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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 15)
Commonwealth Telephone Enterprises, Inc.
(Name of Issuer)
Common Stock Class B Common Stock
$1.00 Par Value $1.00 Par Value
(Title of Classes of Securities)
-----------------------
126504208 126504109
(Cusip Numbers)
Level 3 Telecom Holdings, Inc.
(Name of Persons Filing Statement)
Matthew J. Johnson, Esq.
c/o Level 3 Communications, Inc.
1000 Kiewit Plaza
Omaha, Nebraska 68131
(402) 536-3613
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
September 25, 1998
(Date of Event which Requires Filing of this Statement)
-----------------------
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(b)(3) or (4), check the following: [ ]
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SCHEDULE 13D
CUSIP No. 126504109/126504208 Page 2 of 11 Pages
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1 NAME OF REPORTING PERSON: Level 3 Telecom Holdings, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 47-0761
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
N/A
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES 7 SOLE VOTING POWER (See Item 5)
BENEFICIALLY OWNED BY EACH 7,690,261 Common Stock
REPORTING PERSON WITH 1,190,061 Class B Common Stock
8 SHARED VOTING POWER (See Item 5)
0
9 SOLE DISPOSITIVE POWER (See Item 5)
7,690,261 Common Stock
1,190,061 Class B Common Stock
10 SHARED DISPOSITIVE POWER (See Item 5)
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,690,261 Common Stock
1,190,061 Class B Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
48.27% of Common Stock
48.37% of Class B Common Stock
14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
The following information amends the Schedule 13D dated June 28, 1993 as
previously amended (as so amended, the "Schedule 13D").
Unless otherwise indicated, each capitalized term used but not defined
herein shall have the meaning assigned to such term in the Schedule 13D.
Item 2. Identity and Background.
The response set forth in Item 2 of the Schedule 13D is amended and
restated in its entirety as follows:
This statement is filed on behalf of Level 3 Telecom Holdings, Inc., a
Delaware corporation ("LTTH"), formerly known as Kiewit Telecom Holdings Inc.
In March of 1998, LTTH changed its name from "Kiewit Telecom Holdings Inc." to
"Level 3 Telecom Holdings, Inc." References in the Schedule 13D to "Kiewit
Telecom" shall be construed as references to LTTH.
Level 3 Communications, Inc., a Delaware corporation ("LTC", and together
with LTTH, the "Level 3 Companies"), owns 90% of the common stock and all of
the preferred stock of LTTH. David C. McCourt, Chairman and Chief Executive
Officer of the Company, owns the remaining 10% of the common stock of LTTH.
LTTH was formed to invest in telecommunications businesses that primarily
serve residential customers. The address of the principal executive offices and
principal business of LTTH is 1000 Kiewit Plaza, Omaha, NE 68131. Information
as to each executive officer and director of LTTH is set forth in Schedule A
attached hereto, which is incorporated herein by reference.
LTC is a holding company that engages in the information services,
communications, and coal mining businesses through ownership of operating
companies and equity positions in public companies. The address of the
principal executive offices and principal business of LTC is 3555 Farnam
Street, Omaha, NE 68131. LTC is the surviving corporation from the merger of
Peter Kiewit Sons' Inc. and Kiewit Diversified Group Inc. (which had changed
its name to Level 3 Communications, Inc. prior to that merger). References in
the Schedule 13D to the "Kiewit Companies" shall be construed as references to
the "Level 3 Companies".
LTC is the ultimate parent of LTTH. Information as to each executive
officer and director of LTC is set forth in Schedule B attached hereto, which
is incorporated herein by reference.
During the last five years, none of the Level 3 Companies nor, to the best
knowledge of the Level 3 Companies, any of the persons listed on Schedule A or
B attached hereto, has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violation of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 4. Purpose of Transaction.
The response set forth in Item 4 of the Schedule 13D is hereby amended and
supplemented as follows:
On September 25, 1998, the Company announced that it will distribute to
holders of record of shares of Common Stock and Class B Stock (collectively,
the "Company Stock") transferable subscription rights (the "Rights") to
subscribe for and purchase additional shares of Common Stock (the "Underlying
Shares") for a price of $21.25 per share (the "Subscription Price"). The
distribution of the Rights and sale of the Underlying Shares is referred to
herein as the "Rights Offering". Pursuant to the Rights Offering, 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"). Rights
holders are entitled to purchase one share of Common Stock for each whole Right
held (the "Basic Subscription Privilege"). Approximately 3,678,612 Rights will
be distributed and consequently, there will be approximately 3,678,612
Underlying Shares. Each Right also carries the right to subscribe (the
"Oversubscription Privilege") at the Subscription Price for Underlying Shares
that are not otherwise purchased pursuant to the exercise of the Basic
Subscription 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.
In order to ensure that all Underlying Shares are sold, the Company has
entered into a Rights Exercise Agreement dated as of September 25, 1998 (the
"Rights Exercise Agreement") among the Company, LTTH, Walter Scott, Jr., James
Q. Crowe and David C. McCourt. Messrs. Scott, Crowe and McCourt are directors
of both the Company and LTTH and 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 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.
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 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 related Registration Statement on Form S-3
(Registration No. 333-59747) (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, among other things, the accuracy of the
information set forth in the Prospectus Supplement dated September 25, 1998
with respect to the Rights Offering, the Prospectus accompanying such
Prospectus Supplement (together, the "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 date on which the Rights expire (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 other 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. 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.
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.
During the period from September 30, 1997 to September 25, 1998, LTTH
converted 153,085 shares of Class B Stock into 153,085 shares of Common Stock,
pursuant to the Articles of Incorporation of the Company, as amended (the
"Conversions").
Item 5. Interest in Securities of the Issuer.
The response set forth in Item 5 of the Schedule 13D is hereby amended and
restated in its entirety as follows:
(a) and (b) LTTH owns 7,690,261 shares of Common Stock, representing
approximately 48.27% of the outstanding Common Stock, and 1,190,061 shares of
Class B Stock, representing approximately 48.37% of the outstanding Class B
Stock (collectively, the "Company Shares"). The Common Stock has one vote per
share and the Class B Stock has 15 votes per share, and consequently, LTTH is
entitled to cast 25,541,176 (48.34%) of the 52,838,027 total votes of all
outstanding shares of Common Stock and Class B Stock.
Each share of Class B Stock is convertible into one share of Common Stock.
If all 1,190,061 shares of Class B Stock owned by LTTH (but no other shares of
Class B Stock) were converted into Common Stock, the Company Shares would
comprise 8,880,322 shares of Common Stock representing 48.28% of the 18,393,057
shares of Common Stock then outstanding.
LTTH owns, and has the sole power to vote or to direct the vote, and to
dispose or direct the disposition of, the Company Shares. Through their direct
and indirect ownership of LTTH, Level 3 Communications, Inc. and David C.
McCourt may, for purposes of Rule 13d-3 under the Exchange Act, be deemed to
beneficially own the Company Shares.
David McCourt is the beneficial owner of 19,469 shares of Common Stock and
3,333 shares of Class B Stock representing less than .1% of the shares of the
outstanding Common Stock and Class B Stock, respectively.1 Mr. McCourt
disclaims beneficial ownership of 150 shares of Common Stock beneficially owned
by his wife.
James Q. Crowe is the beneficial owner of 684 shares of Common Stock
representing less than .1% of the outstanding Common Stock. Mr. Crowe has the
sole power to vote or direct the vote and to dispose of or direct the
disposition of such shares.
Richard R. Jaros is the beneficial owner of 661 shares of Common Stock
representing less than .1% of the outstanding Common Stock. Mr. Jaros has the
sole power to vote or direct the vote and to dispose of or direct the
disposition of such shares.
Walter Scott, Jr. is the beneficial owner of 684 shares of Common Stock
representing less than .1% of the outstanding Common Stock. Mr. Scott has the
sole power to vote or direct the vote and to dispose of or direct the
disposition of such shares.
All information in this item 5(a) and (b) as to the number of shares
outstanding, the number of votes that outstanding shares are entitled to cast
or the percentage of shares held or votes entitled to be cast are based on the
number of shares outstanding on September 25, 1998 and does not include the
shares of Common Stock that may be purchased pursuant to the exercise of
Rights.
Except as set forth in this Item 5(a) and (b), none of the Level 3
Companies, nor, to the best knowledge of the Level 3 Companies, any persons
named in Schedule A or B hereto, owns beneficially any shares of Common Stock
or Class B Stock.
(c) Except for the Conversions, no transactions in the Common Stock or the
Class B Stock have been effected during the past 60 days by the Level 3
Companies or, to the best knowledge of the Level 3 Companies, by any of the
persons named in Schedule A or B hereto.
(d) Inapplicable.
(e) Inapplicable.
- --------
1 Does not include 12,652 shares of Common Stock issued to Mr. McCourt as
a matching contribution under the CTE Executive Stock Purchase Plan. Such
shares are unvested and subject to forfeiture. Mr. McCourt has sole power to
vote such shares. Excludes purchases of Common Stock by the Plan Administrator
of the Employee Stock Purchase Plan on behalf of David C. McCourt.
Item 6. Contracts, Arrangements, Understandings or Relation-ships with
Respect to Securities of the Issuer.
The response set forth in Item 6 of the Schedule 13D is hereby amended and
restated in its entirety as follows:
Except for the Rights Exercise Agreement, to the best knowledge of the
Level 3 Companies, there are no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in Item 2 or between
such persons and any other person, with respect to any securities of the
Company, including, but not limited to, transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
The response set forth in Item 7 of the Schedule 13D is hereby amended and
supplemented by the following:
Exhibit 9: Rights Exercise Agreement dated as of September 25, 1998 among
the Company, LTTH, Walter Scott, Jr., David C. McCourt and James Q. Crowe.
SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: September 30, 1998
LEVEL 3 TELECOM HOLDINGS, INC.
By: /s/Matthew J. Johnson
---------------------------------
Name: Matthew J. Johnson
Title: Vice President
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF LEVEL 3 TELECOM HOLDINGS, INC.
The name, business address, citizenship, title, and present principal
occupation or employment of each of the directors and executive officers of
Level 3 Telecom Holdings, Inc. are set forth below.
<TABLE>
<CAPTION>
Principal Occupation or
Name and Office Held Business Address Citizenship Employment
- --------------------------- -------------------------- ------------------ --------------------------------
<S> <C> <C> <C>
David C. McCourt 105 Carnegie Center USA Chairman, Chief
President, Director Princeton, NJ 08540 Executive Officer, RCN
Matthew J. Johnson, 1000 Kiewit Plaza USA Vice President, Corporate
Vice President, Assistant Omaha, NE 68131 Legal, Level 3
Secretary Communications Inc.
James Q. Crowe 1000 Kiewit Plaza USA President, Chief
Director Omaha, NE 68131 Executive Officer, Level
3 Communications Inc.
Walter Scott, Jr. 1000 Kiewit Plaza USA Chairman, Director,
Director Omaha, NE 68131 Level 3 Communications
Inc.
R. Douglas Bradbury 1000 Kiewit Plaza USA Executive Vice President
Vice President and Omaha, NE 68131 and Chief Financial
Director Officer, Level 3
Communications Inc.
Thomas C. Stortz 1000 Kiewit Plaza USA Senior Vice President,
Vice President, Secretary Omaha, NE 68131 General Counsel and
Secretary, Level 3
Communications Inc.
Neil J. Eckstein 1000 Kiewit Plaza USA Assistant General
Vice President and Omaha, NE 68131 Counsel and Assistant
Assistant Secretary Secretary, Level 3
Communications Inc.
</TABLE>
SCHEDULE B
DIRECTORS AND EXECUTIVE OFFICERS OF LEVEL 3 COMMUNICATIONS INC.
The name, business address, citizenship, title, and present principal
occupation or employment of each of the directors and executive officers of
Level 3 Communications Inc. are set forth below.
<TABLE>
<CAPTION>
Principal Occupation or
Name and Office Held Business Address Citizenship Employment
- --------------------------- -------------------------- ------------------ --------------------------------
<S> <C> <C> <C>
Walter Scott, Jr. 1000 Kiewit Plaza USA Director, Peter Kiewit
Director Omaha, NE 68131 Sons'
William L. Grewcock 1000 Kiewit Plaza USA Director, Peter Kiewit
Director Omaha, NE 68131 Sons'
Kenneth E. Stinson 1000 Kiewit Plaza USA Chairman, President,
Director Omaha, NE 68131 Chief Executive Officer,
Peter Kiewit Sons' Inc.
Richard R. Jaros 3555 Farnam Street USA Former President, Kiewit
Director Omaha, NE 68131 Diversified Group Inc.
James Q. Crowe 3555 Farnam Street USA President, Chief
President, Chief Omaha, NE 68131 Executive Officer, Level
Executive Officer, 3 Communications Inc.
Director
Charles M. Harper One Central Park Plaza USA Former Chairman, RJR
Director Suite 1500 Nabisco Holdings Corp.
Omaha, NE 68102
R. Douglas Bradbury 3555 Farnam Street USA Chief Financial Officer,
Chief Financial Officer, Omaha, NE 68131 Level 3 Communications
Director Inc.
Kevin J. O'Hara 1450 Infinite Drive USA Executive Vice President
Executive Vice President Louisville, CO 80027 and Chief Operating
and Chief Operating Officer, Level 3
Officer Communications Inc.
Thomas C. Stortz 3555 Farnam Street USA Senior Vice President
Senior Vice President Omaha, NE 68131 General Counsel,
General Counsel, Secretary, Level 3
Secretary Communications Inc.
Robert E. Julian 11707 Miracle Hills Drive USA Chairman, PKS
Director Omaha, NE 68154 Information Services Inc.
David C. McCourt 105 Carnegie Center USA Chairman, Chief
Director Princeton, NJ 08540 Executive Officer, RCN
Corporation
Michael B. Yanney 1004 Farnam Street USA Chairman, Chief
Director Omaha, NE 61802 Executive Officer,
America First
Companies, L.L.C.
Colin V.K. Williams 3555 Farnam Street Bermuda Executive Vice
Omaha, NE 68131 President, Level 3
Communications, Inc.
Michael Jones 3555 Farnam Street USA Senior Vice President,
Omaha, NE 68131 Level 3
Communications, Inc.
Mark Gershein 3555 Farnam Street USA Senior Vice President,
Omaha, NE 68131 Level 3
Communications, Inc.
</TABLE>
EXHIBIT 9
CONFORMED COPY
RIGHTS EXERCISE AGREEMENT
THIS RIGHTS EXERCISE AGREEMENT (this "Agreement") is made and entered
into as of September 25, 1998, by and among Commonwealth Telephone Enterprises,
Inc., a Pennsylvania corporation (the "Company"), Walter Scott, Jr. ("Mr.
Scott"), James Q. Crowe ("Mr. Crowe"), David C. McCourt ("Mr. McCourt") and
Level 3 Telecom Holdings, Inc., a Delaware corporation ("LTTH").
RECITALS:
A. The Company anticipates distributing and issuing to the holders of
record of its issued and outstanding shares of Common Stock, par value $1.00
per share ("Common Stock"), and to holders of record its outstanding shares of
Class B Common Stock, par value $1.00 per share ("Class B Stock", and together
with the Common Stock, the "Company Stock"), at no charge to such holders,
transferable subscription rights (the "Rights") to subscribe for and purchase
an aggregate of 3,678,612 shares of Common Stock for a price of $21.25 per
share (the "Subscription Price") (such transaction being herein referred to as
the "Rights Offering").
B. The Company is conducting the Rights Offering in order to raise
approximately $77 million of net proceeds which will be used to repay debt.
C. LTTH will receive 1,776,065 Rights (the "LTTH Rights") in respect
of the shares of Company Stock currently owned by it.
D. Mr. Scott will receive 137 Rights (the "Scott Rights") in respect
of shares of Company Stock currently owned by him.
E. Mr. Crowe will receive 137 Rights (the "Crowe Rights") in respect
of shares of Company Stock currently owned by him.
F. Mr. McCourt will receive 7,339 Rights (the "McCourt Rights") in
respect of shares of Company Stock currently owned by him.
G. The Company has requested LTTH, and Messrs. Scott, Crowe and
McCourt to exercise their Rights and to exercise the Oversubscription Privilege
(as defined below) on the terms and subject to the conditions set forth below.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. Rights Offering; Registration of the Common Stock
The Company represents and warrants to each of the other parties
to this Agreement as follows:
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (registration no. 333-59747)
(as amended to the date of this agreement, the "Registration Statement"),
including a related prospectus, relating to the registration of, among other
securities, the Rights. The prospectus included therein, is hereinafter
referred to as the "Base Prospectus." The Base Prospectus, as supplemented by
the prospectus supplement dated September 25, 1998 (the "Prospectus
Supplement") relating to the Rights, is hereinafter referred to as the
"Prospectus". The Registration Statement has been declared effective by the
Commission. All expenses relating to the Registration Statement and the
Prospectus have been borne by the Company. The shares of Common Stock to be
issued and sold pursuant to the Rights Offering (the "Underlying Shares") have
been registered pursuant to the Registration Statement and have been duly
authorized and when issued upon valid exercise of the Rights will be validly
issued, fully paid and non-assessable. A copy of the Prospectus has been
furnished to LTTH and Messrs Scott, Crowe and McCourt. Each part of the
Registration Statement, when such part became effective, did not contain and
each such part, as amended or supplemented, if applicable, will not, on or
prior to the expiration of the Rights Offering, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, the Registration
Statement and the Prospectus comply and, as amended or supplemented, if
applicable, will, on and prior to the expiration of the Rights Offering, comply
in all material respects with the Securities Act of 1933, as amended (the
"Act"), and the applicable rules and regulations of the Commission thereunder
and the Prospectus does not contain and, as amended or supplemented, if
applicable, will not, on or prior to the Rights Offering, contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The Company will timely file with the Commission the
Prospectus Supplement pursuant to Rule 424(b) under the Act. Capitalized terms
used herein without definition shall have the meanings ascribed to them in the
Prospectus.
2. Exercise of Rights
(a) Subject to the terms and conditions herein set forth, LTTH
hereby agrees to properly exercise the Basic Subscription Privilege in respect
of all of the LTTH Rights on or before the Expiration Date.
(b) Subject to the terms and conditions set forth herein, Mr.
Scott agrees (i) to properly exercise the Basic Subscription Privilege in
respect of all of the Scott Rights on or before the Expiration Date and (ii) to
properly exercise the Oversubscription Privilege for 947,468 additional
Underlying Shares on or before the Expiration Date. If Mr. Scott purchases or
otherwise acquires additional Rights (A) such Rights will be treated as Scott
Rights for purposes of clause (i) of the preceding sentence and (B) the number
of Underlying Shares in respect of which Mr. Scott will exercise the
Oversubscription Privilege pursuant to clause (ii) of the preceding sentence
will be reduced by an amount equal to such number of additional Rights.
(c) Subject to the terms and conditions set forth herein, Mr.
Crowe agrees (i) to properly exercise the Basic Subscription Privilege in
respect of all of the Crowe Rights on or before the Expiration Date and (ii) to
properly exercise the Oversubscription Privilege for 473,733 additional
Underlying Shares on or before the Expiration Date. If Mr. Crowe purchases or
otherwise acquires additional Rights (A) such Rights will be treated as Crowe
Rights for purposes of clause (i) of the preceding sentence and (B) the number
of Underlying Shares in respect of which Mr. Crowe will exercise the
Oversubscription Privilege pursuant to clause (ii) of the preceding sentence
will be reduced by an amount equal to such number of additional Rights.
(d) Subject to the terms and conditions set forth herein, Mr.
McCourt agrees (i) to properly exercise the Basic Subscription Privilege in
respect of all of the McCourt Rights on or before the Expiration Date and (ii)
to properly exercise the Oversubscription Privilege for 473,733 additional
Underlying Shares on or before the Expiration Date. If Mr. McCourt purchases or
otherwise acquires additional Rights (A) such Rights will be treated as McCourt
Rights for purposes of clause (i) of the preceding sentence and (B) the number
of Underlying Shares in respect of which Mr. McCourt will exercise the
Oversubscription Privilege pursuant to clause (ii) of the preceding sentence
will be reduced by an amount equal to such number of additional Rights.
(e) The Underlying Shares for which Messrs Scott, Crowe and
McCourt have agreed to exercise the Oversubscription Privilege under Sections
2(b), 2(c) and 2(d) are referred to herein as the "Oversubscription Shares".
The Company agrees that Messrs Scott, Crowe and McCourt will be entitled to
reallocate among themselves the Oversubscription Shares in such manner as they
may agree so long as (i) the total number of Underlying Shares for which they
exercise the Oversubscription Privilege is equal to the number of
Oversubscription Shares and (ii) no such reallocation results in any additional
filing or approval requirements that could adversely affect or delay the Rights
Offering.
3. Payment for Underlying Shares
The Company hereby agrees to permit each of Messrs Scott, Crowe
and McCourt to enter into escrow arrangements for the payment for all
Underlying Shares subscribed for by him pursuant to the Oversubscription
Privilege in excess of 5,000 after the Expiration Date and after all prorations
and adjustments contemplated by the Rights Offering have been effected. Such
escrow arrangements shall be reasonably satisfactory to the Company.
4. Exercise Conditions
The several obligations of LTTH and Messrs Scott, Crowe and
McCourt to take the actions set forth under Section 2 shall in each case be
subject to the satisfaction of the following conditions on the Expiration Date:
(a) No stop order suspending the effectiveness of 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 Commission;
(b) (i) 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; (ii) since the date of this 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; and (iii) since the date of this Agreement,
there shall not have occurred any material adverse change in the financial
markets in the United States; and
(c) The representations and warranties of the Company set forth
in Section 1 shall be true and correct as of the Expiration Date.
(d) Each of the other shareholders who are party to this
Agreement shall have exercised the Rights which such shareholders are required
to exercise pursuant to Section 2.
In addition, (i) the obligation of Mr. Scott to take the actions set forth in
Section 2(b) is subject to the expiration or early termination of the waiting
period under the Hart-ScottRodino Antitrust Improvements Act of 1976 (the "HSR
Act") to the extent applicable to the transactions by Mr. Scott hereunder and
(ii) the several obligations of Messrs Scott, Crowe and McCourt to take the
actions set forth in Sections 2(b), 2(c) and 2(d), respectively, are subject to
the delivery to such individuals by the Company of the registration rights
agreement referred to in Section 6 duly executed by the Company.
5. HSR Filings
Promptly after the execution of this Agreement, the Company and
Mr. Scott will make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act. The Company will pay all filing fees in connection
with such filings.
6. Registration Rights
On the Expiration Date, the Company and Messrs Scott, Crowe and
McCourt shall enter into a customary registration rights agreement in respect
of the shares of the Common Stock purchased by Messrs Scott, Crowe and McCourt
pursuant to the Rights Offering. Such agreement will provide at the Company's
expense Messrs Scott, Crowe and McCourt two demand registration (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 parties thereto.
7. Indemnity
The Company agrees to indemnify and hold harmless each other
party to this Agreement and their affiliates from and against any loss, damage,
liability, claim or expense (including reasonable attorney's fees) arising from
any third party claim (including any derivative claim brought in the name or on
behalf of the Company) arising out of or relating to this Agreement, except to
the extent such claim is for a breach by any such party of its obligations
under this Agreement. Any party seeking indemnification under this Section 7
(the "Indemnified Party") agrees to give prompt notice to the Company of the
assertion of any claim, or the commencement of any suit, action or proceeding
in respect of which indemnity may be sought under such Section; provided,
however, that the failure to so notify the Company shall not relieve the
Company from liability under this Section except to the extent the Company is
prejudiced thereby. The Company may participate in and control the defense of
any such suit, action or proceeding at its own expense so long as the Company
shall acknowledge its obligation to indemnify the Indemnified Party. The
Company shall not be liable under this Section 7 for any settlement effected
without its consent (which consent shall not be unreasonably withheld) of any
claim, litigation or proceeding in respect of which indemnity may be sought
hereunder.
8. Termination
Any of the parties hereto may terminate this Agreement if the
transactions contemplated hereby are not consummated by December 1, 1998.
9. Choice of Law
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York governing contracts made and to be
performed in such State without regard to any principles of conflict of laws.
10. Execution in Counterparts
This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such respective counterparts shall together constitute but one and the
same instrument.
11. Entire Agreement
Except for the Subscription Certificates which LTTH, Mr. Scott,
Mr. Crowe and Mr. McCourt shall execute and deliver to the Subscription Agent
pursuant to this Agreement, this Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof. Any amendment
hereto must be in writing, signed by each party.
COMMONWEALTH TELEPHONE
ENTERPRISES, INC.
By: /s/ Bruce Godfrey
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Name: Bruce Godfrey
Title: Executive Vice President and
Chief Financial Officer
WALTER SCOTT, JR.
/s/ Walter Scott, Jr.
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Walter Scott, Jr.
JAMES Q. CROWE
/s/ James Q. Crowe
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James. Q. Crowe
DAVID C. MCCOURT
/s/ David C. McCourt
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David C. McCourt
LEVEL 3 TELECOM HOLDINGS, INC.
By: /s/ Level 3 Telecom Holdings, Inc.
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Name:
Title: