as set forth above and if no other person exercises any Rights, the
Committed Holders will purchase all shares of Common Stock being offered
hereby. The obligations of the Committed Holders to exercise their Rights and
the Oversubscription Privilege as set forth above are subject to the conditions
set forth in the Rights Exercise Agreement. See "The Rights Offering--Rights
Exercise Agreement". The Rights Offering and the transactions with the
Committed Holders were approved by a special committee of the Board of
Directors of the Company composed solely of directors unaffiliated with the
Committed Holders.
As of the Record Date, there were outstanding 15,932,702 shares of Common
Stock and 2,460,355 shares of Class B Stock. The principal market for the
Common Stock is The Nasdaq National Market ("NASDAQ"). It is anticipated that
the Rights will trade on NASDAQ under the symbol "CTCOR." Certain registered
broker-dealers have indicated to the Company that they intend to make a market
in the Rights. There can be no assurance, however, that a market for the Rights
will develop. Rights may also be sold in over-the-counter and private sales
transactions. On September 24, 1998, the last day on which trade prices were
reported prior to the public announcement of the Rights Offering, the closing
sale price of the Common Stock on NASDAQ was $21.1875 per share. On September
25, 1998, the closing sale price of the Common Stock on NASDAQ was $24 per
share.
See "Risk Factors" beginning on page 8 of the accompanying Prospectus for
a discussion of certain factors that should be considered by potential
investors.
SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN FULL WILL EXPERIENCE DILUTION
IN THEIR RELATIVE PERCENTAGE OWNERSHIP IN THE COMPANY UPON ISSUANCE
OF THE COMMON STOCK TO SHAREHOLDERS EXERCISING THEIR RIGHTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================================
Price to Underwriting Proceeds to the
Public Discounts and Commissions (1) Company (2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................................ $21.25 N/A $21.25
Total................................................ $78,170,505 N/A $78,170,505
============================================================================================================================
</TABLE>
(1) See "Plan of Distribution" for information with respect to contingent fees
payable by the Company.
(2) Before deduction of estimated expenses of $1,170,505 payable by the
Company, including registration fees, listing fees, Hart-Scott-Rodino
filing fees, legal and accounting fees, subscription agent fees,
information agent fees, soliciting dealer fees, printing expenses and other
miscellaneous fees and expenses.
-----------------------
The date of this Prospectus Supplement is September 25, 1998.
Offering Summary
The following information is qualified entirely by, and should be read in
conjunction with, the more detailed information appearing elsewhere in or
incorporated by reference into this Prospectus Supplement and the accompanying
Prospectus.
Rights.............................. Each record holder ("Holder") of Company
Stock will receive one transferable Right
for every five shares of Company Stock
held of record at the close of business
on September 25, 1998 (the "Record
Date"). The number of Rights distributed
by the Company to each Holder of Company
Stock will be rounded up to the nearest
whole number. An aggregate of
approximately 3,678,612 Rights will be
distributed pursuant to the Rights
Offering. Each Right will be exercisable
for one share of Common Stock. An
aggregate of approximately 3,678,612
shares of Common Stock (the "Underlying
Shares") will be sold upon exercise of
the Rights assuming exercise of all
Rights. The distribution of the Rights
and sale of Underlying Shares is referred
to herein as the "Rights Offering." See
"The Rights Offering--The Rights."
Basic Subscription Privilege........ Rights holders are entitled to purchase
for the Subscription Price one share of
Common Stock for each whole Right held
(the "Basic Subscription Privilege").
See "The Rights Offering--Subscription
Privileges--Basic Subscription
Privilege."
Oversubscription Privilege.......... Each holder of Rights who elects to
exercise in full his or her Basic
Subscription Privilege may also subscribe
at the Subscription Price for additional
Underlying Shares available as a result
of unexercised Basic Subscription
Privileges, if any (the "Oversubscription
Privilege"). If an insufficient number
of Underlying Shares is available to
satisfy fully all elections to exercise
the Oversubscription Privilege, the
available Underlying Shares will be
prorated among holders who exercise their
Oversubscription Privilege based on the
respective number of Underlying Shares
subscribed for by such holders pursuant
to the Oversubscription Privilege. The
maximum number of Underlying Shares for
which any beneficial owner may exercise
the Oversubscription Privilege is
1,894,934. See "The Rights
Offering--Subscription
Privileges--Oversubscription Privilege."
Subscription Price.................. $21.25 in cash per share of Common Stock
subscribed for pursuant to the Basic
Subscription Privilege or the
Oversubscription Privilege.
Shares of Common Stock
Outstanding after
Rights Offering................ A total of 19,611,314 shares.
Rights Exercise Agreement........... In order to ensure that all Underlying
Shares are sold, the Company has entered
into a Rights Exercise Agreement dated as
of the date hereof (the "Rights Exercise
Agreement") among the Company, Level 3
Telecom Holdings, Inc., a Delaware
corporation ("LTTH"), Walter Scott, Jr.,
James Q. Crowe and David C. McCourt.
Messrs. Scott, Crowe and McCourt are
referred to herein as the "Committed
Individuals" and, together with LTTH, are
referred to herein as the "Committed
Holders". Pursuant to the Rights
Exercise Agreement, and subject to the
terms and conditions set forth therein,
(i) LTTH has agreed to exercise the
1,776,065 Rights it will receive in
respect of the shares of Company Stock
currently owned by it and, (ii) the
Committed Individuals have agreed to (a)
exercise the 7,613 Rights they will
receive in respect of the shares of
Company Stock currently owned by them and
(b) subscribe in the aggregate for
1,894,934 additional Underlying Shares by
exercising the Oversubscription Privilege
(collectively, the "Agreed Exercises").
See "The Rights Offering--Rights Exercise
Agreement." The opportunity to exercise
the Oversubscription Privilege is
available to all holders of Rights on the
same terms. See "The Rights
Offering--Subscription
Privileges--Oversubscription Privilege."
The Committed Holders will pay the same
Subscription Price for Underlying Shares
they purchase as will any other person
exercising Rights. If the Committed
Holders exercise their Rights and the
Oversubscription Privilege as set forth
above and if no other person exercises
Rights, the Committed Holders will
purchase all of the Underlying Shares.
The commitments by the Committed Holders
under the Rights Exercise Agreement
ensure that the Rights Offering will be
completed consistent with the Company's
recapitalization plan as previously
approved by the Internal Revenue Service.
The obligations of the Committed Holders
to make the Agreed Exercises are subject
to certain conditions set forth in the
Rights Exercise Agreement. See "The
Rights Offering -- Rights Exercise
Agreement." If the Committed Holders do
not make the Agreed Exercises
substantially as described herein, each
other Rights holder who has previously
exercised Rights will be provided the
opportunity to revoke such exercise. The
Rights Offering and the Rights Exercise
Agreement were approved by a special
committee of the Board of Directors of
the Company composed only of directors
unaffiliated with the Committed Holders.
Transferability of Rights........... The Rights are transferable, and it is
anticipated that they will trade on
NASDAQ under the symbol "CTCOR." Certain
registered broker-dealers have indicated
that they intend to make a market in the
Rights during the period the Rights are
outstanding. No assurance can be given,
however, that a market for the Rights
will develop or, if such a market
develops, how long it will continue.
Record Date......................... September 25, 1998.
Expiration Date..................... October 23, 1998, at 5:00 p.m., New York
City time, unless extended (as it may be
extended, the "Expiration Date"),
provided that the Expiration Date shall
in no event be later than December 1,
1998.
Procedure for Exercising Rights..... Basic Subscription Privileges and
Oversubscription Privileges may be
exercised by properly completing and
signing the Subscription Certificate
evidencing the Rights (a "Subscription
Certificate") and forwarding such
Subscription Certificate (or following
the Guaranteed Delivery Procedures), with
payment of the Subscription Price for
each Underlying Share subscribed for
pursuant to the Basic Subscription
Privilege and the Oversubscription
Privilege, to the Subscription Agent on
or prior to the Expiration Date. Any
Rights holder subscribing for an
aggregate of more than 5,000 Underlying
Shares pursuant to the Oversubscription
Privilege prior to the Expiration Date
shall not be required to deliver payment
for such number of Underlying Shares in
excess of 5,000 until the Expiration
Date. The Company, in its sole
discretion, may determine to permit a
holder to establish an escrow arrangement
for payment after the Expiration Date
(and after all prorations and adjustments
contemplated by the terms of the Rights
Offering have been effected) for such
number of Underlying Shares in excess of
5,000 subscribed for pursuant to the
Oversubscription Privilege. The Company
has agreed pursuant to the Rights
Exercise Agreement to permit the
Committed Individuals to establish such
escrow arrangements. If the mail is used
to forward Subscription Certificates, it
is recommended that insured, registered
mail be used. No interest will be paid
on funds delivered in payment of the
Subscription Price. See "The Rights
Offering -- Exercise of Rights."
Once a holder of Rights has exercised the
Basic Subscription Privilege or the
Oversubscription Privilege, such exercise
may not be revoked unless the Agreed
Exercises are not made substantially as
described herein. See "The Rights
Offering--Exercise of Rights" and "The
Rights Offering--No Revocation."
Procedure for Exercising
Rights by Foreign
and Certain Other
Shareholders.................. Subscription Certificates will not be
mailed to Holders of Company Stock whose
addresses are outside the United States
or who have an APO or FPO address, but
will be held by the Subscription Agent
for their account. To exercise such
Rights, such a Holder must notify the
Subscription Agent on or prior to 11:00
a.m., New York City time, on October 16,
1998, and must establish to the
satisfaction of the Subscription Agent
that such exercise is permitted under
applicable law. If such a Holder does
not notify the Subscription Agent and
provide acceptable instructions to the
Subscription Agent by such time, such
Rights will be sold, if feasible, and the
net proceeds, if any, remitted to such
Holder. See "The Rights
Offering--Foreign and Certain Other
Shareholders."
Persons Holding Shares, or
Wishing to Exercise
Rights, Through Others........ Persons holding shares of Company Stock
and receiving the Rights distributable
with respect thereto, through a broker,
dealer, commercial bank, trust company or
other nominee, as well as persons holding
certificates of Company Stock personally
who would prefer to have such institutions
effect transactions relating to the Rights
on their behalf, should contact the
appropriate institution or nominee and
request it to effect the transactions for
them. If a beneficial owner wishes to
obtain a separate Subscription Right
Certificate, such beneficial owner should
contact the nominee as soon as possible
and request that a separate Subscription
Right Certificate be issued. A nominee
may request any Subscription Right
Certificate held by it to be split into
such smaller denominations as it wishes,
provided that the Subscription Right
Certificate is received by the
Subscription Agent, properly endorsed, no
later than the Expiration Date. See "The
Rights Offering--Exercise of Rights."
Issuance of Common Stock........... Certificates representing shares of Common
Stock purchased pursuant to the Basic
Subscription Privilege will be delivered
to subscribers as soon as practicable
after the corresponding Rights have been
validly exercised and full payment for
shares has been received and cleared.
For shares purchased pursuant to the
Oversubscription Privilege, delivery of
certificates will occur as soon as
practicable after the Expiration Date and
after all prorations and adjustments
contemplated by the terms of the Rights
Offering have been effected. See "The
Rights Offering--Subscriptio n
Privileges."
Use of Proceeds.................... The net cash proceeds received by the
Company from the sale of the shares of
Common Stock offered hereby, after payment
of fees and expenses, are estimated to be
approximately $77,000,000. The Company
intends to use the net proceeds to repay
indebtedness under the Company's Revolving
Credit Facility dated as of June 30, 1997,
between the Company and the lenders
referred to therein. See "Use of
Proceeds."
Subscription Agent................. First Union National Bank. See
"Subscription Agent."
Information Agent.................. MacKenzie Partners, Inc. See "Information
Agent."
Risk Factors
See "Risk Factors" beginning on page 8 of the accompanying Prospectus for a
discussion of certain factors that should be considered by prospective
investors.
USE OF PROCEEDS
The net proceeds of the Rights Offering, after payment of fees and
expenses, are estimated to be approximately $77,000,000. The Company intends to
use the net proceeds to repay indebtedness under the Company's Revolving Credit
Facility (the "Credit Facility") dated as of June 30, 1997, between the Company
and the lenders referred to therein. Borrowings under the Credit Facility bear
interest at floating rates and at September 23, 1998, such rates averaged 6.7%.
The Credit Facility terminates on June 30, 2002.
DILUTION
The pro forma net tangible book value of the shares of Company Stock as of
June 30, 1998 was approximately $47,000,000, or $2.58 per share of Company
Stock. "Net tangible book value" per share represents the amount of total
tangible assets (total assets less intangible assets) less total liabilities,
divided by the number of shares of Company Stock outstanding. After giving
effect to the sale by the Company of the 3,678,612 shares of Common Stock
offered hereby and after deducting the estimated offering expenses, the
adjusted pro forma net tangible book value of the shares of Company Stock as of
June 30 , 1998 would have been approximately $124,000,000 , or $5.64 per share,
representing an immediate and substantial dilution of $15.61 per share in
respect of shares of Common Stock purchased pursuant to this Rights Offering.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Subscription Price.................................................................... $21.25
Pro forma net tangible book value per share before offering...................... $2.58
Increase per share attributable to shareholders exercising Rights................ $3.06
-----
Pro forma net tangible book value per share after offering............................ $5.64
------
Dilution to shareholders exercising Rights(1)......................................... $15.61
======
</TABLE>
- -------------------
(1) Dilution is determined by subtracting the pro forma net tangible book
value per share from the Subscription Price paid by an investor for a
share of Common Stock in the Rights Offering.
THE RIGHTS OFFERING
The Rights
The Company is distributing transferable Rights at no cost to the record
holders ("Holders") of outstanding shares of Company Stock as of September 25,
1998 (the "Record Date"). The Company will distribute one Right for every five
shares of Company Stock held on the Record Date. The Rights will be evidenced
by transferable subscription certificates (the "Subscription Certificates") and
each such Right entitles the holder thereof to subscribe for one share of
Common Stock. An aggregate of approximately 3,678,612 shares of Common Stock
(the "Underlying Shares") will be sold upon exercise of the Rights assuming the
exercise of all Rights.
The Subscription Price of $21.25 per share of Common Stock is $0.0625
higher than the closing price of the Common Stock as quoted on NASDAQ on
September 24, 1998, the NASDAQ trading day immediately preceding the Record
Date. There can be no assurance that the Common Stock will trade at prices
above the Subscription Price. See "Risk Factors -- Uncertain Market" in the
accompanying Prospectus.
No fractional Rights or cash in lieu thereof will be issued or paid. The
number of Rights distributed to each Holder will be rounded up to the nearest
whole number. No Subscription Certificate may be divided in such a way as to
permit the holder of such certificate to receive a greater number of Rights
than the number to which such Subscription Certificate entitles its holder,
except that a depository, bank, trust company, or securities broker or dealer
holding shares of Company Stock on the Record Date for more than one beneficial
owner may, upon proper showing to the Subscription Agent, exchange its
Subscription Certificate to obtain a Subscription Certificate for the number of
Rights to which all such beneficial owners in the aggregate would have been
entitled had each been a Holder on the Record Date. The Company reserves the
right to refuse to issue any such Subscription Certificate if such issuance
would be inconsistent with the principle that each beneficial owner's holdings
will be rounded up to the nearest whole Right.
Because the number of Rights distributed to each record holder will be
rounded up to the nearest whole number, beneficial owners of Company Stock who
are also the record holders of such shares will receive more Rights under
certain circumstances than beneficial owners of Company Stock who are not the
record holders of their shares and who do not obtain (or cause the record
holder of their shares of Company Stock to obtain) a separate Subscription
Certificate with respect to the shares beneficially owned by them, including
shares held in an investment advisory or similar account. To the extent that
record holders of Company Stock or beneficial owners of Company Stock who
obtain a separate Subscription Certificate receive more Rights, they will be
able to subscribe for more shares pursuant to the Basic Subscription Privilege.
The issuance by the Company of the shares of Common Stock pursuant to the
Rights Offering is not conditioned upon the subscription of any minimum number
of shares of Common Stock by holders of the Rights.
BEFORE EXERCISING OR SELLING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED TO
READ CAREFULLY THE INFORMATION SET FORTH UNDER "RISK FACTORS" IN THE
ACCOMPANYING PROSPECTUS.
Expiration Date
The Rights will expire at 5:00 p.m., New York City time, on October 23,
1998, unless extended (as it may be extended, the "Expiration Date"), provided
that the Expiration Date shall in no event be later than December 1, 1998.
After such time, unexercised Rights will be null and void. The Company will not
be obligated to honor any purported exercise of Rights received by the
Subscription Agent after 5:00 p.m., New York City time, on the Expiration Date,
regardless of when the documents relating to such exercise were sent, except
pursuant to the Guaranteed Delivery Procedures described below.
Subscription Privileges
Basic Subscription Privilege. Each Right will entitle the holder thereof
to receive, upon payment of the Subscription Price, one share of Common Stock
(the "Basic Subscription Privilege"). Certificates representing shares of
Common Stock purchased pursuant to the Basic Subscription Privilege will be
delivered to subscribers as soon as practicable after the corresponding Rights
have been validly exercised and full payment for shares has been received and
cleared.
Oversubscription Privilege. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for
additional Underlying Shares (the "Oversubscription Privilege"). All beneficial
holders who exercise the Basic Subscription Privilege in full will be entitled
to exercise the Oversubscription Privilege.
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are
not subscribed for through the Basic Subscription Privilege. If the Underlying
Shares not subscribed for through the Basic Subscription Privilege (the "Excess
Shares") are not sufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those holders of Rights
exercising the Oversubscription Privilege in proportion to the number of shares
requested pursuant to the Oversubscription Privilege. The maximum number of
Underlying Shares for which any beneficial owner may exercise the
Oversubscription Privilege is 1,894,934, which is equal to the total number of
Underlying Shares less the number of Underlying Shares that the Committed
Holders (as defined below) have agreed to purchase pursuant to the exercise of
the Basic Subscription Privilege under the Rights they will receive in respect
of shares of Company Stock they currently own. See "--Rights Exercise
Agreement." Certificates representing shares of Common Stock purchased pursuant
to the Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations and adjustments
contemplated by the terms of the Rights Offering have been effected.
Banks, brokers and other nominee holders of Rights who exercise the Basic
Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company, in connection with the exercise of the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised and
the number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
Exercise of Rights
Rights may be exercised by delivering to First Union National Bank (the
"Subscription Agent"), at or prior to 5:00 p.m., New York City time, on the
Expiration Date, the properly completed and executed Subscription Certificate
evidencing such Rights with any signatures required to be guaranteed so
guaranteed, together with payment in full of the Subscription Price for each
Underlying Share subscribed for pursuant to the Basic Subscription Privilege
and the Oversubscription Privilege. Any Rights holder subscribing for an
aggregate of more than 5,000 Underlying Shares pursuant to the Oversubscription
Privilege prior to the Expiration Date shall not be required to deliver payment
for such number of Underlying Shares in excess of 5,000 until the Expiration
Date. The Company, in its sole discretion, may determine to permit a holder to
establish an escrow arrangement for payment after the Expiration Date (and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected) for such excess number of Underlying Shares. The
Company has agreed pursuant to the Rights Exercise Agreement to permit Messrs.
Scott, Crowe and McCourt to establish such escrow arrangements. All payments
must be by (a) check or bank draft drawn upon a U.S. bank or postal or express
money order payable to First Union National Bank, as Subscription Agent, or (b)
by wire transfer of same-day funds, in which case please contact the
Subscription Agent at (800) 829-8432 for such information. Payments will be
deemed to have been received by the Subscription Agent only upon (i) clearance
of any uncertified check, (ii) receipt by the Subscription Agent of any
certified check or bank draft upon a U.S. bank or of any postal or express
money order or (iii) receipt of good funds in the Subscription Agent's account
designated above. If paying by uncertified personal check, please note that the
funds paid thereby may take at least five business days to clear. Accordingly,
holders of Rights who wish to pay the Subscription Price by means of
uncertified personal check are urged to make payment sufficiently in advance of
the Expiration Date to ensure that such payment is received and clears by such
date and are urged to consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
By Mail or by Hand:
First Union National Bank
Corporate Trust Operations
1525 West W.T. Harris Blvd - 3C3
Charlotte, NC 28288-1153
By Overnight Courier:
First Union National Bank
Corporate Trust Operations
1525 West W.T. Harris Blvd - 3C3
Charlotte, NC 28262-1153
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege (subject to the
right of the Company to permit the holder to establish an escrow
arrangement for the payment in respect of the Oversubscription Privilege
as described above) to be received (in the manner set forth above) by the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guarantee notice ("Notice of Guaranteed Delivery"), substantially
in the form provided with the instructions as to use of Commonwealth
Telephone Enterprises, Inc. Subscription Certificates (the "instructions")
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. ("NASD"), or from a commercial
bank or trust company having an office or correspondent in the United
States, or from a bank, stockbroker, savings and loan association or
credit union with membership in an approved signature guarantee medallion
program, pursuant to Rule 17Ad-15 of the Exchange Act (each, an "Eligible
Institution"), stating the name of the exercising Rights holder, the
number of Rights represented by the Subscription Certificate or
Subscription Certificates held by such exercising Rights holder, the
number of Underlying Shares being subscribed for pursuant to the Basic
Subscription Privilege and the number of Underlying Shares, if any, being
subscribed for pursuant to the Oversubscription Privilege, and
guaranteeing the delivery to the Subscription Agent of any Subscription
Certificate evidencing such Rights within three NASDAQ trading days
following the Expiration Date; and
(iii) the properly completed Subscription Certificate evidencing the
Rights being exercised, with any signatures required to be guaranteed so
guaranteed, is received by the Subscription Agent within three NASDAQ
trading days following the Expiration Date. The Notice of Guaranteed
Delivery may be delivered to the Subscription Agent in the same manner as
Subscription Certificates at the address set forth above, or may be
transmitted to the Subscription Agent by facsimile transmission (telecopy
no. 704-590-7628). Additional copies of the form of Notice of Guaranteed
Delivery are available upon request from the Information Agent, whose
address and telephone number are set forth under "Information Agent".
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Rights holder
exercising the Oversubscription Privilege is allocated less than all of the
shares of Common Stock which such holder subscribed for pursuant to the
Oversubscription Privilege, the excess funds paid by such holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription
Certificate must be guaranteed by an Eligible Institution or other eligible
guarantor institution which is a member of or a participant in a medallion
guarantee program acceptable to the Subscription Agent.
Holders who hold shares of Company Stock for the account of others, such
as brokers, trustees or depositories for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through a record holder should contact the holder
and request the holder to effect transactions in accordance with such
beneficial owner's instructions. If a beneficial owner wishes to obtain a
separate Subscription Right Certificate, such beneficial owner should contact
the nominee as soon as possible and request that a separate Subscription Right
Certificate be issued. A nominee may request any Subscription Right Certificate
held by it to be split into such smaller denominations as it wishes, provided
that the Subscription Right Certificate is received by the Subscription Agent,
properly endorsed, no later than the Expiration Date.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY
URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK,
MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company in its sole discretion may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Rights. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Company determines in its sole discretion. Neither the Company, the
Subscription Agent, nor the Information Agent will be under any duty to give
notification of any defect or irregularity in connection with the submission of
Subscription Certificates or incur any liability for failure to give such
notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent, MacKenzie Partners, Inc., at its address set forth under
"Information Agent" (telephone: (212) 929-5500 or (800) 322-2885).
No Revocation
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED UNLESS
THE AGREED EXERCISES (AS DEFINED BELOW) ARE NOT MADE SUBSTANTIALLY AS DESCRIBED
HEREIN.
Method of Transferring Rights
Rights may be purchased or sold through usual investment channels,
including banks and brokers. It is anticipated that the Rights will be traded
on NASDAQ under the symbol "CTCOR". Rights also may be sold in over-the-counter
and private sales transactions. Certain registered broker-dealers have
indicated that they intend to make a market in the Rights during the period the
Rights are outstanding. No assurance can be given, however, that a market for
the Rights will develop or, if such a market develops, as to how long it will
continue.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the instructions accompanying the Subscription Certificate. A
portion of the Rights evidenced by a single Subscription Certificate (but not
fractional Rights) may be transferred by delivering to the Subscription Agent a
Subscription Certificate properly endorsed for transfer, with instructions to
register such portion of the Rights evidenced thereby in the name of the
transferee (and to issue a new Subscription Certificate to the transferee
evidencing such transferred Rights). In such event, a new Subscription
Certificate evidencing the balance of the Rights will be issued to the Rights
holder or, if the Rights holder so instructs, to an additional transferee.
Holders wishing to transfer all or a portion of their Rights (but not
fractional Rights) should allow a sufficient amount of time prior to the
Expiration Date of (i) the transfer instructions to be received and processed
by the Subscription Agent, (ii) a new Subscription Certificate to be issued and
transmitted to the transferee or transferees with respect to transferred
Rights, and to the transferor with respect to retained Rights, if any, and
(iii) the Rights evidenced by such new Subscription Certificates to be
exercised or sold by the recipients thereof. Neither the Company nor the
Subscription Agent shall have any liability to a transferee or transferor of
Rights if Subscription Certificates are not received in time for exercise or
sale prior to the Expiration Date.
Except for the fees charged by the Subscription Agent (which will be paid
by the Company as described above), all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection
with the purchase, sale or exercise of Rights will be for the account of the
transferor of the Rights, and none of such commissions, fees or expenses will
be paid by the Company or the Subscription Agent.
Procedures for Book Entry Transfer Facility Participants
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Basic Subscription Privilege (but not the
Oversubscription Privilege) may be effected through the facilities of the
Depositary Trust Company, Midwest Securities Trust Company and Philadelphia
Depository Trust Company (collectively, the "Book Entry Facilities"; Rights
exercised through any such facility are referred to as "Book Entry Exercised
Rights"). The holder of a Book Entry Exercised Right may exercise the
Oversubscription Privilege in respect of such Book Entry Exercised Right by
properly executing and delivering to the Subscription Agent, at or prior to
5:00 p.m., New York City time, on the Expiration Date, a Nominee Holder
Oversubscription Form, together with payment of the Subscription Price for the
number of Underlying Shares for which the Oversubscription Privilege is to be
exercised. Any Rights holder subscribing for an aggregate of more than 5,000
Underlying Shares pursuant to the Oversubscription Privilege prior to the
Expiration Date shall not be required to deliver payment for such number of
Underlying Shares in excess of 5,000 until the Expiration Date. The Company, in
its sole discretion, may determine to permit a holder to establish an escrow
arrangement for payment after the Expiration Date (and after all prorations and
adjustments contemplated by the terms of the Rights Offering have been
effected) for such excess number of Underlying Shares. The Company has agreed
pursuant to the Rights Exercise Agreement to permit the Committed Individuals
(as defined below) to establish such escrow arrangements. Copies of the Nominee
Holder Oversubscription Form may be obtained from the Subscription Agent.
Determination of Subscription Price
The Subscription Price was determined by the Company and its Board of
Directors. In making this determination, the Company and the Board of Directors
considered, among other factors, the market price of the Common Stock, the pro
rata nature of the offering and the provisions of the private letter ruling
received by the Company from the Internal Revenue Service in connection with
the spin-off of its former subsidiaries, RCN Corporation and Cable Michigan,
Inc. The Subscription Price should not be considered an indication of the
actual value of the Company or the Common Stock. See "Price Range of Common
Stock and Dividend Policy" in the accompanying Prospectus.
Rights Exercise Agreement
In order to ensure that all Underlying Shares are sold, the Company has
entered into a Rights Exercise Agreement dated as of the date hereof (the
"Rights Exercise Agreement") among the Company, Level 3 Telecom Holdings, Inc.,
a Delaware corporation ("LTTH"), Walter Scott, Jr., James Q. Crowe and David C.
McCourt. Messrs. Scott, Crowe and McCourt are referred to herein as the
"Committed Individuals" and, together with LTTH, are referred to herein as the
"Committed Holders". Pursuant to the Rights Exercise Agreement, and subject to
the terms and conditions set forth therein, (i) LTTH has agreed to exercise the
1,776,065 Rights it will receive in respect of the shares of Company Stock
currently owned by it, (ii) Mr. Scott has agreed to (a) exercise the 137 Rights
he will receive in respect of the shares of Company Stock currently owned by
him and (b) subscribe for 947,468 additional Underlying Shares by exercising
the Oversubscription Privilege, (iii) Mr. Crowe has agreed to (a) exercise the
137 Rights he will receive in respect of the shares of Company Stock currently
owned by him and (b) subscribe for 473,733 additional Underlying Shares by
exercising the Oversubscription Privilege and (iv) Mr. McCourt has agreed to
(a) exercise the 7,339 Rights he will receive in respect of the shares of
Company Stock currently owned by him and (b) subscribe for 473,733 additional
Underlying Shares by exercising the Oversubscription Privilege (collectively,
the "Agreed Exercises"). If one of the Committed Individuals purchases or
otherwise acquires additional Rights, he will exercise the Basic Subscription
Privilege in respect of such Rights, and the number of Underlying Shares in
respect of which he is required to exercise the Oversubscription Privilege will
be reduced by an amount equal to such number of additional Rights so exercised.
The Committed Individuals are permitted to reallocate among themselves the
Underlying Shares for which they have agreed to exercise the Oversubscription
Privilege. The commitments by the Committed Holders under the Rights Exercise
Agreement ensure that the Rights Offering will be completed consistent with the
Company's recapitalization plan as previously approved by the Internal Revenue
Service.
The Company has agreed to permit each of the Committed Individuals to
establish escrow arrangements for the payment of the Subscription Price in
respect of the number of Underlying Shares in excess of 5,000 being requested
by each such individual under the Oversubscription Privilege until after the
Expiration Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected. If the Committed Holders
exercise their Rights and the Oversubscription Privilege as set forth above and
if no other person exercises Rights, the Committed Holders will purchase all of
the Underlying Shares.
The opportunity to exercise the Oversubscription Privilege is available to
all holders of Rights on the same terms. See "-- Subscription Privileges --
Oversubscription Privilege." The Committed Holders will pay the same
Subscription Price for shares of Common Stock they purchase as will any other
person exercising Rights.
The several obligations of the Committed Holders to make the Agreed
Exercises are subject to the following conditions: (a) no stop order suspending
the effectiveness of the Registration Statement of which this Prospectus
Supplement forms a part (the "Registration Statement") or any amendment or
supplement thereto shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Securities and Exchange
Commission; (b) there shall not be pending any action or proceeding instituted
by any governmental authority before any court or governmental, administrative
or regulatory authority challenging or seeking to make illegal, materially
delay or make materially more costly the Rights Offering or the transactions
contemplated hereby; (c) since the date of the Rights Exercise Agreement, there
shall not have occurred any change, condition, event or development that has
had a material adverse affect on the business, operations, properties,
condition (financial or otherwise), assets or liabilities of the Company and
its subsidiaries taken as a whole; (d) since the date of the Rights Exercise
Agreement, there shall not have occurred any material adverse change in the
financial markets in the United States; (e) certain representations and
warranties of the Company regarding the accuracy of the information set forth
in this Prospectus Supplement, the accompanying Prospectus and the Registration
Statement, the status of the Underlying Shares and compliance with the
Securities Act of 1933 and the rules and regulations thereunder, shall be true
and correct as of the Expiration Date; and (f) each of the other Committed
Holders shall have made its Agreed Exercises. In addition, (i) the obligation
of Mr. Scott to exercise his Rights and the Oversubscription Privilege as set
forth above is subject to the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") to the extent applicable to the transactions by Mr. Scott under the
Rights Exercise Agreement and (ii) the obligations of the Committed Individuals
to exercise their Rights and the Oversubscription Privilege as set forth above
are subject to the delivery by the Company of a Registration Rights Agreement
as described below. The Company has agreed to pay the HSR Act filing fees. If
one or more of the Committed Holders does not make the Agreed Exercises
substantially as described herein, each Rights holder who has previously
exercised Rights will be provided the opportunity to revoke such exercise.
The Rights Exercise Agreement provides that on the Expiration Date, the
Company and the Committed Individuals will enter into a customary registration
rights agreement in respect of the shares of the Common Stock purchased by the
Committed Individuals pursuant to the Rights Offering. Such agreement will
provide the Committed Individuals two demand registrations (to be exercised by
them jointly) and unlimited "piggyback" registration rights. Such agreement
will contain other customary terms and conditions and will be mutually
satisfactory to the Company and the Committed Individuals.
The Company has agreed to indemnify the Committed Holders against third
party claims arising from or relating to the Rights Exercise Agreement.
If no Rights are exercised by persons other than the Committed Holders,
then after the Rights Offering (i) LTTH will own 9,466,326 shares of Common
Stock, representing 48.27% of the outstanding Common Stock, and 1,190,061
shares of Class B Stock, representing 48.37% of the outstanding Class B Stock,
(ii) Mr. Scott will own 948,289 shares of Common Stock, representing 4.84% of
the outstanding shares of Common Stock (iii) Mr. Crowe will own 474,554 shares
of Common Stock, representing 2.42% of the outstanding shares of Common Stock,
and (iv) Mr. McCourt will own 514,434 shares of Common Stock, representing
2.62% of the outstanding shares of Common Stock, and 3,333 shares of Class B
Stock, representing 0.14% of the outstanding Class B Stock. The Common Stock
has less voting power per share than the Class B Stock. See "Description of
Capital Stock--Common Stock and Class B Common Stock" in the accompanying
Prospectus. As of the Record Date, LTTH is entitled to cast 48.34% of the votes
entitled to be cast by the holders of all shares of Company Stock. If no Rights
are exercised by any person other than the Committed Holders, then after the
Rights Offering is completed LTTH and the Committed Individuals will be
entitled to cast 48.33% and 3.52%, respectively, of the votes entitled to be
cast by the holders of all shares of Company Stock, and collectively the
Committed Holders alone would, if they were to choose to vote in the same
manner at any time, have sufficient voting power to approve any matter
presented to the holders of Company Stock.
Mr. Scott is a director of the Company and the Chairman and a director of
Level 3 Communications, Inc. ("Level 3"), which holds a controlling interest in
LTTH. Mr. Crowe is a director of the Company and a director and the President
and Chief Executive Officer of Level 3. Mr. McCourt is a director and Chairman
and Chief Executive Officer of the Company, is a director of Level 3 and owns
10% of the common stock of LTTH. The Rights Offering and the Rights Exercise
Agreement were approved by a special committee of the Board of Directors of the
Company composed only of directors unaffiliated with the Committed Holders.
Foreign and Certain Other Shareholders
Subscription Certificates will not be mailed to Holders whose addresses
are outside the United States or who have an APO or FPO address, but will be
held by the Subscription Agent for their account. To exercise such Rights, such
a Holder must notify the Subscription Agent at or prior to 11:00 a.m., New York
City time, on October 16, 1998, and must establish to the satisfaction of the
Subscription Agent that such exercise is permitted under applicable law. If
such a Holder does not notify the Subscription Agent and provide acceptable
instructions to the Subscription Agent by such time, such Rights represented
thereby will be sold, if feasible, and the net proceeds, if any, remitted to
such Holder. If the Rights can be sold, sales of such Rights will be deemed to
have been effected at the weighted average price received by the Subscription
Agent on the day such Rights are sold, less any applicable brokerage
commissions, taxes and other expenses.
Other Matters
The Rights Offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor is the Company selling or accepting any
offers to purchase any shares of Company Stock from Rights holders who are
residents of any such state or other jurisdiction. The Company may delay the
commencement of the Rights Offering in certain states or other jurisdictions in
order to comply with the securities law requirements of such states or other
jurisdictions. It is not anticipated that there will be any changes in the
terms of the Rights Offering. The Company, if it so determines in its sole
discretion, may decline to make modifications to the terms of the Rights
Offering requested by certain states or other jurisdictions, in which event
Rights holders resident in those states or jurisdictions will not be eligible
to participate in the Rights Offering.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary sets forth the material United States federal income
tax consequences of the receipt, ownership, exercise and disposition of the
Rights to United States holders of Company Stock under present law. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of this Prospectus Supplement may affect the tax consequences
described herein, possibly on a retroactive basis. This summary does not
discuss all aspects of United States federal income taxation that may be
relevant to a particular investor or to certain types of investors subject to
special treatment under the Untied States federal income tax laws (for example,
banks, dealers in securities, life insurance companies, tax exempt
organizations, foreign taxpayers or persons holding Company Stock as part of a
straddle or conversion transaction), nor does it discuss any aspect of state,
local or foreign income or other tax laws. This discussion is limited to United
States holders of Company Stock who hold such stock as a capital asset. For
purposes of this discussion, a United States holder is a holder that is (i) a
citizen or resident of the United States, (ii) a corporation or partnership
created or organized under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is subject to United
States federal income taxation regardless of its source, or (iv) a trust if a
United States court is able to exercise primary supervision over the
administration of the trust and one or more United States trustees or
fiduciaries have authority to control all substantial decisions of the trust.
Issuance of Rights
Holders of Company Stock will not recognize taxable income in connection
with the receipt of the Rights.
Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of the Rights
received by a shareholder as a distribution with respect to such shareholder's
Company Stock will be zero. If either (i) the fair market value of the Rights
on the date of the issuance of the Rights (the "Issuance") is 15% or more of
the fair market value (on the date of Issuance) of the Company Stock with
respect to which they are received or (ii) the shareholder elects, in his or
her federal income tax return for the taxable year in which the Rights are
received, to allocate part of the basis of such Company Stock to the Rights,
then upon exercise or transfer of the Rights, the shareholder's basis in such
Common Stock will be allocated between the Company Stock and the Rights in
proportion to the fair market values of each on the date of Issuance. The
holding period of a shareholder with respect to the Rights received as a
distribution on such shareholder's Company Stock will include the shareholder's
holding period for the Company Stock with respect to which the Rights were
issued.
Transfer of the Rights
A shareholder who sells Rights received in the Issuance prior to exercise
will recognize gain or loss equal to the difference between the sale proceeds
and such shareholder's basis (if any) in the Rights sold. Such gain or loss
will be long-term capital gain or loss if such shareholder's holding period in
the Rights (as discussed above) exceeds one year. The excess of net long-term
capital gain over net short-term capital losses is taxed at a lower rate than
ordinary income for certain non-corporate taxpayers. The distinction between
capital gain or loss and ordinary income is also relevant for purposes of,
among other things, limitations on the deductibility of capital losses.
Lapse of the Rights
Shareholders who allow the Rights received by them in the Issuance to
lapse will not recognize any gain or loss, and no adjustment will be made to
the basis of the Company Stock, if any, owned by such holders of the Rights.
Exercise of the Rights; Basis and Holding Period of Common Stock
Holders of Rights will not recognize any gain or loss upon the exercise of
such Rights. The basis of the Common Stock acquired through exercise of the
Rights will be equal to the sum of the Subscription Price therefor and the
Rights holder's basis in such Rights (if any) as described above. The holding
period for the Common Stock acquired through exercise of the Rights will begin
on the date the Rights are exercised.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Company has agreed to pay certain broker-dealers that have entered
into a Soliciting Dealer Agreement with the Company fees for their soliciting
efforts (the "Soliciting Fees") equal to $0.25 per share of Common Stock for
each share of Common Stock issued pursuant to the exercise of Rights subject to
a maximum Soliciting Fee of $250.00 in the case of each person beneficially
purchasing more than 1,000 shares of Common Stock pursuant to the exercise of
Rights. The Soliciting Fees will be paid directly to a broker-dealer designated
on the applicable portion of the Subscription Certificate. Soliciting Fees will
not be paid on any undesignated exercise of Rights.
SUBSCRIPTION AGENT
The Company has appointed First Union National Bank as Subscription Agent
for the Rights Offering. The Subscription Agent's address, which is the address
to which the Subscription Certificates and payment of the Subscription Price
(other than wire transfers) should be delivered, as well as the address to
which any Notice of Guaranteed Delivery must be delivered is:
By Mail or by Hand:
First Union National Bank
Corporate Trust Operations
1525 West W.T. Harris Blvd - 3C3
Charlotte, NC 28288-1153
By Overnight Courier:
First Union National Bank
Corporate Trust Operations
1525 West W.T. Harris Blvd - 3C3
Charlotte, NC 28262-1153
The Company will pay the fees and expenses of the Subscription Agent, and
has also agreed to indemnify the Subscription Agent from certain liabilities in
connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed MacKenzie Partners, Inc. as Information Agent
for the Rights Offering. Any questions or requests for additional copies of
this Prospectus, the Instructions or Notice of Guaranteed Delivery may be
directed to the Information Agent at the telephone number and address below.
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
or
Call Toll Free
(800) 322-2885
The Company will pay the fees and expenses of the Information Agent and
has also agreed to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby is being passed upon by John Filipowicz, Senior Vice President and
Assistant General Counsel of the Company. Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York, will advise the Company with respect to certain income
tax matters. Davis Polk & Wardwell, New York, New York, will advise the Company
with respect to certain other matters relating to the Rights Offering.
<TABLE>
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No dealer, salesperson or other individual has
been Commonwealth Telephone authorized to give any
information or to make any Enterprises, Inc.
representations other than those contained in this
Prospectus Supplement. If given or made, such
information or representations must not be relied
upon as having been authorized by the Company or 3,678,612 Shares
the Underwriter. This Prospectus Supplement does Common Stock
not constitute an offer to sell, or a solicitation
of an offer to buy, in any jurisdiction in which
such offer or solicitation is not authorized or in
which the person making such offer or solicitation
is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus Supplement
nor any sale made hereunder shall, under any
circumstances, create an implication that there
has not been any change in the facts set forth in
this Prospectus Supplement or in the affairs of
the Company since the date hereof.
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TABLE OF CONTENTS
Page
- ----- PROSPECTUS SUPPLEMENT
Prospectus Supplement
Offering Summary..................................S-2 ------------------------------------
Use of Proceeds...................................S-7
Dilution..........................................S-7
The Rights Offering...............................S-7
Certain U.S. Federal Income Tax Consequences.....S-14 September 25, 1998
Plan of Distribution.............................S-16
Subscription Agent...............................S-16
Information Agent................................S-16
Legal Matters....................................S-17
Prospectus
Available Information...............................2
Incorporation of Certain Documents by Reference.....2
Special Note on Forward-Looking Statements..........3
Prospectus Summary..................................4
Risk Factors........................................8
Use of Proceeds....................................14 -----------------------
Price Range of Common Stock and Dividend Policy....14
Selected Consolidated Financial Data...............15
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............16
Business...........................................23
Description of Notes...............................33
Description of Capital Stock.......................44
Plan of Distribution...............................48
Experts............................................48
Legal Matters......................................49
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</TABLE>
