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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-16899
CENTURY COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
New Jersey 06-1158179
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Locust Avenue
New Canaan, Connecticut 06840
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 972-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]
As of August 21, 1998, there were 32,628,726 shares of Class A Common
Stock outstanding and 42,322,059 shares of Class B Common Stock outstanding. The
aggregate market value of the Class A Common Stock held by non-affiliates of the
Company, based upon the last reported sale price of the Class A Common Stock on
The Nasdaq Stock Market on August 21, 1998 of $27 per share, was $849,191,040.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Company's Proxy Statement to be filed with the
Commission pursuant to Rule 14a-6 under the Securities Exchange Act of 1934 in
connection with the Company's 1998 Annual Meeting of Shareholders are
incorporated by reference in Part III, Items 10-13 of this Annual Report on Form
10-K.
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TABLE OF CONTENTS
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PART I
<S> <C> <C>
Item 1. Business .................................................... 2
Item 2. Properties .................................................. 16
Item 3. Legal Proceedings ........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders ......... 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters ..................................................... 19
Item 6. Selected Financial Data ..................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 23
Item 7.A. Quantitative and Qualitative Disclosure About Market Risk ... 36
Item 8. Financial Statements and Supplementary Data ................. 36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ......................... 37
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 37
Item 11. Executive Compensation ...................................... 37
Item 12. Security Ownership of Certain Beneficial Owners and
Management .................................................. 37
Item 13. Certain Relationships and Related Transactions .............. 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K .................................................... 38
Signatures .................................................. II-1
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PART I
ITEM 1. Business
General
The Company was incorporated in New Jersey on December 5, 1985 as the
holding company for a corporation of the same name incorporated in Texas on June
12, 1973 ("Century Texas"). As used in this Annual Report on Form 10-K, unless
the context otherwise requires, the term "Company" means Century Communications
Corp., a New Jersey corporation, and its subsidiaries. The Company is engaged
primarily in the ownership and operation of cable television systems. References
to a "fiscal" year mean the Company's fiscal year ended May 31.
At May 31, 1998, the Company owned and operated 72 cable television
systems in 25 states and Puerto Rico. At that date, the Company's cable systems
passed approximately 2,333,000 homes and served a total of approximately
1,319,000 primary basic subscribers. Certain of the Company's cable systems
referred to above are owned 50% by the Company and 50% by unaffiliated entities.
At May 31, 1998, these systems passed approximately 618,000 homes and served
approximately 326,000 primary basic subscribers.
On December 10, 1997, the Company and TCI Communications, Inc. ("TCI")
signed a letter of intent to establish a strategic partnership (the
"Partnership"). TCI will contribute to the Partnership all the assets related to
the businesses of certain cable television systems owned and operated by TCI
serving approximately 245,000 customers in the area of Southern California. The
Company will contribute to the Partnership all the assets related to the
businesses of certain cable television systems owned and operated by the Company
serving approximately 500,000 customers in the area of Southern California,
including approximately 90,000 subscribers to be acquired in an exchange of
cable systems described below. The Company will manage the newly combined cable
systems and own approximately 75 percent of the Partnership. See "The Cable
Television Systems."
The Company has a common stock interest of approximately 34% and, through
ownership of shares of a class of Common Stock which has disproportionate votes
per share (15 votes per share), a voting interest in Centennial Cellular Corp.
("Centennial" or "Centennial Cellular") of approximately 74%. See "Wireless
Telephone." Solely as a result of the Company's controlling interest in the
voting power of Centennial, the operations of Centennial are consolidated with
those of the Company. Centennial is engaged in the ownership and operation of
wireless telephone systems, primarily in four geographic areas in the United
States and Puerto Rico. The Company also currently provides management services
to Centennial pursuant to a services agreement (the "Services Agreement").
On July 2, 1998, Centennial and CCW Acquisition Corp. ("Acquisition"), a
Delaware corporation organized at the direction of Welsh, Carson, Anderson &
Stowe VIII, L.P., a Delaware limited partnership ("WCAS VIII"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the merger
of Acquisition with and into Centennial (the "Merger"). Centennial will continue
as the surviving corporation (the "Surviving Corporation") in the Merger. See
"Wireless Telephone." Pursuant to the Stockholder Agreement, dated July 2, 1998
with Acquisition ("Stockholder Agreement"), the Company has agreed to terminate
the Services Agreement as of the effective time of the Merger.
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The Company also has interests in businesses in the pay television
industry in Australia. On July 9, 1998, the Company and United International
Holdings, Inc. ("UIH") entered into an agreement pursuant to which UIH's UIH
Asia/Pacific Communications Inc. unit ("UAP") agreed to acquire the Company's
25% ownership interest in XYZ Entertainment Pty, Ltd. ("XYZ") for approximately
$24.6 million. Approximately 95% of the sales price will be payable in the form
of UIH Series B Convertible Preferred Stock which is convertible into UIH Class
A stock at a conversion price of $21.25 per share.
Also on July 9, 1998, East Coast Pay Television Pty Limited ("ECT"), the
Company's Australian pay television subsidiary, agreed to sell substantially all
of its assets to Austar Entertainment Pty Ltd. ("Austar"), a wholly-owned
subsidiary of UAP, for approximately $6.1 million in the form of Austar
preferred stock. See "Australian Pay Television."
The sale of these Australian assets are contingent, among other things,
upon the receipt of all appropriate regulatory and other customary approvals.
See "Australian Pay Television."
Cable Television
Cable television is a service that delivers a variety of channels of
television programming, primarily video entertainment and information, and to
subscribers who pay a monthly fee for the service.
The primary level of cable television service is commonly referred to as
"basic service" and must be taken by all subscribers. The content of basic
service varies widely from system to system but, pursuant to the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), must include local television signals and public, governmental and
educational access channels. Basic service may also include certain
satellite-delivered cable programming channels. In addition to basic service,
one or more expanded tiers of service may also be offered to subscribers. These
expanded tiers of service usually include additional satellite-delivered cable
programming channels and are available for additional monthly fees. Basic
service and expanded cable programming service tiers are generally subject to
the rate regulation provisions of the 1992 Cable Act and the Telecommunications
Act of 1996 (the "1996 Act").
Most cable television systems also offer premium services, such as Home
Box Office, Showtime, The Movie Channel and Cinemax, on a per channel basis or
as a part of a package of premium services for an extra monthly fee and may also
offer sporting events, concerts and other entertainment programming as a premium
service on a per program basis. Per channel and per program services are not
subject to the rate regulation provisions of the 1992 Cable Act.
See "Business - Regulation and Legislation - Federal Regulation" and
"Business - Regulation and Legislation - Rates."
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Development of Cable Television Systems
The following table indicates the growth of the Company's cable television
systems since May 31, 1994:
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May 31,
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1998 1997 1996 1995 1994
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Homes passed by cable 2,333,000 2,245,000 2,060,000 1,790,000 1,675,000
Primary basic subscribers 1,319,000 1,273,000 1,250,000 1,100,000 945,000
Primary basic subscribers as a
percentage of homes passed 56.5% 56.7% 60.7% 61.4% 56.4%
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Management's estimate of homes passed in franchise areas is based on local
sources believed to be reliable, such as city directories, chambers of commerce,
public utilities, estimates of public officials and, where available, actual
house counts.
The Cable Television Systems
At May 31, 1998, the Company had 72 cable television systems in 25 states
and Puerto Rico, with the largest concentrations of subscribers in its systems
in Southern California, Puerto Rico and Colorado Springs, Colorado. At such
date, substantially all of the Company's cable television systems were wholly
owned by the Company. The balance of the Company's systems, including systems
serving Brunswick, Georgia; Owensboro, Kentucky; Wauwatosa, Wisconsin; Diamond
Bar, Yorba Linda/Orange County Glendora, Chino and Chino Hills, California; and
greater San Juan, Puerto Rico were owned through certain joint ventures between
the Company and third parties, thereby giving the Company a 50% ownership in
such systems.
The Company owns four of its systems in certain areas of Southern
California serving approximately 90,200 primary basic subscribers at May 31,
1998 through a joint venture with Citizens Utilities Company ("Citizens
Utilities") in which each owns 50% (the "Century/Citizens Joint Venture"). On
October 15, 1997, the Century/Citizens Joint Venture acquired a cable television
system located in Diamond Bar, California serving approximately 20,000 primary
basic subscribers for a purchase price of approximately $33.55 million. On April
30, 1998, the Century/Citizens Joint Venture acquired, for a purchase price of
approximately $34.89 million, a cable television system located in Yorba
Linda/Orange County, California which serves approximately 17,500 primary basic
subscribers.
In August 1998, the Company entered into an agreement to acquire a cable
television system which serves approximately 19,000 primary basic subscribers in
Moreno Valley and Riverside County, California. The purchase price for this
system is approximately $33 million. The Company currently expects to fund the
acquisition using available credit facilities. The purchase of this system by
the Company is subject to regulatory approvals. There is no assurance that the
Company will obtain such approvals or that such acquisition will be consummated.
On December 10, 1997, the Company and TCI Communications, Inc. ("TCI")
signed a letter of intent to establish a strategic partnership (the
"Partnership"). TCI will contribute to the Partnership all the
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assets related to the businesses of certain cable television systems owned and
operated by TCI serving approximately 245,000 customers in the area of Southern
California. The Company will contribute to the Partnership all the assets
related to the businesses of certain cable television systems owned and operated
by the Company serving approximately 500,000 customers in the area of Southern
California, including approximately 90,000 subscribers to be acquired in an
exchange of cable systems described below. The Company will manage the newly
combined cable systems and own approximately 75 percent of the Partnership.
The Company and TCI have agreed to exchange cable systems owned by the
Company in certain communities in Northern California for certain cable systems
owned by TCI in Southern California, allowing each of them to unify operations
in existing service areas. TCI will exchange its East San Fernando Valley cable
system serving approximately 90,000 subscribers for the Company's Northern
California cable systems, serving approximately 90,000 subscribers in the
communities of San Pablo, Benicia, Fairfield and Rohnert Park, California.
The Company and TCI are currently involved in the due diligence process
and are continuing to negotiate with respect to these transactions. These
transactions are subject to the signing of definitive agreements and to all
appropriate regulatory and other approvals. There is no assurance that the
Company will obtain such approvals or that such transactions will be
consummated.
For information regarding common officers and directorships between the
Company and Citizens Utilities, see Item 4. "Executive Officers of the Company."
Subscriber Services and Rates
Like other cable television operators, the Company offers to its
subscribers multiple channels of television programming, primarily video
entertainment and information programming. Services vary from system to system
because of differences in channel capacity, regulatory requirements and viewer
interest.
The Company's cable television revenues are derived principally from
monthly subscription fees. Rates to subscribers vary from market to market and
in accordance with the type of service selected. In virtually all the Company's
cable television systems, basic service has been expanded to include many
satellite-delivered cable programming channels previously offered on expanded
tiers of service, while certain other satellite-delivered cable programming
channels are offered on a per channel basis and as part of a package of
services. Effective September 1, 1993, as part of its rate adjustments, the
Company implemented a plan whereby subscribers were given the choice of buying
certain satellite-delivered programming services individually on a per channel
basis ("a la carte") or as part of a package of services at a discounted price.
The Federal Communications Commission (the "FCC") in its reconsideration of rate
regulations promulgated under the 1992 Cable Act, reviewed the validity of such
a la carte service offerings, and it empowered franchising authorities to do the
same. A la carte packages which were determined to be evasions of rate
regulation rather than true enhancements of subscriber choice were treated as
regulated tiers, and cable operators that engaged in such practices became
subject to further rate adjustments and refund orders.
Further adjustments to the Company's rates were made pursuant to the
November 10, 1994 revision by the FCC to the FCC's rate formula. As part of such
revisions, the FCC decided that discounted packages of non-premium a la carte
services would be subject to rate regulation in the future. However, in applying
this new policy to a la carte packages such as those already offered by the
Company and numerous other cable operators,
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the FCC decided that where only a few services were moved from regulated tiers
to the a la carte package, the package would be treated as if it were a tier of
new program services and thus not subject to rate regulation. Approximately 84%
of the Company's primary basic subscribers have a la carte offerings which
conform to this structure, and thus are not subject to rate regulation.
In addition to monthly subscription fees, other sources of revenue for
cable operators are the sale of advertising time on locally originated and
satellite-delivered programming and revenues from services which offer
merchandise for sale to subscribers. Such services compensate cable television
systems based upon a percentage of their sales revenue. None of these revenue
sources is subject to rate regulation.
Most of the Company's systems have a capacity of at least 35 channels and
all are fully built, except for upgrading, rebuilding and extension of certain
systems and continuing construction of cable plant in certain systems to
accommodate growth within the Company's franchise areas. As of May 31, 1998, all
or certain portions of 45 of the Company's systems, serving an aggregate of
approximately 1,155,000 primary basic subscribers, were equipped with
addressable decoding converters, which permit the Company to adjust service
received by a subscriber without making a service call and serve as a
computerized method of controlling the signals decoded and received by
subscribers. Such converters also facilitate the Company's ability to sell
optional pay-per-view programming.
Franchises
The Company's cable television systems operate pursuant to non-exclusive
franchises issued by governmental authorities. In many cases, a system passes
homes in more than one governmental subdivision and, occasionally, more than one
state. Generally, under the terms of the Company's franchises, a franchise fee
(ranging up to 5% of revenues of the cable system) is payable to the
governmental authority. As of May 31, 1998, the Company held 376 franchises with
unexpired terms ranging from under one year to over 15 years. These franchises
typically contain many conditions, such as standards of service, including
number of channels and provision of free service to schools and certain other
public institutions, time requirements on commencement and completion of
construction, and the maintenance of insurance and indemnity bonds. State and
local franchises are in certain respects subject to the requirements of federal
regulation under the Cable Communications Policy Act of 1984, the 1992 Cable Act
and the 1996 Act. See "Business - Regulation and Legislation - Federal
Regulation."
Most of the Company's franchises can be terminated prior to their stated
expiration by the franchising authority, after due process, for breach of
material provisions of the franchise. All franchises are subject to renewal. To
date, the Company's franchises have generally been renewed or extended at or
effective upon their stated expirations, generally on modified but not unduly
burdensome terms. However, as a condition to the renewal of a franchise, some
franchising authorities have required improved facilities, increased channel
capacity or enhanced services.
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The franchise for the City of Santa Monica, California, serving
approximately 24,900 primary basic subscribers as of May 31, 1998, was
terminated by the City of Santa Monica effective December 13, 1987, due to
alleged violations of the local ordinance with respect to the transfer of the
franchise to the Company prior to approval from the local authority. The parties
are currently negotiating the terms of a new franchise agreement and the Company
anticipates concluding an acceptable franchise agreement with the local
authority.
Programming Suppliers
The Company provides cable network programming to its subscribers pursuant
to contracts with program suppliers. The Company generally pays program
suppliers a monthly fee per subscriber. The costs to the Company to provide
cable programming have increased in recent years and are expected to continue to
increase as a result of additional programming being provided to subscribers,
increased consumer identification with certain programming permitting suppliers
of such programming to charge increased fees, inflationary increases and other
factors. See "Business - Regulation and Legislation - Carriage of Broadcast
Television Signals."
Other Technologies
Digital. The Company expects to utilize compressed digital video
technology, which converts, on average, from ten to 12 analog signals (now used
to transmit video) into a digital format and compresses such signals into the
space normally occupied by one analog signal. The digitally compressed signal is
uplinked to a satellite, which sends the signal back down to a cable system's
headend to be distributed, via optical fiber and coaxial cable, to the
customer's home. At the home, a set-top video terminal converts the digital
signal back into analog channels that can be viewed on a normal television set.
The implementation of digital technology will significantly enhance the quantity
and quality of channel offerings. It is expected that, initially, such digital
services will include expanded pay-per-view movies, additional packages of
premium services and satellite-delivered channels.
Cable Modem Services. The Company is presently in the initial deployment
stage of high-speed cable modem services. Cable modems are capable of providing
access to online information at much faster speeds than conventional modems. On
May 1, 1998, the Company entered into an agreement with @Home Network ("@Home"),
a provider of high-speed internet services via cable infrastructure, to deliver
high-speed internet services in certain of the Company's markets. The agreement
has a term of six years and contains mutual exclusivity provisions relating to
the provision of high-speed internet services in the Company's systems. In
connection with the agreement, the Company will receive a warrant to purchase
2,630,000 shares of @Home's Series A Common Stock at an exercise price equal to
$10.50 per share, subject to adjustment. The warrant will vest on a schedule
based upon the commercial deployment of the @Home services by the Company. To
date, the Company has not received the above-referenced warrant.
Competition
General. Cable television systems generally compete for viewer attention
with the direct reception of broadcast television signals by the viewer's own
antenna. The extent of such competition is dependent upon the number and quality
of signals available and the alternative services offered by the cable system. A
cable system also competes to varying degrees with other communications and
entertainment media, including movies, theater and VCRs, and other leisure time
activities. The extent to which a cable communications system is competitive
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depends, in part, upon the cable system's ability to provide, at a reasonable
price to consumers, a greater variety of programming and other communications
services than are available off-air or through other alternative delivery
sources (see "Business - Regulation and Legislation") and upon high-quality
technical performance and customer service.
Other Technologies. Other technologies supply services that compete with
certain services provided by cable television. These technologies include: (i)
direct broadcast satellite to home transmission ("DBS"), whereby signals are
transmitted by satellite to receiving facilities located on the premises of
subscribers; (ii) "wireless cable" including multichannel multipoint
distribution system ("MMDS") and similar technologies, which use low-power
microwave frequencies to transmit programming over the air to subscribers; (iii)
satellite master antenna systems ("SMATV"), which use a satellite earth station
to receive signals and then transmit such signals by cable to residences within
a given building or complex; (iv) television translator stations, which
rebroadcast television broadcast signals at different frequencies at lower power
to improve reception; and (v) "low-power" television stations, which have begun
operations in certain communities, and may increase the number of free and
subscription broadcast television signals in many areas.
The FCC has implemented regulations to enhance the ability of cable
competitors to purchase and make available to home satellite dish owners certain
satellite-delivered cable programming at competitive costs. The 1996 Act and FCC
regulations implementing the 1996 Act preempt certain local restrictions on the
use of home satellite dishes and roof-top antennae to receive satellite
programming and over-the-air broadcasting services. See "Business - Regulation
and Legislation."
All the foregoing services and technologies have the capacity to deliver
multiple channels of video programming and other information to subscribing
homes and thus to compete directly with the cable services provided by the
Company. Federal law generally prohibits cable operators from owning and
operating certain competing technologies, such as SMATV and MMDS, within their
franchise service areas. As these technologies and services continue to develop,
and because of recent measures by the federal government encouraging such
development, as well as the existing regulatory framework, there is expected to
be increased competition adversely affecting the business of the Company. In
addition, certain provisions of the 1996 Act, such as the change in the
definition of a "cable system" so that competitive providers of video services
will only be regulated as a cable system if they use public rights-of-way, could
materially affect the growth and operation of the cable television industry and
the cable services provided by the Company. See "Business Regulation and
Legislation - Cable Television - Federal Regulation."
Non-Exclusive Franchises. Because the Company's systems are operated under
non-exclusive franchises, other applicants may obtain franchises in areas where
the Company currently has franchises. Franchising authorities may be more likely
to grant a second franchise for an area if they anticipate that increased
competition will have the effect of reducing rates charged or moderating
increases in rates and improving services offered by the franchise holders. In
addition, franchising authorities themselves may seek to operate cable systems
in competition with private cable operators.
Applications for competing franchises may be made at any time. It is
possible that well-financed businesses, including businesses from outside the
cable industry (such as the public utilities which own the facilities to which
the cable is attached), may become competitors for franchises or providers of
competing services. Congress has repealed the prohibition against the national
television networks owning cable systems, and telephone companies may now enter
the cable industry, as more fully discussed below.
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Regulation. Pursuant to the 1996 Act, local telephone companies, including
the Regional Bell Operating Companies, which were previously barred from the
ownership and operation of cable systems in their service areas, are now
permitted to enter the cable television business. Local telephone companies may
obtain a local franchise and provide cable television service in direct
competition with cable operators. Alternatively, telephone companies may utilize
a concept called open video systems ("OVS") whereby telephone companies will be
able to become FCC-certified to offer channel capacity to third parties and to
offer video programming directly on up to one-third of the system's capacity. An
OVS operator will not have to obtain a local franchise, nor will it be subject
to rate regulation, but it will have to abide by a number of the rules that
govern cable operators.
The 1996 Act also provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television), notwithstanding the Public Utility Holding Company Act of 1935, as
amended. Because of their substantial resources, telephone companies and
utilities could be formidable competitors to traditional cable systems, and
several have begun offering cable service.
Other new technologies, including Internet-based services, may become
competitive with services that cable communications systems can offer. The FCC
has authorized television broadcast stations to transmit textual and graphic
information. The FCC also permits commercial and non-commercial FM stations to
use their subcarrier frequencies to provide non-broadcast services including
data transmissions. The FCC established an over-the-air Interactive Video and
Data Service that will permit two-way interaction with commercial and
educational programming along with informational and data services. Local
exchange carriers ("LECs") and other common carriers also provide facilities for
the transmission and distribution to homes and businesses of interactive
computer-based services, including the Internet, as well as data and other
non-video services.
Advances in communications technology, as well as changes in the
marketplace and the regulatory and legislative environment, are constantly
occurring. Thus, it is not possible to predict the effect that ongoing or future
developments might have on the cable communications industry or on the
operations of the Company.
Wireless Telephone
The Company has a common stock interest in Centennial (as described
below), which is primarily engaged in the ownership and operation of wireless
telephone systems in the United States and Puerto Rico. On July 2, 1998,
Centennial and Acquisition entered into the Merger Agreement providing for the
Merger of Acquisition with and into Centennial. Centennial will continue as the
Surviving Corporation in the Merger.
Subject to proration, pursuant to the Merger Agreement, outstanding Class
A Common Stock of Centennial will be converted into the right to receive $43.50
per share in cash or to retain up to 7.1% of the common stock of the Surviving
Corporation outstanding after the Merger. Class B Common Stock of Centennial
will be converted into the right to receive $43.50 per share in cash; provided,
that if the aggregate number of shares of Class A Common Stock elected to be
retained by Centennial's existing stockholders is less than 7.1% of the shares
outstanding after the Merger, then a number of shares of Class B Common Stock
equal to the pro rata portion of such shortfall will be converted into shares of
Class A Common Stock and retained. All outstanding Convertible Redeemable
Preferred Stock of Centennial and Second Series Convertible Redeemable Preferred
Stock of Centennial will be converted into the right to receive $43.50 per share
in cash on an as converted basis.
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Because 7.1% of the shares outstanding immediately after the effective
time of the Merger (the "Effective Time") must be retained by such existing
stockholders of Centennial in the Merger, stockholders who do not elect to
retain any shares may, due to proration, be required to retain some Common Stock
of Centennial. In addition, stockholders who elect to retain shares may, due to
proration, retain Common Stock of Centennial and receive cash in amounts which
vary from the amounts such holders elected.
In connection with the execution of the Merger Agreement, the Company,
Centennial's principal stockholder, entered into a Stockholder Agreement, dated
July 2, 1998, with Acquisition (the "Stockholder Agreement"). Pursuant to the
Stockholder Agreement, the Company, which has an approximate 34% Common Stock
interest and, through ownership of Centennial's Class B Common Stock which has
disproportionate votes per share (15 votes per share), an approximate 74% voting
interest in Centennial at May 31, 1998, agreed to vote its shares in favor of
the approval and adoption of the Merger Agreement. Because the Company agreed to
approve the Merger by written consent, consummation of the Merger does not
require approval by a majority of Centennial's stockholders who are not
affiliated with Centennial or Acquisition. Pursuant to the Stockholder Agreement
with Acquisition, the Company has agreed to terminate the Services Agreement as
of the effective time of the Merger.
The consummation of the Merger is subject to certain conditions,
including, without limitation, Centennial obtaining a final order from the
Federal Communications Commission (the "FCC") approving the transfer of control
of the Company to WCAS VIII and its affiliates, the expiration of antitrust
regulatory waiting periods and Acquisition obtaining financing substantially on
the terms contemplated by the commitment letters it received in connection with
the Merger Agreement.
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger, the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses. However, in the event Centennial or Acquisition shall have terminated
the Merger Agreement as a result of either Centennial entering into a definitive
written agreement with respect to any merger, consolidation or other business
combination, tender or exchange offer, recapitalization transaction, asset or
stock purchase or other similar transaction with a third party (an "Acquisition
Transaction") or the Board of Directors of Centennial having withdrawn, modified
or amended in any manner adverse to Acquisition its approval or recommendation
of the Merger Agreement or approved, recommended or endorsed any proposal for an
Acquisition Transaction, then Centennial shall reimburse Acquisition for
documented fees and expenses (subject to a maximum of $25.0 million) and pay
Acquisition a termination fee of $40 million.
In connection with the Merger, Acquisition has received a commitment from
a third party for financing for Acquisition and certain existing and future
subsidiaries of Centennial in the aggregate amount of approximately $1.6 billion
in the form of senior secured credit facilities and an unsecured bridge loan.
Additionally, an affiliate of WCAS VIII has agreed to purchase approximately
$150 million aggregate amount of subordinated notes of the Surviving
Corporation. Finally, WCAS VIII and other equity investors have agreed to
purchase approximately $350 million of common stock of the Surviving
Corporation. It is anticipated that this funding will be used to pay the merger
consideration described above and related fees and expenses. Additionally,
pursuant to the Merger Agreement, Centennial has agreed that, upon the request
of Acquisition, it will commence offers to repurchase its two outstanding
issuances of public debt (the "Debt Offers"). As a condition to the closing of
the Merger, Centennial must consummate the Debt Offers prior to the closing date
of the Merger. There can be no assurance that Acquisition will receive the
funding referred to above or, if it does receive such funding, there can be no
assurance as to the timing or terms thereof. Additionally, there can be no
assurance that the Debt Offers will be consummated. Finally, in the event that
Acquisition must seek alternative
10
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<PAGE>
financing to consummate the Merger, there can be no assurance that it will be
able to secure alternative financing on terms no less favorable than the terms
of the above commitments.
The Company owns 8,561,819 shares of Class B Common Stock of Centennial.
The Company also owns 3,978 shares of Second Series Convertible Redeemable
Preferred Stock of Centennial. If such Class B Common Stock and Second Series
Convertible Redeemable Preferred Stock are fully exchanged for cash, the Company
would receive an aggregate consideration of approximately $377,473,000 as a
result of the conversion into cash. The Company anticipates recording a net gain
upon the disposition of Centennial of approximately $220 million during fiscal
1999, net of income taxes and the Company's share of estimated losses through
the date of disposition. The Company's share of the estimated losses is not
expected to be material. When the Centennial disposition is completed, the
Company expects to reduce its valuation allowance applied against its deferred
tax assets by approximately $80 million to $90 million.
Australian Pay Television
The Company also had interests in businesses in the pay television
industry in Australia. On July 9, 1998, the Company and UIH entered into an
agreement pursuant to which UIH's UAP unit agreed to acquire the Company's 25%
ownership interest in XYZ for approximately $24.6 million. Approximately 95% of
the sales price will be payable in the form of UIH Series B Convertible
Preferred Stock which is convertible into UIH Class A stock at a conversion
price of $21.25 per share.
Also on July 9, 1998, ECT agreed to sell substantially all of its assets
to Austar for approximately $6.1 million in the form of Austar preferred stock.
ECT will utilize the $6.1 million proceeds and its other current assets of
approximately $5 million to liquidate its current liabilities, which approximate
$25 million.
The Company anticipates recording an immaterial gain as a result of the
sale of its Australian assets. The sale of these Australian assets are
contingent, among other things, upon the receipt of all appropriate regulatory
and other customary approvals.
Regulation and Legislation
General. The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies have in the past, and may in the
future, materially affect the Company and the cable television industry.
Federal Statutory Laws. The principal federal statute governing cable
television is the Communications Act of 1934, as amended. Amendments in 1984 and
1992 and amendments in 1996 (codified as the 1996 Act) have had particular
impact on the way in which cable systems are regulated. The 1984 and 1992
amendments added significantly to the regulatory burdens of cable operators,
particularly in the areas of (i) cable system rates for both basic and certain
nonbasic services; (ii) programming access and exclusivity arrangements; (iii)
access to cable channels by unaffiliated programming services; (iv) leased
access terms and conditions; (v) horizontal and vertical ownership of cable
systems; (vi) customer service requirements; (vii) franchise renewals; (viii)
television broadcast signal carriage and retransmission consent; (ix) technical
standards; (x) customer privacy; (xi) consumer protection issues; (xii) cable
equipment compatibility; (xiii) obscene or indecent programming; and (xiv)
requiring subscribers to subscribe to tiers of service other than basic service
as a condition of purchasing premium services.
11
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<PAGE>
The 1996 Act, enacted into law in February 1996, substantially amended the
Communications Act by, among other things, removing barriers to competition in
the cable television and telephone markets and reducing the regulation of cable
television rates.
Federal Regulation. The FCC, the principal federal regulatory agency with
jurisdiction over cable television, has promulgated extensive regulations
covering such areas as the regulation of cable service rates in areas where
cable television systems are not subject to effective competition,
cross-ownership between cable television systems and certain other
communications businesses, carriage of television broadcast programming,
ownership of inside wiring, programming agreements, programmer access to cable
channels, signal leakage and frequency use, technical standards and performance,
consumer protection and customer service, indecent programs, parental control
devices, origination cablecasting, consumer electronics equipment compatibility,
sponsorship identification, equal employment opportunity, children's
programming, maintenance of various records, and antenna structure notification,
marking and lighting. The FCC has the authority to enforce these regulations
through the imposition of substantial fines, the issuance of cease and desist
orders and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations.
Rates. Under federal law, nearly all cable television systems are subject
to local rate regulation of basic service. Franchising authorities are empowered
under the law to ensure that basic cable rates are reasonable and that rates for
installation of cable service, converter boxes and additional outlets are based
on actual costs. In addition, the FCC is required to review rates for nonbasic
service tiers (other than per-channel or per-program services) under certain
circumstances. The FCC also is authorized to impose restrictions on the
retiering and rearrangement of cable services under certain circumstances. Local
franchising authorities and/or the FCC are empowered to limit future rate
increases and to order a reduction of existing rates which exceed the maximum
permitted level for either basic and/or nonbasic cable services and associated
equipment, and refunds can be required.
The 1996 Act eliminates regulation of rates for nonbasic service tiers for
all cable operators as of March 31, 1999. In the interim, regulation of rates
for nonbasic service tiers can only be triggered if a franchising authority
complaint based on more than one subscriber complaint is made with the FCC
within 90 days after a rate increase. These 1996 Act provisions should
materially alter the applicability of FCC rate regulations previously adopted.
Although rates for video programming offered on a per channel or a per
program basis are not regulated, cable operators must permit customers to
purchase such programming without the necessity of subscribing to any tier of
service, other than the basic service tier, unless the cable system is
technically incapable of doing so. Generally, this exemption from compliance
with the statute for cable systems that lack such technical capability is only
available until a cable system obtains the capability, but not later than
December 2002.
Carriage of Broadcast Television Signals. Commercial television broadcast
stations which are "local" to a cable system, i.e., the system is located in the
station's Area of Dominant Influence, must elect every three years whether to
require the cable system to carry the station, subject to certain exceptions, or
whether the cable system must negotiate for "retransmission consent" to carry
the station. Local noncommercial television stations also are given similar
mandatory carriage rights, but are not given the option to negotiate
retransmission consent for the carriage of their signal. In addition, cable
systems must obtain retransmission consent for the carriage of all commercial
broadcast stations, except for certain "superstations."
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Franchise Fees. Although franchising authorities may impose franchise
fees, such payments cannot exceed five percent of a cable system's annual gross
revenues from cable services. Franchising authorities are also empowered in
awarding new franchises or renewing existing franchises to require cable
operators to provide cable-related facilities and equipment and to enforce
compliance with voluntary commitments.
Renewal of Franchises. Renewal procedures and criteria designed to protect
incumbent franchisees against arbitrary denials of renewal have been established
by federal law governing the cable television industry. These procedures can
provide substantial protection to incumbent franchisees, although renewal is by
no means assured, as the franchisee must meet certain statutory standards. Even
if a franchise is renewed, a franchising authority may impose new and more
onerous requirements such as upgrading facilities and equipment, although the
municipality must take into account the cost of meeting such requirements.
Channel Set-Asides. Under federal law, local franchising authorities may
require cable operators to set aside certain channels for public, educational
and governmental access programming. Further, cable television systems with 36
or more activated channels must designate a portion of their channel capacity
for commercial leased access by unaffiliated third parties. Leased access rates
must be set according to a formula determined by the FCC.
Competing Franchises. Franchising authorities are prohibited from
unreasonably refusing to grant franchises to competing cable television systems.
Franchising authorities are permitted to operate their own cable television
systems without franchises.
Ownership Restrictions and Market Entry. The 1996 Act allows telephone
companies to compete directly with cable operators by repealing the historic
telephone company/cable cross-ownership ban. This allows LECs, including the
Regional Bell Operating Companies, to compete with cable operators both inside
and outside their telephone service areas. Because of their resources, LECs
could be formidable competitors to traditional cable operators, and certain LECs
have begun offering cable service.
The 1996 Act also provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utility Holding Company Act of 1935, as
amended. Because of their resources, utilities could be formidable competitors
to traditional cable systems.
The 1996 Act eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions), but leaves in
place existing FCC regulations prohibiting local cross-ownership between
television stations and cable systems. The 1996 Act also eliminates the three
year holding period previously required under a statutory provision regarding
"anti-trafficking." The present federal regulatory scheme leaves in place
existing restrictions on cable cross-ownership with SMATV and MMDS facilities,
but lifts those restrictions where the cable operator is subject to effective
competition. However, the FCC has adopted regulations which permit cable
operators to own and operate SMATV systems within their franchise area, provided
that such operation is consistent with local cable franchise requirements.
FCC rules preclude a cable system from devoting more than 40% of its
activated channel capacity to the carriage of affiliated national program
services. A companion rule establishing a nationwide ownership cap on any cable
operator equal to 30% of all domestic cable subscribers has been stayed pending
further judicial review.
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Cable Entry Into Telecommunications. The 1996 Act provides that no state
or local laws or regulations may prohibit or have the effect of prohibiting any
entity from providing any interstate or intrastate telecommunications service.
States are authorized, however, to impose "competitively neutral" requirements
regarding universal service, public safety and welfare, service quality and
consumer protection. State and local governments also retain their authority to
manage the public rights-of-way. Although the 1996 Act clarifies that
traditional cable franchise fees may be based only on revenues related to the
provision of cable television services, it also provides that local franchising
authorities ("LFAs") may require reasonable, competitively neutral compensation
for management of the public rights-of-way when cable operators provide
telecommunications service. However, many of the specific terms and conditions
for such interconnection will remain uncertain until they are resolved by the
courts, the FCC and state regulatory commissions.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Act to facilitate the entry of new telecommunications
providers (including cable operators) is the interconnection obligation imposed
on all telecommunications carriers.
Technical Requirements. The FCC has adopted technical standards for cable
television, and local franchising authorities are prohibited from adopting
standards which are in conflict with or more restrictive than those established
by the FCC. Cable systems must also limit signal leakage to prevent harmful
interference with aeronautical navigation and safety radio services.
Pole Attachments. The FCC currently regulates the rates, terms and
conditions imposed by certain public utilities for use of their poles unless
state public service commissions are able to demonstrate that they regulate such
rates, terms and conditions. Under the 1996 Act, investor-owned utilities must
make poles and conduits available to cable systems under delineated terms.
Electric utilities are given the right to deny access to particular poles on a
nondiscriminatory basis for lack of capacity, safety, reliability, and generally
accepted engineering reasons. The current method for determining attachment
rates charged by telephone and utility companies will continue for five years
from the date of the enactment of the statute. Pursuant to the 1996 Act, the FCC
has established a new formula for the rental rate for poles used by cable
operators who provide "telecommunications services" which will result in higher
pole rental rates for such cable operators. Any increases pursuant to this
formula may not begin for five years from the date of the enactment of the
statute and will be phased-in in equal increments over the next five years. This
new FCC formula does not apply in states which certify they regulate pole rents,
nor will it apply to cable operators who provide only traditional cable
services.
Copyright. Cable television systems are subject to federal copyright
licensing covering carriage of broadcast signals. In exchange for making
semi-annual payments to a federal copyright royalty pool and meeting certain
other obligations, cable operators obtain a statutory license to retransmit
broadcast signals. The amount of this royalty payment varies, depending on the
amount of system revenues from certain sources, the number of distant signals
carried, and the location of the cable system with respect to over-the-air
television stations.
Copyrighted music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and basic cable networks (such as
USA Network) is licensed by the networks through private agreements with the
American Society of Composers and Publishers ("ASCAP") and BMI, Inc. ("BMI"),
the two major performing rights organizations in the United States. Copyrighted
music performed by
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cable systems themselves on local origination channels, in advertisements
inserted locally on cable networks, et cetera, also must be licensed.
State and Local Regulation. Because a cable television system uses local
streets and rights-of-way, cable television systems are subject to state and
local regulation, typically imposed through the franchising process. State
and/or local officials are usually involved in franchise selection, system
design and construction, safety, service rates, consumer relations, billing
practices and community related programming and services.
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. Franchises generally are granted for fixed terms and in
many cases are terminable if the franchise operator fails to comply with
material provisions. Although federal law provides for certain procedural
protections, there can be no assurance that renewals will be granted or that
renewals will be made on similar terms and conditions. Franchises usually call
for the payment of fees, often based on a percentage of the system's gross
customer revenues, to the granting authority. Upon receipt of a franchise, the
cable system owner usually is subject to a broad range of obligations to the
issuing authority directly affecting the business of the system. The terms and
conditions of franchises vary materially from jurisdiction to jurisdiction, and
even from city to city within the same state, historically ranging from
reasonable to highly restrictive or burdensome. Under the existing federal
regulatory scheme, there are certain limitations on a franchising authority's
ability to control the operation of a cable system operator. However, exclusive
franchises are prohibited and franchising authorities are permitted to exercise
greater control over the operation of franchised cable television systems,
especially in the area of customer service and rate regulation. Federal law also
allows franchising authorities to operate their own multichannel video
distribution system without having to obtain a franchise and permits states or
local franchising authorities to adopt certain restrictions on the ownership of
cable television systems. Moreover, franchising authorities are immunized from
monetary damage awards arising from regulation of cable television systems or
decisions made on franchise grants, renewals, transfers and amendments.
In addition to the foregoing, other existing federal regulations,
copyright licensing and, in many jurisdictions, state and local franchise
requirements, currently are the subject of a variety of judicial proceedings,
legislative hearings and administrative and legislative proposals that could
change, in varying degrees, the manner in which cable television systems
operate. Neither the outcome of these proceedings nor their impact upon the
cable television industry can be predicted at this time. Moreover, changes in
the regulatory and legislative environment are constantly occurring. The Company
cannot predict the effect that ongoing or future developments may have on the
cable television industry generally or the Company specifically.
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Employees
At May 31, 1998, the Company had approximately 4,211 employees (of which
approximately 1,490 were employees of Centennial). Certain of the employees of
12 of its cable systems, including three of its largest systems, are represented
by unions. The Company considers its relations with its employees to be good.
ITEM 2. Properties.
The principal physical assets associated with the Company's cable
television systems consist of operating plant and equipment, including signal
receiving apparatus, headends and distribution systems and subscriber house drop
equipment. The signal receiving apparatus typically includes a tower, antennas,
ancillary electronic equipment and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution system consists principally of
fiber and coaxial cables and related electronic equipment. Subscriber devices
consist principally of decoding converters. The physical components of cable
television systems may require maintenance and periodic upgrading and rebuilding
to keep pace with technological advances. The Company owns or leases property
for receiving sites (antenna towers and headends), microwave facilities and
business offices and owns most of its service vehicles.
As of May 31, 1998, the Company leases approximately 35,000 square feet of
office space at 50 Locust Avenue, New Canaan, Connecticut, where it has its
corporate headquarters, pursuant to a lease which expires December 31, 2004 and
provides for two five-year renewal terms. The monthly rental payments pursuant
to the lease are approximately $68,000.
With respect to the property owned by the Company, the Company is of the
opinion that it has generally satisfactory title to such properties used in its
business, subject to the liens for current taxes and liens incident to minor
encumbrances. In addition, the Company considers the properties owned and leased
by it to be suitable and adequate for the conduct of its business operations in
the future.
ITEM 3. Legal Proceedings.
There were no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or any of its
subsidiaries is a part of or to which any of their property is subject.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Company's shareholders
during the fiscal quarter ended May 31, 1998.
* * *
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Executive Officers of the Company
The names, ages and positions of all the executive officers of the Company
as of May 31, 1998 are listed below along with their business experience during
the past five years. Officers serve at the discretion of the Board of Directors.
There are no arrangements or understandings between any officer and any other
person pursuant to which the officer was selected and, except as otherwise
indicated below, there are no family relationships between any executive
officers or any directors of the Company.
LEONARD TOW, 70, has been Chairman of the Board of the Company since
October 1989, a director of the Company since 1973 and has been the Chief
Executive Officer of the Company since its incorporation and of Century-Texas
since its organization in 1973 through December 1985. He was Chief Financial
Officer of the Company until December 1996. He also served as President and
Chief Operating Officer of the Company from the date of its incorporation to
October 1989, and in both of said capacities for Century Texas from its
organization in 1973 through December 1985. Mr. Tow has been active in the cable
television industry for more than 30 years. He has also served as Chairman of
the Board, Chief Executive Officer and Chief Financial Officer of Citizens
Utilities, 1.98% of the stock of which is owned by the Company since June 1990,
as Chief Executive Officer of Citizens Utilities since July 1, 1990, and as a
director of Citizens Utilities since April 1989. Mr. Tow holds a Ph.D. from
Columbia University and is the husband of Claire L. Tow.
BERNARD P. GALLAGHER, 51, has been a director of the Company since October
1990 and has been President and Chief Operating Officer of the Company since
October 1989. Mr. Gallagher has also been Chairman of the Board and Chief
Executive Officer of Centennial since August 1991 and has been a director of
Centennial since March 1991. From February 1990 to August 1991, Mr. Gallagher
was President and Chief Operating Officer of Centennial. From 1979 to October
1989, Mr. Gallagher served in various financial and executive capacities at
Comcast Corporation, a cable television and cellular telephone company, and its
subsidiaries, including Vice President and Treasurer from November 1984 to
October 1989.
MICHAEL G. HARRIS, 52, has been a director of the Company since October
1997 and has been Senior Vice President - Engineering; and Chief Engineering
Officer of the Company since June 1991. Mr. Harris has also been Senior Vice
President, Engineering; and Chief Engineering Officer of Centennial Cellular
since August 1991.
SCOTT N. SCHNEIDER, 40, has been a director of the Company since October
1994. Mr. Schneider has been Chief Financial Officer of the Company since
December 1996, Senior Vice President and Treasurer of the Company since June
1991, and has been an Assistant Secretary of the Company since October 1986. He
was a Vice President of the Company from October 1986 to June 25, 1991 and was
Controller of the Company from December 1985 to June 25, 1991. He was Controller
of Century-Texas from December 1982 to December 1985. Mr. Schneider has also
been a director and Senior Vice President, Chief Financial Officer and Treasurer
of Centennial since August 1991. He was a Vice President and Controller of
Centennial from the date of its incorporation in 1988 to August 1991.
DANIEL E. GOLD, 62, was a director of the Company from October 1997 until
July 27, 1998 and was a Senior Vice President of the Company and President of
the Century Cable Television Division of the Company from February 1995 until
July 27, 1998. From July 1994 to January 1995, he was Chief Executive Officer of
the American Society of Composers, Authors and Publishers. Mr. Gold was Senior
Vice President, Operations, of the Century Cable Television Division of the
Company from 1991 to June 1994.
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CLAIRE L. TOW, 67, has been a director of the Company since 1988, a Senior
Vice President of the Company since August 1992 and was Vice President of the
Company from February 1988 to August 1992. She has been involved in the
operations of the Company since its incorporation in December 1985 and with
Century-Texas since its incorporation. Mrs. Tow has served as a director of
Citizens since June 1993. Mrs. Tow is the wife of Leonard Tow.
DAVID Z. ROSENSWEIG, 72, has been a director and the Secretary of the
Company since its incorporation in December 1985 and of Century-Texas from 1982
to December 1985. Mr. Rosensweig has also been a director and Secretary of
Centennial since its incorporation in 1988. He has been a member of the New York
law firm of Leavy Rosensweig & Hyman since May 1987, which acts as general
counsel to the Company and Centennial.
ROBERT J. LARSON, 39, has been Vice President - Controller of the Company
since October 1994, was Controller of the Company from June 26, 1991 to 1994 and
was Assistant Controller from 1989 to June 25, 1991. Mr. Larson has been Vice
President - Accounting and Administration of Centennial since March 1995 and was
Vice President - Controller of Centennial from October 1994 to March 1995,
Controller of Centennial from 1990 to October 1994, and was Assistant Controller
of Centennial from 1989 to 1990. Prior to joining the Company and Centennial,
Mr. Larson was a manager with Touche Ross & Co., a predecessor firm of Deloitte
& Touche LLP.
CLIFFORD A. BAIL, 43, has been Vice President-Legal Affairs and Corporate
Counsel of the Company since January 1997. Mr. Bail has also been Vice President
- - Legal Affairs and Corporate Counsel of Centennial since January 1997. From
1992 to 1996, Mr. Bail was a member of the law firm of Leavy Rosensweig & Hyman,
which acts as general counsel to the Company and Centennial.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Market Information
The Class A Common Stock commenced trading on The Nasdaq Stock Market
("Nasdaq") under the symbol CTYA on January 5, 1995. Prior to such date, the
Class A Common Stock was traded on the American Stock Exchange. There is no
established public market for the Class B Common Stock. The table set forth
below lists the high and low sale prices for the Class A Common Stock reported
on Nasdaq for the calendar quarters indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1996
First Quarter.............. 10 1/8 7 1/2
Second Quarter............. 10 1/8 8 1/4
Third Quarter.............. 8 7/8 6 1/8
Fourth Quarter............. 7 5/8 5 1/8
1997
First Quarter.............. 6 1/4 3 7/8
Second Quarter............. 7 1/8 3 5/8
Third Quarter ............. 7 11/16 5 1/8
Fourth Quarter............. 9 7/8 7
1998
First Quarter.............. 13 8 15/16
Second Quarter............. 20 12 3/8
Third Quarter (through August 21) 28 1/8 17 7/8
</TABLE>
On August 21, 1998, the last sale price of the Class A Common Stock, as
reported on Nasdaq, was $27 per share. At August 21, 1998, there were
approximately 916 holders of record of shares of Class A Common Stock and 3
holders of record of shares of Class B Common Stock.
Dividend Policy
The Company has never paid a cash dividend on its common stock. The
Company is currently restricted from paying cash dividends by certain of its
debt instruments. Its ability to do so is further limited by provisions of
credit agreements entered into by certain of its subsidiaries that limit the
amount of cash that may be upstreamed to the Company.
If all cumulative dividends shall have been paid as declared or set apart
for payment upon shares of Preferred Stock then outstanding, if any, holders of
shares of Class A Common Stock and Class B Common Stock are entitled to receive
such dividends as may be declared by the Company's Board of Directors out of
funds legally available for such purpose. No dividend may be declared or paid in
cash or property on any share of Class B Common Stock, however, unless
simultaneously the same dividend is paid on each share of Class A Common Stock.
Dividends can be declared and paid on shares of Class A Common Stock without
being
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declared and paid on the shares of Class B Common Stock. In the case of any
stock dividend, holders of Class A Common Stock are entitled to receive the same
percentage dividend (payable in shares of Class A Common Stock) as the holders
of Class B Common Stock receive (payable in shares of Class B Common Stock).
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ITEM 6. Selected Financial Data.
The selected consolidated financial data set forth below for the five
years ended May 31, 1998 have been derived from the Company's audited
consolidated financial statements. Amounts have been reclassified where
applicable, to reflect the discontinued operations of Centennial Cellular Corp.
and the Company's Australian operations. This data should be read in conjunction
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto included
elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year ended May 31,
------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Revenues $ 484,736 $ 459,646 $ 368,669 $ 331,439 $ 318,456
--------- --------- --------- --------- ---------
Cost of services 103,932 100,789 82,274 81,521 69,711
Selling, general and
administrative 122,307 111,467 85,591 84,326 64,578
Regulatory restructuring
charge -- -- -- 4,000 --
Depreciation and
amortization 154,029 159,547 124,436 106,289 103,644
--------- --------- --------- --------- ---------
380,268 371,803 292,301 276,136 237,933
--------- --------- --------- --------- ---------
Operating income 104,468 87,843 76,368 55,303 80,523
Interest expense 172,608 157,730 143,030 115,644 100,658
Other (income) expense (1,533) 171 550 2,400 --
--------- --------- --------- --------- ---------
Loss from continuing
operations before
income tax benefit
minority interest and
extraordinary item (66,607) (70,058) (67,212) (62,741) (20,135)
Income tax benefit (624) (23,363) (22,730) 6,395 6,147
--------- --------- --------- --------- ---------
Loss from continuing
operations before
minority interest
and extraordinary item (65,983) (46,695) (44,482) (69,136) (26,282)
Minority interest in income
of subsidiaries (11,899) (7,170) (2,701) (1,486) (925)
--------- --------- --------- --------- ---------
Loss from continuing
operations (77,882) (53,865) (47,183) (70,622) (27,207)
Loss from discontinued
operations (43,089) (80,428) (54,934) (12,003) (14,720)
--------- --------- --------- --------- ---------
Loss before extraordinary
item (120,971) (134,293) (102,117) (82,625) (41,927)
Extraordinary item-loss on
early retirement of
debt, net -- (7,582) -- -- --
--------- --------- --------- --------- ---------
Net loss $(120,971) $(141,875) $(102,117) $ (82,625) $ (41,927)
========= ========= ========= ========= =========
Dividend on discontinued
subsidiary convertible
redeemable preferred
stock $ 5,225 $ 4,850 $ 4,256 $ 4,419 $ 5,838
========= ========= ========= ========= =========
Net loss applicable to
common shares $(126,196) $(146,725) $(106,373) $ (87,044) $ (47,765)
========= ========= ========= ========= =========
Loss per common share:
Loss from continuing
operations $ (1.11) $ (.78) $ (.70) $ (.87) $ (.37)
</TABLE>
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<TABLE>
<CAPTION>
Year ended May 31,
------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Loss from discontinued
operations .58 (1.08) (.74) (.14) (.16)
----------- ----------- ----------- ----------- -----------
Loss before extraordinary
item (1.69) (1.86) (1.44) (1.01) (0.53)
Extraordinary item -- (0.10) -- -- --
----------- ----------- ----------- ----------- -----------
Net loss $ (1.69) $ (1.96) $ (1.44) $ (1.01) $ (0.53)
=========== =========== =========== =========== ===========
Weighted average number of
common shares outstanding
during the period 74,770,000 74,675,000 73,748,000 86,277,000 89,381,000
=========== =========== =========== =========== ===========
Balance Sheet Data
Total assets $ 1,515,182 $ 2,154,231 $ 2,234,909 $ 2,004,417 $ 1,350,426
Long-term debt 2,009,052 2,186,981 2,081,611 1,741,143 1,270,989
Common stockholders'
deficiency (725,252) (598,643) (448,013) (351,645) (243,628)
</TABLE>
Included in Net Assets of Discontinued Operations at May 31, 1998 were
total assets of $869,415, long term debt of $510,000 and Common stockholders'
deficiency of $112,441.
See Note 4 of the consolidated financial statements regarding recent
acquisitions and the effect of such acquisitions on the comparability of the
historical financial statements of the Company.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations (dollar amounts in thousands except subscriber, and share
data)
The Company is primarily engaged in the ownership and operation of cable
television systems and earns its revenues primarily from subscriber fees. At May
31, 1998, the Company owned and operated 72 cable television systems in 25
states and Puerto Rico. At that date, the Company's cable systems passed
approximately 2,333,000 homes and served a total of approximately 1,319,000
primary basic subscribers. Certain of the Company's cable systems referred to
above are owned 50% by the Company and 50% by unaffiliated entities. At May 31,
1998, these systems passed approximately 618,000 homes and served approximately
326,000 primary basic subscribers.
Centennial Cellular Corp. and the Company's Australian Operations, including
ECT, are presented as discontinued operations within the Company's consolidated
financial statements (See Note 2 to the Company's consolidated financial
statements). Accordingly, the consolidated statements of operations reflect
their operating results as discontinued operations for each of the three years
ended May 31, 1998 and the consolidated balance sheet at May 31, 1998 segregates
the net assets of these discontinued operations. The following discussion of
results of operations and financial condition is presented for continuing
operations only.
Certain of the Company's cable television systems are subject to rate regulation
which has negatively affected the Company's business. The Company has
implemented new rate and service offerings which give subscribers the choice of
buying certain programming services individually on a per channel basis or as
part of a package of premium services at a discounted price.
Pursuant to the FCC's second revision to its rate formula, the Company
experienced a further decrease in the regulated portion of its services
beginning in fiscal 1995. Under the regulatory price cap mechanism established
by the FCC, a portion of the decline has been offset, in part, by allowable rate
increases. Such increases relate to adjustments for the annual change in the
Gross National Producers Price Index as well as certain increases in programming
fees, the addition of new channel services and so called "external costs" as
delineated in the rules. The bulk of such price adjustments became effective
during the first quarter of fiscal years 1996, 1997 and 1998.
On February 8, 1996, "The Telecommunications Act of 1996" (the "Act") was
enacted into law. The law alters federal, state and local laws and regulations
regarding telecommunications providers and services, including the cable
television industry. The Act deregulates (except for basic service) cable
service rates over a three year period.
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Fiscal Years Ended May 31, 1998 and May 31, 1997
Revenue from cable television operations increased by $25,090 or 5.5%, over the
corresponding year ended May 31, 1997, principally as a result of acquisitions,
subscription price increases and increases in the number of cable television
subscriptions. Average primary basic cable television subscribers ("Basic
Subscribers") for the twelve months ended May 31, 1998 were approximately
1,296,000, as compared to approximately 1,255,000 for the twelve-month period
ended May 31, 1997, an increase of 3.3%. Acquisitions accounted for
approximately 35.6% of the increase in basic subscribers. Average monthly
revenue per Basic Subscriber, including programmers' share of such revenue, was
approximately $39.51 during the twelve months ended May 31, 1998, as compared to
approximately $38.57 during the comparable prior twelve month period, an
increase of 2.4%.
Cost of services of the cable television operations increased by $3,143, or
3.1%, while selling, general and administrative expenses increased by $10,840,
or 9.7%. The principal reason for the increase in these costs was the increase
in the variable component of the Company's cost structure which increases in
relation to increased revenue. In addition, the Company undertook the transfer
of customer service operations to a national call center effecting approximately
400,000 subscribers in the current fiscal year. The costs of training,
establishing the call center workforce and other transition related costs were
expensed during the current fiscal year. The Company anticipates continued
increases in the cost of services and selling, general and administrative
expenses as the growth of its business continues.
Depreciation and amortization of the Company's cable television operations
decreased by $5,518, or 3.5% below the year ended May 31, 1997. This decrease is
primarily due to property, plant and equipment write-offs during fiscal 1997.
As a result of the factors noted above, operating income was $104,468, an
increase of $16,625, or 18.9% above the year ended May 31, 1997.
Interest expense of the Company's cable television operations for the year ended
May 31, 1998 increased by $14,878, or 9.4% as compared with the year ended May
31, 1997, principally as a result of increased borrowings. For the year ended
May 31, 1998, the average debt outstanding of the cable segment was
approximately $1,871,000 or $144,000 above the average outstanding debt balance
of $1,727,000 during the year ended May 31, 1997. The Company's weighted average
interest rate was approximately 9.2% in both of the years ended May 31, 1998 and
1997.
After income attributable to minority interests in subsidiaries for the year
ended May 31, 1998, a pretax loss of $78,506 was incurred, as compared to a
pretax loss, before extraordinary item of $77,228 for the year ended May 31,
1997. The income tax benefit of $624 for the year ended May 31, 1998 represents
a reduction of the deferred tax liability by the tax effect of the current
period losses of the Company, offset by current state and local taxes for the
period. These tax benefits are non-cash in nature. During the current fiscal
year, the Company began recording limited tax benefits resulting from operating
losses.
The loss from continuing operations for the year ended May 31, 1998 of $77,882
represents an increase of $24,017 from the loss of $53,865 for the year ended
May 31, 1997. The Company expects net losses to continue until such time as the
cable television systems and investments in plant associated with rebuilds
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and extensions of its cable television systems generate sufficient earnings to
offset the associated costs of acquisitions and operations.
Fiscal Years Ended May 31, 1997 and May 31, 1996
Revenue from cable television operations increased by $90,977 or 24.7%, over the
corresponding year ended May 31, 1996 as a result of regulated price increases,
increases in the number of cable television subscribers and acquisitions.
Acquisitions of cable television systems accounted for $54,846 of the increase
or 60.3%. Average primary basic cable television subscribers ("Basic
Subscribers") for the year ended May 31, 1997 were approximately 1,255,000 as
compared to approximately 1,088,000 Basic Subscribers for the year ended May 31,
1996, an increase of 15.3%. The impact of acquisitions of cable television
systems accounted for 95.7% of the increase. Average monthly revenue per Basic
Subscriber, including programmers' share of such revenue, was approximately
$38.57 during the year ended May 31, 1997, as compared to approximately $34.84
during the year ended May 31, 1996, an increase of 10.7%.
Cost of services of the cable television operations increased by $18,515 or
22.5%, while selling, general and administrative expenses of the Company's cable
television operations increased by $25,876 or 30.2%. The Company's cable
television acquisitions accounted for $11,849 or 64.0% of the $18,515 increase
in cost of services and $14,948 or 57.8% of the $25,876 increase in selling,
general and administrative expense. As a result, before giving effect to
increased costs associated with acquisitions, costs of services and selling,
general and administrative expenses increased by $6,666 and $10,928,
respectively, during the year ended May 31, 1997. The principal reason for the
increase in these costs was the increase in the variable component of the
Company's cost structure which increases in relation to increased revenue. The
Company anticipates continued increases in the cost of services and selling,
general and administrative expenses as the growth of its business continues.
Depreciation and amortization for the year ended May 31, 1997 increased by
$35,111 or 28.2% over the year ended May 31, 1996, of which $30,069 was
attributable to cable television acquisitions. The Company's operating income
was $87,843, an increase of $11,475 or 15.0% over the year ended May 31, 1996.
Interest expense for the year ended May 31, 1997 increased by $14,700 or 10.3%
as compared with the year ended May 31, 1996. Interest expense rose as a result
of higher average debt levels. For the year ended May 31, 1997, the average debt
outstanding was approximately $1,727,000 or $323,000 above the average
outstanding debt balance of $1,404,000 during the year ended May 31, 1996. The
increase in expense was partially offset by a decline in interest rates. The
Company's weighted average interest rate excluding borrowings of Centennial, the
Australian investments and the Company's 50% owned joint ventures was
approximately 9.2% in the year ended May 31, 1997 as compared to approximately
10.2% in the year ended May 31, 1996. In addition, the Company increased the
proportion of floating rate bank debt in its capital structure. Short-term
interest rates of the Company's variable rate bank credit agreement increased
from 6.7% at May 31, 1996 to 7.3% at May 31, 1997.
After income attributable to minority interests in subsidiaries for the year
ended May 31, 1997, a pretax loss, before extraordinary item of $77,228 was
incurred, as compared to a pretax loss of $69,913 for the year ended May 31,
1996. The income tax benefit of $23,363 for the year ended May 31, 1997
represents a reduction of the deferred tax liability by the tax effect of the
current period losses of the Company, offset by current state and local taxes
for the period. These tax benefits are non-cash in nature.
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The loss from continuing operations for the year ended May 31, 1997 of $53,865
represents an increase of $6,682 from the loss of $47,183 for the year ended May
31, 1996. Included in the consolidated net loss for the fiscal year ended May
31, 1997 is an extraordinary loss (net of tax benefit of $5,379) of $7,582
related to the early retirement of debt. Such amount represents the accelerated
write-off of deferred financing costs and call premiums paid related to the
Company's 11 7/8% Senior Subordinated Debentures Due 2003 which Debentures were
redeemed on April 15, 1997 (See Liquidity and Capital Resources).
Liquidity and Capital Resources (dollar amounts in thousands except share data)
The Company has grown through acquisitions as well as upgrading, extending and
rebuilding its existing cable television systems. Since the Company's business
is capital intensive, the Company must continue to seek various sources of
financing to meet its needs, including growth in internally generated cash, bank
financing, joint ventures and partnerships and public and private placements of
debt and equity securities.
In addition to an aggregate of $1,823,000 in public debt instruments of the
Company, certain subsidiaries have entered into additional credit agreements
with various bank groups and private lending institutions providing for an
aggregate of approximately $1,255,000 of potential borrowing capacity for cable
operations. At May 31, 1998, approximately $206,000 of that aggregate
availability has been drawn.
The Company's internally-generated cash, along with third party financing,
primarily bank borrowings and the issuance of debt securities to the public,
have enabled it to fund its working capital requirements, capital expenditures
for property, plant and equipment, acquisitions, investments and debt service.
The Company has funded the principal obligations on its long-term borrowings by
refinancing the principal with expanded bank lines of credit, through the
issuance of debt securities in the public market and through private
institutions as well as internally generated cash flow. Although to date the
Company has been able to obtain financing on satisfactory terms, there can be no
assurance that this will continue to be the case in the future. Certain of the
debt instruments to which the Company and its subsidiaries are a party impose
restrictions on the incurrence of additional indebtedness.
During the year ended May 31, 1998, the Company made capital expenditures of
$113,222. The Company's future commitments for property, plant and equipment in
its cable television business consist of usual upgrades, extensions, betterments
and replacements of cable plant and equipment. As the Company completes capital
projects started in prior fiscal years, it anticipates an annualized rate of
approximately $120,000 for cable television capital expenditures in fiscal 1999.
Various construction projects have been undertaken to expand the operations of
certain cable television systems into adjacent and previously unbuilt areas and
to rebuild and upgrade its existing cable system plant. The Company is currently
considering the further upgrade of its cable television distribution systems in
certain of its cable television markets to expand its capability for the
delivery of video, voice and data transmission. Should the Company undertake
such an upgrade plan, it would result in an acceleration of capital expenditures
which would otherwise be incurred in future years. The Company has not yet
determined the feasibility, timing or cost of such projects. Funds for cable
television capital projects and related equipment are currently available from
internally generated cash and other financing resources.
For the year ended May 31, 1998, earnings were less than fixed charges by
$71,832. However, such amount reflects non-cash charges totaling $159,254,
consisting of depreciation and amortization and subsidiary preferred stock
dividends. Historically, cash generated from operating activities has exceeded
fixed charges.
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Based upon current market conditions, the Company expects that cash flows from
operations, the sale of Centennial and funds from currently available credit
facilities will be sufficient to enable the Company to meet required cash
commitments through the next twelve month period.
Financing and Capital Formation
On July 2, 1998, Centennial and CCW Acquisition Corp. ("Acquisition"), a
Delaware corporation organized at the direction of Welsh, Carson, Anderson &
Stowe VIII, L.P. ("WCAS VIII") entered into an Agreement and Plan of Merger (the
"Merger Agreement") providing for the merger of Acquisition with and into
Centennial (the "Merger"). Centennial will continue as the surviving corporation
(the "Surviving Corporation") in the Merger.
The Company owns 8,561,819 shares of Class B Common Stock of Centennial. The
Company also owns 3,978 shares of Second Series Convertible Redeemable Preferred
Stock of Centennial. If such Class B Common Stock and Second Series Convertible
Redeemable Preferred Stock are fully exchanged for cash, the Company would
receive an aggregate consideration of approximately $377,473 as a result of the
conversion into cash. The Company anticipates recording a net gain in relation
to the disposition of Centennial of approximately $220,000 during fiscal 1999,
net of income taxes and the Company's share of estimated losses through the date
of disposition. The Company's share of the estimated losses is not expected to
be material. When the Centennial disposition is completed, the Company expects
to reduce its valuation allowance applied against its deferred tax assets by
approximately $80,000 to $90,000 (See "Discontinued Operations" section
following).
On January 7, 1998, the Company filed a shelf registration statement with the
SEC for $500,000 of the Company's debt securities, augmenting the remaining
$77,000 under the Company's 1997 shelf registration. The registration statement
became effective on January 28, 1998. The debt securities may be issued from
time to time, in series, on terms to be specified in one or more prospective
supplements at the time of the offering. If so specified with respect to any
particular series, the debt securities may be convertible into shares of the
Company's Class A Common Stock. As of August 21, 1998, there was $577,000
available for issuance under this shelf registration.
On January 15, 1998, the Company issued $605,000 principal amount at maturity of
Senior Discount Notes due 2008, Series A ("Senior Discount Notes") to a
qualified institutional buyer under a private placement offering pursuant to
Rule 144A and Regulation S of the Securities Act of 1933, as amended (the
"Private Placement Offering"). The Senior Discount Notes were sold at a discount
of 41.266% from the principal amount due at maturity (the "Original Issue
Discount"). The Original Issue Discount began accruing on the Senior Discount
Notes on January 15, 1998 and will continue accruing during the period in which
the Senior Discount Notes remain outstanding. The Original Issue Discount
represents an annual yield to maturity of 9.05% based on the issue price of the
Senior Discount Notes. There will be no periodic payments of interest on the
Senior Discount Notes. The Senior Discount Notes are senior unsecured
obligations of the Company, and will not be entitled to the benefit of any
sinking fund.
The net proceeds received by the Company from the sale of the Senior Discount
Notes were approximately $246,106. The Company applied $96,000 of the net
proceeds from the sale of the Senior Discount Notes to repay temporarily
portions of the long-term debt outstanding under both the CCC-I and CCC-II
credit agreements. The remainder of the net proceeds are to be used for capital
expenditures, operations,
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acquisitions and other investments that would otherwise have been paid for under
the CCC-I and CCC-II credit agreement. Further borrowings may be made under the
CCC-I and CCC-II Credit Agreements until August 31, 1999 for general corporate
purposes, including, but not limited to, the financing of capital expenditures,
investments, purchases of the Company's securities, and acquisitions.
On March 2, 1998, the Company filed a registration statement with the SEC
relating to the exchange of all outstanding Senior Discount Notes for Senior
Discount Notes due 2008, Series B (the "Senior Discount Notes, Series B"). The
terms of the Senior Discount Notes, Series B are identical in all material
respects to the Senior Discount Notes, except that the Senior Discount Notes,
Series B are registered under the Securities Act of 1933, as amended, and
therefore the transfer of the Senior Discount Notes, Series B is not restricted.
This registration statement became effective on March 17, 1998.
During the year ended May 31, 1998, excluding the issuance of the Senior
Discount Notes, Series B, the Company issued an aggregate of $425,000 of public
debt securities in three separate offerings. The net proceeds received by the
Company from these issuances of $410,449 were used by the Company to repay
temporarily the long-term debt outstanding under the Company's CCC-I and CCC-II
credit agreements.
At May 31, 1998, the Company's public debt securities of approximately
$1,823,000 in the aggregate, have interest rates ranging from 8 3/8% to 9 3/4%,
with remaining maturities ranging from 2 1/4 to 19 1/2 years. These public debt
securities were all issued pursuant to shelf registrations of the Company's debt
securities which were filed with the SEC. The Company's public debt securities
rank pari passu with all existing and future Senior Indebtedness (as that term
is defined in the respective Indentures under which the public debt securities
were issued) of the Company, are senior in right of payment to all existing and
future subordinated indebtedness of the Company, and may not be redeemed prior
to maturity.
Certain subsidiaries of the Company have four credit facilities with $1,155,000
of total potential credit availability at May 31, 1998, of which $106,000 was
outstanding. The interest rates payable on borrowings under the respective
credit facilities are as follows:
At the election of CCC-I, (a) the Base Rate of interest announced by
Citibank, N.A. plus 0% to 0.625% per annum based upon certain conditions,
or (b) the London Interbank Offering Rate plus 0.75% to 1.625% per annum
based upon certain conditions.
At the election of CCC-II, (a) the Base Rate of interest announced by
Citibank, N.A. plus 0% to 0.5% per annum based upon certain conditions, or
(b) the London Interbank Offering Rate plus 0.75% to 1.375% per annum
based upon certain conditions.
At the election of Citizens Century Cable Television Venture ("CCCTV"),
either the Base Rate, or the Eurodollar Rate, plus the applicable margin
(as defined in the agreement).
At the election of Century Venture Corp. ("CVC"), (a) the "C/D Base Rate"
plus an applicable margin, as defined or (b) the "Eurodollar Base Rate"
plus an applicable margin, as defined or (c) the ABR Rate, as defined.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate risks. The Company entered into a five-
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year interest rate hedge agreement during October 1997 in relation to certain of
its fixed rate debt. The hedge agreement is structured such that the Company
pays a variable rate of interest based on the higher of the U.S. dollar six
month LIBOR or the U.S. dollar six month LIBOR set in arrears and receives a
fixed rate of interest of 6.695% based on a notional amount of $35,000. Subject
to the terms of the hedge agreement, if the six month LIBOR is set at or below
4.75% at the beginning of any period, the hedge agreement would terminate for
that period alone and the Company would receive a 50 basis points subsidy for
that period alone.
The subsidiaries' credit facilities and the Company's public debt instruments,
among other things, require the maintenance of certain financial and operating
covenants, restrict the use of proceeds from such borrowing, limit the
incurrence of additional indebtedness and limit the ability to pay dividends and
management fees.
At May 31, 1998, the Company and its subsidiaries were in compliance with all
covenants of their respective debt agreements.
Acquisitions - Cable Television
On March 2, 1993, a joint venture in which the Company and Citizens have a 50%
interest ("the Century/Citizens Joint Venture") entered into agreements to
acquire the assets of two cable television systems which serve in the aggregate
approximately 45,000 primary basic subscribers. The aggregate purchase price for
the cable television systems was $92,900, subject to adjustment. On September
30, 1994, the Century/Citizens Joint Venture completed the acquisition of one of
these cable television systems serving approximately 24,000 primary basic
subscribers. On December 1, 1995, the second acquisition serving approximately
21,000 primary basic subscribers was completed. The purchase price of
approximately $51,900 at September 30, 1994 and $41,000 at December 1, 1995 was
funded by the Company and Citizens equally.
On May 31, 1996, the Company acquired the cable television systems serving
Anaheim, Hermosa Beach/Manhattan Beach, Fairfield and Rohnert Park/Yountville,
California for an aggregate purchase price of approximately $287,600. Funds for
this acquisition were provided by an existing bank credit facility. At May 31,
1996, such cable television systems served an aggregate of approximately 135,000
primary basic subscribers.
On August 16, 1996, the Company entered into agreements to acquire two cable
television systems which serve an aggregate of approximately 35,000 primary
basic subscribers, which agreements were subsequently assigned to the
Century/Citizens Joint Venture. These systems are primarily located in Yorba
Linda/Orange County and Diamond Bar, California (the "CCCTV Acquisitions").
Pursuant to the agreements, the aggregate purchase price for these systems was
approximately $68,440. On October 15, 1997, the Century/Citizens Joint Venture
completed the acquisition of the Diamond Bar system for a purchase price of
approximately $33,550. The Diamond Bar system serves approximately 20,000
primary basic subscribers. On April 30, 1998, the Century/Citizens Joint Venture
completed the acquisition of the Yorba Linda/Orange County systems for a
purchase price of approximately $34,890. The Yorba Linda/Orange County systems
serve approximately 17,500 primary basic subscribers. The Company funded its
share of the purchase price for the Yorba Linda/Orange County systems and the
Diamond Bar system using available credit facilities.
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On December 10, 1997, the Company and TCI Communications, Inc. ("TCI") signed a
letter of intent to establish a strategic partnership (the "Partnership"). TCI
will contribute to the Partnership all the assets related to the businesses of
certain cable television systems owned and operated by TCI serving approximately
245,000 customers in the area of Southern California. The Company will
contribute to the Partnership all the assets related to the businesses of
certain cable television systems owned and operated by the Company serving
approximately 500,000 customers in the area of Southern California, including
approximately 90,000 subscribers to be acquired in an exchange of cable systems
described below. The Company will manage the newly combined cable systems and
own approximately 75 percent of the Partnership.
As part of the Partnership Transaction, the Company and TCI have agreed to
exchange cable systems owned by the Company in certain communities in Northern
California for certain cable systems owned by TCI in Southern California,
allowing each of them to unify operations in existing service areas. TCI will
exchange its East San Fernando Valley cable system serving approximately 90,000
subscribers for the Company's Northern California cable systems, serving
approximately 90,000 subscribers in the communities of San Pablo, Benicia,
Fairfield and Rohnert Park, California.
The Company and TCI are currently involved in the due diligence process
and are continuing to negotiate with respect to these transactions. These
transactions are subject to the signing of definitive agreements and to all
appropriate regulatory and other approvals. There is no assurance that the
Company will obtain such approvals or that such transactions will be
consummated.
In August 1998, the Company entered into an agreement to acquire a cable
television system which serves approximately 19,000 primary basic subscribers in
Moreno Valley and Riverside County, California. The purchase price for this
system is approximately $33,000. The Company currently expects to fund the
acquisition using available credit facilities. The purchase of this system by
the Company is subject to regulatory approvals. There is no assurance that the
Company will obtain such approvals or that such acquisition will be consummated.
Discontinued Operations
On July 2, 1998, Centennial and Acquisition, entered into the Merger Agreement
providing for the merger of Acquisition with and into Centennial (the "Merger").
Centennial will continue as the surviving corporation (the "Surviving
Corporation") in the Merger.
Subject to proration, pursuant to the Merger Agreement, outstanding Class A
Common Stock of Centennial will be converted into the right to receive $43.50
per share in cash or to retain up to 7.1% of the common stock of the Surviving
Corporation outstanding after the Merger. Class B Common Stock of Centennial
will be converted into the right to receive $43.50 per share in cash; provided,
that if the aggregate number of shares of Class A Common Stock elected to be
retained by Centennial's existing stockholders is less than 7.1% of the shares
outstanding after the Merger, then a number of shares of Class B Common Stock
equal to the pro rata portion of such shortfall will be converted into shares of
Class A Common Stock and retained. All outstanding Convertible Redeemable
Preferred Stock of Centennial and Second Series Convertible Redeemable Preferred
Stock of Centennial and, together with the Convertible Redeemable Preferred
Stock of Centennial, (the "Redeemable Preferred Stock") will be converted into
the right to receive $43.50 per share in cash on an as converted basis.
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Because 7.1% of the shares outstanding immediately after the effective time of
the Merger (the "Effective Time") must be retained by such existing stockholders
of Centennial in the Merger, stockholders who do not elect to retain any shares
may, due to proration, be required to retain some Common Stock of Centennial. In
addition, stockholders who elect to retain shares may, due to proration, retain
Common Stock of Centennial and receive cash in amounts which vary from the
amounts such holders elected.
In connection with the execution of the Merger Agreement, the Company,
Centennial's principal stockholder, entered into a Stockholder Agreement, dated
July 2, 1998, with Acquisition (the "Stockholder Agreement"). Pursuant to the
Stockholder Agreement, the Company agreed to vote its shares in favor of the
approval and adoption of the Merger Agreement. Because the Company agreed to
approve the Merger by written consent, consummation of the Merger does not
require approval by a majority of Centennial's stockholders who are not
affiliated with the Company or Acquisition. Pursuant to the Stockholder
Agreement with Acquisition, the Company has agreed to terminate the Services
Agreement as of the effective time of the Merger.
The consummation of the Merger is subject to certain conditions, including,
without limitation, Centennial obtaining a final order from the Federal
Communications Commission (the "FCC") approving the transfer of control of the
Company to WCAS VIII and its affiliates, the expiration of antitrust regulatory
waiting periods and Acquisition obtaining financing substantially on the terms
contemplated by the commitment letters it received in connection with the Merger
Agreement.
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses. However, in the event Centennial or Acquisition shall have terminated
the Merger Agreement as a result of either Centennial entering into a definitive
written agreement with respect to any merger, consolidation or other business
combination, tender or exchange offer, recapitalization transaction, asset or
stock purchase or other similar transaction with a third party (an "Acquisition
Transaction") or the Board of Directors of Centennial having withdrawn, modified
or amended in any manner adverse to Acquisition its approval or recommendation
of the Merger Agreement or approved, recommended or endorsed any proposal for an
Acquisition Transaction, then Centennial shall reimburse Acquisition for
documented fees and expenses (subject to a maximum of $25,000) and pay
Acquisition a termination fee of $40,000.
In connection with the Merger, Acquisition has received a commitment from a
third party for financing for Acquisition and certain existing and future
subsidiaries of Centennial in the aggregate amount of approximately $1.6 billion
in the form of senior secured credit facilities and an unsecured bridge loan.
Additionally, an affiliate of WCAS VIII has agreed to purchase approximately
$150 million aggregate amount of subordinated notes of the Surviving
Corporation. Finally, WCAS VIII and other equity investors have agreed to
purchase approximately $350 million of common stock of the Surviving
Corporation. It is anticipated that this funding will be used to pay the merger
consideration described above and related fees and expenses. Additionally,
pursuant to the Merger Agreement, Centennial has agreed that, upon the request
of Acquisition, it will commence offers to repurchase its two outstanding
issuances of public debt (the "Debt Offers"). As a condition to the closing of
the Merger, Centennial must consummate the Debt Offers prior to the closing date
of the Merger. There can be no assurance that Acquisition will receive the
funding referred to above or, if it does receive such funding, there can be no
assurance as to the timing or terms thereof.
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Additionally, there can be no assurance that the Debt Offers will be
consummated. Finally, in the event that Acquisition must seek alternative
financing to consummate the Merger there can be no assurance that it will be
able to secure alternative financing on terms no less favorable than the terms
of the above commitments.
The Company owns 8,561,819 shares of Class B Common Stock of Centennial. The
Company also owns 3,978 shares of Second Series Convertible Redeemable Preferred
Stock of Centennial. If such Class B Common Stock and Second Series Convertible
Redeemable Preferred Stock are fully exchanged for cash, the Company would
receive an aggregate consideration of approximately $377,473 as a result of the
conversion into cash. The Company anticipates recording a net gain upon the
disposition of Centennial of approximately $220,000 during fiscal 1999, net of
income taxes and the Company's share of estimated losses through the date of
disposition. The Company's share of the estimated losses is not expected to be
material. When the Centennial disposition is completed, the Company expects to
reduce its valuation allowance applied against its deferred tax assets by
approximately $80,000 to $90,000.
The Company had interests in businesses in the pay television industry in
Australia. The interests included investments in entities, which include East
Coast Pay Television Pty. Limited ("ECT") and XYZ Entertainment Pty. Limited
("XYZ"), which have the following: (i) programming arrangements and ownership of
a satellite subscription broadcast license which permits distribution of
programming via direct-to-home (DTH) satellite television broadcasting
throughout Australia; (ii) ownership of wireless cable distribution licenses
(MDS) in areas covering approximately 755,000 households; and (iii) programming
services.
On July 9, 1998, the Company and United International Holdings, Inc. ("UIH")
entered into an agreement pursuant to which UIH's UIH Asia/Pacific
Communications Inc. unit ("UAP") agreed to acquire the Company's 25% ownership
interest in XYZ for approximately $24,600. Approximately 95% of the sales price
is payable in the form of UIH Series B Convertible Preferred Stock which is
convertible into UIH Class A stock at a conversion price of $21.25 per share.
Also on July 9, 1998, ECT agreed to sell substantially all of its operating
assets to Austar Entertainment Pty. Ltd. ("Austar"), a wholly owned subsidiary
of UAP, for approximately $6,100 in the form of Austar preferred stock. ECT will
utilize the $6,100 proceeds and its other current assets of approximately $5,000
to liquidate its current liabilities, which approximate $25,000.
The Company anticipates recording an immaterial gain as a result of the sale of
its Australian assets. The sale of these Australian assets are contingent, among
other things, upon the receipt of all appropriate regulatory and other customary
approvals.
Stock Purchases
During the year ended May 31, 1998, the Company purchased 1,959,500 shares of
Class A Common Stock in the open market for an aggregate purchase price of
$12,151 pursuant to previous authorizations by the Company's Board of Directors.
These shares have been accounted for as treasury shares. Subsequent to May 31,
1998, the Company has not purchased any shares in the open market. As of August
21, 1998, the Company is authorized to purchase 4,869,000 additional shares of
Class A Common Stock after giving effect to the shares purchased to date.
32
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Year 2000
During fiscal 1998, the Company began a review of its computer systems and
related software to identify systems and software which might malfunction due to
a misidentification of the Year 2000. A committee consisting of members of
senior management from various disciplines within the Company has been formed
and is meeting regularly to discuss the steps that must be taken to deal with
any potential Year 2000 issues. The Company is utilizing both internal and
external resources to identify, correct or reprogram, and test systems for Year
2000 readiness.
Most of the Company's customer-related computer systems and data bases,
including its billing systems, are managed by third parties under contractual
arrangements. The Company has requested those third parties to advise the
Company as to whether they anticipate difficulties in addressing Year 2000
problems and if so, the nature of such difficulties. The Company is also working
with others in the industry using the same or similar systems to determine the
appropriate steps necessary to address the anticipated difficulties.
The Company is currently undertaking an inventory of all local equipment used in
the transmission and reception of all signals to identify items that need to be
upgraded or replaced. The Company is also monitoring industry-wide efforts with
respect to signal delivery to its cable distribution plant and is working with
others in the industry to address potential solutions.
Management of the Company has not finally determined the cost associated with
its Year 2000 readiness efforts and the related potential impact on the
Company's results of operations. Amounts expended to date have not been
material. There can be no assurance that the Company's systems or systems of
other companies on which the Company relies will be converted in time or that
any such failure to convert by the Company or another company will not have
an adverse effect on the Company's financial condition or position.
After evaluating its internal compliance efforts as well as the compliance of
third parties as described above by the end of calendar year 1998, the Company
will develop during 1999 appropriate contingency plans to address situations in
which various systems of the Company, or of third parties with which the Company
does business, are not Year 2000 compliant. In addition, the Company is
currently participating in an industry wide effort to address Year 2000 issues
with similarly situated companies, the goal of which is to develop contingency
plans which address not only the Company's issues but that of the industry as a
whole.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
(Dollar amounts in thousands, except subscriber, and share data)
This report contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the Company
cautions that assumed facts or bases almost always vary from the actual results,
and the differences between assumed facts or bases and actual results can be
material, depending upon the circumstances. Where, in any forward-looking
statement, the Company or its management expresses an expectation or belief as
to future results, there can be no assurance that the statement of expectation
or belief will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "anticipate", "project" and similar expressions may
identify forward-looking statements.
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Taking into account the foregoing, the following are identified as
important factors that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company:
Net Losses; Stockholders' Deficiency
The Company has reported net losses from continuing operations of $77,882,
$53,865 and $47,183 for the fiscal years ended May 31, 1998, 1997, and 1996,
respectively. The Company expects net losses to continue for the foreseeable
future, at least until such time as the operations of its cable television
systems can generate sufficient earnings to offset the charges, including
depreciation and amortization and interest expense, incurred in connection with
such operations and its investments in plants associated with rebuilds and
extensions of its cable television systems.
Reflecting net losses in prior periods, the common stockholders'
deficiency as stated on the Company's consolidated balance sheet at May 31, 1998
was $725,252. The Company's assets, including its cable television franchises,
are recorded on its balance sheet at historical cost. The Company believes that
the current fair value of such assets is significantly in excess of their
historical cost.
Leverage; Capital Requirements
The Company has met and believes, based on current market conditions, that
it will continue to meet its cash obligations with internally generated cash
from operations, along with third party financing, primarily bank borrowings and
the issuance of debt securities to the public, and anticipates that its cable
television operations will continue to meet the debt service obligations under
debt instruments applicable to the cable television operations. Principal
payments are due under the Company's cable operations (excluding its 50% owned
subsidiaries) beginning in the fiscal year ended May 31, 2001. The Company will
need to refinance certain such obligations on or before such time and believes,
based on current market conditions, that it will be able to do so. However,
there can be no assurance that the Company will be successful in any such
refinancing or that the terms of any such financing will be favorable to the
Company. The Indentures for the Company's outstanding issues of publicly-held
debt (the "Indentures") impose certain restrictions on the incurrence of
additional indebtedness. See " --Restrictive Covenants; Consequences of
Default."
For the year ended May 31, 1998, earnings were less than fixed charges by
$71,832. Such amount reflects non-cash charges totaling $159,254, consisting of
depreciation and amortization and subsidiary preferred stock dividends.
Highly Competitive Industry
The Company's ability to maintain or increase its offering of cable
television and other communications services can be subject to the changes in
consumer demand, price competition, and the cost and supply of hardware,
software and other technology required to provide such services. Future
profitability also may be affected by the Company's ability to compete with
other cable television services and communications service enterprises which may
be larger, offer more services, and possess greater resources.
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Cable television systems generally compete for viewer attention with the
direct reception of broadcast television signals by the viewer's own antenna as
well as direct reception via high and low power direct to home television via
satellite transmission. The extent of such competition is dependent upon the
number and quality of signals available and the alternative services offered by
the cable system. A cable system also competes to varying degrees with other
communications and entertainment media, including movies, theater and VCRs, and
other leisure time activities. The extent to which a cable communications system
is competitive depends, in part, upon the cable system's ability to provide, at
a reasonable price to consumers, a greater variety of programming and other
communications services than are available off-air or through other alternative
delivery sources (see Item 1. "Business - Regulation and Legislation") and upon
superior technical performance and customer service. Additionally, because the
Company's systems are operated under non-exclusive franchises, other applicants
may obtain franchises in areas where the Company currently has franchises.
Highly Regulated Industry
The 1996 Act alters federal, state and local laws and regulations
regarding telecommunications providers and services, including the cable
television industry. The 1996 Act deregulates (except for basic service) cable
service rates over a three year period. Implementing regulations of the 1996 Act
are currently being written. The effect that the 1996 Act will have on the
Company's cable television business cannot be determined at this time. See Item
1. "Business - Regulation and Legislation."
Restrictive Covenants; Consequences of Default
The Credit Agreements limit the ability of certain subsidiaries of the
Company to incur additional indebtedness, including intercompany indebtedness,
or liens, to pay dividends to the Company and require that certain operating and
financial tests be met, including the maintenance of the ratio of earnings
before interest, depreciation and taxes (as defined in the Credit Agreements,
"EBIDT") to debt service for the Total Debt (as defined therein) of such
subsidiaries, the ratio of Total Debt to EBIDT and the ratio of EBIDT to
interest expense for the Total Debt of such subsidiaries at certain prescribed
levels. The Note Agreements impose similar restrictions and requirements. The
Indentures also contain various covenants including, but not limited to, the
following: (i) restrictions on mergers, sales and consolidations, (ii)
restrictions on dividends, redemptions or repurchase of the Company's capital
stock or the capital stock of any of its affiliates, (iii) limitations on
transactions with, or investments in, affiliates, (iv) restrictions on the
ability to make loans to, or act as guarantor for, certain of its subsidiaries
and affiliates, and (v) the maintenance of various financial ratios. There can
be no assurance that the assets of the Company would be sufficient to repay all
such senior debt and any Senior Subordinated Debt Securities and Subordinated
Debt Securities then outstanding.
Management believes that the Company is not presently at risk of
noncompliance with any of the covenants described above. However, there can be
no assurance that this will continue to be the case.
35
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Control By Certain Stockholders
The ownership interest in the Company of Leonard Tow and certain trusts
for the benefit of members of his family (the "Tow Trusts"), constituting
approximately 93% of the combined voting power of both the Class A Common Stock
and the Class B Common Stock of the Company as of August 21, 1998, presently
gives them the power to elect all but one member of the Board of Directors of
the Company and to control the vote on all other matters submitted to a vote of
the Company's stockholders.
Under certain of the Credit Agreements, an event of default occurs if
Leonard Tow and/or members of his immediate family or the Tow Trusts cease to
own, in the aggregate, stock of the Company having at least a majority of the
combined voting power of both classes of Common Stock of the Company.
Operating Hazards and Uninsured Risks
While the Company maintains insurance against certain of the risks
associated with its cable television business, the occurrence of a significant
event that is not fully insured against could have a material adverse affect on
the Company.
Refinancing and Interest Rate Exposure Risks
The business and operating results of the Company can be adversely
affected by factors such as the availability or cost of capital, changes in
interest rates, changes in tax rates due to new tax laws, market perceptions of
the cable television business of the Company, or security ratings.
Potential for Changes in Accounting Standards
Authoritative generally accepted accounting principle or policy changes
from such standard setting bodies as the Financial Accounting Standards Board,
and the SEC may affect the Company's results of operations or financial
position.
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
None
ITEM 8. Financial Statements and Supplementary Data.
The financial statements and supplementary financial information that are
required to be included pursuant to this Item 8 are listed in Item 14 under the
caption "1. Index of Financial Statements" in this Annual Report on Form 10-K,
together with the respective pages in this Annual Report on Form 10-K where such
information is located. The financial statements and supplementary financial
information specifically referenced in such list are incorporated in this Item 8
by reference.
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ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
During the fiscal year ended May 31, 1998, the Company was not involved in
any disagreement with its independent certified public accountants on accounting
principles or practices or on financial disclosure.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information with respect to the directors of the Company required to
be included pursuant to this Item 10 will be included under the caption
"Election of Directors" in the Company's Proxy Statement relating to the 1998
Annual Meeting of Shareholders (the "Proxy Statement"), to be filed with the
Securities and Exchange Commission (the "Commission") pursuant to Rule 14a-6
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
is incorporated in this Item 10 by reference. The information with respect to
the executive officers of the Company required to be included pursuant to this
Item 10 is included under the caption "Executive Officers of the Company" in
Part I of this Annual Report on Form 10-K.
ITEM 11. Executive Compensation
The information with respect to executive compensation required to be
included pursuant to this Item 11 will be included under the caption "Executive
Compensation and Other Information" in the Proxy Statement and is incorporated
in this Item 11 by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information with respect to the security ownership of (1) beneficial
owners of more than 5% of the Class A Common Stock, (2) the directors or
nominees for director of the Company, (3) each of the top five executive
officers and (4) all directors and officers of the Company as a group that is
required to be included pursuant to this Item 12 will be included under the
captions "Principal Shareholders," "Election of Directors" and "Executive
Compensation and Other Information - Beneficial Ownership by Management" in the
Proxy Statement and is incorporated in this Item 12 by reference.
ITEM 13. Certain Relationships and Related Transactions
The information with respect to any reportable transaction, business
relationship or indebtedness between the Company and the beneficial owners of
more than 5% of the Class A Common Stock, the directors or nominees for director
of the Company, the executive officers of the Company or the members of the
immediate families of such individuals that is required to be included pursuant
to this Item 13 will be included under the caption "Executive Compensation and
Other Information - Certain Relationships and Related Transactions" in the Proxy
Statement and is incorporated in this Item 13 by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Index of Financial Statements
The following financial statements are included at the indicated page in
this Annual Report on Form 10-K and incorporated in this Item 14(a)1 by
reference:
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Page
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Independent Auditors' Report................................................F-1
Consolidated Balance Sheets.................................................F-2
Consolidated Statements of Operations.......................................F-4
Consolidated Statements of Cash Flows.......................................F-5
Notes to Consolidated Financial Statements..................................F-7
</TABLE>
2. Financial Statement Schedule
None.
3. Reports On Form 8-K
The Company did not file a Report on Form 8-K during the fiscal quarter
ended May 31, 1998.
4. Exhibits
The following documents are filed as part of this Annual Report on Form
10-K:
<TABLE>
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EXHIBIT
NUMBER EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 6(a)(i) to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1990 and incorporated herein by
reference and Amendment to Restated Certificate of Incorporation of
the Company, filed as Exhibit 6(a)(i) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1990
and incorporated herein by reference).
3.2 By-laws of the Company, as amended (filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1995, and incorporated herein by reference.
4.1 Equity Subscription Agreement, dated as of November 21, 1990, among
Centennial Cellular, Century Communications Corp, a Texas
corporation, and Century Cellular Holding Corp., a New York
corporation (filed as Exhibit 4(o) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1992 and incorporated
herein by reference).
4.2 Indenture, dated as of November 15, 1988, by and between the Company
and the Bank of Montreal Trust Company, as Trustee (filed as Exhibit
4(1) to Amendment No. 7 to the Company's Registration Statement on
Form S-1 (File No 33-21394) under the Securities Act of 1933, as
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amended (the "1988 Form S-1"); said 1988 Form S-1 having been filed
with the Commission on April 22, 1988 and incorporated herein by
reference, and said Amendment No. 7 to the 1988 Form S-1 having been
filed with the Commission on November 10, 1988 and incorporated
herein by reference).
4.3 Indenture, dated as of October 15, 1991, by and between the Company
and the Bank of Montreal Trust Company, as Trustee (filed as Exhibit
4.2 to Amendment No. 2 to the Company's Registration Statement on
Form S-3 (File No. 33-33787) under the Securities Act of 1933, as
amended (the "1991 Form S-3"); said 1991 Form S-3 having been filed
with the Commission on August 31, 1990 and incorporated herein by
reference, and said Amendment No. 2 to the 1991 Form S-3 having been
filed with the Commission on March 1, 1991 and incorporated herein
by reference).
4.4 First Supplemental Indenture, dated as of October 15, 1991, by and
between the Company and the Bank of Montreal Trust Company, as
Trustee (filed as Exhibit 7(2) to the Company's current report on
Form 8-K, dated October 17, 1991 and incorporated herein by
reference).
4.5 Indenture, dated as of February 15, 1992, by and between the Company
and the Bank of America National Trust and Savings Association, as
Trustee (filed as Exhibit 4.3 to Amendment No. 2 to the Company's
Registration Statement on Form S-3 (File No. 33-33787) under the
Securities Act of 1933, as amended (the "1991 Form S-3"); said 1991
Form S-3 having been filed with the Commission on March 9, 1990 and
incorporated herein by reference, and said Amendment No. 2 to the
1991 Form S-3 having been filed with the Commission on March 1, 1991
and incorporated herein by reference).
4.6 First Supplemental Indenture, dated as of February 15, 1992, by and
between the Company and the Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 4(t) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1992 and incorporated herein by reference).
4.7 Second Supplemental Indenture, dated as of August 15, 1992, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(u) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1992
and incorporated herein by reference).
4.8 Third Supplemental Indenture, dated as of April 1, 1993, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(v) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1993
and incorporated herein by reference).
4.9 Fourth Supplemental Indenture, dated as of March 6, 1995, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(w) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1995,
and incorporated herein by reference).
4.10 Fifth Supplemental Indenture, dated as of January 23, 1997, by and
between the Company and First Trust of California, National
Association, successor trustee to Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
4.11 Sixth Supplemental Indenture, dated as of September 29, 1997,
between the Company and First Trust of California, National
Association, successor trustee to Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended August 31, 1997, and incorporated herein by reference).
4.12 Seventh Supplemental Indenture dated as of November 13, 1997 between
the Company and First Trust of California, National Association,
successor trustee to Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4.1 to the Company's
Quarterly Report on Form
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10-Q for the quarterly period ended November 30, 1997, and
incorporated herein by reference).
4.13 Indenture, dated as of January 15, 1998 between the Company and
First Trust of California, National Association, as Trustee (filed
as Exhibit 4 to the Company's Registration Statement on Form S-4
(File No. 333-47161) under the Securities Act of 1933, as amended
(the "1998 Form S-4"); said 1998 Form S-4 having been filed with the
Commission on March 2, 1998 and incorporated herein by reference).
The Company hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument omitted pursuant to Item
601(b)(4) (iii) of Regulation S-K.
*10.1 Amended Employment Agreement, dated as of July 1, 1991, between the
Company and Leonard Tow (filed as Exhibit 10(a)(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1992
and incorporated herein by reference).
*10.2 Agreement, dated July 30, 1992, between the Company and the Leonard
and Claire Tow Life Insurance Trust (filed as Exhibit 10(a)(2) to
the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992 and incorporated herein by reference).
*10.3 Employment Agreement, dated as of January 1, 1995, between the
Company and Daniel E. Gold (filed as Exhibit 10(a)(7) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1996 and incorporated herein by reference).
*10.4 Employment Agreement, dated as of January 1, 1997, between the
Company and Scott N. Schneider (filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
*10.5 Employment Agreement, dated as of January 1, 1997, between the
Company and Michael G. Harris (filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
*10.6 Employment Agreement, dated as of January 1, 1997, between the
Company and Frank Tow (filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1997, and
incorporated herein by reference).
*10.7 Employment Agreement, dated as of January 1, 1997, between the
Company and Clifford A. Bail (filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1997,
and incorporated herein by reference).
10.8 Principal Stockholders' Agreement, dated as of December 7, 1985,
between Sentry Insurance a Mutual Company ("Sentry"), the Company,
Leonard Tow individually and as Trustee, and Claire Tow as Trustee
(filed as Exhibit 10(a) to the Company's Registration Statement on
Form S-1 (No. 33-2025) under the Securities Act of 1933, as amended,
filed with the Commission on December 9, 1985 (the "1986 Form S-1")
and incorporated herein by reference).
10.9 Amendment to Principal Stockholders' Agreement, dated August 31,
1987 (filed as an Exhibit to the Company's Current Report on Form
8-K dated September 11, 1987 and incorporated herein by reference).
10.10 Lease, dated July 15, 1987, between Locust Avenue Associates and
Century-Texas (filed as Exhibit 10(h) to the 1988 Form S-1 and
incorporated herein by reference).
10.11 Agreement for lease dated as of January 1, 1997 by and between
Locust Avenue Associates Limited Partnership and Century Texas
(filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1997, and incorporated herein by
reference).
10.12 Third Agreement of Amendment to the Amended and Restated Joint
Venture Agreement, dated June 18, 1987, among American Television
and Communications Corporation, Daniels & Associates, Inc.,
Tele-communications, Inc., Comcast Corporation and Century Southwest
Cable
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<S> <C>
Television, Inc. (filed as Exhibit 10(m) to the 1988 Form S-1 and
incorporated herein by reference).
10.13 Colorado Springs Joint Sharing and Buy-Sell Agreement, dated
November 1, 1974, among Century Venture Corporation, Century
Colorado Corp., American Television and Communications Corporation,
Century Texas and Vumore-Video Corporation of Colorado, Inc. (filed
as Exhibit 10(h) to the 1986 Form S-1 and incorporated herein by
reference).
*10.14 1985 Stock Option Plan of the Company (filed as Annex A to the
Company's Registration Statement on Form S-8 (File No. 33-34387)
under the Securities Act of 1933, as amended, filed with the
Commission on April 19, 1990 and incorporated herein by reference).
*10.15 Incentive Award Plan of the Company (filed as Annex A to the
Company's Registration Statement on Form S-8 (File No. 33-23718)
under the Securities Act of 1933, as amended, filed with the
Commission on August 11, 1988 and incorporated herein by reference.
*10.16 1985 Employee Stock Purchase Plan of the Company, as amended (filed
as Exhibit 10(r) to the Company's Annual Report on Form 10-K for the
year ended May 31, 1995, and incorporated herein by reference).
*10.17 Non-Employee Director Stock Option Plan of the Company (filed as
Annex A to the Company's Registration Statement on Form S-8 (File No
33-34388) under the Securities Act of 1933, as amended, filed with
the Commission on April 19, 1990 and incorporated herein by
reference).
*10.18 1985 Stock Equivalent Plan (filed as Exhibit 10(m) to the 1986 Form
S-1 and incorporated herein by reference).
*10.19 Century Retirement Investment Plan (filed as Exhibit 10(x) to the
Company's Annual Report on Form 10-K for year ended May 31, 1992 and
incorporated herein by reference).
*10.20 Century 1992 Management Equity Incentive Plan (filed as Exhibit
10(x)(1) to the Company's Annual Report on Form 10-K for the year
ended May 31, 1992 and incorporated herein by reference).
*10.21 1993 Non-Employee Directors' Stock Option Plan of the Company (filed
as Exhibit 10(v)(2) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1995, and incorporated herein by
reference).
*10.22 1994 Stock Option Plan of the Company (filed as Exhibit 10(v)(3) to
the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995, and incorporated herein by reference).
10.23 Interest Rate Swap Agreement, dated as of July 18, 1986, between
Citibank, N.A. and Century-Texas (filed as Exhibit 10(v) to
Amendment No. 5 to the 1988 Form S-1 and incorporated herein by
reference).
10.24 Amendment No. 1 to Management Agreement and Joint Venture Agreement
(Century ML Venture), dated September 21, 1987, between Century
Texas and ML Media Partners, L.P., a Delaware limited partnership
(filed as Exhibit 10(w) to the Company's Annual Report on Form 10-X
for the fiscal year ended May 31, 1989 and incorporated herein by
reference).
10.25 Management Agreement and Joint Venture Agreement (Century-ML Radio
Venture), dated as of February 15, 1989, between Century Texas and
ML Media Partners, L.P., a Delaware limited partnership (filed as
Exhibit 10(x) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1989 and incorporated herein by
reference).
10.26 Plan and Agreement of Merger, dated August 2, 1991, by and among
Century Cellular Holding Corp., Century Cellular Corp., Citizens
Utilities Company and Citizens Cellular Corp., together with
exhibits, including Management Agreement, Conflicts/Non-Compete
Agreement, Stock Transfer Agreement and Registration Rights
Agreement (filed as Exhibit 10(cc) to the Company's
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<S> <C>
Annual Report on Form 10-K for the fiscal year ended May 31, 1991
and incorporated herein by reference).
10.27 Credit Agreement, dated as of August 4, 1995, by and among CCC-I,
Inc., Pullman TV Cable Co., Inc., Kootenai Cable, Inc., Citibank
N.A., as agent, and each of the banks parties thereto (filed as
Exhibit 10(ff) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1996 and incorporated herein by
reference).
10.28 Credit Agreement, dated as of June 30, 1994, by and among CCC-II,
Inc., Citibank N.A. as managing agent, and each of the banks parties
thereto (filed as Exhibit 10 to the Company's report on Form 8-K
dated July 25, 1994 and incorporated herein by reference. The
Company hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument omitted
pursuant to Item 601(b)(4)(iii) of Regulation S-K).
10.29 Eighth Restated Credit Agreement, dated as of July 10, 1990, between
Century Texas, Century Investors and Citibank, N.A., on behalf of
itself and as agent, and The Chase Manhattan Bank (National
Association), The Bank of Nova Scotia, The First National Bank of
Chicago, Bank of Montreal, The Royal Bank of Canada, Continental
Bank N.A., Bankers Trust Company, Nippon Credit Bank, Provident
National Bank, and Security Pacific National Bank ("the Eighth
Restated Banks") (filed as an Exhibit to the Company's Current
Report on Form 8-K, filed July 13, 1990, and incorporated herein by
reference).
10.30 Third Amendment, dated as of November 21, 1990 (the "Third
Amendment"), among Centennial Cellular Corp., a Delaware corporation
("Centennial Cellular Corp."), the Lender parties on the signature
page thereto, Citibank, N.A., as agent, Century Cellular Holding
Corp., and the Guarantor of parties on the signature page thereto,
to the Credit Agreement, dated as of October 11, 1989, among
Centennial Cellular Corp., and Citibank, N.A., on behalf of itself
and as agent, and Kansallis-Osake-Pankki, Provident National Bank,
DnC America Banking Corporation, Meridian Bank, Lincoln Savings
Bank, Toronto Dominion Bank, and The Bank of Nova Scotia (the
"Cellular Banks") (filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1991,
and incorporated herein by reference).
10.31 Credit Agreement, dated as of October 11, 1989, among Centennial
Cellular Corp., and Citibank, N.A., on behalf of itself and as
agent, and the Cellular Banks, as Amended and Restated pursuant to
the Third Amendment (filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1991,
and incorporated herein by reference).
10.32 Second Restated Consolidated Guaranty and Pledge Agreement, dated as
of July 10, 1990, made by the subsidiaries of the Company set forth
on the signature pages thereto to Citibank, N.A., as agent for the
Eighth Restated Banks (filed as Exhibit 4(g) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990 and
incorporated herein by reference).
10.33 Third Restated Pledge Agreement and Guaranty, dated as of July 10,
1990, made by the Company to Citibank, N.A., as agent for the Eighth
Restated Banks (filed as Exhibit 4(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1990 and incorporated
herein by reference).
10.34 Seventh Restated Pledge and Security Agreement, dated as of July 10,
1990, made by Century Texas to Citibank, N.A., as agent for the
Eighth Restated Banks (filed as Exhibit (i)A to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990 and
incorporated herein by reference).
10.35 Third Collateral Agreement Amendment, dated as of July 10, 1990 made
by Century Texas, the Company and Citibank, N.A. as agent for the
Eighth Restated Banks (filed as Exhibit 4(i)B to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1990
and incorporated herein by reference).
10.36 Pledge Agreement, dated as of October 11, 1989, made by Century
Cellular Holding Corp., a New
</TABLE>
42
<PAGE>
<PAGE>
<TABLE>
<S> <C>
York corporation, to Citibank, N.A., as agent for the Cellular Banks
(filed as an Exhibit to the Company's Quarterly Report on Form 10-Q
for the period quarterly ended November 30, 1990 and incorporated
herein by reference).
10.37 Pledge and Security Agreement, dated as of October 11, 1989, made by
Centennial Cellular Corp to Citibank, N.A., as agent for the
Cellular Banks, as Amended and Restated pursuant to the Third
Amendment (filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended November 30, 1990 and
incorporated herein by reference).
10.38 Consolidated Guaranty and Pledge Agreement, dated as of October 11,
1989, made by the subsidiaries of Centennial Cellular Corp. set
forth on the signature pages thereto to Citibank, N.A., as agent for
the Cellular Banks, as Amended and Restated pursuant to the Third
Amendment (filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended November 30, 1990 and
incorporated herein by reference).
10.39 Amendment No. 1 dated as of August 9, 1996 among CCC-I, Inc.,
Pullman TV Cable Co., Inc. and Kootenai Cable, Inc., Citibank, N.A.,
as agent, and each of the bank parties thereto (filed as Exhibit
10.39 to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, and incorporated herein by reference).
10.40 Amendment No. 1 dated as of August 9, 1996 among CCC-II, Inc.,
Citibank, N.A., as managing agent, and each of the bank parties
thereto (filed as Exhibit 10.40 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1997, and incorporated
herein by reference).
10.41 Credit Agreement dated as of April 15, 1997 among Citizens Century
Cable Television Venture, Bank of America, National Trust and
Savings Association, as Syndication Agent, and Societe General, as
Agent, Corestates Bank, N.A., The First National Bank of Boston,
LTCB Trust Company, and PNC Bank, National Association, as
Co-Agents, and each of the bank parties thereto (filed as Exhibit
10.41 to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, and incorporated herein by reference).
10.42 Extension Agreement to Employment Agreement dated September 10, 1997
between the Company and Daniel E. Gold (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended November 30, 1997, and incorporated herein by reference).
10.43 Employment Agreement, dated as of January 1, 1997, between the
Company and Bernard P. Gallagher (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended August 31, 1997, and incorporated herein by reference).
'D'*10.44 Modification Agreement, dated as of June 1, 1998, between the
Company and Scott N. Schneider.
'D'*10.45 Modification Agreement, dated as of June 1, 1998, between the
Company and Bernard P. Gallagher.
'D'*10.46 Modification Agreement, dated as of June 1, 1998, between the
Company and Michael G. Harris.
'D'*10.47 Modification Agreement, dated as of June 1, 1998, between the
Company and Frank Tow.
'D'*10.48 Employment Agreement, dated as of July 1, 1998, between the Company
and Leonard Tow.
'D'10.49 Agreement and Plan of Merger, dated as of July 2, 1998, between
Centennial Cellular Corp. and CCW Acquisition Corp.
'D'10.50 Stockholder Agreement, dated as of July 2, 1998, between CCW
Acquisition Corp. and Century Communications Corp.
'D'11 Computation of loss per common share.
'D'12 Computation of ratios.
</TABLE>
43
<PAGE>
<PAGE>
<TABLE>
<S> <C>
'D'21 List of subsidiaries of the Company.
'D'23.1 Consent of Deloitte & Touche LLP.
'D'27 Financial Data Schedule.
99 Press Release of Centennial Cellular Corp., dated April 14, 1998
(filed as Exhibit 99 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended February 28, 1998, and incorporated
herein by reference).
</TABLE>
- ----------
* Constitutes a management contract or compensatory plan or arrangement.
'D' Filed herewith.
44
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Century Communications Corp.
New Canaan, Connecticut
We have audited the accompanying consolidated balance sheets of Century
Communications Corp. and subsidiaries as of May 31, 1998 and 1997, and the
related consolidated statements of operations and cash flows for each of the
three years in the period ended May 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Century Communications Corp.
and subsidiaries as of May 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
August 4, 1998
F-1
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Amounts in Thousands
<TABLE>
<CAPTION>
May 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 285,498 $ 151,947
Accounts receivable less allowance
for doubtful accounts of $1,695
and $3,592 respectively 16,109 48,958
Prepaid expenses and other current
assets 3,465 14,649
Net assets of discontinued operations 37,323 --
---------- ----------
Total current assets 342,395 215,554
Property, plant and equipment - net 565,965 715,418
Investment in marketable equity securities 52,451 45,118
Equity investments in cable television and
wireless telephone systems - net -- 102,097
Debt issuance costs, less accumulated
amortization of $16,013 and $13,270,
respectively 33,829 31,735
Cable television franchises, less
accumulated amortization of $324,835
and $322,309, respectively 344,612 401,775
Wireless telephone licenses, less
accumulated amortization of
$214,494 in 1997 -- 347,206
Excess of purchase price over value of net
assets acquired, less accumulated
amortization of $40,612 and $58,920,
respectively 166,570 280,643
Other assets 9,360 14,685
---------- ----------
$1,515,182 $2,154,231
========== ==========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
Amounts in Thousands (Except Share Data)
<TABLE>
<CAPTION>
May 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS'
DEFICIENCY
Current liabilities:
Current maturities of long-term debt $ 20,050 $ 15,011
Accounts payable 35,983 26,711
Accrued expenses and other current liabilities 97,499 150,407
----------- -----------
Total current liabilities 153,532 192,129
Long-term debt 2,009,052 2,186,981
Deferred income taxes 5,170 53,959
Minority interest in subsidiaries 67,030 133,518
Other deferred income 5,650 --
Commitments and contingencies (See Notes)
Preferred stock, par value $.01 per share
authorized 100,000,000 shares,
none issued -- --
Subsidiary convertible redeemable preferred
stock (at aggregate liquidation value
which approximates the fair market value)
par value $.01 per share, authorized, issued
and outstanding 102,187 shares (redemption
value of $1,823 per share) -- 186,287
Common stockholders' deficiency:
Common stock, par value $.01 per share:
Class A, authorized 400,000,000 shares,
issued, 65,684,888 and 62,695,127
shares, respectively, and outstanding
31,954,085 and 30,968,289 shares,
respectively 657 627
Class B, authorized 300,000,000 shares,
issued and outstanding 42,726,115
and 45,126,115 shares, respectively 427 451
Additional paid-in capital 176,179 176,871
Other, including 33,730,803 and 31,726,838
treasury shares, respectively (132,501) (127,549)
Accumulated deficit (770,014) (649,043)
----------- -----------
Total common stockholders' deficiency (725,252) (598,643)
----------- -----------
$ 1,515,182 $ 2,154,231
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Amounts in Thousands (Except Share Data)
<TABLE>
<CAPTION>
Year ended May 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Service income $ 484,736 $ 459,646 $ 368,669
Costs and expenses:
Cost of services 103,932 100,789 82,274
Selling, general and administrative 122,307 111,467 85,591
Depreciation and amortization 154,029 159,547 124,436
------------ ------------ ------------
380,268 371,803 292,301
------------ ------------ ------------
Operating income 104,468 87,843 76,368
Interest expense 172,608 157,730 143,030
Other (income) expense (1,533) 171 550
------------ ------------ ------------
Loss from continuing operations before income
tax (benefit), minority interest and
extraordinary item (66,607) (70,058) (67,212)
Income tax (benefit) (624) (23,363) (22,730)
------------ ------------ ------------
Loss from continuing operations before
minority interest and extraordinary item (65,983) (46,695) (44,482)
Minority interest in income of subsidiaries (11,899) (7,170) (2,701)
------------ ------------ ------------
Loss from continuing operations (77,882) (53,865) (47,183)
Loss from discontinued operations, net of
income tax benefit of $13,597, $7,295
and $11,596 and minority interest in losses
of $21,193, $22,584 and $10,970 (43,089) (80,428) (54,934)
------------ ------------ ------------
Loss before extraordinary item (120,971) (134,293) (102,117)
Extraordinary item - loss on early retirement
of debt, net of income tax benefit
of $5,379 -- (7,582) --
------------ ------------ ------------
Net loss $ (120,971) $ (141,875) $ (102,117)
============ ============ ============
Dividend on discontinued subsidiary
convertible redeemable preferred stock $ 5,225 $ 4,850 $ 4,256
============ ============ ============
Net loss applicable to common shares $ (126,196) $ (146,725) $ (106,373)
============ ============ ============
Net loss per common share - basic and diluted:
Loss from continuing operations $ (1.11) $ (.78) $ (.70)
Loss from discontinued operations (.58) (1.08) (.74)
------------ ------------ ------------
Loss before extraordinary item (1.69) (1.86) (1.44)
Extraordinary item -- (0.10) --
------------ ------------ ------------
Net loss per common share - basic
and diluted $ (1.69) $ (1.96) $ (1.44)
============ ============ ============
Weighted average number of common shares
outstanding during the period 74,770,000 74,675,000 73,748,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in Thousands
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 616,043 $ 557,224 $ 456,210
Cash paid to suppliers, employees and
governmental agencies (327,271) (330,862) (255,777)
Interest paid (129,148) (119,419) (122,090)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 159,624 106,943 78,343
----------- ----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (113,222) (79,563) (62,205)
Cable television franchise expenditures (1,764) (2,105) (3,973)
Acquisition of other assets (1,524) (885) --
Acquisition and exchanges of cable television systems (70,994) (13,928) (333,020)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (187,504) (96,481) (399,198)
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 813,659 1,043,000 728,500
Principal payments on long-term debt (575,550) (1,039,050) (415,957)
Debt issuance costs (18,307) (9,017) (4,849)
Purchase of treasury stock (12,576) (2,358) (159)
Issuance of common stock 2,951 3,822 2,526
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 210,177 (3,603) 310,061
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS - CONTINUING OPERATIONS 182,297 6,859 (10,794)
CASH FLOWS OF DISCONTINUED OPERATIONS - NET (48,746) (19,504) (53,378)
CASH AND SHORT-TERM INVESTMENTS - BEGINNING
OF YEAR 151,947 164,592 228,764
----------- ----------- -----------
CASH AND SHORT-TERM INVESTMENTS - END OF YEAR $ 285,498 $ 151,947 $ 164,592
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Amounts in Thousands
<TABLE>
<CAPTION>
Year ended May 31,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
NET LOSS $(120,971) $(141,875) $(102,117)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 154,029 159,547 124,436
Minority interest in income of
subsidiaries - continuing operations 11,899 7,170 2,701
Deferred income taxes (4,812) (32,905) (25,690)
Non cash interest charges 39,138 30,006 27,087
Loss from discontinued operations - net 43,089 80,428 54,934
Change in assets and liabilities net of
effects of acquired cable television
systems:
Accounts receivable - (increase)/
decrease 5,189 (10,799) 694
Prepaid expenses and other current
assets - decrease 5,437 323 262
Accounts payable and accrued expenses
- increase/(decrease) 26,626 15,048 (3,964)
--------- --------- ---------
Total adjustments 280,595 248,818 180,460
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 159,624 $ 106,943 $ 78,343
========= ========= =========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
<PAGE>
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1998, 1997 and 1996 (Amounts
in thousands except subscriber and share data)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Century
Communications Corp., all of its subsidiaries and certain partnership interests
(the "Company") from their respective dates of acquisition (see Note 4).
Included in subsidiaries are the 50% indirectly-owned: Century Venture Corp. and
Subsidiary, Century-ML Cable Venture and Subsidiary, and Citizens Century Cable
Television Venture (see Note 11). In addition, the consolidated financial
statements include the accounts of Centennial Cellular Corp., ("Centennial"), an
approximately 34% owned company (at May 31, 1998) in which the Company controls
approximately 74% of the voting power of the common shares and East Coast Pay
Television Pty. Limited ("ECT"), an Australian Company. All material
intercompany transactions and balances have been eliminated. As discussed more
thoroughly in Note 2, Centennial Cellular Corp. (the "Wireless Telephone
Segment") and the Company's Australian operations, including ECT, are presented
as discontinued operations within the accompanying consolidated financial
statements. Accordingly, the consolidated financial statements reflect their
operating results and cash flows as discontinued operations for each of the
three years ended May 31, 1998 and the consolidated balance sheet at May 31,
1998 segregates the net assets of these discontinued operations.
Revenue recognition
Cable service income includes earned subscriber service revenues and charges for
installation and connections, net of programmers' share of pay television
revenues. Such programmers' share netted against service income amounted to
$131,792, $114,591 and $92,014 in 1998, 1997 and 1996 respectively.
Charges for installations and connections are recognized into revenue upon
completion of the installation or reconnection. Subscriber services paid in
advance are recognized as income when earned.
Investment in marketable equity securities
The Company classifies its investments in debt and equity securities as
available for sale in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115 "Accounting for Certain Investments in Debt and
Equity Securities".
Unrealized holding gains and losses, net of the related income tax effect on
these securities are excluded from earnings and are reported as a component of
stockholders' deficiency until realized. Equity securities at May 31, 1998 and
1997 are stated at their fair market values. The adjusted cost basis of these
equity securities at May 31, 1998 and 1997 was $32,255. The Company recorded an
increase in the unrealized gain of $7,333 during the year ended May 31, 1998, a
decrease in the unrealized gain of
F-7
<PAGE>
<PAGE>
$7,950 during the year ended May 31, 1997 and an increase in the unrealized gain
of $6,397 during the year ended May 31, 1996. As of August 4, 1998, the market
value of these securities had declined approximately $12,250 from May 31, 1998.
Debt issuance costs
Costs associated with the issuance of the Company's debt securities and credit
facilities (Note 7) have been capitalized and are being amortized on a
straight-line basis over the expected lives of the issues.
Equity investments in cable television and wireless systems
The Company records such investments at purchased cost at the date of
acquisition and adjusts for the Company's share of net income or loss from the
acquisition date. At May 31, 1998, the Company's equity investments in cable
television and wireless systems related to discontinued operations are included
in Net Assets of Discontinued Operations in the accompanying consolidated
balance sheet. At May 31, 1997, the Company's equity investments principally
consisted of a $94,153 investment in wireless minority interests. The difference
of $123,024 between the cost of the Company's equity investments in wireless
systems and the underlying book value is amortized over ten years. Accumulated
amortization at May 31, 1997 was $69,878.
Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed
principally using the straight-line method over the following estimated useful
lives of the assets:
<TABLE>
<S> <C>
Buildings 15 - 25 years
Cable television transmission and
distribution systems and
related equipment 8 - 15 years
Miscellaneous equipment and
furniture and fixtures 3 - 15 years
</TABLE>
The cost of connections for new cable television subscribers are capitalized at
standard per subscriber rates for labor, materials and overhead. Expenditures
for maintenance and repairs are charged to operating expense as incurred, and
betterments, replacement equipment and additions are capitalized.
Cable television franchises
Cable television franchises principally consist of amounts allocated under
purchase accounting (see Note 4). Such amounts are amortized using the
straight-line method over the lives of the franchises (generally ranging from 10
to 15 years).
Wireless telephone licenses
Wireless telephone licenses at May 31, 1998 are included in Net Assets of
Discontinued Operations in the accompanying consolidated balance sheet. Wireless
telephone licenses consists of amounts allocated under purchase accounting. Such
amounts are amortized, commencing with the date of operations, using the
straight-line method over a period of 10 and 40 years for cellular and personal
communications services ("PCS") licenses, respectively. Centennial, during the
fiscal year ended May 31, 1997,
F-8
<PAGE>
<PAGE>
capitalized interest costs of $2,752 related to the acquisition of the PCS
license.
Excess of purchase price over value of net assets acquired
The excess of purchase price over value of net assets acquired ("goodwill") is
being amortized using the straight-line method over a period of 40 years.
Income taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" which provides that
the deferred tax provision is determined by the liability method. Deferred tax
assets and liabilities are recognized based on the differences between the book
and tax basis of assets and liabilities using presently enacted tax rates.
Loss per common share
Effective with the quarter ended February 28, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"), which was effective for financial statements ending after
December 15, 1997. This statement superseded Accounting Principles Board Opinion
No. 15 ("APB 15") and replaces the presentation of primary earnings per share
("EPS") and fully diluted EPS on the face of the statement of operations with
basic and diluted EPS. Basic EPS is calculated by dividing loss applicable to
common shares by weighted average common shares outstanding. Diluted EPS
reflects the potential dilution that could occur if potential common stock
instruments of the Company were exercised, converted or issued. Adoption of SFAS
128 did not result in a change of EPS previously reported by the Company using
APB 15.
The loss per common share reflects a charge for the dividends on subsidiary
convertible redeemable preferred stock of $5,225, $4,850 and $4,256 for the
years ended May 31, 1998, 1997 and 1996, respectively. These dividends are
related to the Company's discontinued wireless telephone segment.
Statement of cash flows
Short-term investments classified as cash equivalents in the consolidated
financial statements consist principally of overnight deposits, government
securities and commercial paper with acquired maturities of three months or
less.
Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates.
Valuation of long lived assets
The Company, on a quarterly basis, undertakes a review and valuation of the net
carrying value, recoverability and write-off period of all categories of its
long lived assets. The Company in its
F-9
<PAGE>
<PAGE>
valuation considers current market values of its properties, competition,
prevailing economic conditions, government policy including taxation, and the
Company's and the industry's historical and current growth patterns. The Company
also considers its financial structure, including the underlying cost of
securities which support the Company's internal growth and acquisitions, as well
as the recoverability of the cost of its long lived assets based on a comparison
of estimated undiscounted operating cash flows for the systems which generated
long lived assets with the carrying value of the long lived assets. The
Company's long lived assets are stated at the lower of cost or market and are
amortized over their respective expected lives.
Disclosure of fair value of financial instruments
The carrying amount reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates fair value because of the immediate short-term maturity of these
financial instruments.
Reclassifications
Certain prior year balances have been reclassified to conform with the current
year presentation.
New accounting pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 129 "Disclosure of Information about Capital
Structure", Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" in 1997,
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" and Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" in 1998. Additionally, during 1998 the AICPA's Accounting Standards
Executive Committee issued Statement of Position (SOP) 98-5 "Reporting on the
Cost of Start-up Activities". The Company believes these Statements will not
have a material impact on the Consolidated Financial Statements of the Company
when adopted.
NOTE 2. DISCONTINUED OPERATIONS
Centennial Cellular Corp.
On July 2, 1998, Centennial and CCW Acquisition Corp. ("Acquisition"), a
Delaware corporation organized at the direction of Welsh, Carson, Anderson &
Stowe VIII, L.P. ("WCAS VIII") entered into an Agreement and Plan of Merger (the
"Merger Agreement") providing for the merger of Acquisition with and into
Centennial (the "Merger"). Centennial will continue as the surviving corporation
(the "Surviving Corporation") in the Merger.
Subject to proration, pursuant to the Merger Agreement, outstanding Class A
Common Stock of Centennial will be converted into the right to receive $43.50
per share in cash or to retain up to 7.1% of the common stock of the Surviving
Corporation outstanding after the Merger. Class B Common Stock of Centennial
will be converted into the right to receive $43.50 per share in cash; provided,
that if the aggregate number of shares of Class A Common Stock elected to be
retained by Centennial's existing stockholders is less than 7.1% of the shares
outstanding after the Merger, then a number of shares of
F-10
<PAGE>
<PAGE>
Class B Common Stock equal to the pro rata portion of such shortfall will be
converted into shares of Class A Common Stock and retained. All outstanding
Convertible Redeemable Preferred Stock of Centennial and Second Series
Convertible Redeemable Preferred Stock of Centennial and, together with the
Convertible Redeemable Preferred Stock of Centennial, the ("Redeemable Preferred
Stock") will be converted into the right to receive $43.50 per share in cash on
an as converted basis.
Because 7.1% of the shares outstanding immediately after the effective time of
the Merger (the "Effective Time") must be retained by such existing stockholders
of Centennial in the Merger, stockholders who do not elect to retain any shares
may, due to proration, be required to retain some Common Stock of Centennial. In
addition, stockholders who elect to retain shares may, due to proration, retain
Common Stock of Centennial and receive cash in amounts which vary from the
amounts such holders elected.
In connection with the execution of the Merger Agreement, the Company,
Centennial's principal stockholder, entered into a Stockholder Agreement, dated
July 2, 1998, with Acquisition (the "Stockholder Agreement"). Pursuant to the
Stockholder Agreement, the Company agreed to vote its shares in favor of the
approval and adoption of the Merger Agreement. Because the Company agreed to
approve the Merger by written consent, consummation of the Merger does not
require approval by a majority of Centennial's stockholders who are not
affiliated with the Company or Acquisition. Pursuant to the Stockholder
Agreement, the Company has agreed to terminate the Services Agreement, whereby
the Company provides management services to Centennial, as of the effective
time of the Merger.
The consummation of the Merger is subject to certain conditions, including,
without limitation, Centennial obtaining a final order from the Federal
Communications Commission (the "FCC") approving the transfer of control of the
Company to WCAS VIII and its affiliates, the expiration of antitrust regulatory
waiting periods and Acquisition obtaining financing substantially on the terms
contemplated by the commitment letters it received in connection with the Merger
Agreement.
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
expenses. However, in the event Centennial or Acquisition shall have terminated
the Merger Agreement as a result of either Centennial entering into a definitive
written agreement with respect to any merger, consolidation or other business
combination, tender or exchange offer, recapitalization transaction, asset or
stock purchase or other similar transaction with a third party (an "Acquisition
Transaction") or the Board of Directors of Centennial having withdrawn, modified
or amended in any manner adverse to Acquisition its approval or recommendation
of the Merger Agreement or approved, recommended or endorsed any proposal for an
Acquisition Transaction, then Centennial shall reimburse Acquisition for
documented fees and expenses (subject to a maximum of $25,000) and pay
Acquisition a termination fee of $40,000.
In connection with the Merger, Acquisition has received a commitment from a
third party for financing for Acquisition and certain existing and future
subsidiaries of Centennial in the aggregate amount of approximately $1.6 billion
in the form of senior secured credit facilities and an unsecured bridge loan.
Additionally, an affiliate of WCAS VIII has agreed to purchase approximately
$150 million aggregate amount of subordinated notes of the Surviving
Corporation. Finally, WCAS VIII and other equity investors have agreed to
purchase approximately $350 million of common stock of the Surviving
Corporation. It is anticipated that this funding will be used to pay the merger
consideration described above and related fees and expenses. Additionally,
pursuant to the Merger Agreement, Centennial has
F-11
<PAGE>
<PAGE>
agreed that, upon the request of Acquisition, it will commence offers to
repurchase its two outstanding issuances of public debt (the "Debt Offers"). As
a condition to the closing of the Merger, Centennial must consummate the Debt
Offers prior to the closing date of the Merger. There can be no assurance that
Acquisition will receive the funding referred to above or, if it does receive
such funding, there can be no assurance as to the timing or terms thereof.
Additionally, there can be no assurance that the Debt Offers will be
consummated. Finally, in the event that Acquisition must seek alternative
financing to consummate the Merger there can be no assurance that it will be
able to secure alternative financing on terms no less favorable than the terms
of the above commitments.
The Company owns 8,561,819 shares of Class B Common Stock of Centennial. The
Company also owns 3,978 shares of Second Series Convertible Redeemable Preferred
Stock of Centennial. If such Class B Common Stock and Second Series Convertible
Redeemable Preferred Stock are fully exchanged for cash, the Company would
receive an aggregate consideration of approximately $377,473 as a result of the
conversion into cash.
The Company anticipates recording a net gain upon the disposition of Centennial
of approximately $220,000 during fiscal 1999, net of income taxes and the
Company's share of estimated losses through the date of disposition. The
Company's share of the estimated losses is not expected to be material. When the
Centennial disposition is completed, the Company expects to reduce its valuation
allowance applied against its deferred tax assets by approximately $80,000 to
$90,000.
Australian Operations
On July 9, 1998, the Company and United International Holdings, Inc. ("UIH")
entered into an agreement pursuant to which UIH's UIH Asia/Pacific
Communications Inc. unit ("UAP") agreed to acquire the Company's 25% ownership
interest in XYZ for approximately $24,600. Approximately 95% of the sales price
is payable in the form of UIH Series B Convertible Preferred Stock which is
convertible into UIH Class A stock at a conversion price of $21.25 per share.
Also on July 9, 1998, ECT agreed to sell substantially all of its operating
assets to Austar Entertainment Pty Ltd. ("Austar"), a wholly owned subsidiary of
UAP, for approximately $6,100 in the form of Austar preferred stock. ECT will
utilize the $6,100 proceeds and its other current assets of approximately $5,000
to liquidate its current liabilities, which approximate $25,000. The Company
anticipates recording an immaterial gain as a result of the sale of its
Australian assets. The sale of these Australian assets are contingent, among
other things, upon the receipt of all appropriate regulatory and other customary
approvals.
The consolidated financial statements and notes thereto reflect the discontinued
operations of Centennial and the Australian Operations. The net assets of these
discontinued operations have been separately classified in the accompanying
consolidated balance sheet at May 31, 1998 under the caption "Net Assets of
Discontinued Operations". The separate balance sheets of Centennial and the
Australian operations at May 31, 1998, which are included in the Net Assets of
Discontinued Operations, are detailed within Note 15.
Operating results of Centennial and the Australian Operations for the years
ended May 31, 1998, 1997 and 1996, are shown separately within the accompanying
consolidated statements of operations under the caption "Loss from Discontinued
Operations". The separate statements of operations of Centennial and the
Australian operations for the year ended May 31, 1998 are detailed within Note
15. The
F-12
<PAGE>
<PAGE>
operating results of Centennial and the Australian Operations for the years
ended May 31, 1997 and 1996 consist of the following:
Centennial Cellular Corp.:
<TABLE>
<CAPTION>
Years Ended May 31,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenue $ 151,023 $ 112,197
Costs and expenses (177,080) (131,306)
--------- ---------
Operating Loss (26,057) (19,109)
Income from equity investments 15,180 10,473
Interest expense (33,379) (27,886)
Gain on sale of assets 3,819 8,310
Income tax benefit 7,295 11,596
Minority interest in income of subsidiaries (153) (15)
--------- ---------
Net Loss (a) $ (33,295) $ (16,631)
========= =========
</TABLE>
Australian Operations:
<TABLE>
<CAPTION>
Years Ended May 31,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenue $ 33,248 $ 14,571
Costs and expenses (89,073) (55,419)
--------- ---------
Operating Loss (55,825) (40,848)
Interest expense (9,634) (1,299)
Other loss (4,258) (7,126)
--------- ---------
Net Loss (a) $ (69,717) $ (49,273)
========= =========
</TABLE>
(a) Prior to minority interest share of losses.
NOTE 3. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The table below summarizes non-cash reclassifications that occurred during the
years ended May 31, 1998, 1997 and 1996. The reclassifications result primarily
from the Company's acquisitions.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Property, plant and equipment $ -- $ -- $ (3,643)
Marketable securities 7,333 (7,951) 6,398
Cable television franchises 5,000 (14,828) 5,314
Goodwill -- 14,828 3,004
Other assets -- -- (966)
-------- -------- --------
$ 12,333 $ (7,951) $ 10,107
======== ======== ========
Current liabilities $ 8,067 $ 3,005 $ --
Deferred taxes -- -- 2,809
Minority interest (3,067) (3,005) 900
Other stockholders' deficiency 7,333 (7,951) 6,398
-------- -------- --------
$ 12,333 $ (7,951) $ 10,107
======== ======== ========
</TABLE>
F-13
<PAGE>
<PAGE>
NOTE 4. ACQUISITIONS
During the three years ended May 31, 1998, the Company acquired the net assets
of cable television systems as follows:
<TABLE>
<CAPTION>
Amounts allocated to
----------------------
Number of Total Cable Property
Systems purchase television plant and
Acquired price franchises equipment
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended May 31, 1998 2 $ 68,440 $ 23,383 $ 24,647
Year ended May 31, 1997 -- $ -- $ -- $ --
Year ended May 31, 1996 6 $331,164 $212,693 $116,613
</TABLE>
These transactions have been accounted for as purchases and the results of
operations of the acquired systems have been included in the accompanying
consolidated financial statements from the dates of acquisition. The Company has
recorded the purchase price of the cable television systems at the fair market
value of acquired assets on the dates of acquisition with the excess purchase
price being recorded to cable television franchises.
Cable Television Acquisitions
On May 31, 1996, the Company acquired the cable television systems serving
Anaheim, Hermosa Beach/Manhattan Beach, Fairfield and Rohnert Park/Yountville,
California for an aggregate purchase price of approximately $287,600. Funds for
this acquisition were provided by an existing bank credit facility. At May 31,
1996, such cable television systems served an aggregate of approximately 135,000
primary basic subscribers.
On May 8, 1996, the Company acquired the Orange County News Channel ("OCN") for
approximately $2,500.
On March 2, 1993, the Company and Citizens ("the Century/Citizens Joint
Venture") entered into an agreement to acquire the assets of two cable
television systems which serve in the aggregate approximately 45,000 primary
basic subscribers. The aggregate purchase price for the cable television systems
was $92,900 subject to adjustment. Citizens and the Company own and operate the
cable television systems in a joint venture structure in which each company has
a 50% ownership interest. On September 30, 1994, the Century/Citizens Joint
Venture completed the acquisition of one of these cable television systems
serving approximately 24,000 primary basic subscribers. On December 1, 1995, the
second acquisition serving approximately 21,000 primary basic subscribers was
completed. The purchase price of approximately $51,900 at September 30, 1994 and
$41,000 at December 1, 1995 was funded by the Company and Citizens equally.
On August 16, 1996, the Company entered into agreements to acquire two cable
television systems which served an aggregate of approximately 35,000 primary
basic subscribers, which agreements were subsequently assigned to a joint
venture in which each of the Company and Citizen Utilities Company have a 50%
interest (the "Century/Citizens Joint Venture"). These systems are primarily
located in Yorba Linda/Orange County and Diamond Bar, California. The aggregate
purchase price for these systems was approximately $68,440. On October 15, 1997,
the Century/Citizens Joint Venture completed the acquisition of the Diamond Bar
system for a purchase price of approximately $33,550.
F-14
<PAGE>
<PAGE>
The Diamond Bar system serves approximately 20,000 primary basic subscribers. On
April 30, 1998, the Century/Citizens Joint Venture completed the acquisition of
the Yorba Linda/Orange County systems for a purchase price of approximately
$34,890. The Yorba Linda/Orange County systems serve approximately 17,500
primary basic subscribers. The Company funded its share of the purchase price
for the Yorba Linda/Orange County systems and the Diamond Bar system using
available credit facilities.
In August 1998, the Company entered into an agreement to acquire a cable
television system which serves approximately 19,000 primary basic subscribers in
Moreno Valley and Riverside County, California. The purchase price for this
system is approximately $33,000. The Company currently expects to fund the
acquisition using available credit facilities. The purchase of this system by
the Company is subject to regulatory approvals. There is no assurance that the
Company will obtain such approvals or that such acquisition will be consummated.
Pro Forma Information
The summary pro forma information includes the results of the Company's
continuing operations and all of the above acquisitions and pending acquisitions
as of May 31, 1998 related to these continuing operations, in each case as if
such acquisitions had been consummated as of June 1, 1995 (unaudited).
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
Revenue $ 491,249 $ 472,019 $ 428,819
Loss from continuing operations
before extraordinary item $ (79,456) $ (55,804) $ (66,978)
Net loss $ (122,545) $ (143,814) $(121,912)
Loss from continuing operations
before extraordinary item per common share $ (1.13) $ (.81) $ (.94)
Loss per common share - basic and diluted $ (1.71) $ (1.99) $ (1.67)
</TABLE>
Pro forma basic loss per common share for the years ended May 31, 1998, 1997 and
1996 is calculated using the weighted average number of common shares
outstanding during the period.
NOTE 5. TRANSACTIONS WITH RELATED PARTIES
The Company purchased workers compensation and general liability insurance from
Sentry Insurance (holder of approximately 1% of Class B Common stock at May 31,
1998) and its affiliated companies. In fiscal 1996, the Company also purchased
group health, life and casualty insurance coverage from Sentry Insurance. The
Company paid a total of $4,665, $7,083 and $8,467 for such insurance for the
fiscal years ended May 31, 1998, 1997 and 1996, respectively.
Leavy, Rosensweig & Hyman of which David Z. Rosensweig is a member, serves as
General Counsel to the Company. Mr. Rosensweig is also a director and secretary
of the Company. The Company paid approximately $1,165, $1,352 and $1,254 to
Leavy, Rosensweig & Hyman for the fiscal years ended May 31, 1998, 1997 and
1996, respectively.
F-15
<PAGE>
<PAGE>
The Company believes that all transactions between it, Sentry Insurance and
Leavy, Rosensweig & Hyman have been on terms no less favorable to the Company
than would have been available from nonaffiliated parties.
The Company recorded deferred revenue during fiscal 1997 in the amount of
$6,000, representing a payment to be made to its 50% owned subsidiary,
Century-ML Cable Venture (the "Venture"), by Centennial Puerto Rico Wireless
Corp., an affiliated Company ("Puerto Rico Wireless"), to secure the use of the
Venture's fiber optic network as required by the Facilities Agreement dated
January 2, 1995 between the Venture and Puerto Rico Wireless. This payment,
which was received by the Venture during fiscal 1998, represents Puerto Rico
Wireless' share of the costs of constructing the Venture's fiber optic network.
NOTE 6. ACCOUNT ANALYSIS
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
May 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Land $ 6,794 $ 8,651
Buildings 33,175 35,674
Cable television and wireless telephone
transmission and distribution systems
and related equipment 908,513 1,021,686
Miscellaneous equipment and furniture
and fixtures 54,470 57,226
Australian plant and equipment -- 21,524
----------- -----------
1,002,952 1,144,761
Less accumulated depreciation (436,987) (429,343)
----------- -----------
$ 565,965 $ 715,418
=========== ===========
</TABLE>
At May 31, 1997, gross property plant and equipment of $237,227 and accumulated
depreciation of $43,834 related to discontinued operations.
Depreciation expense was approximately $93,926, $98,429 and $80,448 for the
fiscal years ended May 31, 1998, 1997, and 1996, respectively. During fiscal
1998 and 1997 the Company wrote-off $42,476 and $117,855, respectively, of fully
depreciated property, plant and equipment.
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
May 31,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Accrued interest $ 33,249 $ 32,409
Accrued capital purchases -- 11,317
Accrued unpaid invoices -- 9,620
Australian A/P & accrued expenses -- 17,070
Accrued other 39,409 58,821
Customer deposits & prepaids 24,841 21,170
-------- --------
$ 97,499 $150,407
======== ========
</TABLE>
F-16
<PAGE>
<PAGE>
Accrued expenses and other current liabilities of $78,126 at May 31, 1997
related to discontinued operations.
NOTE 7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Credit facility (a) $ -- $ 324,000
Credit facility (b) -- 165,000
9 1/2% Senior notes due 2000 (c) 150,000 150,000
9 3/4% Senior notes due 2002 (d) 200,000 200,000
Zero Coupon Senior discount notes due 2003 (e) 289,870 265,381
9 1/2% Senior notes due 2005 (f) 250,000 250,000
8 7/8% Senior Notes due 2007 (g) 250,000 250,000
8 3/4% Senior Notes due 2007 (h) 225,000 --
8 3/8% Senior Notes due 2017 (i) 100,000 --
8 3/8% Senior Notes due 2007 (j) 100,000 --
Senior Discount Notes due 2008, Series B (k) 258,132 --
Subsidiary 8 7/8% Senior notes due 2001 (l) -- 250,000
Subsidiary 9.47% Senior secured notes due 2002 (m) 100,000 100,000
Subsidiary 10 1/8% Senior notes due 2005 (n) -- 100,000
Subsidiary revolving credit and term loan (o) 54,000 53,500
Subsidiary credit facility (p) -- 74,000
Subsidiary credit facility (q) -- 5,000
Subsidiary credit facility (r) 52,000 --
Other, including Australian operations (1997) 100 15,111
---------- ----------
Long - term debt - continuing operations 2,029,102 2,201,992
---------- ----------
Australian Operations 10,546 --
Subsidiary 8 7/8% Senior notes due 2001 (l) 250,000 --
Subsidiary 10 1/8% Senior notes due 2005 (n) 100,000 --
Subsidiary credit facility (p) 150,000 --
Subsidiary credit facility (q) 10,000 --
---------- ----------
Long-term debt-discontinued operations 520,546 --
---------- ----------
Total 2,549,648 2,201,992
========== ==========
Current maturities of long-term debt:
Continuing operations 20,050 15,011
Discontinued operations 10,546 --
---------- ----------
$ 30,596 $ 15,011
========== ==========
</TABLE>
As of May 31, 1997, long-term debt related to discontinued operations totaled
$443,961.
(a) On August 4, 1995, as amended August 12, 1996, CCC-I, Inc. ("CCC-I"), a
subsidiary of the Company, entered into a three year, $525,000 unsecured
revolving credit facility which converts to a five year term loan. The interest
rates payable on borrowings under the amended credit facility are based on, at
the election of CCC-I, (a) the base rate of interest announced by Citibank, N.A.
plus 0% to 0.625% per annum based upon certain conditions, or (b) the London
Interbank Offering Rate plus 0.75%
F-17
<PAGE>
<PAGE>
to 1.625% per annum based upon certain conditions. At May 31, 1998, no amounts
were outstanding under the CCC-I credit facility.
The agreement expires on August 31, 2004 and provides for mandatory principal
repayments, among other possible reductions, in the following percentages:
<TABLE>
<CAPTION>
Last day Last day Last day Last day
Year of February of May of August of November
- ---- ----------- ------ --------- -----------
<S> <C> <C> <C> <C>
1999 -- -- -- 4.00%
2000 4.00% 4.00% 4.00% 4.50%
2001 4.50% 4.50% 4.50% 5.25%
2002 5.25% 5.25% 5.25% 5.75%
2003 5.75% 5.75% 5.75% 5.50%
2004 5.50% 5.50% 5.50% --
</TABLE>
(b) On June 30, 1994, as amended August 12, 1996, CCC-II, Inc. ("CCC-II"), a
subsidiary of the Company entered into a three year $350,000 unsecured revolving
credit facility which converts to a five year term loan with a syndicate of
banks led by Citibank, N.A. as agent for the syndicate. The interest rates
payable on borrowings under the amended credit facility are based on, at the
election of CCC-II, (a) the base rate of interest announced by Citibank, N.A.
plus 0% to 0.5% per annum based upon certain conditions, or (b) the London
Interbank Offering Rate plus 0.75% to 1.375% per annum based upon certain
conditions. At May 31, 1998, no amounts were outstanding under the CCC-II credit
facility.
The agreement expires on August 31, 2004 and provides for mandatory principal
repayments, among other possible reductions, in the following percentages:
<TABLE>
<CAPTION>
Last day Last day Last day Last day
Year of February of May of August of November
- ---- ----------- ------ --------- -----------
<S> <C> <C> <C> <C>
1999 -- -- -- 2.50%
2000 2.50% 2.50% 2.50% 5.00%
2001 5.00% 5.00% 5.00% 5.00%
2002 5.00% 5.00% 5.00% 6.25%
2003 6.25% 6.25% 6.25% 6.25%
2004 6.25% 6.25% 6.25% --
</TABLE>
(c) On August 21, 1992, the Company issued Senior Notes Due 2000 ("9 1/2%
Notes") in the principal amount of $150,000 which mature on August 15, 2000. The
9 1/2% Notes bear interest at 9 1/2% payable semiannually on February 15 and
August 15 of each year commencing February 15, 1993. At May 31, 1998 and 1997
the 9 1/2% Notes were trading at 105% and 103.3% of par or $157,500 and
$154,950, respectively.
(d) On February 13, 1992, the Company issued Senior Notes Due 2002 ("the 9 3/4%
Notes") in the principal amount of $200,000 which mature on February 15, 2002.
The notes bear interest at 9 3/4% payable semiannually on February 15 and August
15 of each year commencing August 15, 1992. At May 31, 1998 and 1997, the 9 3/4%
Notes were trading at 107% and 104.2% of par or $214,000 and $208,400
respectively.
F-18
<PAGE>
<PAGE>
(e) On April 1, 1993, the Company issued Zero Coupon Senior Discount Notes Due
2003 ("the Discount Notes") in the discounted amount of $183,678 yielding 8.875%
annually to maturity. The Discount Notes mature on March 15, 2003 at $444,000.
There will be no periodic payments of interest on the Discount Notes, and they
may not be redeemed prior to maturity. During the years ended May 31, 1998 and
1997, approximately $24,489 and $22,419 of interest, respectively was amortized
in the consolidated financial statements. At May 31, 1998 and 1997, the Notes
were trading at 67% and 58.13% of par or $297,480 and $258,097 respectively. The
accreted value of the Discount Notes at May 31, 1998 was $289,870.
(f) On March 6, 1995, the Company issued unsecured Senior Notes due 2005 ("the 9
1/2% Notes") in the principal amount of $250,000 which mature March 1, 2005. The
Notes bear interest at 9 1/2% payable semi-annually on March 1 and September 1
of each year commencing September 1, 1995. At May 31, 1998 and 1997, the Notes
were trading at 106.75% and 102.8% of par or $266,875 and $257,075,
respectively.
(g) On January 17, 1997, the Company issued Senior Notes Due 2007 ("8 7/8%
Notes") in the principal amount of $250,000 which mature on January 15, 2007.
The 8 7/8% Notes bear interest at 8 7/8% payable semiannually on January 15 and
July 15. At May 31, 1998 and 1997 the Notes were trading at 104.25% and 97.11%
of par or $260,625 and $242,775, respectively.
The net proceeds received by the Company from the sale of the 8 7/8% Notes, of
approximately $244,607, were used to temporarily repay a portion of the
long-term debt outstanding under two credit agreements executed by subsidiaries
of the Company. The net proceeds were used to retire $204,000 aggregate
principal amount of 11 7/8% Senior Subordinated Debentures due 2003 issued by
the Company in October 1991 (the "11 7/8% Debentures). The 11 7/8% Debentures
were called by the Company on April 15, 1997 at a redemption price of 105% of
the principal amount thereof. Accordingly, the amount required to retire the 11
7/8% Debentures at such time was $214,200 plus accrued interest of $12,113. The
effect of the redemption resulted in an extraordinary loss on early retirement
of debt in fiscal 1997 of approximately $7,582, net of income taxes of $5,379,
reflecting the call premium and write-off of deferred financing costs. The
balance of the net proceeds may be used by the Company for general corporate
purposes, including but not limited to the financing of capital expenditures,
investments, purchases of the Company's securities and acquisitions.
On April 4, 1997, the Company filed a registration statement with the SEC
relating to the shelf registration of $500,000 of the Company's debt securities,
augmenting the remaining $2,000 available under the July 1994 registration
statement. The registration became effective July 15, 1997.
(h) On September 29, 1997, the Company issued 8 3/4% Senior Notes due 2007 (the
"8 3/4% Notes") in the principal amount of $225,000, which mature on October 1,
2007. The 8 3/4% Notes bear interest at 8 3/4% payable semiannually on April 1
and October 1 of each year commencing April 1, 1998. At May 31, 1998 the 8 3/4%
Notes were trading at 103.75% of par or $233,438.
(i) On November 13, 1997, the Company issued 8 3/8% Senior Notes due 2017 (the
"8 3/8% Notes") in the principal amount of $100,000, which mature on November
15, 2017. The 8 3/8% Notes bear interest at 8 3/8% payable semiannually on May
15 and November 15 of each year commencing May 15, 1998. At May 31, 1998, the 8
3/8% Notes were trading at 99.44% of par or $99,440.
F-19
<PAGE>
<PAGE>
(j) On December 10, 1997, the Company issued 8 3/8% Senior Notes due 2007 (the
"Senior Notes due 2007") in the principal amount of $100,000, which mature on
December 15, 2007. The Senior Notes due 2007 bear interest at 8 3/8% payable
semiannually on June 15 and December 15 of each year commencing June 15, 1998.
At May 31, 1998, the Senior Notes due 2007 were trading at 101.5% of par or
$101,500.
The net proceeds received by the Company from the issuance of the 8 3/4% Notes,
the 8 3/8% Notes and the Senior Notes due 2007 of $410,449 were used by the
Company to temporarily repay portions of the long-term debt outstanding under
the Company's CCC-I and CCC-II credit agreements.
(k) On January 15, 1998, the Company issued $605,000 principal amount at
maturity of Senior Discount Notes due 2008, Series A ("Senior Discount Notes")
to a qualified institutional buyer under a private placement offering pursuant
to Rule 144A and Regulation S of the Securities Act of 1933, as amended (the
"Private Placement Offering"). The Senior Discount Notes were sold at a discount
of 41.266% from the principal amount due at maturity (the "Original Issue
Discount"). The Original Issue Discount began accruing on the Senior Discount
Notes on January 15, 1998 and will continue accruing during the period in which
the Senior Discount Notes remain outstanding. The Original Issue Discount
represents an annual yield to maturity of 9.05% based on the issue price of the
Senior Discount Notes. There will be no periodic payments of interest on the
Senior Discount Notes. The Senior Discount Notes are senior unsecured
obligations of the Company, may not be redeemed prior to maturity and will not
be entitled to the benefit of any sinking fund.
The net proceeds received by the Company from the sale of the Senior Discount
Notes were approximately $246,106. The Company used $96,000 of the net proceeds
from the sale of the Senior Discount Notes to temporarily repay portions of the
long-term debt outstanding under both the CCC-I and CCC-II credit agreements.
The remainder of the net proceeds are to be used for capital expenditures,
operations, acquisitions and other investments. Further borrowings may be made
under the CCC-I and CCC-II Credit Agreements until August 31, 1999 for general
corporate purposes, including, but not limited to, the financing of capital
expenditures, investments, purchases of the Company's securities and
acquisitions.
On March 2, 1998, the Company filed a registration statement with the SEC
relating to the exchange of all outstanding Senior Discount Notes due 2008,
Series A for Senior Discount Notes, Series B (the "Senior Discount Notes, Series
B"). The terms of the Senior Discount Notes, Series B are identical in all
material respects to the Senior Discount Notes, except that the Senior Discount
Notes, Series B were registered under the Securities Act of 1933, as amended,
and therefore the transfer of the Senior Discount Notes, Series B are not
restricted. This registration statement became effective on March 17, 1998.
During the year ended May 31, 1998, approximately $8,473 of interest was
amortized in the consolidated financial statements related to the Senior
Discount Notes, Series B. At May 31, 1998, the Senior Discount Notes, Series B
were trading at 44% of par or $266,200.
On January 7, 1998, the Company filed a shelf registration statement with the
SEC for $500,000 of the Company's debt securities, augmenting the remaining
$77,000 under the shelf registration statement filed on April 4, 1997. The
registration statement became effective on January 28, 1998. The debt securities
may be issued from time to time, in series, on terms to be specified in one or
more prospective supplements at the time of the offering. If so specified with
respect to any particular series, the debt
F-20
<PAGE>
<PAGE>
securities may be convertible into shares of the Company's Class A Common Stock.
As of May 31, 1998, there was $577,000 available for issuance under this shelf
registration.
The Company's public debt securities rank pari passu with all existing and
future Senior Indebtedness (as that term is defined in the respective Indentures
under which the public debt securities were issued) of the Company, are senior
in right of payment to all existing and future subordinated indebtedness of the
Company, and may not be redeemed prior to maturity.
(l) On November 15, 1993, Centennial issued $250,000 of eight year unsecured
Senior Notes (the 8 7/8% Notes). The interest on these notes is payable
semi-annually at an interest rate of 8 7/8%. The interest is computed on the
basis of a 360-day year (twelve 30 day months). The maturity date of the 8 7/8%
Notes is November 1, 2001 unless redeemed earlier at the option of Centennial,
however not prior to May 1, 1999. If early redemption is sought during the
twelve-month period beginning May 1 of each of the following years, the
redemption price is calculated using:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 105.25%
2000 103.50%
2001 101.75%
</TABLE>
The proceeds of the 8 7/8% Notes were used to retire all outstanding bank debt.
Costs associated with the bond offering were capitalized and are being written
off on a straight-line basis over the expected life of the issue. At May 31,
1998 and 1997, the 8 7/8% Notes were trading at 104.01% and 99.47% of par or
$260,025 and $248,675, respectively. At May 31, 1998, the $250,000 of 8 7/8%
Notes were included in Net Assets of Discontinued Operations in the accompanying
consolidated balance sheet.
(m) On December 31, 1992, Century-ML Cable Corporation ("CML") and Century/ML
Cable Venture ("CCV"), subsidiaries of the Company through which the Company
owns a 50% interest in cable television systems in Puerto Rico, entered into
separate note agreements (the "Note Agreements") with a group of institutional
lenders providing for the issuance by CML of $100,000 aggregate principal amount
of its 10-year 9.47% Senior Secured Notes Due 2002. Interest on the Notes is
payable semiannually and principal will be payable in installments of 20% of the
original principal amount beginning on September 30, 1998, with final maturity
at September 30, 2002. The Notes are subject to various other prepayment
provisions, including prepayment with premium at the option of CML at any time
prior to their expressed maturity and prepayment with premium at the option of
the holders thereof upon the occurrence of certain events involving changes in
control of CML and CCV. The Notes are entitled to the benefits of certain
security agreements and guarantees, including a guaranty by CCV of the payment
of all principal of, premium, if any, and interest on the notes. The notes are
secured by substantially all of the assets of CCV. The estimated fair value of
the notes at May 31, 1998 was approximately $103,860.
(n) On May 11, 1995, Centennial issued $100,000 of ten year unsecured Senior
Notes ("the 10 1/8% Notes"). The interest on the 10 1/8% Notes is payable
semi-annually on the basis of a 360-day year (twelve 30 day months). The 10 1/8%
Notes rank pari passu with Centennial's 8 7/8% Notes and may not be redeemed
prior to maturity on May 15, 2005. Costs associated with the May 11, 1995 bond
offering were capitalized and will be written off on a straight-line basis over
the expected life of the issue. At May 31, 1998 and 1997, the 10 1/8% Notes were
trading at 110.87% and 104.25% of par or
F-21
<PAGE>
<PAGE>
$110,870 and $104,250, respectively. At May 31, 1998, the $100,000 of 10 1/8%
Notes were included in Net Assets of Discontinued Operations in the accompanying
consolidated balance sheet.
Both the 8 7/8% and 10 1/8% Notes restrict Centennial from directly or
indirectly declaring or paying any dividends on its presently or subsequently
issued common stock, limit the ability of Centennial to incur additional
indebtedness and limit making any distributions of assets to its stockholders.
At May 31, 1998, Centennial was in compliance with all covenants of the Notes.
(o) On July 31, 1995, a subsidiary of the Company, Century Venture Corp. ("CVC")
entered into a three year, $80,000 revolving credit facility which converts to a
five year term loan. The proceeds of the facility were used by CVC to repay
existing indebtedness of CVC and will be used for working capital and general
corporate purposes. The repayment by CVC of its existing indebtedness discharged
all of CVC's obligations under its then-existing credit agreement and, as a
result, such agreement was terminated. The interest rates payable on borrowings
under the new credit facility are based on, at the election of CVC, (a) "C/D
Base Rate" plus an applicable margin, as defined or (b)"Eurodollar Base Rate"
plus an applicable margin as defined or (c) "ABR" rate as defined. At May 31,
1998, $54,000 was outstanding under the CVC credit facility.
The agreement expires on February 28, 2004 and provides for a reduction in the
aggregate commitment, among other possible reductions, in the following amounts:
<TABLE>
<CAPTION>
Last day Last day Last day Last day
Year of February of May of August of November
- ---- ----------- -------- --------- -----------
<S> <C> <C> <C> <C>
1998 $ -- $ -- $1,875 $1,875
1999 1,875 1,875 2,500 2,500
2000 2,500 2,500 3,125 3,125
2001 3,125 3,125 3,750 3,750
2002 3,750 3,750 3,750 3,750
2003 3,750 3,750 6,667 6,667
2004 6,666 -- -- --
</TABLE>
(p) Centennial Puerto Rico Wireless Corporation, a wholly owned subsidiary of
Centennial, has a four year, $180,000 revolving credit facility, as amended,
which converts to a four-year term loan on April 25, 2001 (the "Puerto Rico
Credit Facility"). The interest rate payable to CPRW on borrowings under the
Puerto Rico Credit Facility is based, at the election of CPRW, on (a) the Base
Rate, as defined, plus a margin of 1.50% or (b) the Eurodollar Base Rate, as
defined, plus a margin of 2.5%, adjusted for the maintenance of certain
specified ratios, as applicable. The Puerto Rico Credit Facility is non-recourse
to Centennial and the Company. The Puerto Rico Credit Facility is secured by
substantially all of the assets of CPRW and its direct subsidiaries. At May 31,
1998, $150,000 was outstanding under the Puerto Rico Credit Facility and
included in Net Assets of Discontinued Operations in the accompanying
consolidated balance sheet.
(q) On September 12, 1996, Centennial entered into a $75,000 credit facility
with Citibank, N.A., which was amended April 22, 1997 and then further amended
on July 28, 1997 and September 25, 1997 (the "Centennial Credit Facility"). The
Centennial Credit Facility terminates on January 31, 2001. Approximately $35,000
of the facility was used to fund a wireless telephone system acquisition and has
since been repaid. The remainder will be used for working capital and general
corporate purposes. The interest rate payable on borrowings under the Centennial
Credit Facility is based at the election of
F-22
<PAGE>
<PAGE>
Centennial, on (a) the "Base Rate", as defined, plus a margin of 2% or (b) the
"Eurodollar Rate", as defined, plus a margin of 3%. The Centennial Credit
Facility is secured by the pledge of stock of certain of Centennial's
subsidiaries not otherwise subject to restrictions under its Senior Note
Indentures. The Centennial Credit Facility is further guaranteed by certain of
Centennial's subsidiaries holding Investment Interests. At May 31, 1998, $10,000
was outstanding under the Centennial Credit Facility and included in Net Assets
of Discontinued Operations in the accompanying consolidated balance sheet.
(r) On April 15, 1997, Citizens Century Cable Television Venture ("CCCTV")
entered into an agreement for the provision of a three-year, $200,000 revolving
credit facility with Bank of America and Societe General, which converts into a
five-year term loan. The facility is secured by the assets of CCCTV. The loan is
non-recourse to both Citizens and the Company. Borrowings under the facility are
to be repaid in semi-annual installments commencing June 30, 2000 and expiring
on March 31, 2005. The agreement provides for mandatory principal repayments,
among other possible reductions, in the following percentages:
<TABLE>
<CAPTION>
Last Day of Last day of Last day of Last day of
Year March June September December
---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
2000 -- 2.33% 2.33% 2.33%
2001 4.00% 4.00% 4.00% 4.00%
2002 5.00% 5.00% 5.00% 5.00%
2003 5.25% 5.25% 5.25% 5.25%
2004 7.13% 7.13% 7.13% 7.13%
2005 7.50% -- -- --
</TABLE>
The facility requires mandatory prepayments of principal refinancing under
certain circumstances (as specified in the agreement). Borrowings under the
facility bear interest, at the option of CCCTV, at either the base rate or the
Eurodollar rate, plus the applicable margin (as defined in the agreement). The
principal use of proceeds will be to fund acquisitions as well as general
corporate purposes. As of May 31, 1998 $52,000 was outstanding under the
facility.
The subsidiaries' credit facilities and the Company's public debt securities,
among other things, require the maintenance of certain financial and operating
covenants, restrict the use of proceeds from such borrowing, limit the
incurrence of additional indebtedness, restrict the purchase or redemption of
its capital stock and limit the ability to pay dividends and management fees
and make capital expenditures.
During the year ended May 31, 1996, all of the Company's obligations with
respect to prior Hedge Agreements expired. Subsequently, the Company entered
into a five year interest rate hedge agreement during October 1997 in relation
to certain of its fixed rate debt. The hedge agreement is structured such that
the Company pays a variable rate of interest based on the higher of the U.S.D.
six (6) month LIBOR or the U.S.D. six (6) month LIBOR set in arrears and
receives a fixed rate of interest of 6.695% based on a notional amount of
$35,000. Subject to the terms of the hedge agreement, if the six month LIBOR is
set at or below 4.75% at the beginning of any period, the hedge agreement would
terminate for that period alone and the Company would receive a 50 basis points
subsidy for that period alone. The net gain or loss, which has not been
material, is included in interest expense in the accompanying 1998 consolidated
statement of operations and interest paid in the 1998 consolidated statement of
cash flows. At May 31, 1998, the estimated fair value of the hedge agreement
represents an asset of approximately $413.
F-23
<PAGE>
<PAGE>
The aggregate annual principal payments related to continuing operations for the
next five years and thereafter are summarized as follows (amounts in thousands):
<TABLE>
<S> <C>
1999 $ 20,050
2000 20,050
2001 179,720
2002 243,840
2003 489,530
2004 and thereafter 1,576,910
------------
2,530,100
Less: unamortized discount (500,998)
------------
$ 2,029,102
============
</TABLE>
At May 31, 1998, the Company and its subsidiaries were in compliance with all
covenants of the above noted agreements.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Stock Purchases
During the year ended May 31, 1998, the Company purchased 1,959,500 shares of
Class A Common Stock in the open market for an aggregate purchase price of
$12,151 pursuant to previous authorization by the Company's Board of Directors.
These shares have been accounted for as treasury shares. Subsequent to May 31,
1998, the Company has not purchased any shares in the open market. As of August
4, 1998, the Company is authorized to purchase 4,869,000 additional shares of
Class A Common Stock after giving effect to the shares purchased to date.
Leases
At May 31, 1998, the Company's approximate annual lease obligations and expenses
(under operating leases) were as follows:
<TABLE>
<S> <C>
Pole rentals $ 3,651
Vehicles and equipment 515
Antenna site and property access 359
Warehouse, studio and office 4,047
----------
$ 8,572
==========
</TABLE>
The above leases are substantially all short-term or cancelable by either party
upon notice.
Letters of Credit
The Company is a party to several available letters of credit totaling $8,463.
No payments have been made under these agreements.
Litigation
The Company and its subsidiaries are involved in litigation and regulatory
matters which involve certain claims which arise in the normal course of
business, none of which individually, or in the aggregate, in the opinion of
management, is expected to have a materially adverse effect on the Company's
consolidated financial position or results of operations.
F-24
<PAGE>
<PAGE>
NOTE 9. COMMON STOCKHOLDERS' DEFICIENCY
Common Stock
The voting rights with respect to the two classes of Common Stock are as
follows: Class A shares entitle the holder to one vote per share, Class B shares
entitle the holder to ten votes per share. Shares of Class B Common Stock are
convertible into shares of Class A Common Stock on a one-for-one basis upon
transfer from the current Class B stockholders. The Company is restricted from
paying cash dividends on its common stock by its credit agreements (Note 7).
Treasury Stock
During fiscal 1998 and 1997, the Company purchased 1,959,000 and 171,500 shares,
respectively, of the Company's Class A Common Stock in the open market. These
shares were accounted for as treasury shares in the respective fiscal years (See
Note 8).
F-25
<PAGE>
<PAGE>
The following table presents changes in the Company's stockholders' equity for
the years ended May 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------
Class A Class B Additional
--------------------- ----------------------- Paid-in Accumulated
Shares Dollars Shares Dollars Capital Deficit Other Total
------------ ------- ---------- --------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1995 59,484,685 $ 595 45,406,115 $ 454 $ 175,545 $(405,051) $(123,188) $(351,645)
Shares issued and acquired in
connection with employee
incentive plans 461,595 4 2,971 (158) 2,817
Net paid in capital contributed
by minority interests 1,238 1,238
Accretion in liquidation value
of subsidiary preferred stock (4,256) (4,256)
Foreign currency translation
adjustment (753) (753)
Unrealized appreciation of
marketable securities 6,397 6,397
Vesting of subsidiary stock
options 306 306
Net loss (102,117) (102,117)
---------- ----- ------------ --------- --------- --------- --------- ---------
Balance at May 31, 1996 59,946,280 $ 599 45,406,115 $ 454 $ 175,804 $(507,168) $(117,702) $(448,013)
Shares issued in connection
with employee incentive plans 711,490 7 25,000 3,948 3,955
Class A shares purchased by the
Company (2,359) (2,359)
Class B shares converted to
Class A shares 305,000 3 (305,000) (3) --
Class A shares issued in
connection with acquisitions 1,732,357 18 (18) --
Subsidiary preferred stock
dividends (4,850) (4,850)
Foreign currency translation
adjustment 462 462
Change in unrealized
appreciation of marketable
securities (7,950) (7,950)
Income tax benefit-subsidiary
stock options exercised 1,987 1,987
Net loss (141,875) (141,875)
---------- ----- ------------ --------- --------- --------- --------- ---------
Balance at May 31, 1997 62,695,127 $ 627 45,126,115 $ 451 $ 176,871 $(649,043) $(127,549) $(598,643)
Share issued in connection
with employee incentive plans 589,761 6 4,533 4,539
Class A Shares purchased by the
Company (12,576) (12,576)
Class B shares converted to
Class A shares 2,400,000 24 (2,400,000) (24) --
Subsidiary preferred stock
dividends (5,225) (5,225)
Change in unrealized
appreciation of marketable
securities 7,333 7,333
Foreign currency translation
transferred to discontinued
operations 291 291
Net loss (120,971) (120,971)
---------- ----- ------------ --------- --------- --------- --------- ---------
Balance at May 31, 1998 65,684,888 $ 657 42,726,115 $ 427 $ 176,179 $(770,014) $(132,501) $(725,252)
========== ===== ============ ========= ========= ========= ========= =========
<CAPTION>
May 31,
--------------------------------------
Other stockholders' deficiency items: 1998 1997 1996
- ------------------------------------- ------------ --------- ---------
<S> <C> <C> <C>
Treasury stock, at cost $ (152,697) $(140,121) $(137,762)
Unrealized appreciation of
marketable securities 20,196 12,863 20,813
Foreign currency translation
adjustment -- (291) (753)
------------ --------- ---------
$ (132,501) $(127,549) $(117,702)
============ ========= =========
</TABLE>
F-26
<PAGE>
<PAGE>
NOTE 10. INCOME TAXES
The Company and its consolidated subsidiaries, except for Century Venture
Corporation and Subsidiaries, Century-ML Cable Venture and Subsidiary, Citizens
Century Cable Television Venture, East Coast Pay Television Pty, Ltd., and
Centennial Cellular Corp. and Subsidiaries (collectively the "Unconsolidated Tax
Group"), file a consolidated federal income tax return. The provision (benefit)
for income taxes are summarized as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current $ 7,984 $ 7,486 $ 2,844
Deferred (22,205) (38,144) (37,170)
-------- -------- --------
$(14,221) $(30,658) $(34,326)
======== ======== ========
</TABLE>
Income tax expense is included in the Company's consolidated financial
statements as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Continuing operations $ (624) $(23,363) $(22,730)
Discontinued operations (13,597) (7,295) (11,596)
-------- -------- --------
$(14,221) $(30,658) $(34,326)
======== ======== ========
</TABLE>
Deferred income taxes result primarily from nondeductible depreciation and
amortization resulting from book and tax basis differences of certain acquired
subsidiaries.
The effective income tax rate of the Company's continuing operations differs
from the statutory rate as a result of the effect of the following items:
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Computed tax benefit at federal
statutory rate on loss from continuing
operations before income taxes and
minority interest $(23,383) $(24,586) $(23,581)
Computed tax benefit of
Unconsolidated Tax Group (7,006) (3,600) 1,968
Recognized tax benefit of
Unconsolidated Tax Group 2,014 2,155 (790)
Nondeductible amortization
resulting from acquired
subsidiaries 1,192 1,131 2,433
State and local income taxes,
net of federal income tax
effect (4,622) (3,782) (2,760)
Tax benefits related to net operating
and capital loss carryforwards
not recognized and changes in
valuation allowance 30,998 5,284 --
Other 183 35 --
-------- -------- --------
$ (624) $(23,363) $(22,730)
======== ======== ========
</TABLE>
F-27
<PAGE>
<PAGE>
Temporary differences and carryforwards which give rise to a significant portion
of deferred tax assets and (liabilities) are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
Tax loss carryforward $ 224,083 $ 200,974
Valuation allowance (129,179) (99,778)
--------- ---------
$ 94,904 $ 101,196
========= =========
Deferred Tax Liabilities:
Amortization of intangible assets $ 32,099 $ 86,575
Depreciation of fixed assets 67,975 68,580
--------- ---------
$ 100,074 $ 155,155
========= =========
Net deferred tax liabilities $ 5,170 $ 53,959
========= =========
</TABLE>
At May 31, 1997, net deferred tax liabilities of $43,977 related to discontinued
operations.
The Company and its subsidiaries, except for the Unconsolidated Tax Group, have
an investment tax credit carryover (after the 35% reduction mandated by TRA 86)
for federal income tax purposes of approximately $11,428 and net operating loss
carryforwards for federal income tax purposes of approximately $539,287 expiring
through 2002 and 2013, respectively.
Century Venture Corporation and Subsidiaries have an investment tax credit
carryover of approximately $2,032 and net operating loss carryforwards of
approximately $8,181 which will expire through 2002 and 2008, respectively.
The operations of CPRW and Century ML Cable Venture and Subsidiary are subject
to Puerto Rico income taxes.
NOTE 11. JOINT VENTURES
The combined operations and certain other information related to the 50%
indirectly owned Century Venture Corp. and Subsidiaries, Century-ML Cable
Venture and Subsidiary and Citizens Century Cable Television Venture included in
the consolidated financial statements of the Company are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Combined Statement of Operations Data
Revenues $122,543 $110,811
Costs and expenses:
Costs of services 34,781 32,072
Selling, general and administrative 21,272 18,681
Depreciation and amortization 30,638 36,660
-------- --------
86,691 87,413
-------- --------
</TABLE>
F-28
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Operating Income 35,852 23,398
Interest expense 15,833 13,114
-------- --------
Income before taxes 20,019 10,284
Income tax provision 2,356 1,957
-------- --------
Net Income $ 17,663 $ 8,327
======== ========
Combined Balance Sheet Data
Property, plant and equipment - net $136,866 $102,572
Total assets 389,495 311,766
Long-term debt 206,000 153,500
Total liabilities 255,940 195,875
</TABLE>
The Company's joint venture partner, ML Media Partners, L.P. ("Media Partners")
has the right to cause a sale of Century-ML Cable Venture and Subsidiary. If
Media Partners proposes such a sale, the Company will have the right to purchase
Media Partners' interest for the appraised fair market value of Media Partners'
50% interest in Century-ML Cable Venture and Subsidiary.
NOTE 12. EMPLOYEE BENEFIT PLANS
Stock Option Plans
The Company's 1985 Stock Option Plan (the "1985 Option Plan"), adopted by the
Board of Directors and approved by the stockholders on December 5, 1985, expired
by its terms on May 31, 1995. Accordingly, the Board of Directors adopted and
the stockholders ratified the Company's 1994 Stock Option Plan (the "1994 Option
Plan") on October 26, 1994. Upon ratification of the 1994 Option Plan, no more
grants are to be made under the 1985 Option Plan. The 1985 Stock Option Plan and
the 1994 Stock Option Plan, collectively the "Option Plans", permit the issuance
of "incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended, as well as non-qualified options. The 1985 Option Plan
and the 1994 Option Plan provide for the grant of options to purchase up to
6,897,079 and 5,000,000 shares, respectively, of Class A Common Stock to
directors, officers and other key employees of the Company and its subsidiaries.
The Option Plans are administered by a committee of the Board of Directors (the
"Stock Option Committee") that determines the recipients and provisions of
options granted under the Option Plans, including the option price, term and
number of shares subject to option. The Board of Directors may amend the Option
Plans, except that the approval of the stockholders is necessary to increase the
total number of shares which may be issued or shares subject to options, to
change the minimum purchase price for shares subject to options, to change the
maximum period during which options may be exercised, to extend the period
during which options may be granted under the Option Plans, or to materially
increase benefits to option recipients. Generally, the option price of incentive
and non-qualified stock options granted may be as determined by the Stock Option
Committee, but must be at least equal to 100% of the fair market value of the
shares on the date of the grant. The maximum term of each option is ten years.
For any participant who owns shares possessing more than 10% of the voting
rights of the Company's outstanding common stock, the exercise price of any
incentive stock option must be at least equal to 110% of the fair market value
of the shares subject to such option on the date of grant and the term of the
option may be no longer than five years. Options become exercisable at such time
or times as the Stock Option Committee may determine when it grants options. All
options granted on or before December 31, 1985 must be exercised in the sequence
in which they were granted. The Option Plans
F-29
<PAGE>
<PAGE>
permit the exercise of options by the payment of cash or mature shares of Class
A Common Stock equal in value to the option price. Under the terms of the Option
Plan with respect to options granted on or before December 31, 1986, the
aggregate fair market value of the Class A Common Stock (determined at the date
of the option grant) for which any employee may be granted incentive stock
options in any calendar year may not exceed $100, plus certain carry-over
allowances from the previous three years. Options granted under the Option Plans
are not transferable by the holder other than by will or the laws of descent and
distribution.
As of May 31, 1998, approximately 226 employees were participating in the Option
Plans.
Director Option Plan
The Company's 1993 Non-Employee Directors' Stock Option Plan (the "Directors'
Option Plan") was adopted on October 26, 1994. The Directors' Option Plan
replaced the Non-Employee Director Option Plan adopted in 1989 (the "1989
Director Option Plan") which was terminated by the Board of Directors. Under the
Directors' 1993 Option Plan a total of 323,123 shares of Class A Common Stock
were reserved for issuance. Options for 1,000 shares of Class A Common Stock
will be automatically granted under the Directors' 1993 Option Plan to each
person who is elected or re-elected a non-employee Director on the date of the
annual meeting of shareholders of the Company in each of the years 1994 through
2003.
The Directors' Option Plan shall be administered by the Board of Directors or a
committee (the "Board Committee"). In administering the Directors' Option Plan,
the Board of Directors or the Board Committee may adopt rules and regulations
for carrying out the Directors' Option Plan. The Board of Directors may amend
the Directors' Option Plan and amend the terms and conditions of any option
granted under the Directors' Option Plan, except that the approval of the
stockholders is necessary to increase the total number of shares which may be
issued or transferred under the Directors' Option Plan and to change the minimum
purchase price for shares subject to options.
Options granted under the Directors' Option Plan are nonqualified options not
qualifying as incentive stock options under Section 422 of the Code. The option
price that shares of the Company's Class A Common Stock may be purchased upon
exercise of any option granted under the Directors' Option Plan, will be the
fair market value of such shares on the last trading day prior to the date of
the grant of such option. The Directors' Option Plan permits the exercise of
options in cash, mature shares of Class A Common Stock valued at the fair market
value on the date of purchase or a combination thereof. The maximum term of each
option is five years and six months immediately succeeding the date of grant.
Options granted under the Directors' Option Plan are not transferable by the
holder other than by will or the laws of descent and distribution. Under the
1993 Directors' Option Plan, options to purchase 3,000 shares of Class A Common
Stock were granted during each of the fiscal years ended May 31, 1998, 1997 and
1996 at an exercise price of $7.75, $7.00 and $8.63 per share, respectively. As
of May 31, 1998, 6,000 options were outstanding under the Directors' Option
Plan, of which 1,200 were exercisable.
F-30
<PAGE>
<PAGE>
A summary of the status of the Company's stock options as of May 31, 1996, 1997
and 1998 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Number Price
---------- --------
<S> <C> <C> <C>
1996 Outstanding at June 1, 1995 2,961,041 $ 7.16
Granted 186,000 8.86
Exercised (338,109) 3.53
Canceled (162,418) 7.43
---------
Outstanding at May 31, 1996 2,646,514 7.73
1997 Granted 2,915,909 6.70
Exercised (401,440) 5.46
Canceled (1,703,933) 8.69
---------
Outstanding at May 31, 1997 3,457,050 6.66
1998 Granted 10,000 6.44
Exercised (340,836) 6.34
Canceled (242,415) 6.66
---------
Outstanding at May 31, 1998 2,883,799 6.70
=========
</TABLE>
The number of the Company's options which were exercisable at May 31, 1998, 1997
and 1996 were 1,598,650, 1,566,966, and 1,568,965 respectively. The weighted
average exercise prices of such options were $6.62, $6.55, and $7.60 and at May
31, 1998, 1997 and 1996, respectively.
Of the Company's options granted during fiscal 1998, 1997 and 1996, 0, 1,175,072
and 27,500 options, respectively, had exercise prices that were at least equal
to 110% of the fair market value of the Company's Class A Common Stock at the
date of grant. The following table summarizes information about the Company's
options outstanding at May 31, 1998:
<TABLE>
<CAPTION>
Range of Number Weighted Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at 5/31/98 Contractual Life Exercise Price at 5/31/98 Exercise Price
- ------ ---------- ---------------- -------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
$ 4.00 - $8.69 2,883,799 6.13 years $6.70 1,598,650 $ 6.62
========= ========== ===== ========= ======
</TABLE>
The estimated fair value of the Company's options granted during fiscal 1998 was
immaterial. The fair value of options granted during fiscal 1997 and 1996 were
$2.29 per share and $3.04 per share, respectively.
Employee Stock Purchase Plan
On December 5, 1985, the Company adopted the 1985 Employee Stock Purchase Plan.
On October 26, 1994, the Board of Directors and shareholders approved an
amendment to the Company's 1985 Employee Stock Purchase Plan (the "Amended
Purchase Plan"). Under the Amended Purchase Plan, eligible employees (which
generally includes all full-time employees of the Company) may subscribe
F-31
<PAGE>
<PAGE>
for shares of Class A Common Stock at a purchase price of 85% of the average
market price (as defined) of the Class A Common Stock on the first day or last
day of the purchase period, whichever is lower. Payment of the purchase price of
the shares will be made in installments through payroll deductions, with no
right of prepayment. The Company has reserved 1,125,767 shares of Class A Common
Stock for issuance under the Amended Purchase Plan. The Amended Purchase Plan is
administered by the Compensation Committee. As of May 31, 1998, no shares of
Class A Common Stock were subscribed for under the Amended Purchase Plan.
Equity Incentive Plan
The Company's 1992 Equity Incentive Plan (the "Equity Plan") was adopted by the
Board of Directors and approved by the stockholders on October 28, 1992 and
amended on October 31, 1997. The plan permits the issuance of up to 1,613,945
shares of the Company's Class A Common Stock for high levels of performance and
productivity by officers and other management employees of the Company. The
Equity Plan is administered by the Company's Board of Directors. The plan
authorizes the Board of Directors to grant stock based awards that include but
are not limited to, restricted stock, performance shares and deferred stock. The
Board of Directors determines the recipients and provisions of the grants under
the Equity Plan, including the grant price, term and number of shares subject to
grant.
Generally, an employee will realize compensation taxable as ordinary income, and
the Company will be entitled to a corresponding tax deduction in an amount equal
to the sum of any cash received by the employee plus the fair market value of
any shares of Class A Common Stock received by the employee.
During the years ended May 31, 1998, 1997 and 1996 and the Company granted
170,000, 230,897 and 72,500 shares of restricted stock with weighted average
fair values at the date of grant of $6.87, $8.07 and $10.25 per share,
respectively. Through May 31, 1998, the Company had granted 968,027 shares of
restricted stock to nine officers and employees of the Company. The restrictions
primarily lapse at the rate of 20% per year over a five-year period. As of May
31, 1998, 645,918 shares were available for awards under the Equity Plan.
The Company applies APB Opinion No. 25 and related interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized with
respect to their stock option, and stock purchase plans. Had compensation cost
for the Company's stock option and stock purchase plans been determined based on
the fair value of the awards on the grant dates in accordance with the
accounting provisions of Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's
Consolidated net loss and Consolidated net loss per common share for the years
ended May 31, 1998, 1997 and 1996 would have been increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Consolidated net loss applicable to common shares:
As reported:
Loss from continuing operations $ (83,107) $ (58,715) $ (51,439)
Loss from discontinued operations (43,089) (80,428) (54,934)
--------- --------- ---------
Loss before extraordinary item (126,196) (139,143) (106,373)
Extraordinary item -- (7,582) --
--------- --------- ---------
Net loss $(126,196) $(146,725) $(106,373)
========= ========= =========
</TABLE>
F-32
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Pro forma:
Loss from continuing operations $ (84,540) $ (59,424) $ (51,608)
Loss from discontinued operations (43,089) (80,428) (54,934)
--------- --------- ---------
Loss before extraordinary item (127,629) (139,852) (106,542)
Extraordinary item -- (7,582) --
--------- --------- ---------
Net loss $(127,629) $(147,434) $(106,542)
========= ========= =========
Consolidated net loss per common share:
As reported:
Loss from continuing operations $ (1.11) $ (.78) $ (.70)
Loss from discontinued operations (.58) (1.08) (.74)
--------- --------- ---------
Loss before extraordinary item (1.69) (1.86) (1.44)
Extraordinary item -- (.10) --
--------- --------- ---------
Net loss per common share $ (1.69) $ (1.96) $ (1.44)
========= ========= =========
Pro forma:
Loss from continuing operations $ (1.13) $ (.79) $ (.70)
Loss from discontinued operations (.58) (1.08) (.74)
--------- --------- ---------
Loss before extraordinary item (1.71) (1.87) (1.44)
Extraordinary item -- (0.10) --
--------- --------- ---------
Net loss per common share $ (1.71) $ (1.97) $ (1.44)
========= ========= =========
</TABLE>
The fair value of options granted under the Company's stock option plans during
fiscal 1998 was immaterial. The fair values of options granted during fiscal
1997 and 1996 were estimated on the dates of grant using the Black-Scholes
options-pricing model with the following weighted average assumptions used:
expected volatility of 40.82%, risk free interest rate of 6%, and expected lives
of option grants of 3 years. Proforma compensation cost related to shares
purchased under the Company's Employee Stock Purchase Plan is measured based on
the discount from market value.
Incentive Award Plan
An Incentive Award Plan (the "Incentive Plan") was adopted by the Board of
Directors and approved by the stockholders of the Company on December 5, 1985.
The Incentive Plan permits the grant of awards to key employees of the Company
and its subsidiaries, which may include directors and officers, payable in cash
or shares of Class A Common Stock. The Company has reserved 559,529 shares of
Class A Common Stock for issuance under the Incentive Plan. The awards are
payable in five to ten equal annual installments on January 1 of the succeeding
years after the grant of the award, provided that the recipient is an employee
on the installment payment date. The Incentive Plan is administered by the
Compensation Committee, which selects the recipients of awards as well as the
amount of such awards. The Board of Directors may amend the Incentive Plan.
Awards granted under the Incentive Plan may not be transferred by the recipients
and may be forfeited in the event of the recipient's termination of employment.
At May 31, 1998, no grants were outstanding.
Stock Equivalent Plan
The Company's 1985 Stock Equivalent Plan (the "Equivalent Plan") was adopted by
the Board of Directors and approved by the stockholders on December 5, 1985. The
Equivalent Plan permits the
F-33
<PAGE>
<PAGE>
grants of units of Class A Common Stock Equivalents ("units") to key employees
of the Company and its subsidiaries, including officers and directors. The
Equivalent Plan is administered by the Compensation Committee which selects the
employees to be granted units, determines the number of units covered by each
grant, determines the time or times when units will be granted and the
conditions subject to which any amount may become payable with respect to the
units, and prescribes the form of instruments evidencing units granted under the
Plan. Payments for units may be made by the Company in cash or in mature shares
of Class A Common Stock at the fair market value of the units on the date of
payment. The Company has reserved 566,155 shares of Class A Common Stock for
issuance under the Equivalent Plan. Under the terms of the Equivalent Plan, the
total number of units included in all grants to any participant may not exceed
10% of the total number of units for which grants may be made under the
Equivalent Plan. Units granted under the Equivalent Plan are not transferable by
the holder other than by will or the laws of descent and distribution. As of May
31, 1998, no units have been granted under the Equivalent Plan.
Retirement Plans
Effective April 1, 1992, the Company adopted a 401(k) defined contribution
retirement plan covering employees of its wholly-owned cable subsidiaries who
are not covered by collective bargaining arrangements. Effective July 1, 1992,
the Company adopted a similar 401(k) plan covering employees of its wholly-owned
cable subsidiaries who are covered by collective bargaining agreements. If a
participant decides to contribute, a portion of the contribution is matched by
the Company. Total expense under the plans was approximately $1,367, $1,168 and
$855, for the years ended May 31, 1998, 1997 and 1996, respectively.
NOTE 13. REGULATORY MATTERS
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 ("the 1992 Cable Act"). The 1992 Act substantially
reregulated the cable television industry and imposed numerous requirements,
including provisions regarding rates which may be regulated by the applicable
local franchising authority and those to be regulated by the FCC, exclusive
programming arrangements, the carriage of broadcast signals, customer service
standards, leased access channels, VCR compatibility and various other matters.
On February 8, 1996, "The Telecommunications Act of 1996" ("the Act"), was
signed into law. The new law alters federal, state and local laws and
regulations regarding telecommunications providers and services, including the
cable television industry. The Act deregulates (except for basic service) cable
service rates over a three year period.
NOTE 14. STRATEGIC PARTNERSHIP
On December 10, 1997, the Company and TCI Communications, Inc. ("TCI") signed a
letter of intent to establish a strategic partnership (the "Partnership"). TCI
will contribute to the Partnership all the assets
F-34
<PAGE>
<PAGE>
related to the businesses of certain cable television systems owned and operated
by TCI serving approximately 245,000 customers in the area of Southern
California. The Company will contribute to the Partnership all the assets
related to the businesses of certain cable television systems owned and operated
by the Company serving approximately 500,000 customers in the area of Southern
California, including approximately 90,000 subscribers to be acquired in an
exchange of cable systems described below. The Company will manage the newly
combined cable systems and own approximately 75 percent of the Partnership.
As part of the Partnership Transaction, the Company and TCI have agreed
to exchange cable systems owned by the Company in certain communities
in Northern California for certain cable systems owned by TCI in
Southern California allowing each of them to unify operations in existing
service areas. TCI will exchange its East San Fernando Valley cable system
serving approximately 90,000 subscribers for the Company's Northern California
cable systems, serving approximately 90,000 subscribers in the communities of
San Pablo, Benicia, Fairfield and Rohnert Park, California.
The Company and TCI are currently involved in the due diligence process and
are continuing to negotiate with respect to these transactions. These
transactions are subject to the signing of definitive agreements and to all
appropriate regulatory and other approvals. There is no assurance that
the Company will obtain such approvals or that such transactions will be
consumated.
NOTE 15. CABLE TELEVISION OPERATIONS AND DISCONTINUED SEGMENTS
The financial information which follows is that of Century Communications Corp.
before the consolidation of its discontinued operations: Centennial Cellular
Corp. and the Australian Operations; Centennial Cellular Corp., which comprises
the Company's discontinued wireless telephone business segment; the Company's
discontinued Australian Operations; as well as consolidated information.
F-35
<PAGE>
<PAGE>
Note 15. Cable Television Operations and Discontinued Segments (continued)
BALANCE SHEET FINANCIAL DATA
May 31, 1998
<TABLE>
<CAPTION>
Century
Communications
Corp. before
consolidation of Reclassifications
Centennial Centennial Australian and
and Australia Cellular Corp. Operations Eliminations Consolidated
------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 285,498 $ 14,620 $ 3,666 $ (18,286) $ 285,498
Accounts receivable - net 16,109 37,178 1,335 (38,513) 16,109
Prepaid expenses and other
current assets 3,465 7,852 451 (8,303) 3,465
Net assets of discontinued operations -- -- -- 37,323 37,323
----------- ----------- ----------- ----------- -----------
Total current assets 305,072 59,650 5,452 (27,779) 342,395
Property, plant and equipment - net 565,965 263,661 11,005 (274,666) 565,965
Investment in marketable equity securities 52,451 -- -- -- 52,451
Investment in Centennial Cellular
Corp. at cost 139,685 -- -- (139,685) --
Equity investments in cable television and
wireless telephone systems - net 147,935 87,634 1,204 (236,773) --
Debt issuance cost - net 33,829 8,538 -- (8,538) 33,829
Cable television franchise - net 344,612 -- 4,337 (4,337) 344,612
Wireless telephone licenses - net -- 295,943 -- (295,943) --
Excess of purchase price over value of
net assets acquired - net 166,570 124,533 -- (124,533) 166,570
Other assets 9,360 7,458 -- (7,458) 9,360
----------- ----------- ----------- ----------- -----------
$ 1,765,479 $ 847,417 $ 21,998 $(1,119,712) $ 1,515,182
=========== =========== =========== =========== ===========
</TABLE>
F-36
<PAGE>
<PAGE>
Note 15. Cable Television Operations and Discontinued Segments (continued)
BALANCE SHEET FINANCIAL DATA
May 31, 1998
<TABLE>
<CAPTION>
Century
Communications
Corp. before
consolidation of Reclassifications
Centennial Centennial Australian and
and Australia Cellular Corp. Operations Eliminations Consolidated
------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current Liabilities:
Current maturities of long-term
debt $ 20,050 $ -- $ 10,546 $ (10,546) $ 20,050
Accounts payable and accrued
expenses 133,482 74,685 16,367 (91,052) 133,482
----------- ----------- ----------- ----------- -----------
Total current liabilities 153,532 74,685 26,913 (101,598) 153,532
Long-term debt 2,009,052 510,000 -- (510,000) 2,009,052
Other deferred income 10,650 2,200 -- (7,200) 5,650
Deferred income taxes 5,170 26,584 -- (26,584) 5,170
Minority interest in subsidiaries 67,030 -- -- -- 67,030
Due to parent -- -- 147,935 (147,935) --
Convertible redeemable preferred stock -- 186,287 -- (186,287) --
Second series convertible redeemable
preferred stock -- 7,252 -- (7,252) --
Commonstockholders' equity (deficiency):
Common stock, par value $.01 per
share:
Class A 657 167 -- (167) 657
Class B 427 105 -- (105) 427
Additional paid-in capital 91,132 358,018 -- (272,971) 176,179
Other (132,501) (33,643) 875 32,768 (132,501)
Accumulated deficit (439,670) (284,238) (153,725) 107,619 (770,014)
----------- ----------- ----------- ----------- -----------
Total common stockholders' equity
(deficiency) (479,955) 40,409 (152,850) (132,856) (725,252)
----------- ----------- ----------- ----------- -----------
$ 1,765,479 $ 847,417 $ 21,998 $(1,119,712) $ 1,515,182
=========== =========== =========== =========== ===========
</TABLE>
F-37
<PAGE>
<PAGE>
Note 15. Cable Television Operations and Discontinued Segments (continued)
STATEMENT OF OPERATIONS FINANCIAL DATA
Year Ended May 31, 1998
<TABLE>
<CAPTION>
Century
Communications
Corp. before
consolidation of Reclassifications
Centennial Centennial Australian and
and Australia Cellular Corp. Operations Eliminations Consolidated
------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Service income (1) $ 484,736 $ 237,501 $ 35,257 $ (272,758) $ 484,736
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of services 103,932 54,818 -- (54,818) 103,932
Selling, general and administrative 122,307 81,790 -- (81,790) 122,307
Depreciation and amortization 154,029 114,194 10,849 (125,043) 154,029
Write down of Australian assets -- -- 12,814 (12,814) --
Australian operations -- -- 31,009 (31,009) --
----------- ----------- ----------- ----------- -----------
380,268 250,802 54,672 (305,474) 380,268
----------- ----------- ----------- ----------- -----------
Operating income (loss) 104,468 (13,301) (19,415) 32,716 104,468
Income from equity investments -- (13,069) -- 13,069 --
Interest 172,608 45,155 10,547 (55,702) 172,608
Other (income) expense (1,533) (5) 2,373 (2,368) (1,533)
----------- ----------- ----------- ----------- -----------
Loss before income tax benefit, and
minority interest (66,607) (45,382) (32,335) 77,717 (66,607)
Income tax (benefit) (624) (13,597) -- 13,597 (624)
----------- ----------- ----------- ----------- -----------
Loss before minority interest (65,983) (31,785) (32,335) 64,120 (65,983)
Minority interest in loss of subsidiaries (11,899) (162) -- 162 (11,899)
----------- ----------- ----------- ----------- -----------
Loss from continuing operations (77,882) (31,947) (32,335) 64,282 (77,882)
Discontinued operations -- -- -- (43,089) (43,089)
----------- ----------- ----------- ----------- -----------
Net loss $ (77,882) $ (31,947) $ (32,335) $ 21,193(2) $ (120,971)
=========== =========== =========== =========== ===========
</TABLE>
(1) Intersegment sales are not significant. No single customer accounted for
more than 10% of revenues.
(2) Represents minority interest share of net loss.
F-38
<PAGE>
<PAGE>
NOTE 16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
----------------------------------------------------------
August 31, November 30, February 28, May 31,
1995 1995 1996 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 89,745 $ 91,202 $ 91,808 $ 95,914
Operating income 18,533 21,167 18,917 17,751
Loss from continuing operations (20,626) (8,695) (10,086) (7,776)
Loss from discontinued operations (1,291) (12,453) (13,538) (27,652)
Net loss (21,917) (21,148) (23,624) (35,428)
Loss from continuing operations
per common share (.29) (.13) (.16) (.12)
Loss from discontinued operations
per common share (.02) (.17) (.18) (.37)
Net loss per common share (1) (.31) (.30) (.34) (.49)
<CAPTION>
Three months ended
----------------------------------------------------------
August 31, November 30, February 28, May 31,
1996 1996 1997 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 112,728 $ 115,172 $ 113,542 $ 118,204
Operating income (loss) 24,648 22,668 24,332 16,195
Loss from continuing operations (10,004) (8,698) (13,963) (21,200)
Loss from discontinued operations (51,208) (8,559) (9,405) (11,256)
Loss before extraordinary item (61,212) (17,257) (23,368) (32,456)
Net loss (61,212) (17,257) (23,368) (40,038)
Loss from continuing operations
per common share (.15) (.13) (.20) (.30)
Loss from discontinued operations
per common share (.69) (.12) (.13) (.14)
Loss before extraordinary item per
Common share (.84) (.25) (.33) (.44)
Net loss per common share (1) (.84) (.25) (.33) (.54)
<CAPTION>
Three months ended
----------------------------------------------------------
August 31, November 30, February 28, May 31,
1997 1997 1998 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 119,564 $ 121,322 $ 120,725 $ 123,125
Operating income 24,589 24,193 24,941 30,745
Loss from continuing operations (15,376) (19,784) (22,266) (20,456)
Loss from discontinued operations (9,193) (23,828) (6,852) (3,216)
Net loss (24,569) (43,612) (29,118) (23,672)
Loss from continuing operations
per common share (.22) (.28) (.32) (.29)
Loss from discontinued operations
per common share (.12) (.32) (.09) (.05)
Net loss per common share (1) (.34) (.60) (.41) (.34)
</TABLE>
(1) See Note 1 Loss per common share.
F-39
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this Annual Report
on Form 10-K for the fiscal year ended May 31, 1998 to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 27th day of August, 1998.
CENTURY COMMUNICATIONS CORP.
By: /s/ LEONARD TOW
--------------------------------
LEONARD TOW
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-K for the fiscal year ended May 31, 1998
has been signed below by the following persons in the capacities indicated on
the 27th day of August, 1998.
/s/ LEONARD TOW Chief Executive Officer (principal
- ------------------------------ executive officer), Chairman and
LEONARD TOW Director
/s/ SCOTT N. SCHNEIDER Senior Vice President, Chief Financial
- ------------------------------ Officer, Treasurer (principal financial
SCOTT N. SCHNEIDER officer and principal accounting
officer) and Director
/s/ BERNARD P. GALLAGHER President and Chief Operating Officer
- ------------------------------ and Director
BERNARD P. GALLAGHER
/s/ WILLIAM KRAUS Director
- ------------------------------
WILLIAM KRAUS
/s/ CLAIRE TOW Director
- ------------------------------
CLAIRE TOW
/s/ DAVID Z. ROSENSWEIG Director
- ------------------------------
DAVID Z. ROSENSWEIG
/s/ JOHN P. COLE. Jr. Director
- ------------------------------
JOHN P. COLE. Jr.
/s/ MICHAEL G. HARRIS Director
- ------------------------------
MICHAEL G. HARRIS
/s/ DAVID R. MILLER Director
- ------------------------------
DAVID R. MILLER
II-1
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 6(a)(i) to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1990 and incorporated herein by
reference and Amendment to Restated Certificate of Incorporation of
the Company, filed as Exhibit 6(a)(i) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1990
and incorporated herein by reference).
3.2 By-laws of the Company, as amended (filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1995, and incorporated herein by reference.
4.1 Equity Subscription Agreement, dated as of November 21, 1990, among
Centennial Cellular, Century Communications Corp, a Texas
corporation, and Century Cellular Holding Corp., a New York
corporation (filed as Exhibit 4(o) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1992 and incorporated
herein by reference).
4.2 Indenture, dated as of November 15, 1988, by and between the Company
and the Bank of Montreal Trust Company, as Trustee (filed as Exhibit
4(1) to Amendment No. 7 to the Company's Registration Statement on
Form S-1 (File No 33-21394) under the Securities Act of 1933, as
amended (the "1988 Form S-1"); said 1988 Form S-1 having been filed
with the Commission on April 22, 1988 and incorporated herein by
reference, and said Amendment No. 7 to the 1988 Form S-1 having been
filed with the Commission on November 10, 1988 and incorporated
herein by reference).
4.3 Indenture, dated as of October 15, 1991, by and between the Company
and the Bank of Montreal Trust Company, as Trustee (filed as Exhibit
4.2 to Amendment No. 2 to the Company's Registration Statement on
Form S-3 (File No. 33-33787) under the Securities Act of 1933, as
amended (the "1991 Form S-3"); said 1991 Form S-3 having been filed
with the Commission on August 31, 1990 and incorporated herein by
reference, and said Amendment No. 2 to the 1991 Form S-3 having been
filed with the Commission on March 1, 1991 and incorporated herein
by reference).
4.4 First Supplemental Indenture, dated as of October 15, 1991, by and
between the Company and the Bank of Montreal Trust Company, as
Trustee (filed as Exhibit 7(2) to the Company's current report on
Form 8-K, dated October 17, 1991 and incorporated herein by
reference).
4.5 Indenture, dated as of February 15, 1992, by and between the Company
and the Bank of America National Trust and Savings Association, as
Trustee (filed as Exhibit 4.3 to Amendment No. 2 to the Company's
Registration Statement on Form S-3 (File No. 33-33787) under the
Securities Act of 1933, as amended (the "1991 Form S-3"); said 1991
Form S-3 having been filed with the Commission on March 9, 1990 and
incorporated herein by reference, and said Amendment No. 2 to the
1991 Form S-3 having been filed with the Commission on March 1, 1991
and incorporated herein by reference).
4.6 First Supplemental Indenture, dated as of February 15, 1992, by and
between the Company and the Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 4(t) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1992 and incorporated herein by reference).
4.7 Second Supplemental Indenture, dated as of August 15, 1992, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(u) to the
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1992 and incorporated herein by reference).
4.8 Third Supplemental Indenture, dated as of April 1, 1993, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(v) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1993
and incorporated herein by reference).
4.9 Fourth Supplemental Indenture, dated as of March 6, 1995, by and
between the Company and Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4(w) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1995,
and incorporated herein by reference).
4.10 Fifth Supplemental Indenture, dated as of January 23, 1997, by and
between the Company and First Trust of California, National
Association, successor trustee to Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 4.10 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
4.11 Sixth Supplemental Indenture, dated as of September 29, 1997,
between the Company and First Trust of California, National
Association, successor trustee to Bank of America National Trust and
Savings Association, as Trustee (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended August 31, 1997, and incorporated herein by reference).
4.12 Seventh Supplemental Indenture dated as of November 13, 1997 between
the Company and First Trust of California, National Association,
successor trustee to Bank of America National Trust and Savings
Association, as Trustee (filed as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 30, 1997, and incorporated herein by reference).
4.13 Indenture, dated as of January 15, 1998 between the Company and
First Trust of California, National Association, as Trustee (filed
as Exhibit 4 to the Company's Registration Statement on Form S-4
(File No. 333-47161) under the Securities Act of 1933, as amended
(the "1998 Form S-4"); said 1998 Form S-4 having been filed with the
Commission on March 2, 1998 and incorporated herein by reference).
The Company hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument omitted pursuant to Item
601(b)(4) (iii) of Regulation S-K.
*10.1 Amended Employment Agreement, dated as of July 1, 1991, between the
Company and Leonard Tow (filed as Exhibit 10(a)(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1992
and incorporated herein by reference).
*10.2 Agreement, dated July 30, 1992, between the Company and the Leonard
and Claire Tow Life Insurance Trust (filed as Exhibit 10(a)(2) to
the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992 and incorporated herein by reference).
*10.3 Employment Agreement, dated as of January 1, 1995, between the
Company and Daniel E. Gold (filed as Exhibit 10(a)(7) to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1996 and incorporated herein by reference).
*10.4 Employment Agreement, dated as of January 1, 1997, between the
Company and Scott N. Schneider (filed as Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
*10.5 Employment Agreement, dated as of January 1, 1997, between the
Company and Michael G. Harris (filed as Exhibit 10.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended May
31, 1997, and incorporated herein by reference).
*10.6 Employment Agreement, dated as of January 1, 1997, between the
Company and Frank Tow (filed as Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
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1997, and incorporated herein by reference).
*10.7 Employment Agreement, dated as of January 1, 1997, between the
Company and Clifford A. Bail (filed as Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1997,
and incorporated herein by reference).
10.8 Principal Stockholders' Agreement, dated as of December 7, 1985,
between Sentry Insurance a Mutual Company ("Sentry"), the Company,
Leonard Tow individually and as Trustee, and Claire Tow as Trustee
(filed as Exhibit 10(a) to the Company's Registration Statement on
Form S-1 (No. 33-2025) under the Securities Act of 1933, as amended,
filed with the Commission on December 9, 1985 (the "1986 Form S-1")
and incorporated herein by reference).
10.9 Amendment to Principal Stockholders' Agreement, dated August 31,
1987 (filed as an Exhibit to the Company's Current Report on Form
8-K dated September 11, 1987 and incorporated herein by reference).
10.10 Lease, dated July 15, 1987, between Locust Avenue Associates and
Century-Texas (filed as Exhibit 10(h) to the 1988 Form S-1 and
incorporated herein by reference).
10.11 Agreement for lease dated as of January 1, 1997 by and between
Locust Avenue Associates Limited Partnership and Century Texas
(filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1997, and incorporated herein by
reference).
10.12 Third Agreement of Amendment to the Amended and Restated Joint
Venture Agreement, dated June 18, 1987, among American Television
and Communications Corporation, Daniels & Associates, Inc.,
Tele-communications, Inc., Comcast Corporation and Century Southwest
Cable Television, Inc. (filed as Exhibit 10(m) to the 1988 Form S-1
and incorporated herein by reference).
10.13 Colorado Springs Joint Sharing and Buy-Sell Agreement, dated
November 1, 1974, among Century Venture Corporation, Century
Colorado Corp., American Television and Communications Corporation,
Century Texas and Vumore-Video Corporation of Colorado, Inc. (filed
as Exhibit 10(h) to the 1986 Form S-1 and incorporated herein by
reference).
*10.14 1985 Stock Option Plan of the Company (filed as Annex A to the
Company's Registration Statement on Form S-8 (File No. 33-34387)
under the Securities Act of 1933, as amended, filed with the
Commission on April 19, 1990 and incorporated herein by reference).
*10.15 Incentive Award Plan of the Company (filed as Annex A to the
Company's Registration Statement on Form S-8 (File No. 33-23718)
under the Securities Act of 1933, as amended, filed with the
Commission on August 11, 1988 and incorporated herein by reference.
*10.16 1985 Employee Stock Purchase Plan of the Company, as amended (filed
as Exhibit 10(r) to the Company's Annual Report on Form 10-K for the
year ended May 31, 1995, and incorporated herein by reference).
*10.17 Non-Employee Director Stock Option Plan of the Company (filed as
Annex A to the Company's Registration Statement on Form S-8 (File No
33-34388) under the Securities Act of 1933, as amended, filed with
the Commission on April 19, 1990 and incorporated herein by
reference).
*10.18 1985 Stock Equivalent Plan (filed as Exhibit 10(m) to the 1986 Form
S-1 and incorporated herein by reference).
*10.19 Century Retirement Investment Plan (filed as Exhibit 10(x) to the
Company's Annual Report on Form 10-K for year ended May 31, 1992 and
incorporated herein by reference).
*10.20 Century 1992 Management Equity Incentive Plan (filed as Exhibit
10(x)(1) to the Company's Annual Report on Form 10-K for the year
ended May 31, 1992 and incorporated herein by reference).
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*10.21 1993 Non-Employee Directors' Stock Option Plan of the Company (filed
as Exhibit 10(v)(2) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1995, and incorporated herein by
reference).
*10.22 1994 Stock Option Plan of the Company (filed as Exhibit 10(v)(3) to
the Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995, and incorporated herein by reference).
10.23 Interest Rate Swap Agreement, dated as of July 18, 1986, between
Citibank, N.A. and Century-Texas (filed as Exhibit 10(v) to
Amendment No. 5 to the 1988 Form S-1 and incorporated herein by
reference).
10.24 Amendment No. 1 to Management Agreement and Joint Venture Agreement
(Century ML Venture), dated September 21, 1987, between Century
Texas and ML Media Partners, L.P., a Delaware limited partnership
(filed as Exhibit 10(w) to the Company's Annual Report on Form 10-X
for the fiscal year ended May 31, 1989 and incorporated herein by
reference).
10.25 Management Agreement and Joint Venture Agreement (Century-ML Radio
Venture), dated as of February 15, 1989, between Century Texas and
ML Media Partners, L.P., a Delaware limited partnership (filed as
Exhibit 10(x) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1989 and incorporated herein by
reference).
10.26 Plan and Agreement of Merger, dated August 2, 1991, by and among
Century Cellular Holding Corp., Century Cellular Corp., Citizens
Utilities Company and Citizens Cellular Corp., together with
exhibits, including Management Agreement, Conflicts/Non-Compete
Agreement, Stock Transfer Agreement and Registration Rights
Agreement (filed as Exhibit 10(cc) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1991 and incorporated
herein by reference).
10.27 Credit Agreement, dated as of August 4, 1995, by and among CCC-I,
Inc., Pullman TV Cable Co., Inc., Kootenai Cable, Inc., Citibank
N.A., as agent, and each of the banks parties thereto (filed as
Exhibit 10(ff) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1996 and incorporated herein by
reference).
10.28 Credit Agreement, dated as of June 30, 1994, by and among CCC-II,
Inc., Citibank N.A. as managing agent, and each of the banks parties
thereto (filed as Exhibit 10 to the Company's report on Form 8-K
dated July 25, 1994 and incorporated herein by reference. The
Company hereby agrees to furnish to the Securities and Exchange
Commission, upon its request, a copy of each instrument omitted
pursuant to Item 601(b) (4) (iii) of Regulation S-K).
10.29 Eighth Restated Credit Agreement, dated as of July 10, 1990, between
Century Texas, Century Investors and Citibank, N.A., on behalf of
itself and as agent, and The Chase Manhattan Bank (National
Association), The Bank of Nova Scotia, The First National Bank of
Chicago, Bank of Montreal, The Royal Bank of Canada, Continental
Bank N.A., Bankers Trust Company, Nippon Credit Bank, Provident
National Bank, and Security Pacific National Bank ("the Eighth
Restated Banks") (filed as an Exhibit to the Company's Current
Report on Form 8-K, filed July 13, 1990, and incorporated herein by
reference).
10.30 Third Amendment, dated as of November 21, 1990 (the "Third
Amendment"), among Centennial Cellular Corp., a Delaware corporation
("Centennial Cellular Corp."), the Lender parties on the signature
page thereto, Citibank, N.A., as agent, Century Cellular Holding
Corp., and the Guarantor of parties on the signature page thereto,
to the Credit Agreement, dated as of October 11, 1989, among
Centennial Cellular Corp., and Citibank, N.A., on behalf of itself
and as agent, and Kansallis-Osake-Pankki, Provident National Bank,
DnC America Banking Corporation, Meridian Bank, Lincoln Savings
Bank, Toronto Dominion Bank, and The Bank of Nova Scotia (the
"Cellular Banks") (filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1991,
and incorporated herein by reference).
</TABLE>
II-5
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10.31 Credit Agreement, dated as of October 11, 1989, among Centennial
Cellular Corp., and Citibank, N.A., on behalf of itself and as
agent, and the Cellular Banks, as Amended and Restated pursuant to
the Third Amendment (filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended November 30, 1991,
and incorporated herein by reference).
10.32 Second Restated Consolidated Guaranty and Pledge Agreement, dated as
of July 10, 1990, made by the subsidiaries of the Company set forth
on the signature pages thereto to Citibank, N.A., as agent for the
Eighth Restated Banks (filed as Exhibit 4(g) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990 and
incorporated herein by reference).
10.33 Third Restated Pledge Agreement and Guaranty, dated as of July 10,
1990, made by the Company to Citibank, N.A., as agent for the Eighth
Restated Banks (filed as Exhibit 4(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1990 and incorporated
herein by reference).
10.34 Seventh Restated Pledge and Security Agreement, dated as of July 10,
1990, made by Century Texas to Citibank, N.A., as agent for the
Eighth Restated Banks (filed as Exhibit (i)A to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990 and
incorporated herein by reference).
10.35 Third Collateral Agreement Amendment, dated as of July 10, 1990 made
by Century Texas, the Company and Citibank, N.A. as agent for the
Eighth Restated Banks (filed as Exhibit 4(i)B to the Company's
Annual Report on Form 10-K for the fiscal year ended May 31, 1990
and incorporated herein by reference).
10.36 Pledge Agreement, dated as of October 11, 1989, made by Century
Cellular Holding Corp., a New York corporation, to Citibank, N.A.,
as agent for the Cellular Banks (filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the period quarterly
ended November 30, 1990 and incorporated herein by reference).
10.37 Pledge and Security Agreement, dated as of October 11, 1989, made by
Centennial Cellular Corp to Citibank, N.A., as agent for the
Cellular Banks, as Amended and Restated pursuant to the Third
Amendment (filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended November 30, 1990 and
incorporated herein by reference).
10.38 Consolidated Guaranty and Pledge Agreement, dated as of October 11,
1989, made by the subsidiaries of Centennial Cellular Corp. set
forth on the signature pages thereto to Citibank, N.A., as agent for
the Cellular Banks, as Amended and Restated pursuant to the Third
Amendment (filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended November 30, 1990 and
incorporated herein by reference).
10.39 Amendment No. 1 dated as of August 9, 1996 among CCC-I, Inc.,
Pullman TV Cable Co., Inc. and Kootenai Cable, Inc., Citibank, N.A.,
as agent, and each of the bank parties thereto (filed as Exhibit
10.39 to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, and incorporated herein by reference).
10.40 Amendment No. 1 dated as of August 9, 1996 among CCC-II, Inc.,
Citibank, N.A., as managing agent, and each of the bank parties
thereto (filed as Exhibit 10.40 to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1997, and incorporated
herein by reference).
10.41 Credit Agreement dated as of April 15, 1997 among Citizens Century
Cable Television Venture, Bank of America, National Trust and
Savings Association, as Syndication Agent, and Societe General, as
Agent, Corestates Bank, N.A., The First National Bank of Boston,
LTCB Trust Company, and PNC Bank, National Association, as
Co-Agents, and each of the bank parties thereto (filed as Exhibit
10.41 to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1997, and incorporated herein by reference).
10.42 Extension Agreement to Employment Agreement dated September 10, 1997
between the Company
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II-6
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and Daniel E. Gold (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended November 30,
1997, and incorporated herein by reference).
10.43 Employment Agreement, dated as of January 1, 1997, between the
Company and Bernard P. Gallagher (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended August 31, 1997, and incorporated herein by reference).
'D'*10.44 Modification Agreement, dated as of June 1, 1998, between the
Company and Scott N. Schneider.
'D'*10.45 Modification Agreement, dated as of June 1, 1998, between the
Company and Bernard P. Gallagher.
'D'*10.46 Modification Agreement, dated as of June 1, 1998, between the
Company and Michael G. Harris.
'D'*10.47 Modification Agreement, dated as of June 1, 1998, between the
Company and Frank Tow.
'D'*10.48 Employment Agreement, dated as of July 1, 1998, between the Company
and Leonard Tow.
'D'10.49 Agreement and Plan of Merger, dated as of July 2, 1998, between
Centennial Cellular Corp. and CCW Acquisition Corp.
'D'10.50 Stockholder Agreement, dated as of July 2, 1998, between CCW
Acquisition Corp. and Century Communications Corp.
'D'11 Computation of loss per common share.
'D'12 Computation of ratios.
'D'21 List of subsidiaries of the Company.
'D'23.1 Consent of Deloitte & Touche LLP.
'D'27 Financial Data Schedule.
99 Press Release of Centennial Cellular Corp., dated April 14, 1998
(filed as Exhibit 99 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended February 28, 1998, and incorporated
herein by reference).
</TABLE>
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* Constitutes a management contract or compensatory plan or arrangement.
'D' Filed herewith.
II-7
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ...................'D'
The section symbol shall be expressed as .................'SS'
<PAGE>
<PAGE>
MODIFICATION AGREEMENT
AGREEMENT made as of this first day of June 1998 by and between Century
Communications Corp., a New Jersey Corporation whose address for the purposes of
this Agreement is 50 Locust Avenue, New Canaan, CT 06840 (the "Company") and
Scott N. Schneider, an individual residing at 240 Peaceable Road, Ridgefield, CT
06877 ("Employee").
W I T N E S S E T H
WHEREAS:
A. Under the date of January 1, 1997, the Company and Employee
entered into an employment agreement (the "Employment Agreement") pursuant to
which the Employee was employed by the Company as its financial officer and to
carry out other duties assigned to him pursuant to the Employment Agreement.
B. Both the Company and the Employee are now mutually desirous of
amending the Employment Agreement to (i) extend its term to June 30, 2003 (ii)
provide for the continuation of certain benefits and the use of certain
furniture and equipment services and the transfer of certain property following
termination of employment under certain circumstances and (iii) to make
provision in the instance of a change of control of the Company.
NOW THEREFORE, in consideration of the mutual covenance and agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which is mutually acknowledged, it is agreed by and between the
parties as follows:
<PAGE>
<PAGE>
1. Section 4 of the Employment Agreement is deleted in its entirety and
replaced by the following:
"4. Term
4.1 The term of this Agreement (the "Term") shall be
seventy-eight consecutive months commencing January 1, 1997 and
expiring June 30, 2003"
2. The date "December 31, 1999" contained in Section 8.1 of the Employment
Agreement is deleted in its entirety and replaced by the date "June 30, 2003."
3. Section 12.2 is amended by deleting the period at the end of the first
sentence and by adding the following to such sentence:
"(iv) to have transferred to Employee and for Employee to become the
owner thereof, free of all liens and other encumbrances, the motor
vehicle then being supplied and made available to Employee pursuant to
Section 6.1, (v) to continue to have the availability in the same
amount, manner and degree as if still employed on a full time basis and
rendering services in a satisfactory manner, all medical, major
medical, dental, life and disability insurance and ancillary medical
benefits that were then available to Employee and (vi) without cost to
Employee, for a period of one year following such termination, to be
provided with an office and the
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<PAGE>
equipment and accoutrements of office which were being furnished to
Employee at the tme of such termination."
4. Section 15.5 of the Employment Agreement is deleted in its entirety
and replaced by the following:
"15.5 "Subsidiaries" or "Subsidiary" shall include and mean any
corporation, partnership, venture or other entity 50% or more of the
then issued and outstanding voting stock is owned directly or
indirectly by the Company in the instance of a Corporation, or 50% or
more of the interest in capital or in profits is owned directly or
indirectly by the Company in the instance of a partnership, venture
and/or other entity, or any corporation, partnership, venture or other
entity, the business of which is controlled or managed by the Company
or any of its Subsidiaries."
5. There is added a new section to be known as Section 14A reading as
follows:
14A. Change of Control; Termination.
14A.1 A "Change in Control" of the Company shall be deemed to occur (A)
when any person or group of affiliated or related persons (other than a
group of which Employee or an entity controlled by Employee is a
participant and other than an employee benefit plan (or related trust
of the Company) acquires, directly or indirectly, voting securities or
assets of the Company if, immediately after
<PAGE>
<PAGE>
giving effect to such acquisition, such person or group of affiliated
or related persons (i) beneficially owns 9% or more of the outstanding
shares of common stock of the Company or of the total voting power of
all of the Company's voting securities outstanding at the time of such
acquisition, or stock having a fair market value of 9% or more of the
fair market value of the Company's issued and outstanding stock, or
(ii) otherwise effectively controls the operations of the Company,
whether by control of its Board of Directors, by contract, or
otherwise, or (B) upon the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding shares of the Company's common stock
and outstanding shares of the Company's voting securities immediately
prior to such Business Combination, beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as
their ownership immediately prior to such Business Combination, of the
outstanding shares of the
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Company's common stock and outstanding shares of the Company's voting
securities, as the case may be, (ii) no person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 9% or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority
of the members of the board of directors of the corporation resulting
form such Business Combination were members of the board of directors
of the Company at the time of the execution of the initial agreement
provided for the Business Combination, or of the action of the Board of
Directors of the Company, providing for such Business Combination,
whichever is earlier, or (C) when a majority of the members of the
Board of Directors of the Company is replaced during a 12-month period
by directors whose appointment or election was not endorsed by the
prior Board. Without limitation, a "Threatened Change in Control" shall
be deemed to have occurred when any person or group of persons acquires
such ownership of securities of the Company that such person or group
files or is required to file Forms 13D and 13G or otherwise files or is
required to make a filing pursuant to Regulation 13d under the
Securities and Exchange Act of 1934, as amended.
<PAGE>
<PAGE>
14A.2 In the event of a Threatened Change in Control or a Change in
Control, as defined in Sub-Section 14A.1, Employee shall have the right to
terminate this Agreement on not less than ten days notice to the Company (or to
the successor in interest or the acquirer of the assets or interests of the
Company, or the surviving Company in the instance of a business combination if
same is not the Company) in which event Employee shall be entitled to the same
monies and benefits to which Employee would be entitled in the event the Company
terminated this Agreement and Employee's employment, other than for cause, as
provided in Section 12.2.
14A.3 In the event any of the payments provided in this Section 14.A or
pursuant to Section 12.2 is determined by the United States Internal Revenue
Service to be an "Excess Parachute Payment" under Section 280G of the United
States Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay Employee additional amounts (the "Tax Payment") to make him whole, on an
after-tax basis (based on the highest applicable federal, state, and local
income tax rates and after giving effect to the federal deduction arising from
such state or local income taxes), for any excise tax under Section 4999 of the
Code imposed with respect to such Excess Parachute Payments.
14A.4 The parties agree and acknowledge that the payments to be made
under Sections 11, 12.2 and this Section 14 constitute fair and reasonable
provisions for the consequence of the applicable termination and do not
constitute a penalty.
<PAGE>
<PAGE>
6. In all other respects the Employment Agreement is ratified, adopted and
confirmed.
IN WITNESS WHEREOF, the parties hereto have executed and have caused this
agreement to be executed as of the day and year first above written.
CENTURY COMMUNICATIONS CORP.
By: /s/ [Signature]
----------------------------------
Its Secretary
/s/ Scott N. Schneider
----------------------------------
Scott N. Schneider
<PAGE>
<PAGE>
MODIFICATION AGREEMENT
AGREEMENT made as of this first day of June 1998 by and between Century
Communications Corp., a New Jersey Corporation whose address for the purposes of
this Agreement is 50 Locust Avenue, New Canaan, CT 06840 (the "Company") and
Bernard P. Gallagher, an individual residing at 115 Lone Tree Farm Road, New
Canaan, CT 06840 ("Employee").
W I T N E S S E T H
WHEREAS:
A. Under the date of January 1, 1997, the Company and Employee
entered into an employment agreement (the "Employment Agreement") pursuant to
which the Employee was employed by the Company as its chief operating officer
and to carry out other duties assigned to him pursuant to the Employment
Agreement.
B. Both the Company and the Employee are now mutually desirous of
amending the Employment Agreement to (i) extend its term to June 30, 2003 (ii)
provide for the continuation of certain benefits and the use of certain
furniture and equipment services and the transfer of certain property following
termination of employment under certain circumstances and (iii) to make
provision in the instance of a change of control of the Company.
<PAGE>
<PAGE>
NOW THEREFORE, in consideration of the mutual covenance and agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which is mutually acknowledged, it is agreed by and between the
parties as follows:
1. Section 4 of the Employment Agreement is deleted in its entirety and
replaced by the following:
"4. Term
4.1 The term of this Agreement (the "Term") shall be seventy-eight
consecutive months commencing January 1, 1997 and expiring June 30,
2003"
2. The date "December 31, 1999" contained in Section 8.1 of the
Employment Agreement is deleted in its entirety and replaced by the date "June
30, 2003."
3. Section 12.2 is amended by deleting the period at the end of the
first sentence and by adding the following to such sentence:
"(iv) to have transferred to Employee and for Employee to become the
owner thereof, free of all liens and other encumbrances, the motor
vehicle then being supplied and made available to Employee pursuant to
Section 6.1, (v) to continue to have the availability in the same
amount, manner and degree as if still employed on a full time basis and
rendering services in a satisfactory manner, all medical, major
medical, dental, life and disability insurance and
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<PAGE>
ancillary medical benefits that were then available to Employee and
(vi) without cost to Employee, for a period of one year following such
termination, to be provided with an office and the equipment and
accoutrements of office which were being furnished to Employee at the
tme of such termination."
4. Section 15.5 of the Employment Agreement is deleted in its entirety
and replaced by the following:
"15.5 "Subsidiaries" or "Subsidiary" shall include and mean any
corporation, partnership, venture or other entity 50% or more of the
then issued and outstanding voting stock is owned directly or
indirectly by the Company in the instance of a Corporation, or 50% or
more of the interest in capital or in profits is owned directly or
indirectly by the Company in the instance of a partnership, venture
and/or other entity, or any corporation, partnership, venture or other
entity, the business of which is controlled or managed by the Company
or any of its Subsidiaries."
5. There is added a new section to be known as Section 14A reading as
follows:
14A. Change of Control; Termination.
14A.1 A "Change in Control" of the Company shall be deemed to occur (A)
when any person or group of affiliated or related persons (other than a
group of
<PAGE>
<PAGE>
which Employee or an entity controlled by Employee is a
participant and other than an employee benefit plan (or related trust
of the Company) acquires, directly or indirectly, voting securities or
assets of the Company if, immediately after giving effect to such
acquisition, such person or group of affiliated or related persons (i)
beneficially owns 9% or more of the outstanding shares of common stock
of the Company or of the total voting power of all of the Company's
voting securities outstanding at the time of such acquisition, or stock
having a fair market value of 9% or more of the fair market value of
the Company's issued and outstanding stock, or (ii) otherwise
effectively controls the operations of the Company, whether by control
of its Board of Directors, by contract, or otherwise, or (B) upon the
consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following
such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively,
of the outstanding shares of the Company's common stock and outstanding
shares of the Company's voting securities immediately prior to such
Business Combination, beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company
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<PAGE>
or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Business Combination, of
the outstanding shares of the Company's common stock and outstanding
shares of the Company's voting securities, as the case may be, (ii) no
person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 9% or more of, respectively,
the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power
of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting form such Business
Combination were members of the board of directors of the Company at
the time of the execution of the initial agreement provided for the
Business Combination, or of the action of the Board of Directors of the
Company, providing for such Business Combination, whichever is earlier,
or (C) when a majority of the members of the Board of Directors of the
Company is replaced during a 12-month period by directors whose
appointment or election was not endorsed by the prior Board. Without
limitation, a "Threatened Change in Control" shall be deemed to have
occurred when any person or group of persons acquires such ownership of
securities of the Company that such person or group files or is
required to file
<PAGE>
<PAGE>
Forms 13D and 13G or otherwise files or is required to make a filing
pursuant to Regulation 13d under the Securities and Exchange Act of
1934, as amended.
14A.2 In the event of a Threatened Change in Control or a Change in
Control, as defined in Sub-Section 14A.1, Employee shall have the right to
terminate this Agreement on not less than ten days notice to the Company (or to
the successor in interest or the acquirer of the assets or interests of the
Company, or the surviving Company in the instance of a business combination if
same is not the Company) in which event Employee shall be entitled to the same
monies and benefits to which Employee would be entitled in the event the Company
terminated this Agreement and Employee's employment, other than for cause, as
provided in Section 12.2.
14A.3 In the event any of the payments provided in this Section 14.A or
pursuant to Section 12.2 is determined by the United States Internal Revenue
Service to be an "Excess Parachute Payment" under Section 280G of the United
States Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay Employee additional amounts (the "Tax Payment") to make him whole, on an
after-tax basis (based on the highest applicable federal, state, and local
income tax rates and after giving effect to the federal deduction arising from
such state or local income taxes), for any excise tax under Section 4999 of the
Code imposed with respect to such Excess Parachute Payments.
<PAGE>
<PAGE>
14A.4 The parties agree and acknowledge that the payments to be made
under Sections 11, 12.2 and this Section 14 constitute fair and reasonable
provisions for the consequence of the applicable termination and do not
constitute a penalty.
6. In all other respects the Employment Agreement is ratified, adopted
and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed and have caused
this agreement to be executed as of the day and year first above written.
CENTURY COMMUNICATIONS CORP.
By: /s/ [Signature]
----------------------------------
Its Secretary
/s/ Bernard P. Gallgher
----------------------------------
Bernard P. Gallgher
<PAGE>
<PAGE>
MODIFICATION AGREEMENT
AGREEMENT made as of this first day of June 1998 by and between Century
Communications Corp., a New Jersey Corporation whose address for the purposes of
this Agreement is 50 Locust Avenue, New Canaan, CT 06840 (the "Company") and
Michael G. Harris, an individual residing at Beech Hill Lane, Pound Ridge, NY
10576 ("Employee").
W I T N E S S E T H
WHEREAS:
A. Under the date of January 1, 1997, the Company and Employee
entered into an employment agreement (the "Employment Agreement") pursuant to
which the Employee was employed by the Company as its engineering officer and to
carry out other duties assigned to him pursuant to the Employment Agreement.
B. Both the Company and the Employee are now mutually desirous of
amending the Employment Agreement to (i) extend its term to June 30, 2003 (ii)
provide for the continuation of certain benefits and the use of certain
furniture and equipment services and the transfer of certain property following
termination of employment under certain circumstances and (iii) to make
provision in the instance of a change of control of the Company.
NOW THEREFORE, in consideration of the mutual covenance and agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which is mutually acknowledged, it is agreed by and between the
parties as follows:
<PAGE>
<PAGE>
1. Section 4 of the Employment Agreement is deleted in its entirety and
replaced by the following:
"4. Term
4.1 The term of this Agreement (the "Term") shall be seventy-eight
consecutive months commencing January 1, 1997 and expiring June 30,
2003"
2. The date "December 31, 1999" contained in Section 8.1 of the
Employment Agreement is deleted in its entirety and replaced by the date "June
30, 2003."
3. Section 12.2 is amended by deleting the period at the end of the
first sentence and by adding the following to such sentence:
"(iv) to have transferred to Employee and for Employee to become the
owner thereof, free of all liens and other encumbrances, the motor
vehicle then being supplied and made available to Employee pursuant to
Section 6.1, (v) to continue to have the availability in the same
amount, manner and degree as if still employed on a full time basis and
rendering services in a satisfactory manner, all medical, major
medical, dental, life and disability insurance and ancillary medical
benefits that were then available to Employee and (vi) without cost to
Employee, for a period of one year following such termination, to be
provided with an office and the
<PAGE>
<PAGE>
equipment and accoutrements of office which were being furnished to
Employee at the tme of such termination."
4. Section 15.5 of the Employment Agreement is deleted in its entirety
and replaced by the following:
"15.5 "Subsidiaries" or "Subsidiary" shall include and mean any
corporation, partnership, venture or other entity 50% or more of the
then issued and outstanding voting stock is owned directly or
indirectly by the Company in the instance of a Corporation, or 50% or
more of the interest in capital or in profits is owned directly or
indirectly by the Company in the instance of a partnership, venture
and/or other entity, or any corporation, partnership, venture or other
entity, the business of which is controlled or managed by the Company
or any of its Subsidiaries."
5. There is added a new section to be known as Section 14A reading as
follows:
14A. Change of Control; Termination.
14A.1 A "Change in Control" of the Company shall be deemed to
occur (A) when any person or group of affiliated or related persons
(other than a group of which Employee or an entity controlled by
Employee is a participant and other than an employee benefit plan (or
related trust of the Company) acquires, directly or indirectly, voting
securities or assets of the Company if, immediately after
<PAGE>
<PAGE>
giving effect to such acquisition, such person or group of
affiliated or related persons (i) beneficially owns 9% or more of
the outstanding shares of common stock of the Company or of the
total voting power of all of the Company's voting securities
outstanding at the time of such acquisition, or stock having a
fair market value of 9% or more of the fair market value of the
Company's issued and outstanding stock, or (ii) otherwise
effectively controls the operations of the Company, whether by
control of its Board of Directors, by contract, or otherwise, or
(B) upon the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding shares of the
Company's common stock and outstanding shares of the Company's
voting securities immediately prior to such Business Combination,
beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business
Combination, of the outstanding shares of the
<PAGE>
<PAGE>
Company's common stock and outstanding shares of the Company's
voting securities, as the case may be, (ii) no person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 9% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior
to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting
form such Business Combination were members of the board of
directors of the Company at the time of the execution of the
initial agreement provided for the Business Combination, or of the
action of the Board of Directors of the Company, providing for
such Business Combination, whichever is earlier, or (C) when a
majority of the members of the Board of Directors of the Company
is replaced during a 12-month period by directors whose
appointment or election was not endorsed by the prior Board.
Without limitation, a "Threatened Change in Control" shall be
deemed to have occurred when any person or group of persons
acquires such ownership of securities of the Company that such
person or group files or is required to file Forms 13D and 13G or
otherwise files or is required to make a filing pursuant to
Regulation 13d under the Securities and Exchange Act of 1934, as
amended.
<PAGE>
<PAGE>
14A.2 In the event of a Threatened Change in Control or a Change in
Control, as defined in Sub-Section 14A.1, Employee shall have the right to
terminate this Agreement on not less than ten days notice to the Company (or to
the successor in interest or the acquirer of the assets or interests of the
Company, or the surviving Company in the instance of a business combination if
same is not the Company) in which event Employee shall be entitled to the same
monies and benefits to which Employee would be entitled in the event the Company
terminated this Agreement and Employee's employment, other than for cause, as
provided in Section 12.2.
14A.3 In the event any of the payments provided in this Section 14.A or
pursuant to Section 12.2 is determined by the United States Internal Revenue
Service to be an "Excess Parachute Payment" under Section 280G of the United
States Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay Employee additional amounts (the "Tax Payment") to make him whole, on an
after-tax basis (based on the highest applicable federal, state, and local
income tax rates and after giving effect to the federal deduction arising from
such state or local income taxes), for any excise tax under Section 4999 of the
Code imposed with respect to such Excess Parachute Payments.
14A.4 The parties agree and acknowledge that the payments to be made
under Sections 11, 12.2 and this Section 14 constitute fair and reasonable
provisions for the consequence of the applicable termination and do not
constitute a penalty.
<PAGE>
<PAGE>
6. In all other respects the Employment Agreement is ratified, adopted
and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed and have caused
this agreement to be executed as of the day and year first above written.
CENTURY COMMUNICATIONS CORP.
By: /s/ [Signature]
----------------------------------
Its Secretary
/s/ Michael G. Harris
----------------------------------
Michael G. Harris
<PAGE>
<PAGE>
MODIFICATION AGREEMENT
AGREEMENT made as of this first day of June 1998 by and between Century
Communications Corp., a New Jersey Corporation whose address for the purposes of
this Agreement is 50 Locust Avenue, New Canaan, CT 06840 (the "Company") and
Frank Tow, an individual residing at 25 Llanberris Road, Bala Cynwyd, PA 19004
("Employee").
W I T N E S S E T H
WHEREAS:
A. Under the date of January 1, 1997, the Company and Employee
entered into an employment agreement (the "Employment Agreement") pursuant to
which the Employee was employed by the Company as President of Century
Advertising and to carry out other duties assigned to him pursuant to the
Employment Agreement.
B. Both the Company and the Employee are now mutually desirous of
amending the Employment Agreement to (i) extend its term to June 30, 2003 (ii)
provide for the continuation of certain benefits and the use of certain
furniture and equipment services and the transfer of certain property following
termination of employment under certain circumstances and (iii) to make
provision in the instance of a change of control of the Company.
NOW THEREFORE, in consideration of the mutual covenance and agreements
herein set forth and other good and valuable consideration, the receipt and
adequacy of which is mutually acknowledged, it is agreed by and between the
parties as follows:
<PAGE>
<PAGE>
1. Section 4 of the Employment Agreement is deleted in its entirety and
replaced by the following:
"4. Term
4.1 The term of this Agreement (the "Term") shall be seventy-eight
consecutive months commencing January 1, 1997 and expiring June 30,
2003"
2. The date "December 31, 1999" contained in Section 8.1 of the
Employment Agreement is deleted in its entirety and replaced by the date "June
30, 2003."
3. Section 12.2 is amended by deleting the period at the end of the
first sentence and by adding the following to such sentence:
"(iv) to have transferred to Employee and for Employee to become the
owner thereof, free of all liens and other encumbrances, the motor
vehicle then being supplied and made available to Employee pursuant to
Section 6.1, (v) to continue to have the availability in the same
amount, manner and degree as if still employed on a full time basis and
rendering services in a satisfactory manner, all medical, major
medical, dental, life and disability insurance and ancillary medical
benefits that were then available to Employee and (vi) without cost to
Employee, for a period of one year following such termination, to be
provided with an office and the
<PAGE>
<PAGE>
equipment and accoutrements of office which were being furnished to
Employee at the tme of such termination."
4. Section 15.5 of the Employment Agreement is deleted in its entirety
and replaced by the following:
"15.5 "Subsidiaries" or "Subsidiary" shall include and mean any
corporation, partnership, venture or other entity 50% or more of the
then issued and outstanding voting stock is owned directly or
indirectly by the Company in the instance of a Corporation, or 50% or
more of the interest in capital or in profits is owned directly or
indirectly by the Company in the instance of a partnership, venture
and/or other entity, or any corporation, partnership, venture or other
entity, the business of which is controlled or managed by the Company
or any of its Subsidiaries."
5. There is added a new section to be known as Section 14A reading as
follows:
14A. Change of Control; Termination.
14A.1 A "Change in Control" of the Company shall be deemed to occur (A)
when any person or group of affiliated or related persons (other than a
group of which Employee or an entity controlled by Employee is a
participant and other than an employee benefit plan (or related trust
of the Company) acquires, directly or indirectly, voting securities or
assets of the Company if, immediately after
<PAGE>
<PAGE>
giving effect to such acquisition, such person or group of affiliated
or related persons (i) beneficially owns 9% or more of the outstanding
shares of common stock of the Company or of the total voting power of
all of the Company's voting securities outstanding at the time of such
acquisition, or stock having a fair market value of 9% or more of the
fair market value of the Company's issued and outstanding stock, or
(ii) otherwise effectively controls the operations of the Company,
whether by control of its Board of Directors, by contract, or
otherwise, or (B) upon the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the outstanding shares of the Company's common
stock and outstanding shares of the Company's voting securities
immediately prior to such Business Combination, beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or
all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions
as their ownership immediately prior to such Business Combination, of
the outstanding shares of the
<PAGE>
<PAGE>
Company's common stock and outstanding shares of the Company's voting
securities, as the case may be, (ii) no person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 9% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the corporation
resulting form such Business Combination were members of the board of
directors of the Company at the time of the execution of the initial
agreement provided for the Business Combination, or of the action of
the Board of Directors of the Company, providing for such Business
Combination, whichever is earlier, or (C) when a majority of the
members of the Board of Directors of the Company is replaced during a
12-month period by directors whose appointment or election was not
endorsed by the prior Board. Without limitation, a "Threatened Change
in Control" shall be deemed to have occurred when any person or group
of persons acquires such ownership of securities of the Company that
such person or group files or is required to file Forms 13D and 13G or
otherwise files or is required tomake a filing pursuant to Regulation
13d under the Securities andExchange Act of 1934, as amended.
<PAGE>
<PAGE>
14A.2 In the event of a Threatened Change in Control or a Change
in Control, as defined in Sub-Section 14A.1, Employee shall have the right to
terminate this Agreement on not less than ten days notice to the Company (or to
the successor in interest or the acquirer of the assets or interests of the
Company, or the surviving Company in the instance of a business combination if
same is not the Company) in which event Employee shall be entitled to the same
monies and benefits to which Employee would be entitled in the event the Company
terminated this Agreement and Employee's employment, other than for cause, as
provided in Section 12.2.
14A.3 In the event any of the payments provided in this Section
14.A or pursuant to Section 12.2 is determined by the United States Internal
Revenue Service to be an "Excess Parachute Payment" under Section 280G of the
United States Internal Revenue Code of 1986, as amended (the "Code"), the
Company shall pay Employee additional amounts (the "Tax Payment") to make him
whole, on an after-tax basis (based on the highest applicable federal, state,
and local income tax rates and after giving effect to the federal deduction
arising from such state or local income taxes), for any excise tax under Section
4999 of the Code imposed with respect to such Excess Parachute Payments.
14A.4 The parties agree and acknowledge that the payments to be
made under Sections 11, 12.2 and this Section 14 constitute fair and reasonable
provisions for the consequence of the applicable termination and do not
constitute a penalty.
<PAGE>
<PAGE>
6. In all other respects the Employment Agreement is ratified, adopted
and confirmed.
IN WITNESS WHEREOF, the parties hereto have executed and have caused
this agreement to be executed as of the day and year first above written.
CENTURY COMMUNICATIONS CORP.
By: /s/ [Signature]
----------------------------------
Its Secretary
/s/ Frank Tow
----------------------------------
Frank Tow
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day July, 1997, by and between Century
Communications Corp., a New Jersey corporation, with offices at 50 Locust
Avenue, New Canaan, Connecticut 06840 (the "Company"), and Leonard Tow of 160
Lantern Ridge Road, New Canaan, Connecticut 06840 ("Tow").
WHEREAS:
A. Under date of February 11, 1986 the Company entered into an
employment agreement with Tow (the "Prior Employment Agreement") wherein Tow was
employed as the chief executive, financial and operating officer of Century for
a term which terminates on June 30, 1998 and which Prior Employment Agreement
was amended by an "Amended Employment Agreement" entered into by the Company and
Tow as of July 1, 1991. The Prior Employment Agreement and the Amended
Employment Agreement are together sometimes referred to as the "Prior
Agreement".
B. Tow is presently acting as chief executive officer and Chairman
of the Board of the Company, the Company with Tow's consent having designated
other individuals to act as chief financial officer and chief operating officer
of the Company.
C. The Company has requested Tow to extend the Prior Agreement for a
period of five years from its expiration date of
<PAGE>
<PAGE>
June 30, 1998 so that Tow's full-time employment with the Company as its chief
executive officer expires on June 30, 2003 followed by an advisory period of
five years.
D. Tow is willing to extend and renew the Prior Agreement as provided in
Recital "C" provided that in partial consideration for his entering into this
agreement and upon execution of this agreement, he is awarded 125,000 shares of
the Company's Class A Common Stock under the Company's 1992 Management Equity
Incentive Plan and 25,000 of the Company's Class B Common Stock subject to
substantially the same restrictions on disposition as set forth in said Plan,
with all restrictions on transfer to lapse on the January 1st immediately
succeeding the later of the termination of (i) Tow's term of Full-Time
Employment (as hereafter defined) and,(ii) the termination of the Advisory
Period (as hereafter defined), that the Registration rights referenced in the
Prior Agreement be maintained as expanded by the provisions of this agreement
and that the Company agree to the other provisions set forth in this agreement,
including, without limitation, Tow's base salary, which he is currently
receiving under the Prior Agreement.
2
<PAGE>
<PAGE>
E. The Company is willing to award the shares referenced in Recital D, to
maintain the registration rights referenced in the Prior Agreement as expanded,
and to agree to the other provisions set forth in this agreement including
without limitation the setting of Tow's base salary as set forth in Recital D.
NOW, THEREFORE, for good and valuable consideration, each to the other
in hand paid, and the receipt and adequacy of which is hereby mutually
acknowledged, it is agreed as follows:
SECTION 1. Employment;Issuance of Shares
(a) Simultaneous with the execution and delivery of this Agreement,
the Company shall issue to Tow 125,000 shares of its Class A Common Stock
pursuant to the Company's 1992 Management Equity Incentive Plan, which shares
shall be restricted from sale, exchange, transfer, pledge, hypothecation or
other disposition during the period from the date of issuance until the January
1st immediately succeeding the later of (i) the termination of Tow's term of
Full-Time Employment, as hereafter defined and (ii) the termination of the
Advisory Period, as hereafter defined (the "Restricted Period"), at which time
said restrictions shall lapse, and additionally, shall issue to Tow 25,000
shares of the its Class B Common Stock which shares shall
3
<PAGE>
<PAGE>
be restricted from sale, exchange, transfer, pledge, hypothecation or other
disposition in substantially the same manner as said Class A shares during the
Restricted Period, at which time all of said restrictions on both Class A Shares
and the Class B Shares shall lapse.
(b) The Company hereby employs and continues to employ Tow, and Tow
hereby accepts and agrees to continue his employment, as the chief executive
officer of the Company. During the Term of Full-Time Employment, as hereafter
defined, Tow's duties and authority shall include, without limitation, the
supervision, management and control of and responsibility for all policy,
financial, operating and other aspects of the business, activities and affairs
of the Company, subject only to such authority and responsibility which under
applicable law cannot be delegated, and which may only be exercised, by the
board of directors. Tow's powers and authority shall be superior to those of any
other officer or employee of the Company and Tow shall report only to the board
of directors of the Company. Tow is currently Chairman of the Board of the
Company and a member of the board of directors of the Company. It is the
intention that Tow shall be elected and re-elected Chairman of the Board of the
Company as well as a director of the Company for the duration of
4
<PAGE>
<PAGE>
the Term of Full-Time Employment, as defined, and Tow agrees to serve in each
such capacity, and to the full extent permitted by applicable law, Tow shall be
elected and re-elected Chairman of the Board and a member of the board of
directors of the Company during the Term of Full-Time Employment. During the
Term of Full-Term Employment, except as permitted by Section 7 or employment by
a subsidiary or affiliate of the Company, Tow agrees to devote his services
exclusively to the business and activities of the Company.
(c) During the term of the Advisory Period, as hereafter defined,
Tow will provide such advisory services concerning the business, affairs and
management of the Company as may be requested by the Company's board of
directors, but shall not be required to devote more than 25 hours each month to
such services, which shall be performed at a time and place mutually convenient
to both parties. Tow may engage in other full-time employment during the
Advisory Period (other than with a company then in competition with the business
of the Company, it being understood and agreed that being employed or engaged by
Citizens Utilities Company or any of its subsidiary or affiliated companies
(including without limitation Electric Lightwave, Inc. and Hungarian Telephone &
Cable Corp.) shall not be or be deemed
5
<PAGE>
<PAGE>
to be employment with or being engaged by a company in competition with the
Company) and his advisory services under this Agreement shall be required only
at times and places consistent with his other employment or with his private
activities. It is agreed further and without limitation that such advisory
services may be rendered, at Tow's request, by means of telephonic communication
or other communication facilities or devices. If requested by the Company's
board of directors, Tow will serve as a member of the Company's Board of
Directors during the Advisory Period.
SECTION 2. Term. Tow's Term of full-time employment (the "Term of
Full-Time Employment") shall commence July 1, 1997 (the "Commencement Date"),
and shall terminate on June 30, 2003. Tow's "Advisory Period," except as
otherwise set forth in Section 8(c), shall be the period commencing immediately
upon the expiration of the Term of Full-Time Employment and continuing for five
consecutive years thereafter. The "Employment Term" shall mean the term
commencing with the Commencement Date and continuing through the end of the
Advisory Period.
SECTION 3. Compensation.
(a) The Company shall pay to Tow, for each year of the Term of
Full-Time Employment, a salary (the "Base Salary")
6
<PAGE>
<PAGE>
of $2,059,073 (being the same Base Salary, prior to awarding of any bonus, which
Tow is currently receiving under the Prior Agreement) subject only to such
withholdings as may be required by applicable law; provided, however, that
notwithstanding the foregoing, the Base Salary for each year of the Term of
Full-Time Employment and the Advisory Period shall be increased by the
following:
The Salary for each year of the Term of Full-Time Employment and the
Advisory Period (the "Applicable Year") shall be increased by the
percentage increase in the Consumer Price Index prepared by the
United States Labor Department for the United States as a whole, or
equivalent measure of increase in the cost of living if such
Consumer Price Index is not then being issued (hereafter sometimes
referred to as the "Consumer Price Index"), for the last calendar
month in such Applicable Year over and above such Consumer Price
Index for the last full calendar month immediately preceding the
commencement of the Applicable Year. Such increase is sometimes
referred to as the "Additional Salary."
7
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<PAGE>
The methodology to be utilized in computing the Additional Salary pursuant
to the aforementioned formula shall be the methodology heretofore utilized in
determining Additional Salary pursuant to the Prior Agreement.
(b) During each year of the Advisory Period, Tow shall receive and
the Company shall pay Tow in equal monthly installments on the first day of each
month a fixed amount equal to 25% of the total compensation (including but not
limited to bonuses) paid or payable to Tow for the most recent year of Full-Time
Employment immediately preceding the commencement of the Advisory Period, to be
increased each year by reason of increases in the Consumer Price Index, as set
forth in sub-section (a).
SECTION 4. Place and Time of Services. During the Term of Full-Time
Employment, Tow shall render his services generally in, and shall not be obliged
to maintain his office in any place other than, the New York City metropolitan
area or Fairfield County, Connecticut. Tow agrees to take such trips outside of
such area as shall be reasonably necessary in connection with his duties. In
addition to the other payments provided for hereunder, the Company will pay
Tow's transportation, living and other expenses in connection with each such
trip and return to such area. Tow's wife may accompany him on each of said
trips, and all
8
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<PAGE>
transportation, living and other expenses relating to Tow's wife in connection
with each such trip and return to such area shall be paid by the Company.
Transportation provided to Tow and his wife shall be first class (or at Tow's
option chartered aircraft), provided that if during the Employment Term, the
Company owns, leases or otherwise has aircraft available to it such aircraft, at
Tow's option, may be utilized by and shall be made available to Tow and his
wife. Hotel accommodations shall be deluxe.
SECTION 5. Business Expenses; Accouterments of Office, Insurance and Other
Benefits.
(a) The Company agrees that all expenses, including without
limitation, travel and business entertainment expenses, incurred by Tow on
behalf of or in the conduct of the business of the Company will be fully and
promptly paid, and if not paid, reimbursed to Tow by the Company upon reasonable
substantiation.
(b) During the Employment Term, Tow shall be entitled to continue to
participate in all employee benefit plans (including without limitation, stock
option,
9
<PAGE>
<PAGE>
medical, dental, major medical, disability and life insurance, incentive award,
profit sharing and pension plans) that may from time to time be generally
available to executive employees of the Company and in accordance with the
provisions thereof.
(c) Additionally, the Company shall continue to provide and maintain
the life insurance policies on Tow and his wife under the split-dollar insurance
arrangement effected and entered into between the Company and Tow under date of
July 30, 1992 as referenced in Section 10(b).
SECTION 6. Vacation. Tow shall be entitled to vacations in each year of
the Term of Full-Time Employment at times reasonably agreeable to both Tow and
the Company.
SECTION 7. Exclusivity.
(a) Except as permitted in this Section 7 or employment by a
subsidiary or affiliate of the Company, during the Term of Full-Time Employment
Tow agrees to devote his services exclusively, and his best energies and
abilities, to the business and activities of the Company; provided, however,
that nothing in this agreement or elsewhere shall prevent Tow, during
10
<PAGE>
<PAGE>
the Term of Full-Time Employment, from (i) overseeing his personal and family
investments or investing in other businesses provided, in each of such
instances, subject to the provisions of clause (ii) below, that same are not
competitive with any business then being conducted by the Company or any of its
subsidiaries; (ii) investing in any business, the shares of stock of which are
traded on a national or a regional securities exchange, or over NASDAQ or the
over-the-counter market, even if such business is competitive with any business
then being conducted by the Company or any of its subsidiaries, provided that
Tow's stock interest in any such business is not a controlling or substantial
interest and does not in any event exceed 5% of the voting power of any such
business, or investing in any mutual or similar-type investment fund; (iii)
serving as a director of any corporation which is not engaged in a business
competitive with the business then being conducted by the Company (iv) serving
as Chief Executive Officer, Chairman of the Board, or other officer, and/or as a
director of Citizens Utilities Company or any of its subsidiary or affiliated
companies, including but not limited to Electric Lightwave, Inc. and Hungarian
Telephone and Cable Corp., (all referred to as "Citizens Utilities") at the same
time that he is serving as a
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director, Chief Executive Officer, Chairman of the Board and/or other officer of
the Company, it being expressly agreed that the rendering of such services to
Citizens Utilities is expressly authorized.
SECTION 8. Termination in Certain Events.
(a) If, during the Term of Full-Time Employment, Tow should become
disabled, through illness or otherwise, and by reason thereof is unable to
perform his duties hereunder, Tow shall be entitled to a leave of absence from
the Company for the duration of any such disability up to but not exceeding an
aggregate of twelve consecutive months. Tow's compensation and status as an
employee hereunder and as Chairman of the Board and Chief Executive Officer
shall continue during any such leave of absence. Tow shall be deemed to be
permanently incapacitated only if and when a leave of absence for disability
shall have continued for more than twelve consecutive months. If Tow becomes
permanently incapacitated during the Term of Full-Time Employment, as above
defined, the Company shall have the right to terminate this Agreement, and if
the Company exercises such right then all future payments by the Company under
Section 4 hereof shall cease except for and subject to the provisions of
Paragraph
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(c) of this Section 8. This Agreement shall also terminate at the death of Tow
during the Term of Full-Time Employment in which event the payments provided for
in Paragraph (c) of this Section 8 shall become due and payable.
(b) Except as may be provided in Paragraph (a) of this Section 8,
the Company shall have the right to terminate Tow's employment hereunder only
for "cause", limited to an action by Tow during the Term of Full-Time Employment
(i) involving material breach of Tow's obligations as Chief Executive Officer
under Section 1 of this Agreement, or (ii) willful malfeasance in office or
gross misconduct which at the time of such willful malfeasance or gross
misconduct has a materially injurious effect on the Company's business;
provided, however, that such termination shall be effected only by notice
thereof delivered by the Company to Tow, specifying in detail and setting forth
particulars of the basis for termination, and shall be effective subject to the
immediately succeeding clause, as of the date which is 30 business days after
receipt of such notice by Tow; provided, however, that if (i) within 20 business
days following the date of receipt of such notice, Tow shall cease his refusal
or actions (of commission or omission) which are particularized as wilful
malfeasance or gross misconduct and shall use his best
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efforts to perform such obligations or correct such action (or commence and
diligently pursue the performance of such obligations or correction), the
termination shall not be effective, and provided further that in the event Tow
is disputing the existence of a basis for termination for cause, as above
defined, the Company shall not have the right to proceed with the termination of
or to terminate this Agreement (subject to such termination not being effective,
as above provided) until a court, having jurisdiction, has issued a final
non-appealable order finding the existence of "cause."
(c) Anything in Paragraph (a) of this Section 8 to the contrary, it
is agreed that upon the termination of this Agreement by reason of permanent
incapacity as provided in sub-paragraph (a) or death of Tow during the Term of
Full-Time Employment, there shall be paid to Tow, if incapacitated (or his legal
representative(s) if a conservator or guardian of his person has been appointed)
or, in the instance of his death, to the person or persons as may be designated
by Tow during his lifetime, and in the absence of such designation to the legal
representative(s) of the estate of Tow, in 36 equal monthly installments, the
first of such installment payments to be made on the first day of the second
full calendar month following the
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death or permanent incapacity of Tow and the other installment payments to be
paid on the first days of the immediately succeeding 35 months, an aggregate
amount equal to the sum of (i) three times (five times if such death or
incapacity occurs during the first year and four times if such death or
incapacity occurs during the second year of the Term of Full-Time Employment),
the annual salary which would have been payable to Tow during the year of
permanent incapacity or death (assuming he were not permanently incapacitated or
did not die during such year and fully rendered his services), and which salary
shall include any additions thereto by reason of the provisions of Section 3
with respect to the Consumer Price Index, and for the purposes of this Section
8(c) shall include a bonus payment equal to the bonus paid to Tow in the
immediately preceding year of the Term (or if death or incapacity occurs during
the first year of the Term of Full-Time Employment, the bonus paid during the
year immediately preceding the commencement of the Term under the Prior
Agreement plus (ii) the amounts that would have been payable to Tow during the
Advisory Period assuming he were alive and not permanently incapacitated and
performed fully all of his obligations to the Company during the Advisory
Period. Additionally, the Company (i) shall continue in force and at the
Company's expense the health,
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hospital and medical and dental care, insurance and similar benefits included in
the benefits provided for in Sections 5(b) and 10(b) and any additional benefits
which the Company was then providing to Tow, and (ii) shall pay to Tow the
difference between the exercise price contained in any option held by Tow to
acquire common shares of the Company (whether Class A or Class B) and the fair
value of such shares measured by the market value of the Class A Common Shares
of the Company (or any class of shares issued in substitution therefor then
being traded publicly) based on the mean average of the closing market prices of
such shares for the 20 trading-day period commencing on the termination of this
Agreement, if the Class A Shares (or the class of shares issued in substitution
therefor, as above provided) are traded on an exchange, or the mean average of
the bid and asked prices of such shares during such 20 trading-day period, if
such shares are traded in the over-the-counter market, and any shares of the
Common Stock of the Company which were therefore granted to Tow under the
Company's 1992 Management Equity Plan and which still contain restrictions on
transfer shall be and be deemed to be free of any and all of such restrictions
and fully vested.
(d) In the event Tow becomes permanently incapacitated as defined in
paragraph (a) of this Section 8,
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during the Advisory Period, or dies during the Advisory Period, the Advisory
Period shall then terminate but the Company shall nevertheless continue to pay
to Tow (or his guardian, if applicable) or his estate or legal representatives,
as applicable, the monies that would otherwise have been payable to Tow during
the Advisory Period had he been alive, not incapacitated and fully performing
all of his obligations to the Company and rendering the advisory services as
provided for in this Agreement, and in addition the provisions of subdivisions
(i) and (ii) of Section 8(c) shall be applicable.
SECTION 9. Specified Breach.
(a) If at any time during the Term of Full-Time Employment the board
of directors of the Company shall fail to designate, elect and continue Tow as
Chairman of the Board and chief executive officer, or shall remove Tow, without
his prior written consent, from any of such offices, or if the principal offices
of the Company are located outside Fairfield County, Connecticut or the New York
City Metropolitan area, or in the event the Company otherwise breaches any of
its obligations hereunder, Tow shall have the right, without limitation of his
rights and remedies, to terminate this Agreement on notice to the
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Company, effective as of the last day of the month of the giving of such notice,
and despite such termination and as and for liquidated damages and not as a
penalty, (i) the Company shall continue to pay and Tow shall be entitled to
continue to receive, without diminution of any kind or for any reason, the
payments of Salary provided for herein (including increases provided in Section
3) as if this Agreement continued through the Term of Full-Time Employment,
although Tow shall not be required to render services hereunder, and he shall
also be entitled to all payments to be made to him during the Advisory Period
without diminution and without having to render any services hereunder, it being
understood and agreed that salary for the purposes of this Section 9(a) shall
include cash bonuses payable to Tow during the Term of Full-Time Employment
assuming in each of the years of such Term other than the first year of such
Term, he would have been awarded a bonus equal to the bonus most recently paid
to him and that for the first years of the Term he would have been paid a bonus
equal in amount to the bonus paid him in the most recent year of the Prior
Agreement (ii) the Company shall continue in force and at the Company's expense
the health, hospital and medical and dental care, insurance and similar benefits
included in the benefits provided for in Sections 5(b)
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and 10(b) and any additional benefits which the Company was then providing to
Tow; (iii) without cost to Tow, for a period of one year following such
termination, the Company shall provide Tow with an office and the equipment and
accoutrements of office which were being furnished to Tow at the time of such
termination, (iv) the Company shall pay to Tow the difference between the
exercise price contained in any option held by Tow to acquire common shares of
the Company (whether Class A or Class B) and the fair value of such shares
measured by the market value of the Class A Common Shares of the Company (or any
class of shares issued in substitution therefor then being traded publicly)
based on the mean average of the closing market prices of such shares for the 20
trading-day period commencing on the termination by Tow of this Agreement, if
the Class A Shares (or the class of shares issued in substitution therefor, as
above provided) are traded on an exchange, or the mean average of the bid and
asked prices of such shares during such 20 trading-day period, if such shares
are traded in the over-the-counter market; and (v) any shares of the Common
Stock of the Company which were therefore granted to Tow under the Company's
1992 Management Equity Plan and which still contain restrictions on transfer
shall be and be
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deemed to be free of any and all of such restrictions and fully vested.
In the event the Company terminates this Agreement other than for cause
and other than by reason of the permanent incapacity of Tow, Tow shall be
entitled to receive and be paid and afforded the same payments and benefits set
forth above in this Section 9(a) in the instance of Tow terminating this
Agreement pursuant to this Section 9(a), and the Company shall make such
payments to Tow and afford him such benefits.
(b) Tow shall have the right in his sole discretion to cause the
Company to pay to Tow the present value of all or certain of the aforementioned
payments to be made to him under any of all of the subdivision (i) of Section
9(a) above, said present value to be determined by negotiation between Tow and
the Company and if Tow and the Company do not or cannot reach agreement on said
present value, same shall be the mean average of such present value determined
by three separate banking institutions, one selected by Tow and one by the
Company (each from the list of institutions set forth in Schedule A) and the
third of which shall be selected by the two banks selected by Tow and the
Company. The expenses and charges of said banks for making said evaluation shall
be paid by and the responsibility of
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the Company and payment of the determined amount shall be made by the Company
within 20 days following the determination.
(c) In the event that during the Advisory Period the Company
breaches its obligations to Tow, including without limitation, failure or
refusal to make payments to Tow as provided for in Section 3 Tow shall be
entitled to receive from the Company, in addition to any and all of his other
rights and remedies, in one lump sum, an amount equal to the balance of monies
payable to Tow for the balance of the Advisory Period, assuming he performed
fully all of his obligations to the Company during the Advisory Period.
Additionally, the provisions of subdivisions (ii), (iii) and (iv) of Section
9(a) shall also be applicable.
SECTION 10. Key Man Insurance; Split Dollar Insurance.
(a) Tow agrees that during the Term of Full-Time Employment the
Company may apply for and maintain, at the Company's expense, additional
insurance on Tow's life, with the benefits being payable to the Company, and Tow
agrees to submit to such physical examinations as may be required by the
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particular carrier to enable it to consider effectuating such insurance. At the
end of the Term of Full-Time Employment, Tow in his discretion may purchase the
applicable policy or policies of insurance at the then cash surrender value
thereof.
(b) Under date of July 30, 1992, the Company and the Leonard and
Claire Tow Insurance Trust entered into an agreement pursuant to which certain
life insurance was effected on the lives of Tow and his wife, Claire Tow. The
plan pursuant to such insurance was effected is commonly referred to as a
split-dollar insurance plan, with the insurance sometimes referred to as
"split-dollar insurance". The agreement is referred to herein as the "Insurance
Agreement". To induce Tow to enter into this Employment Agreement the Company
(i) confirms and ratifies the Insurance Agreement and its obligations thereunder
and agrees that a breach or default by the Company under or pursuant to the
Insurance Agreement shall be deemed a breach or default by the Company under
this Agreement, and (ii) agrees that, upon the request of Tow or his legal
represenatives, upon the termination of Tow's employment with the Company, for
any reason, or upon a threatened or actual change in control of the Company, as
referenced in Section 13, the Company shall forthwith pay in full all premiums
due on all of the policies of
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split dollar insurance so that all of such policies are fully paid-up policies
requiring no further payment of premiums or other monies of any kind or nature.
SECTION 11. Registration Rights. Pursuant to the Prior Agreement, the
Company agreed to register certain shares held by Tow and certain trusts for the
benefit of certain members of Tow's family. As an inducement to Tow to enter
into this Agreement, the Company ratifies and confirms its obligations to
register shares held by Tow and such Trusts and agrees to register such shares
as provided for in Schedule B annexed to this Agreement. Schedule B increases
the number of shares which the Company was obligated to register under the Prior
Agreement. Additionally, Schedule B repeats and reiterates, in essential part,
the registration obligations of the Company under and pursuant to the Prior
Agreement and in particular, Schedule A thereof.
SECTION 12. Notices. Except as may herein otherwise be provided, all
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
if mailed, first class postage prepaid, registered or certified mail, return
receipt
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requested, or if sent by telecopier or overnight express delivery service, (a)
to Tow at 160 Lantern Ridge Road, New Canaan, CT 06840 (telecopier (203 972
2821) or at such other address as Tow may have notified the Company, sent by
registered or certified mail, return receipt requested, or by telecopier or
overnight express delivery service, or (b) if to the Company at 50 Locust
Avenue, New Canaan, CT 06840 (Telecopier (203)-972-2821), attention: Office of
the President, or at such other address as the Company may have notified
Employee in writing sent by registered or certified mail, return receipt
requested or by telecopier or overnight express delivery service, and with a
copy to Leavy, Rosensweig & Hyman, 11 East 44th Street, New York, NY 10017
(Attention: David Z. Rosensweig, Esq., telecopy (212) 983-2537). Notice shall be
deemed given (i) upon personal delivery, or (ii) on the second business day
immediately succeeding the posting of same, prepaid, in the U.S. mail, (iii) on
the date sent by telecopy if the addressee has compatible receiving equipment
and provided the transmittal is made on a business day during the hours of 9:00
A.M. to 6:00 P.M. of the receiving party and if sent on other times, on the
immediately succeeding business day, or (iv) on the first business day
immediately
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succeeding delivery to the express overnight carrier for the next business day
delivery.
13. Change of Control; Termination.
13.1 A "Change in Control" of the Company shall be deemed to occur (A)
when any person or group of affiliated or related persons (other than a group of
which Tow or an entity controlled by Tow is a participant and other than an
employee benefit plan (or related trust of the Company) acquires, directly or
indirectly, voting securities or assets of the Company if, immediately after
giving effect to such acquisition, such person or group of affiliated or related
persons (i) beneficially owns 9% or more of the total voting power of all of the
Company's voting securities outstanding at the time of such acquisition,or stock
having a fair market value of 9% or more of the fair market value of the
Company's issued and outstanding stock or (ii) otherwise effectively controls
the operations of the Company, whether by control of its Board of Directors, by
contract, or otherwise, or (B) upon the consummation of a reorganization, merger
or consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and
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entities who were the beneficial owners, respectively, of the outstanding shares
of the Company's common stock and outstanding shares of the Company's voting
securities immediately prior to such Business Combination, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation, resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business Combination,
of the outstanding shares of the Company's common stock and outstanding shares
of the Company's voting securities, as the case may be, (ii) no person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 9% or more of, respectively, the then outstanding shares of common
stock of the Corporation resulting from such Business Combination
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or the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting form such Business Combination were
members of the board of directors of the Company at the time of the execution of
the initial agreement provided for the Business Combination, or of the action of
the Board, providing for such Business Combination, whichever is earlier, or (C)
when a majority of the members of the Board of Directors of the Company is
replaced during a 12-month period by directors whose appointment or election was
not endorsed by the prior Board. Without limitation, a "Threatened Change in
Control" shall be deemed to have occurred when any person or group of persons
acquires such ownership of securities of the Company that such person or group
files or is required to file Forms 13D and 13G or otherwise files or is required
to make a filing pursuant to Regulation 13d under the Securities and Exchange
Act of 1934, as amended.
13.2 In the event of a Threatened Change in Control or a Change in
Control, as defined in Sub-Section 13.1,
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Employee shall have the right to terminate this Agreement on not less than ten
days notice to the Company (or to the successor in interest or the acquirer of
the assets or interests of the Company, or the surviving Company in the instance
of a business combination if same is not the Company) in which event Employee
shall be entitled to the same monies and benefits to which Employee would be
entitled in the event the Company terminated this Agreement and Employee's
employment, other than for cause, as provided in Section 9(a).
13.3 In the event any of the payments provided in this Section 13 or
pursuant to Section 9(a) is determined by the United States Internal Revenue
Service to be an "Excess Parachute Payment" under Section 280G of the United
States Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay Employee additional amounts (the "Tax Payment") to make him whole, on an
after-tax basis (based on the highest applicable federal, state and local income
tax rates and after giving effect to the Federal Deduction arising from such
state or local income taxes), for any excise tax under Section 4999 of the Code
imposed with respect to such Excess Parachute Payments.
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SECTION l4. Miscellaneous.
(a) This Agreement constitutes the entire understanding of the
parties and supersedes any and all prior agreements and understandings, whether
oral or written, between the parties hereto. This Agreement may be modified only
by an agreement in writing executed by both of the parties hereto;
(b) This Agreement is being delivered in the State of Connecticut
and the rights and liabilities of the parties shall in all respects be
interpreted, construed, enforced and governed by, under and in accordance with
the laws of the State of Connecticut applicable to agreements executed and fully
to be performed therein, without any reference to any rules of conflicts of
laws.
(c) The waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach thereof. Any and all waivers must
be in writing.
(d) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, representatives, successors and
permitted assigns. This Agreement shall only be assignable by the Company to a
subsidiary
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or to a company controlled by the Company or to any person, firm or corporation
into or with which the Company may merge or consolidate or which acquires by
purchase or otherwise all or substantially all of the Company's assets, and it
must be so assigned by the Company in connection with such merger, consolidation
or acquisition, and such assignee must affirmatively assume all the obligations
of the Company hereunder and such Assignee shall be obligated to perform all of
the terms and conditions hereof, and the Company shall remain liable despite any
such merger, consolidation or acquisition. This Agreement and Tow's rights and
obligations may not be assigned or delegated by Tow except that any payments due
to Tow may be assigned by Tow.
(e) The title of the sections of this Agreement are for convenience
of reference only, and are not to be considered in construing this Agreement.
(f) Nothing herein shall preclude such increases in Tow's
compensation including bonuses, incentive awards, options and other payments or
benefits as the Board of Directors (or appropriate committee of the Board of
Directors) of the Company may approve in its sole discretion.
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(g) Each party hereto shall make, execute and deliver such other
instruments or documents as may be reasonably required in order to effectuate
the purposes of this Agreement.
(h) For the purposes of authority granted to Tow under and pursuant
to the provisions of Section 1, the term Company shall mean and include all
subsidiaries of the Company and all companies controlled by the Company.
(i) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner
that is not invalid, illegal or against public policy, to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.
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The payments provided for by reason of termination pursuant to Sections 8,
9 and 13 are and are deemed to constitute fair and reasonable provisions for the
consequences of such termination and do not constitute a penalty.
(j) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(k) This Agreement shall be effective as of the date specified
herein.
(l) No provision of this Agreement shall be construed against a
party hereto by reason of this Agreement and/or the particular provision thereof
having been prepared or drafted by a representative of such party.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
CENTURY COMMUNICATIONS CORP.
By: /s/ [Signature]
----------------------------------
President
/s/ Leonard Tow
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LEONARD TOW
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SCHEDULE "A"
1. Citibank, N.A.
2. The Chase Bank, N.A.
3. Bankers Trust Company
4. Continental Illinois National Bank & Trust
Company of Chicago
7. Bank of America National Trust and Savings
Association
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SCHEDULE "B" -- REGISTRATION RIGHTS
Tow's "registration" rights shall be as follows:
A. "Piggyback" Registrations. If the Company at any time proposes to
register any of its securities under the Securities Act of 1933, as amended (the
"Securities Act"), on any form upon which may be registered securities similar
to the securities (the "Registrable Securities") held by Tow and by two trusts
for the benefit of certain members of Tow's family and denominated Tow Trust #1
and Tow Trust #2 (the "Holders" and each a "Holder"), for sale to the general
public, the Company will at each such time give prompt notice to each of the
Holders (notice to Trust #1 and Trust #2 shall be given at their addresses set
forth below) of its intention. Upon the request of any Holder given within 30
days after the Company has given such notice, the Company will cause each of the
Registrable Securities which the Company has been requested to register under
the Securities Act, all to the extent requisite to permit the sale or other
disposition by any Holder of the Registrable Securities so registered. If the
securities to be so registered for sale are to be distributed by or through a
firm of underwriters of recognized standing under underwriting terms appropriate
for such transaction, then the Registrable Securities shall also be included in
such underwriting on the same terms as other securities of the same class, as
the Registrable Securities included in such underwriting, provided that if, in
the written opinion of the managing underwriter or underwriters, the total
amount of such securities to be so registered, when added to such Registrable
Securities, will exceed the maximum amount of the Company's securities which can
be marketed without otherwise materially and adversely affecting the entire
offering, then the Company shall exclude from such underwriting (a) first, all
securities other than Registrable Securities being sold for the account of other
than the Company, (b) next, the maximum number of securities for the account of
the Company which in the opinion of the managing underwriter can be excluded,
and (c) last, the minimum number of Registrable Securities, pro rata to the
extent practicable on the basis of the number of Registrable Securities
requested to be registered among the participating Holders of Registrable
Securities, as is necessary to reduce the size of the offering.
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B. Registrations for the Holders. At the request of any Holder from
time to time during the Term of Full-Time Employment Term, the Company will use
its best efforts to:
1. prepare and file with the United States Securities and
Exchange Commission (the "Commission"), within 60 days after the
initial request from Tow to register Registrable Securities, setting
forth the number thereof, a registration statement with respect to
such Registrable Securities and cause such registration statement to
become and remain effective, provided that the Company shall not be
required to keep such registration statement effective, or to prepare
and file any amendments or supplements thereto, later than the last
business day of the sixth month following the date on which such
registrable statement becomes effective under the Securities Act or
such longer period during which the Commission requires that such
registration statement be kept effective with respect to any of the
Registrable Securities so registered;
2. subject to the proviso contained in the immediately preceding
clause (1), prepare and file with the commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement whenever such Holder
shall desire to dispose of the same;
3. furnish to such Holder such numbers of copies of a printed
prospectus, including a preliminary prospectus and any amendments or
supplements thereto, in conformity with the requirements of the
Securities Act, and such other documents as such Holder may reasonably
request in order to facilitate the disposition of such Registrable
Securities;
4. register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as
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such Holder shall reasonably request, and do any and all other acts
and things which may be necessary or advisable to enable such Holder
to consummate the disposition in such jurisdictions of such
Registrable Securities;
5. furnish to such Holder an agreement satisfactory in form and
substance to such Holder by the Company and each of its officers,
directors and holders of 5% or more of any class of capital stock or
any class of securities convertible into 5% or more of any class of
capital stock, that during the seven days before and the 90 days after
the effective date of any underwritten public offering, the Company
and such officers, directors and 5% security-holders shall not offer,
sell, contract to sell or otherwise dispose of any shares of capital
stock or securities convertible into capital stock, except as part of
such underwritten public offering
6. furnish to such Holder at the closing of the sale of such
Registrable Securities by such Holder, a signed copy of an opinion or
opinion of counsel for the Company acceptable to such Holder to the
effect that:
(i) a registration statement covering such Registrable
Securities has been filed with the Commission under the
Securities Act and has been made effective by order of the
Commission;
(ii) said registration statement and the prospectus
contained therein comply as to form in all material respects
with the requirements of the Securities Act, and nothing has
come to said counsel's attention which would cause it to
believe that either said registration statement or said
prospectus (except for the financial statements and schedules
and other financial and statistical data included or
incorporated by reference therein, as to which such counsel
need express no opinion) contains an
36
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untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein (in the case of said prospectus,
in the light of the circumstances under which they were made)
not misleading;
(iii) said counsel knows of no legal or governmental
proceedings required to be described as required, or of any
contract or document of a character required to be described
in said registration statement or said prospectus or to be
filed as an exhibit to said registration statement or to be
incorporated by reference therein which is not described and
filed as required;
(iv) no stop order has been issued by the Commission
suspending the effectiveness of such registration statement
and, to the best of such counsel's knowledge, no proceedings
for the issuance of such a stop order are pending, threatened
or contemplated; and
In giving such opinion, counsel for the Company may rely, as to all
factual matters treated therein, on certificates of the Company (copies of which
shall be delivered to such Holder), and as to all questions of the laws of each
state in which the Company shall be so required to register or qualify such
Registrable Securities, on the opinion of counsel from such state acceptable to
such Holder, copies of which shall be delivered to such Holder.
The costs and expenses of all registrations and qualifications under
the Securities Act, and of all other actions which the Company is required to
take or effect pursuant to this Schedule "A", shall be paid by the Company
(including, without limitation, all registration and filing fees, printing
expenses, auditing costs and expenses, and the reasonable fees and disbursements
of counsel for the Company and special counsel for such Holder), and such Holder
shall pay only the underwriting
37
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discounts and commissions, if any, relating to the Registrable Securities sold
by them, provided that the Company shall only be obligated under Paragraph B of
this Schedule "A" to pay the costs and expenses of not more than an aggregate of
[two] registrations and then only for such registrations which become effective
under the Securities Act as a result of requests made during the Employment Term
(as defined in Tow's Employment Agreement to which this Schedule B is attached).
For the purposes of this Schedule "A", the address of each of Tow Trust #1
and Tow Trust #2 shall be c/o David Z. Rosensweig, Esq., 11 East 44th Street,
New York, NY 10017, and the address of Tow shall be as set forth in Section 12
of the Agreement.
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and between
CCW ACQUISITION CORP.
and
CENTENNIAL CELLULAR CORP.
------------------------------------
Dated as of July 2, 1998
------------------------------------
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TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................2
1.1 The Merger..............................................2
1.2 Conversion of Shares....................................3
1.3 Common Share Elections..................................4
1.4 Proration...............................................5
1.5 Surrender and Payment...................................7
1.6 Dissenting Shares.......................................8
1.7 Stock Options...........................................9
ARTICLE II THE SURVIVING CORPORATION.................................9
2.1 Certificate of Incorporation............................9
2.2 Bylaws..................................................9
2.3 Directors...............................................9
2.4 Officers................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............10
3.1 Corporate Existence and Power..........................10
3.2 Corporate Authorization................................10
3.3 Governmental Authorization.............................11
3.4 Non-contravention......................................11
3.5 Capitalization.........................................12
3.6 Subsidiaries...........................................13
3.7 SEC Filings............................................14
3.8 Financial Statements...................................14
3.9 Disclosure Documents...................................14
3.10 Absence of Certain Changes or Events...................15
3.11 Litigation.............................................16
3.12 Taxes..................................................16
3.13 Employee Benefit Plans.................................17
3.14 Brokers................................................19
3.15 FCC Matters............................................19
3.16 Compliance with Applicable Laws........................20
3.17 Environmental Matters..................................20
3.18 Opinion of Financial Advisor...........................20
3.19 Affiliate Transactions.................................20
3.20 Intellectual Property..................................21
3.21 No Other Representations...............................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUISITION............22
4.1 Corporate Existence and Power..........................22
4.2 Corporate Authorization................................22
4.3 Governmental Authorization.............................22
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4.4 Non-contravention......................................23
4.5 Information............................................23
4.6 Brokers................................................23
4.7 Qualification of Acquisition...........................23
4.8 Acquisition Not an Interested Stockholder..............24
4.9 Financing..............................................24
ARTICLE V COVENANTS OF THE COMPANY.................................25
5.1 Conduct of the Company.................................25
5.2 Access to Information..................................27
5.3 No Solicitation........................................27
5.4 Communications Licenses and Authorizations.............28
5.5 Debt Offers............................................28
5.6 Notices of Certain Events..............................29
5.7 State Takeover Laws....................................30
ARTICLE VI COVENANTS OF ACQUISITION.................................30
6.1 Confidentiality........................................30
6.2 Indemnification; Directors' and Officers' Insurance....30
6.3 Employee Benefit Arrangements..........................31
6.4 Financing..............................................32
6.5 NASDAQ Listing.........................................32
ARTICLE VII COVENANTS OF ACQUISITION AND THE COMPANY.................32
7.1 Reasonable Best Efforts................................32
7.2 Stockholder Meeting....................................32
7.3 Consents...............................................33
7.4 Public Announcements...................................34
7.5 Notification of Certain Matters........................35
7.6 Further Assurances.....................................35
7.7 FCC Applications.......................................35
7.8 HSR Act Matters........................................36
ARTICLE VIII CONDITIONS TO THE MERGER.................................37
8.1 Conditions to the Obligations of Each Party............37
8.2 Conditions Precedent to the Obligations of Acquisition.37
8.3 Conditions Precedent to the Obligations of the Company.38
ARTICLE IX TERMINATION..............................................39
9.1 Termination............................................39
9.2 Effect of Termination..................................40
9.3 Fees and Expenses......................................40
ARTICLE X MISCELLANEOUS............................................41
10.1 Notices................................................41
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10.2 Survival of Representations and Warranties and
Agreements...........................................42
10.3 Amendment..............................................42
10.4 Extension; Waiver......................................42
10.5 Successors and Assigns.................................43
10.6 Governing Law..........................................43
10.7 Jurisdiction...........................................43
10.8 Counterparts; Effectiveness............................43
10.9 Entire Agreement; No Third-party Beneficiaries.........43
10.10 Headings...............................................43
10.11 Schedules..............................................44
10.12 Severability...........................................44
10.13 WAIVER OF JURY TRIAL...................................44
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Schedules
Schedule 3.4 Violations Caused by Consummation of the Merger
Schedule 3.5(f) Minority Interests in Limited Partnerships of the
Company and its Subsidiaries and Other Outstanding
Obligations
of the Company and its Subsidiaries
Schedule 3.5(e) Voting, Transfer and Registration Rights
Schedule 3.6(a) Significant Subsidiaries of the Company
Schedule 3.6(b) Other Ownership Interests in Subsidiaries
of the Company
Schedule 3.10 Liabilities and Obligations of the Company and
its Subsidiaries
Schedule 3.11 Litigation of the Company and its Subsidiaries
Schedule 3.12 Tax Matters
Schedule 3.13(a) Employee Benefit Plans of the Company
Schedule 3.13(g) Severance Benefits
Schedule 3.15(a) Communications Licenses of the Company and its
Subsidiaries
Schedule 3.15(b) Communications Licenses Exceptions
Schedule 3.19 Affiliate Transactions
Schedule 3.20 Intellectual Property
</TABLE>
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INDEX OF DEFINED TERMS
<TABLE>
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Term Section
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Acquisition....................................................Preamble
Acquisition Material Adverse Effect............................4.1
Acquisition Transaction........................................5.3
Affiliate......................................................3.13(f)
Antitrust Laws.................................................7.3(b)
Board..........................................................3.2
Cash Election Price............................................1.2(b)
Cash Merger Consideration......................................1.2
Class B Shares.................................................Preamble
Closing........................................................1.1(b)
Closing Date...................................................1.1(b)
Code...........................................................1.5(c)
Commitment Letters.............................................4.9(b)
Common Shares .................................................Preamble
Company Securities.............................................3.5(c)
Communications Act.............................................3.3
Communications Licenses........................................3.15(a)
Company........................................................Preamble
Company Securities.............................................3.5(c)
Confidentiality Agreement......................................5.2
Convertible Preferred Shares...................................Preamble
Debt Offers....................................................5.5(a)
Delaware Law...................................................Preamble
Dissenting Shares .............................................1.6
Effective Time.................................................1.1(c)
Electing Shares................................................1.2(b)
Election Date..................................................1.3(b)
Eligible Institution...........................................1.3(b)
Employee Benefit Arrangement...................................5.1(e)
Employee Plan..................................................3.13(a)
Environmental Law..............................................3.17(a)
ERISA..........................................................3.13(c)
Excess Proration Factor........................................1.4(b)
Exchange Act...................................................3.3
Exchange Agent.................................................1.5(a)
FCC............................................................1.1(a)
FCC Applications...............................................7.7(a)
FCC Licenses...................................................3.15(a)
FCC Transfer Approvals.........................................8.2(c)
Financing .....................................................4.9(b)
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Term Section
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Form of Election...............................................1.3(b)
Form S-4.......................................................7.2(b)
Governmental Entity ...........................................1.5(f)
Hazardous Substance............................................3.17
HSR Act........................................................3.3
Indemnified Parties............................................6.2(a)
Intellectual Property..........................................3.20(a)
Interested Stockholder.........................................4.8
Lien...........................................................3.4
Material Adverse Effect........................................3.1
Merger.........................................................1.1(a)
Merger Consideration...........................................1.2
Non-Cash Election..............................................1.3(a)
Non-Cash Election Number.......................................1.4(a)
Non-Cash Election Share........................................1.2(b)
Offer Documents ...............................................5.5(b)
Option ........................................................1.7(a)
Option Plans ..................................................1.7(a)
Person.........................................................1.5(d)
Preferred Shares ..............................................Preamble
Proxy Statement/Prospectus.....................................7.2(b)
Returns .......................................................3.12(a)
SEC............................................................1.3(b)
SEC Reports....................................................3.7(a)
Second Series Convertible Preferred Shares ...................Preamble
Securities Act.................................................3.3
Senior Notes...................................................5.5(a)
Shares.........................................................Preamble
Shortfall Proration Factor.....................................1.4(c)
Significant Subsidiary.........................................3.6(a)
State Licenses.................................................3.15(a)
State PUC......................................................3.15(a)
State PUC Applications.........................................7.7(b)
Stockholder Meeting ...........................................7.2(a)
Stockholders Agreement.........................................Preamble
Subsidiary.....................................................3.1
Subsidiary Securities..........................................3.6(b)
Surviving Corporation..........................................3.1(a)
Tax............................................................3.12(d)
Violation......................................................3.4
WCAS...........................................................3.4
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of July 2, 1998 by and between
CCW ACQUISITION CORP., a Delaware corporation ("Acquisition"), and CENTENNIAL
CELLULAR CORP., a Delaware corporation (the "Company").
WHEREAS, Acquisition and the Company desire that Acquisition merge
with and into the Company, upon the terms and conditions set forth herein and in
accordance with the General Corporation Law of the State of Delaware (the
"Delaware Law") with the result that the Company shall continue as the surviving
corporation and the separate existence of Acquisition shall cease;
WHEREAS, Acquisition and the Company desire that upon the Merger (as
hereinafter defined), at the Effective Time (as hereinafter defined), all issued
and outstanding shares of capital stock of the Company (collectively, the
"Shares"), other than Shares owned by Acquisition or the Company and Dissenting
Shares (as hereinafter defined), be converted as follows: (i) all outstanding
shares of Class A Common Stock, par value $.01 per share, of the Company (the
"Common Shares"), be converted into the right to (a) retain Common Shares or (b)
receive cash; (ii) all outstanding shares of Class B Common Stock, par value
$0.01 per share, of the Company (the "Class B Shares") be converted into the
right to receive cash and, after the conversion thereof into Common Shares, to
retain a number of Common Shares, if any, such that the aggregate number of
Common Shares retained pursuant to clauses (i) and (ii) shall equal 7.1% of the
total number of Common Shares issued and outstanding immediately after the
Effective Time; and (iii) all outstanding shares of (x) Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Convertible Preferred
Shares") and (y) Second Series Convertible Preferred Stock, par value $.01 per
share, of the Company (the "Second Series Convertible Preferred Shares" and,
together with the Convertible Preferred Shares, the "Preferred Shares") be
converted into the right to receive cash;
WHEREAS, Acquisition and the Company desire that upon the Merger, at
the Effective Time, all issued and outstanding shares of capital stock of
Acquisition be converted into a number of Common Shares equal to 92.9% of the
total number of Common Shares issued and outstanding immediately after the
Effective Time;
WHEREAS, the respective Boards of Directors of the Company and
Acquisition have each approved the Merger and declared it to be in the best
interests of their respective stockholders;
WHEREAS, the sole stockholder of Acquisition has approved and
adopted this Agreement and the Merger;
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WHEREAS, Acquisition has required, as a condition to its willingness
to enter into this Agreement, that Century Communications Corp., a stockholder
of the Company, contemporaneously enter into a stockholder agreement (the
"Stockholder Agreement"), which includes, among other things, an agreement to
vote in favor of this Agreement and the Merger;
WHEREAS, it is intended that the Merger be accounted for as a
recapitalization for financial reporting purposes;
NOW, THEREFORE, in consideration of the promises and the respective
representations, warranties, covenants, and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to the conditions set forth in
this Agreement (including approval of the Federal Communications Commission (the
"FCC") as set forth in Article VIII hereof), at the Effective Time, Acquisition
shall be merged (the "Merger") with and into the Company in accordance with
Delaware Law whereupon the separate existence of Acquisition shall cease, and
the Company shall be the surviving corporation (the "Surviving Corporation").
(b) Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at 10:00
a.m. on a date to be specified by the parties (the "Closing Date"), which shall
be no later than the second business day after satisfaction of the conditions
set forth in Article VIII, at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019, unless another
time, date or place is agreed to in writing by the parties hereto.
(c) Upon the Closing, the Company and Acquisition will file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection with
the Merger. The Merger shall become effective at such time as the certificate of
merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the certificate of merger (the "Effective
Time").
(d) The Merger shall have the effects set forth in Section 259
of the Delaware Law.
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1.2 Conversion of Shares. At the Effective Time:
(a) each Share held by the Company as treasury stock or owned
by any Subsidiary (as hereinafter defined) or Acquisition immediately prior to
the Effective Time shall be canceled, and no payment shall be made with respect
thereto;
(b) except as otherwise provided in Section 1.2(a) or as
provided in Section 1.6 with respect to Shares as to which appraisal rights have
been exercised, each Common Share issued and outstanding immediately prior to
the Effective Time shall be converted into the following:
(i) in the case of Common Shares with respect to which
an election to retain has been effectively made and not revoked or
forfeited pursuant to Sections 1.3(c), (d) and (e) ("Electing Shares"),
and subject to Section 1.4 below, the right to retain one fully paid and
nonassessable Common Share (a "Non-Cash Election Share"); and
(ii) in the case of Common Shares other than Electing
Shares, and subject to Section 1.4 below, the right to receive a cash
payment of $43.50 per Common Share (the "Cash Election Price");
(c) except as otherwise provided in Section 1.2(a), each Class
B Share issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive the following:
(i) after conversion thereof into Common Shares, the
right to retain a number of Common Shares equal to the "Shortfall
Proration Factor" (as hereinafter defined), which Common Shares, if any,
shall be deemed to be Non-Cash Election Shares; and
(ii) an amount in cash equal to the Cash Election Price
multiplied by a fraction, the numerator of which is the number of Class B
Shares issued and outstanding immediately prior to the Effective Time less
the aggregate number, if any, of Common Shares retainable pursuant to
clause (c)(i), and the denominator of which is the number of Class B
Shares issued and outstanding immediately prior to the Effective Time;
(d) except as otherwise provided in Section 1.2(a), each
Preferred Share issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive a cash payment equal to the product
of the Cash Election Price and the number of Common Shares into which such
Preferred Share could have been converted immediately prior to the Effective
Time; and
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(e) the shares of common stock of Acquisition issued and
outstanding immediately prior to the Effective Time shall be converted into a
total number of Shares equal to 92.9% of the outstanding Shares as of the
Effective Time (excluding Options).
The cash amounts payable pursuant to paragraphs (b), (c) and (d) above are
collectively referred to as the "Cash Merger Consideration," and including the
Non-Cash Election Shares, the "Merger Consideration."
1.3 Common Share Elections.
(a) Each Person (as hereinafter defined) who, on the Election
Date (as hereinafter defined), is a record holder of Common Shares will be
entitled, with respect to all or any portion of such Shares, to make an
unconditional election (a "Non-Cash Election") on or prior to the Election Date
to retain Non-Cash Election Shares, on the basis hereinafter set forth.
(b) The Company shall prepare a form of election, which form
shall be subject to the reasonable approval of Acquisition (as the same may be
amended or supplemented, the "Form of Election"), to be mailed by the Company
with the Proxy Statement/Prospectus (as hereinafter defined) to the record
holders of Common Shares as of the record date for the Stockholder Meeting (as
hereinafter defined) and otherwise distributed in accordance with the
requirements of the Securities and Exchange Commission ("SEC"), which Form of
Election shall be used by each record holder of Common Shares who wishes to
elect, subject to the provisions of Section 1.4, to retain Non-Cash Election
Shares for any or all Common Shares as to which it is the record holder. The
Company will use its reasonable efforts to make the Form of Election and the
Proxy Statement/Prospectus available to all Persons who become holders of Common
Shares during the period between the record date and the Election Date. Any such
holder's election to retain Non-Cash Election Shares shall have been properly
made only if the Exchange Agent (as hereinafter defined) shall have received at
its designated office, by 5:00 p.m., local time for the Exchange Agent, on the
second business day prior to the date of the Stockholder Meeting (the "Election
Date"), pursuant to (i) a Form of Election properly completed and signed and
accompanied by certificates representing the Common Shares to which such Form of
Election relates, duly endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company (or by an appropriate guarantee of delivery
of such certificates as set forth in such Form of Election from a firm which is
an "eligible guarantor institution" (as defined in Rule 17Ad-15 under the
Exchange Act (as hereinafter defined)) (an "Eligible Institution"), provided
such certificates are in fact delivered to the Exchange Agent within three
Nasdaq trading days after the date of execution of such guarantee of delivery)
or (ii) such other procedures as may be set forth in the Proxy
Statement/Prospectus.
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(c) Any Form of Election may be revoked by the holder
submitting it to the Exchange Agent only by notice received by the Exchange
Agent prior to 5:00 p.m., local time for the Exchange Agent, on the Election
Date in accordance with the procedures set forth in the Proxy
Statement/Prospectus (unless Acquisition and the Company determine not less than
two Business Days prior to the Election Date that the Closing Date is not likely
to occur within five Business Days following the Election Date, in which case
any Form of Election will remain revocable until a subsequent date which shall
be a date prior to the Closing Date determined by Acquisition and the Company).
In addition, all Forms of Election shall automatically be revoked if the
Exchange Agent is notified in writing by Acquisition and the Company that this
Agreement has been terminated. If a Form of Election is properly revoked, the
certificate or certificates (or guarantees of delivery, as appropriate) for the
Common Shares to which such Form of Election relates shall be promptly returned
by the Exchange Agent to the shareholder submitting the same, or pursuant to
such other procedures as are set forth in the Proxy Statement/Prospectus.
(d) The determination of the Exchange Agent (or the Company if
the Exchange Agent declines to make such determination) shall be binding as to
whether elections to retain Non-Cash Election Shares have been properly made or
revoked pursuant to this Section 1.3 with respect to Common Shares and as to
when elections and revocations were received by it. If the Exchange Agent
reasonably determines in good faith that any election to retain Non-Cash
Election Shares was not properly made with respect to Common Shares, such shares
shall be treated by the Exchange Agent as shares that were not Electing Shares
at the Effective Time, and such shares shall be exchanged in the Merger for cash
pursuant to Section 1.2(b)(ii), subject to proration as provided in Section 1.4.
The Exchange Agent (or the Company if the Exchange Agent declines to make such
determination) shall also make all computations as to the allocation and the
proration contemplated by Section 1.4, and any such computation shall be
conclusive and binding on the holders of Common Shares and the Class B Common
Shares. The Exchange Agent may, with the mutual written agreement of Acquisition
and the Company, establish procedures as are consistent with this Section 1.3
for the implementation of the elections provided for herein as shall be
necessary or desirable fully to effect such elections.
1.4 Proration.
(a) Notwithstanding anything in this Agreement to the
contrary, the aggregate number of Common Shares to be retained pursuant to
paragraphs (b) and (c) of Section 1.2 at the Effective Time shall be equal to
7.1% of the Common Shares to be issued and outstanding immediately after the
Effective Time (the "Non-Cash Election Number").
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(b) If the number of Electing Shares exceeds the Non-Cash
Election Number, then each Electing Share shall be converted into the right to
retain Non-Cash Election Shares or receive cash in accordance with the terms of
Section 1.2(b) in the following manner:
(i) a proration factor (the "Excess Proration Factor")
shall be determined by dividing the Non-Cash Election Number by the total
number of Electing Shares;
(ii) the number of Electing Shares covered by each
Non-Cash Election shall be determined by multiplying the Excess Proration
Factor by the total number of Electing Shares covered by such Non-Cash
Election (subject to rounding, to avoid the issuance of fractional
shares); and
(iii) all Electing Shares, other than those Shares
converted into the right to retain Non-Cash Election Shares in accordance
with Section 1.4(b)(ii), shall be converted into cash in accordance with
the terms of Section 1.2(b)(ii), as if such Shares were not Electing
Shares.
(c) If the number of Electing Shares is less than the Non-Cash
Election Number, then:
(i) all Electing Shares shall be converted into the
right to retain Common Shares in accordance with the terms of Section
1.2(b)(i);
(ii) additional Common Shares (other than Electing
Shares and Dissenting Shares) shall be converted into the right to retain
Non-Cash Election Shares in accordance with the terms of Section 1.2(b) in
the following manner:
(A) a proration factor (the "Shortfall Proration
Factor") shall be determined by dividing (x) the difference between the
Non-Cash Election Number and the number of Electing Shares, by (y) the
total number of Common Shares outstanding at the Effective Time (other
than Electing Shares and Dissenting Shares) and including, as if they had
been converted into Common Shares, all Class B Shares issued and
outstanding at the Effective Time; and
(B) the number of Common Shares (other than
Electing Shares and Dissenting Shares) held by each stockholder that shall
be converted into the right to retain Non-Cash Election Shares shall be
determined by multiplying the Shortfall Proration Factor by the total
number of Common Shares (other than Electing Shares and Dissenting Shares)
held by such holder (subject to rounding to avoid the issuance of
fractional shares) and
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(iii) Common Shares subject to clause (ii) of this
Section 1.4(c) shall be converted into the right to retain Non-Cash
Election Shares in accordance with Section 1.2(b)(i), as if such shares
were Electing Shares.
1.5 Surrender and Payment.
(a) Prior to the Effective Time, Acquisition shall authorize
one or more commercial banks (acceptable to the Company) organized under the
laws of the United States or any state thereof with capital, surplus and
undivided profits of at least $500,000,000 to act as Exchange Agent hereunder
(the "Exchange Agent") for the purpose of exchanging certificates representing
Shares for the Merger Consideration. Acquisition will make available to the
Exchange Agent prior to the Effective Time the Merger Consideration to be paid
in respect of the Shares. Promptly after the Effective Time, Acquisition will
send, or will cause the Exchange Agent to send, to each holder of Shares at the
Effective Time a letter of transmittal for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates representing Shares to the
Exchange Agent).
(b) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, will be entitled
to receive the Merger Consideration payable in respect of such Shares. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes, only the right to receive such Merger Consideration.
(c) Acquisition shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as Acquisition is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Acquisition, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which such deduction and withholding was made
by Acquisition.
(d) If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is
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not payable. For purposes of this Agreement, "Person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
(e) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article I.
(f) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 1.5(a) that remains unclaimed by the
holders of Shares six months after the Effective Time shall be returned to the
Surviving Corporation, upon demand, and any such holder who has not exchanged
its Shares for the Merger Consideration in accordance with this Section 1.5
prior to that time shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration in respect of its Shares. Notwithstanding
the foregoing, neither Acquisition nor the Surviving Corporation shall be liable
to any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Shares two years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become property
of any Governmental Entity) shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation free and clear of any claims or
interest of any Person previously entitled thereto. As used in this Agreement,
"Governmental Entity" means any government or subdivision thereof, or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational.
1.6 Dissenting Shares. Notwithstanding Section 1.2, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Section 262 of the
Delaware Law ("Dissenting Shares") shall not be converted into a right to
receive the Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses its right to appraisal. If after the Effective
Time, any such holder fails to perfect or withdraws or loses its right to
appraisal, such Dissenting Shares shall be treated as if they had been converted
as of the Effective Time into the right to receive the Cash Merger Consideration
to which such holder is entitled, without interest or dividends thereon. The
Company shall give Acquisition prompt notice of any demands received by the
Company for appraisal of Shares, and, prior to the Effective Time, Acquisition
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Acquisition, make any payment with
respect to, or settle or offer to settle, any such demands.
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1.7 Stock Options. The Company shall take all actions necessary so
that, immediately prior to the Effective Time, (i) each outstanding option to
purchase Class A Shares (an "Option") granted under the Company's 1991 Employee
Stock Option Plan, as amended, and Non-Employee/Officer Director Option Plan
(collectively, the "Option Plans"), whether or not then exercisable or vested,
shall become fully exercisable and vested, (ii) each Option which is then
outstanding shall be canceled and (iii) in consideration of such cancellation,
and except to the extent that Acquisition and the holder of any such Option
otherwise agree, the Company shall pay to such holders of Options an amount in
respect thereof equal to the product of (x) the excess of the Cash Merger
Consideration over the exercise price thereof and (y) the number of Common
Shares subject thereto (such payment to be net of taxes required by law to be
withheld with respect thereto); provided that the foregoing shall be subject to
the obtaining of any necessary consents of holders of Options, it being agreed
that the Company and Acquisition will use their reasonable best efforts to
obtain any such consents.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The certificate of incorporation
of Acquisition in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
2.2 Bylaws. Subject to Section 6.2 hereof, the bylaws of Acquisition
in effect at the Effective Time shall be the bylaws of the Surviving Corporation
until amended in accordance with applicable law.
2.3 Directors. From and after the Effective Time, until successors
are duly elected or appointed and qualified in accordance with applicable law,
the directors of Acquisition at the Effective Time shall be the directors of the
Surviving Corporation.
2.4 Officers. From and after the Effective Time, until successors
are duly elected or appointed and qualified in accordance with applicable law,
the officers of the Company at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquisition that:
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3.1 Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers required to carry on its business as
now conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not have a material adverse effect on the business, assets,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, or upon the ability of the Company to consummate the transactions
contemplated by this Agreement or perform its obligations hereunder (a "Material
Adverse Effect"). The Company has heretofore delivered to Acquisition complete
and correct copies of the Company's certificate of incorporation and bylaws as
currently in effect. For purposes of this Agreement, a "subsidiary" of any
Person means any other Person of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other Persons performing similar functions are directly or indirectly owned or
controlled by such Person, and unless otherwise specified, "Subsidiary" means a
subsidiary of the Company.
3.2 Corporate Authorization. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's corporate powers and,
except for the approval by the Company's stockholders of this Agreement and the
Merger, have been duly authorized by all necessary corporate action. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery of this
Agreement by Acquisition and receipt of all required approvals by the Company's
stockholders in connection with the consummation of the Merger, constitutes a
valid and binding agreement of the Company, enforceable against it in accordance
with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally and by equitable principles of general
applicability. The Board of Directors of the Company (the "Board") has approved
the Merger, this Agreement and the transactions contemplated hereby and such
approval, assuming the accuracy of Acquisition's representation in Section 4.8
hereof, is sufficient to render the provisions of Section 203 of Delaware Law
inapplicable to the Merger, this Agreement and the transactions contemplated
hereby. No other corporate proceedings on the part of the Company are necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby (other than the approval and adoption of the Merger and this
Agreement by holders of the Shares to the extent required by the Company's
certificate of incorporation and by applicable law).
3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the Merger and the other transactions contemplated hereby require no
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consent, waiver, approval, authorization or permit by or from, or action by or
in respect of, or filing with, any Governmental Entity, other than (i) the
filing of a certificate of merger in accordance with Delaware Law; (ii)
compliance with any applicable requirements of state takeover laws; (iii)
compliance with the applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"); (iv) compliance with any applicable
requirements of the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "Securities Act") and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"); (v) compliance with any applicable
requirements of the Communications Act of 1934, as amended (together with the
rules, regulations and published decisions of the FCC, the "Communications
Act"); (vi) compliance with the applicable requirements of state and local
public utility commissions or similar entities; and (vii) any action, filing,
consent, waiver, approval, authorization or permit that would not in the
aggregate prevent or delay consummation of the Merger in any material respect,
or otherwise prevent the Company from performing its obligations under this
Agreement in any material respect or would not in the aggregate have a Material
Adverse Effect.
3.4 Non-contravention. Except as described in Schedule 3.4 and
assuming compliance with the matters referred to in Section 3.3, the execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not and will not (i)
assuming receipt of the approval of stockholders referred to in Section 3.2,
contravene or conflict with the certificate of incorporation or bylaws of the
Company, (ii) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to the Company or any Subsidiary, (iii) result in a breach or
violation of or constitute a default under (or an event which with the giving of
notice or the lapse of time or both would constitute a default under) or give
rise to a right of termination, amendment, cancellation or acceleration of any
right or obligation of the Company or any Subsidiary or to a loss of any benefit
to which the Company or any Subsidiary is entitled or require any consent,
approval or authorization under any provision of any material agreement,
contract or other instrument binding upon the Company or any Subsidiary or any
of their respective assets (including any material license, franchise, permit or
other similar authorization held by the Company or any Subsidiary) or (iv)
result in the creation or imposition of any Lien (as defined below) on any
material asset of the Company or any Subsidiary, except for such contraventions,
conflicts or violations referred to in clause (ii) and breaches, violations,
defaults, rights of termination, cancellation or acceleration, losses, Liens or
other occurrences referred to in clauses (iii) and (iv) (each, a "Violation")
that in the aggregate would not have a Material Adverse Effect or prevent or
materially delay the consummation of the Merger in any material respect or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect. For purposes of this Agreement, "Lien" means,
with respect to any asset, any mortgage,
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lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
3.5 Capitalization.
(a) The authorized capital stock of the Company consists of
the following, as of June 25, 1998: (i) 100,000,000 Class A Shares, of which
15,070,470 are issued and outstanding; (ii) 50,000,000 Class B Shares, of which
10,544,113 were issued and outstanding; (iii) 102,187 Convertible Preferred
Shares, of which 102,187 are issued and outstanding; (iv) 3,978 Second Series
Convertible Preferred Shares, of which 3,978 are issued and outstanding; (v)
250,000 shares of Senior Preferred Stock, par value $0.01 per share, of which no
shares are issued and outstanding; and (vi) 9,996,022 shares of Additional
Preferred Stock, par value $0.01 per share, of which no shares are issued and
outstanding.
(b) As of June 25, 1998, there were outstanding, under the
Option Plans, Options to purchase an aggregate of 1,503,643 Common Shares.
(c) All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in this Section 3.5 and except for changes
since June 25, 1998, resulting from the exercise of Options outstanding on such
date, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company and
(iii) no options or other rights to acquire from the Company, and no obligation
of the Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company (the items in clauses (a) and (b) of this Section 3.5 being referred to
collectively as the "Company Securities"). Except pursuant to the terms of the
Company Securities as set forth in the Company's Certificate of Incorporation,
there are no outstanding obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any Company Securities or pay any
dividend or make any other distribution in respect thereof.
(d) Upon consummation of the Merger, neither any outstanding
Convertible Preferred Shares, Second Series Convertible Preferred Shares nor any
other outstanding securities of the Company shall be convertible into or
exchangeable for any equity security of the Surviving Corporation other than
Options that have not been canceled.
(e) Except as set forth in Schedule 3.5(e), upon consummation
of the Merger, the Company shall have no obligations due under any contracts
entered into by the Company on or prior to the Closing Date with regard to the
voting, transfer or registration under the Securities Act of any equity
securities of
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the Company or that grant any preemptive rights with respect to its equity
securities (other than any such contracts executed with Acquisition).
(f) Except with respect to the minority interests in the
limited partnerships listed in Schedule 3.5(f), there are no outstanding
obligations of the Company or any Subsidiary to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other Person, other than to wholly owned Subsidiaries of the
Company in the ordinary course of business consistent with past practice.
3.6 Subsidiaries.
(a) Each Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate powers required to carry on its business as now
conducted and is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the character of the property owned
or leased by it or the nature of its activities makes such qualification
necessary, except for such qualifications the failure of which to obtain would
not, individually or in the aggregate, have a Material Adverse Effect. All
significant Subsidiaries within the meaning of Regulation S-X under the Exchange
Act (a "Significant Subsidiary") and their respective jurisdictions of
incorporation are identified in Schedule 3.6(a).
(b) Except as set forth in Schedule 3.6(b), all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary
of the Company, is owned by the Company, directly or indirectly, free and clear
of any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). There are no outstanding (i) securities of
the Company or any Subsidiary convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any
Subsidiary and (ii) options or other rights to acquire from the Company or any
Subsidiary, and no other obligation of the Company or any Subsidiary to issue,
any capital stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary (the items in clauses
3.6(b)(i) and 3.6(b)(ii) being referred to collectively as the "Subsidiary
Securities"). There are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities or pay any dividend or make any other distribution in respect thereof
to a Person other than the Company or a wholly-owned Subsidiary except as set
forth in the Company Securities.
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3.7 SEC Filings.
(a) The Company has filed with the SEC all forms, reports,
definitive proxy statements, schedules and registration statements (the "SEC
Reports") required to be filed with the SEC since February 28, 1997.
(b) No Subsidiary is required to file any report, form or
document with the SEC pursuant to the Exchange Act or the Securities Act.
(c) As of their respective filing dates, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(d) The SEC Reports (including, without limitation, any
financial statements and schedules included therein) when filed complied in all
material respects with applicable requirements of the Securities Act and the
Exchange Act.
3.8 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the SEC Reports filed since May 31, 1997 fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto or in the case of
unaudited interim financial statements as permitted by Form 10-Q of the SEC),
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and its consolidated statements of
operations, stockholders' equity and cash flows for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements which would not be material in amount or effect). Except as
and to the extent set forth on the consolidated balance sheet of the Company and
the Subsidiaries as of May 31, 1997, including the notes thereto, neither the
Company nor any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet prepared in accordance with generally accepted
accounting principles, except for liabilities and obligations (i) incurred in
the ordinary course of business consistent with past practice since May 31,
1997, (ii) that would not be material to the Company or the Subsidiaries or
(iii) as set forth on Schedule 3.8.
3.9 Disclosure Documents. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in:
(a) the Form S-4 (as hereinafter defined) will, at the time
the Form S-4 is filed with the SEC, at any time it is amended or supplemented
and at the
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time it becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(b) the Proxy Statement/Prospectus will, at the date it is
first mailed to the Company's stockholders or at the time of the Stockholder
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading; or
(c) the Offer Documents (as hereinafter defined) will, at the
time the Offer Documents (or any amendments or supplements thereto) are first
published, sent or given to holders of the Senior Notes, or at the time the
applicable Debt Offer is consummated, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading;
provided, that in each case no representation is made by the Company with
respect to statements made therein based on information supplied in writing by
Acquisition specifically for inclusion therein. The Form S-4, as of its
effective date, and the Proxy Statement/Prospectus and the Offer Documents, as
of their respective dates, will comply as to form with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be;
provided, that in each case no representation is made by the Company with
respect to statements made therein based on information supplied in writing by
Acquisition specifically for inclusion therein.
3.10 Absence of Certain Changes or Events. Since May 31, 1997,
neither the Company nor any Subsidiary has (i) incurred or agreed to incur any
indebtedness for borrowed money other than in the ordinary course of business,
(ii) discharged or satisfied any material lien (prior to the time it is due and
payable) or any material obligation or liability (absolute or contingent) which
would have a Material Adverse Effect other than current liabilities shown on the
consolidated balance sheet of the Company as of May 31, 1997 or which are
required to be discharged, satisfied or paid by any law, (iii) declared or made
any payment or distribution to stockholders or purchased or redeemed any shares
of its capital stock or other securities, (iv) sold, assigned or transferred any
of its tangible assets material to the consolidated business of the Company and
its Subsidiaries, or canceled any material debts or claims, except in the
ordinary course of business or as otherwise contemplated hereby, (v) granted any
general or uniform increase in the rates of pay of employees other than in the
ordinary course of business or any material increase in salary payable or to
become payable by the Company or any of its Subsidiaries to any officer,
director or senior executive of the Company (other than normal increases
consistent with past practices or as required under any existing employment
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agreement), (vi) agreed, in writing or otherwise, to take any of the actions
listed in clauses (i) through (v) above, or (vii) suffered any Material Adverse
Effect.
3.11 Litigation. Except as set forth in the Company's SEC Reports
filed prior to the date hereof or in Schedule 3.11, there is no action, suit or
proceeding pending, or to the knowledge of the Company threatened, against the
Company or any Subsidiary before any court, arbitrator or other Governmental
Entity which, if adversely decided, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
3.12 Taxes.
(a) Except as set forth on Schedule 3.12 hereto and except to
the extent that failure to do so would not have a Material Adverse Effect, each
of the Company, the Subsidiaries and any affiliated, combined or unitary group
of which any such corporation or other Person is or was a member has (i) timely
filed all Federal, state, local and foreign returns, declarations, reports,
estimates, information returns and statements ("Returns") required to be filed
by it in respect of any Taxes (as hereinafter defined), which Returns correctly
reflect the facts regarding the income, business, assets, operations, activities
and status of the Company and the Subsidiaries, (ii) timely paid or withheld all
Taxes that are due and payable with respect to the Returns referred to in clause
(i) (other than Taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved for in the Company's most recent
consolidated financial statements described in Section 3.8 hereof), (iii)
established reserves that are adequate for the payment of all Taxes not yet due
and payable with respect to the results of operations of the Company and the
Subsidiaries through the date hereof, and (iv) complied with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
has timely withheld from employee wages and paid over to the proper governmental
authorities all material amounts required to be so withheld and paid over.
(b) Except as set forth on Schedule 3.12 hereto and except as
would not have a Material Adverse Effect, (i) there is no deficiency, claim,
audit, action, suit, proceeding, or investigation now pending against or with
respect to the Company or any Subsidiary in respect of any Taxes; and (ii) there
are no requests for rulings or determinations in respect of any Taxes pending
between the Company or any Subsidiary and any taxing authority.
(c) Except as set forth on Schedule 3.12 hereto and except as
would not have a Material Adverse Effect, neither the Company nor any Subsidiary
has executed or entered into (or prior to the Effective Time will execute or
enter into) with the Internal Revenue Service or any taxing authority (i) any
agreement or other document extending or having the effect of extending the
period for assessments or collection of any Taxes for which the Company or any
Subsidiary would be liable or (ii) a closing agreement pursuant to Section 7121
of the Code, or any predecessor
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provision thereof or any similar provision of foreign, state or local Tax law
that relates to the assets or operations of the Company or any Subsidiary.
(d) For purposes of this Agreement, "Tax" (and with
correlative meaning, "Taxes") shall mean all federal, state, local, foreign or
other taxing authority net income, franchise, sales, use, ad valorem, property,
payroll, withholding, excise, severance, transfer, employment, alternative or
add-on minimum, stamp, occupation, premium, environmental or windfall profits
taxes, and other taxes, charges, fees, levies, imposts, customs, duties,
licenses or other assessments, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
3.13 Employee Benefit Plans.
(a) Schedule 3.13(a) identifies each employment, severance or
similar contract or arrangement whether or not written or any plan, policy,
fund, program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option, or other stock related rights
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, workers' compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that (i) is entered into, maintained, administered or contributed to,
as the case may be, by the Company or any Subsidiary and (ii) covers any
employee or former employee of any Company or Subsidiary employed in the United
States or Puerto Rico (each, an "Employee Plan").
(b) The Company has furnished or made available to Acquisition
copies of the Employee Plans (and, if applicable, related trust agreements) and
all amendments thereto and written interpretations thereof together with the
most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) and the most recent actuarial valuation report prepared in connection
with any Employee Plan.
(c) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be qualified under Section 401(a) of the Code and each trust related thereto
has been determined to be exempt from tax pursuant to Section 501(a) of the
Code, and the Company is not aware of any event that has occurred since the date
of such determinations that would adversely affect such qualification or tax
exempt status. The Company has provided Acquisition with the most recent
determination letter of the Internal Revenue Service relating to each such
Employee Plan. Each Employee Plan has been maintained in compliance in all
material respects with its terms and with the requirements prescribed by any and
all applicable statutes, orders, rules and
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regulations, including but not limited to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and the Code.
(d) No Employee Plan is a multiemployer plan as defined in
Section 3(37) of ERISA or is a plan subject to Title IV of ERISA and neither the
Company nor any Subsidiary has ever maintained, adopted or established,
contributed or been required to contribute to, or otherwise participated or been
required to participate in, any such plan.
(e) Neither the Company nor any Subsidiaries has any current
or projected liability in respect of post-employment or post-retirement health
or medical or life insurance benefits for retired, former or current employees
of the Company, except as required to avoid excise tax under Section 4980B of
the Code.
(f) There has been no amendment to, written interpretation of
or announcement (whether or not written) by the Company, any Subsidiary or their
respective Affiliates relating to, or change in employee participation or
coverage under, any Employee Plan that would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
As used in this Agreement, unless the context requires otherwise, "Affiliate,"
as applied to any Person, shall mean any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.
(g) Other than as described in Schedule 3.13(g), no employee
or former employee of the Company or any Subsidiary will become entitled to any
bonus, retirement, severance, job security or similar benefit or an enhancement
of such benefit (including acceleration of vesting or exercise of an incentive
award) under any Employee Plan as a result of the transactions contemplated
hereby.
(h) Notwithstanding anything else set forth herein, other than
routine claims for benefits and liability for premiums due to the Pension
Benefit Guaranty Corporation, neither the Company nor any Subsidiary has
incurred any material liability with respect to any Employee Plan that is
currently due and owing and has not yet been satisfied, including without
limitation under ERISA (including without limitation Title I or Title IV
thereof), the Code or other applicable law, and no event has occurred, and, to
the knowledge of the Company, there exists no condition or set of circumstances
(other than the accrual of benefits under the normal terms of the Employee
Plans), that could result in the imposition of any material liability on the
Company or any Subsidiary with respect to any Employee Plan, including without
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limitation under ERISA (including without limitation Title I or Title IV of
ERISA), the Code or other applicable law with respect to any Employee Plan.
3.14 Brokers. Except for the engagement of Donaldson, Lufkin &
Jenrette Securities Corporation and Peter J. Solomon & Co. pursuant to
engagement letters that have been provided to Acquisition, none of the Company
or any of its Subsidiaries, or any of their respective officers, directors or
employees has employed any investment banker, broker, finder or other
intermediary or incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by this
Agreement.
3.15 FCC Matters.
(a) The Company and its Subsidiaries hold all licenses,
permits, certificates, franchises, registrations and other authorizations issued
by the FCC (the "FCC Licenses") or by any governmental entity asserting
jurisdiction over the Company or one of its Subsidiaries (the "State Licenses"),
including, without limitation, any state public service or public utilities
commission and the Telecommunications Regulatory Board of Puerto Rico ("State
PUC"), that are required for the conduct of their businesses as presently
conducted, and for the holding of their assets, except where the failure to
obtain or hold such licenses would not have a Material Adverse Effect. All of
the FCC Licenses and the State Licenses (collectively the "Communications
Licenses") are set forth in Schedule 3.15(a) hereto.
(b) Except as set forth on Schedule 3.15(b), each of the
Communications Licenses was duly issued, and is valid and in full force and
effect except where failure to be in full force and effect would not have a
Material Adverse Effect, and to the Company's knowledge, each of the
Communications Licenses has not been modified, canceled, revoked, or conditioned
in any manner which would have a Material Adverse Effect.
(c) Each holder of a Communications License has operated in
compliance with all terms thereof, and each holder is in compliance with, and
its businesses have operated in compliance with, the Communications Act or any
applicable state regulations, and has filed all registrations and reports,
including any renewal applications, required by the Communications Act or any
applicable state regulations, except where the failure to so comply or file
would not have a Material Adverse Effect. To the Company's knowledge, there is
no pending or threatened action by or before the FCC or any State PUC to revoke,
cancel, suspend, modify or refuse to renew any of the Communications Licenses.
There is not now issued or outstanding or, to the Company's knowledge,
threatened any notice of violation or complaint against the Company or any of
its Subsidiaries with respect to the operation of its respective businesses, the
resolution of which violation or complaint could reasonably be expected to have
a Material Adverse Effect.
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(d) No event has occurred which permits the revocation or
termination of any of the Communications Licenses or the imposition of any
restriction thereon of such a nature as would have a Material Adverse Effect.
3.16 Compliance with Applicable Laws. The Company and its
Subsidiaries are in substantial compliance with all laws, regulations and orders
of any Governmental Entity applicable to it or such Subsidiaries, except for
such failures so to comply which would not have a Material Adverse Effect.
Except as set forth in the Schedules hereto, neither the Company nor any
Subsidiary has failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, which failure would have a Material Adverse Effect.
3.17 Environmental Matters. Except as would not have a Material
Adverse Effect, (i) no real property currently or formerly owned or operated by
the Company or any current Subsidiary is contaminated with any Hazardous
Substances (as defined herein) to an extent or in a manner or condition now
requiring remediation under any Environmental Law (as defined herein), (ii) no
judicial or administrative proceeding is pending or, to the knowledge of the
Company, threatened relating to liability for any off-site disposal or
contamination and (iii) the Company and its Subsidiaries have not received in
writing any claims or notices alleging liability under any Environmental Law.
Neither the Company nor any Subsidiary is in violation of any applicable
Environmental Law and no condition or event has occurred with respect to the
Company or any Subsidiary that would constitute a violation of such
Environmental Law, excluding in any event, such violations, conditions and
events that would not have a Material Adverse Effect. "Environmental Law" means
any applicable federal, state or local law, regulation, order, decree or
judicial opinion or other agency requirement having the force and effect of law
and relating to noise, odor, Hazardous Substances or the protection of the
environment. "Hazardous Substance" means any toxic or hazardous substance that
is regulated by or under authority of any Environmental Law.
3.18 Opinion of Financial Advisor. The Company has received the
written opinion of Donaldson, Lufkin & Jenrette Securities Corporation to the
effect that the Merger Consideration is fair from a financial point of view to
the stockholders of the Company (other than Acquisition and stockholders who are
Affiliates of the Company).
3.19 Affiliate Transactions. Except as described in the SEC Reports,
there are no existing or proposed material transactions or arrangements between
the Company or any Subsidiary and any Affiliate of the Company (including,
without limitation, Century Communications Corp., Citizens Utility Company and
the Company's directors and executive officers, but excluding wholly owned
Subsidiaries). Except as set forth in Schedule 3.19 hereto, there are no
payments due from the Company or any Subsidiary to any such Affiliate between
May 31, 1998 and the
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Effective Time for which adequate reserves are not reflected in the Company's
consolidated balance sheet as of May 31, 1998 except for those payments that
would not be material to the operations of the Company and the Subsidiaries.
3.20 Intellectual Property. Except as set forth in Schedule 3.20
hereto:
(a) The Company and its Subsidiaries own or have the right to
use all material copyrights, trade names, trademarks, service marks, trade
secrets, know-how, designs, software, patents, licenses and other intellectual
property rights (collectively, the "Intellectual Property") that are necessary
to conduct the business of the Company and its Subsidiaries as presently
conducted, free and clear of all Liens, other than those rights the absence of
which individually or in the aggregate would not have a Material Adverse Effect.
There are no material trade names, trademarks or service marks owned by the
Company or any of its Subsidiaries that are not registered or the subject of
applications therefor.
(b) There is no suit, action or proceeding pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries, which challenges the legality, validity, enforceability of, or the
Company's or any of its Subsidiaries' use or ownership of, any of the
Intellectual Property owned by the Company or any of its Subsidiaries or, to the
Company's knowledge, licensed to the Company or to any of its Subsidiaries,
other than any such suit, action or proceeding that individually or in the
aggregate would not have a Material Adverse Effect.
(c) To the knowledge of the Company, neither the Company nor
any Subsidiary has infringed upon or otherwise violated the intellectual
property rights of third parties or has received or has been the subject of any
claim, charge or notice alleging any such infringement or other violation, other
than any such infringement, violation or appropriation that individually or in
the aggregate would not have a Material Adverse Effect.
(d) The Company has taken steps that are reasonable to ensure
that the occurrence of the year 2000 will not materially and adversely affect
the information and business systems of the Company or the Subsidiaries and no
expenditures in excess of currently budgeted items are expected to cause such
systems to operate properly following the change of the year 1999 to 2000.
3.21 No Other Representations. Except as specifically set forth in
this Article III, the Company has not made, and Acquisition has not relied upon,
any other representations or warranties, whether express or implied.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Acquisition represents and warrants to the Company that:
4.1 Corporate Existence and Power. Acquisition is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Acquisition has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its businesses as
now conducted, except for such licenses, authorizations, consents and approvals
the failure of which to obtain would not, individually or in the aggregate, have
a material adverse effect on the business, assets, operations or financial
condition of Acquisition or upon the ability of Acquisition to consummate the
transactions contemplated by this Agreement or perform its obligations hereunder
(an "Acquisition Material Adverse Effect"). Since the date of its incorporation,
Acquisition has not engaged in any activities other than in connection with or
as contemplated by this Agreement or in connection with arranging any financing
required to consummate the transactions contemplated hereby.
4.2 Corporate Authorization. The execution, delivery and performance
by Acquisition of this Agreement and the consummation by Acquisition of the
transactions contemplated hereby are within the corporate powers of Acquisition
and have been duly authorized by all necessary corporate action. Assuming the
due and valid authorization, execution and delivery of this Agreement by the
Company, this Agreement constitutes a valid and binding agreement of
Acquisition, enforceable against each in accordance with its terms except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other similar laws affecting creditors' rights generally and by
equitable principles of general applicability.
4.3 Governmental Authorization. The execution, delivery and
performance by Acquisition of this Agreement and the consummation by Acquisition
of the transactions contemplated by this Agreement require no action by or in
respect of, or filing with, any Governmental Entity other than (i) the filing of
a certificate of merger in accordance with Delaware Law, (ii) compliance with
any applicable requirements of the HSR Act, (iii) compliance with any applicable
requirements of the Securities Act and Exchange Act, (iv) compliance with any
applicable requirements of the Communications Act, (v) compliance with the
applicable requirements of state and local utility commissions or similar
entities and (vi) compliance with applicable state takeover statutes.
4.4 Non-contravention. The execution, delivery and performance by
Acquisition of this Agreement and the consummation by Acquisition of the
transactions contemplated hereby do not and will not (i) contravene or conflict
with
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the certificate of incorporation or bylaws of Acquisition, (ii) assuming
compliance with the matters referred to in Section 4.3, contravene or conflict
with or constitute a violation of any provision of law, regulation, judgment,
order or decree binding upon Acquisition or (iii) result in a breach or
violation of or constitute a default under (or an event which with the giving of
notice or the lapse of time or both would constitute a default under) or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of Acquisition or to a loss of any benefit to which it is entitled or
require any consent, approval or authorization under any provision of any
material agreement, contract or other instrument binding upon Acquisition or any
of its assets, except for such contraventions, conflicts or violations referred
to in clause (ii) and breaches, violations, defaults, rights of termination,
cancellation or acceleration or losses referred to in clause (iii) that in the
aggregate would not have an Acquisition Material Adverse Effect or prevent or
delay the consummation of the Merger in any material respect or otherwise
prevent Acquisition from performing their obligations under this Agreement in
any material respect.
4.5 Information. None of the information supplied or to be supplied
by Acquisition in writing specifically for inclusion in (i) the Offer Documents,
(ii) the Form S-4, (iii) the Proxy Statement/Prospectus or (iv) any other
filings will, at the respective times filed with the SEC or such other
Governmental Entity, and, in addition, in the case of the Proxy
Statement/Prospectus, at the date it or any amendment or supplement is mailed to
stockholders and at the time of the Special Meeting, or in the case of the Offer
Documents, at the date such documents are mailed to the holders of the Senior
Notes, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
4.6 Brokers. None of Acquisition or any of its respective
subsidiaries, officers, directors or employees has employed any investment
banker, broker, finder or other intermediary or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement for or with respect to which the Company or any
Subsidiary is or might be liable prior to the Effective Time.
4.7 Qualification of Acquisition. Acquisition is and at the
Effective Time will be legally, technically and otherwise qualified under the
Communications Act to acquire, own and operate the assets and business of the
Company and its Subsidiaries. To the best of Acquisition's knowledge, there are
no facts or proceedings which would reasonably be expected to disqualify
Acquisition under the Communications Act or otherwise from acquiring or
operating any of the assets and business of the Company and its Subsidiaries or
would cause the FCC not to approve the FCC Applications (as defined herein).
Acquisition has no knowledge of any fact or circumstance relating to Acquisition
or any of its Affiliates that would be reasonably be expected to (a) cause the
filing of any meritorious objection to the FCC
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Applications which is likely to prevail or (b) lead to a material delay in the
processing by the FCC of the FCC Applications. No waiver of any FCC rule or
policy is necessary to be obtained for the approval of the FCC Applications, and
no processing pursuant to any exception or rule of general applicability will be
requested or required in connection with the consummation of the transaction
herein.
4.8 Acquisition Not an Interested Stockholder. As of the date of
this Agreement, neither Acquisition nor any of its Affiliates is an "Interested
Stockholder" as such term is defined in Section 203 of the Delaware Law.
4.9 Financing. Acquisition has received and executed commitment
letters each dated July 2, 1998 (the "Commitment Letters"), from (i) Merrill
Lynch Capital Corporation, pursuant to which it has committed, subject to the
terms and conditions set forth therein, to provide Acquisition and certain
existing or future subsidiaries of the Company with up to $1.21 billion of
financing under available senior secured credit facilities and $350.0 million in
aggregate principal amount of financing in the form of an unsecured senior
bridge loan, (ii) WCAS Capital Partners III, L.P., pursuant to which it has
committed, subject to the terms and conditions set forth therein, to purchase
$150.0 million in aggregate principal amount of subordinated notes of
Acquisition and (iii) Welsh, Carson, Anderson & Stowe VIII, L.P. ("WCAS")
pursuant to which it has committed to provide to Acquisition $350.0 million in
equity to consummate the Merger, pay the Merger Consideration and pay the
related transaction expenses (the financings referred to in clauses (i), (ii)
and (iii) above being collectively referred to as the "Financing"). Such
Financing is adequate to pay in full in cash at closing the Cash Merger
Consideration together with all fees and expenses of Acquisition associated with
the transactions contemplated hereby, and to make any other payments necessary
to consummate the transactions contemplated hereby. True and complete copies of
the Commitment Letters have been furnished to the Company. Neither Acquisition,
WCAS nor their affiliates will terminate, amend or modify in any respect the
Commitment Letters in a manner which will adversely affect the probability that
such financing will be actually funded, or the timing thereof, without prior
written consent of the Company. Acquisition or WCAS has fully paid any and all
commitment fees or other fees required by such Commitment Letters to be paid as
of the date hereof (and will duly pay any such fees after the date hereof). The
Commitment Letters are valid and in full force and effect and no event has
occurred which (with or without notice, lapse of time or both) would constitute
a default on the part of WCAS or Acquisition thereunder or would adversely
affect the probability that such financing will actually be funded. The $350.0
million equity investment of WCAS will be used solely to acquire common stock of
Acquisition at a price of $43.50 per share.
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ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
5.1 Conduct of the Company. From the date hereof until the Effective
Time, except as contemplated by this Agreement or with the prior written consent
of Acquisition (which consent shall not be unreasonably withheld or delayed),
the Company and its Subsidiaries shall conduct their business in the ordinary
course consistent with past practice and shall use reasonable efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and key
employees. Without limiting the generality of the foregoing, the Company will
not, and will not permit any of its Subsidiaries to, do any of the following:
(a) adopt any amendment to its certificate of incorporation or
bylaws;
(b) except for issuances of capital stock of the Company's
Subsidiaries to the Company or a wholly-owned Subsidiary of the Company, issue,
reissue or sell, or authorize the issuance, reissuance or sale of (i) additional
shares of capital stock of any class, or securities convertible into capital
stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, other than the issue of Common Shares,
in accordance with the terms of the instruments governing such issuance on the
date hereof, pursuant to the exercise of Options outstanding on the date hereof
or pursuant to the conversion of Convertible Preferred Shares, Second Series
Convertible Preferred Shares or Class B Common Shares outstanding on the date
hereof, or (ii) any other securities in respect of, in lieu of, or in
substitution for, Common Shares outstanding on the date hereof;
(c) redeem or otherwise repurchase, or declare, set aside or
pay any dividend or other distribution (whether in cash, securities or property
or any combination thereof) in respect of any class or series of its capital
stock other than between any of the Company and any of its wholly owned
Subsidiaries;
(d) split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
(e) (i) except for (x) increases in salary, wages and benefits
of non-executive officers or employees of the Company or its Subsidiaries in
accordance with past practice and (y) increases in salary, wages and benefits
granted to non-executive officers and employees of the Company or its
Subsidiaries in conjunction with new hires, promotions or other changes in job
status, increase the
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compensation or fringe benefits payable or to become payable to its directors,
officers or key employees (whether from the Company or any of its Subsidiaries);
(ii) pay any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units); (iii)
grant any severance or termination pay to (except pursuant to existing
agreements, plans or policies), or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or any of
its Subsidiaries; or (iv) establish, adopt, enter into, or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, savings, welfare, deferred compensation,
employment, termination, severance or other employee benefit plan, agreement,
trust, fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees (any of the foregoing being an "Employee
Benefit Arrangement"), except in each case to the extent required by applicable
law or regulation; provided, however, that nothing herein will be deemed to
prohibit the payment of benefits payable under terms of plans existing on or
prior to the date hereof as they become payable;
(f) acquire, sell, lease or dispose of any assets (other than
in the ordinary course of business consistent with past practice) or securities
which are material to the Company and its Subsidiaries, taken as a whole, or
enter into any commitment to do any of the foregoing or enter into any material
commitment or transaction outside the ordinary course of business other than
transactions between any wholly owned Subsidiary of the Company and the Company
or another wholly owned Subsidiary of the Company;
(g) (i) incur, assume or pre-pay any long-term debt or incur
or assume any short-term debt, except that the Company and its Subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent with
past practice under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person or Persons that are
individually or in the aggregate material, or (iii) make any loans, advances or
capital contributions to, or investments in, any other Person or Persons that
are individually or in the aggregate material except for loans, advances,
capital contributions or investments between any wholly owned Subsidiary of the
Company and the Company or another wholly owned Subsidiary of the Company; or
(h) terminate, modify, assign, waive, release or relinquish
any material contract rights or amend any material rights or claims not in the
ordinary course of business;
(i) make any capital expenditures, except in the ordinary
course of business and consistent with past practice or as currently budgeted;
or
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(j) agree in writing or otherwise to take any of the foregoing
actions.
5.2 Access to Information. From the date hereof until the Effective
Time, the Company will (i) give Acquisition and its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of the Company and
its Subsidiaries as such Persons may reasonably request, and furnish such
Persons with such financial and operating data and other information as such
Persons may reasonably request and (ii) instruct the Company's employees,
counsel and financial advisors to cooperate with Acquisition in its
investigation of the business of the Company and its Subsidiaries; provided that
no investigation pursuant to this Section 5.2 shall affect any representation or
warranty given by the Company to Acquisition hereunder. The foregoing
information shall be held in confidence to the extent required by, and in
accordance with, the provisions of the letter agreement between Donaldson,
Lufkin & Jenrette Securities Corporation and WCAS (the "Confidentiality
Agreement") .
5.3 No Solicitation. The Company (i) agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
Subsidiaries or any of its or its Subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate or
encourage any inquiries or the making of any proposal with respect to any
merger, consolidation or other business combination, tender or exchange offer,
recapitalization transaction or other similar transaction involving the Company
or any of its Significant Subsidiaries, acquisition of all or any material
portion of the assets or capital stock of the Company or the acquisition of all
or substantially all of the assets or capital stock of any Significant
Subsidiary (an "Acquisition Transaction") or provide information to or
negotiate, explore or otherwise engage in discussions with any Person (other
than Acquisition or its directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement, provided, however, that the Company may, in response to an
unsolicited proposal with respect to an Acquisition Transaction from a third
party, furnish information to, and negotiate, explore and otherwise engage in
substantive discussions with such third party, and enter into any such
agreement, arrangement or understanding (so long as immediately after entering
into any such agreement the Company terminates this Agreement), in each case, if
the Board determines in its good faith judgment, after consultation with its
independent legal counsel, that the failure to do so would result in a breach of
its fiduciary obligations; and (ii) represents that, as of the date of this
Agreement, the Company has discontinued, and has caused its Subsidiaries and its
and their respective directors, officers, employees, agents and representatives
to discontinue, discussions or negotiations with all persons or groups with whom
discussions or negotiations have previously been held concerning any proposal
with respect to an Acquisition
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Transaction. The Company shall promptly notify Acquisition if any proposal or
offer is received by, or any information is requested from, or any discussions
or negotiations are sought to be initiated or continued with, the Company in
respect of an Acquisition Proposal, and shall, in any such notice to
Acquisition, indicate the identity of the third party and the terms and
conditions of any proposals or offers; provided, however, that such notice shall
be given only to the extent the Board may disclose such information without
breaching its fiduciary duties as advised by counsel and as determined in good
faith and without violating any of the conditions of such Acquisition Proposal.
Thereafter, the Company shall keep Acquisition informed (subject to such
fiduciary duties), on a current basis, of the status and terms of any such
proposals or offers and the status of any such discussions or negotiations.
5.4 Communications Licenses and Authorizations. The Company shall,
and shall cause its Subsidiaries to, use commercially reasonable efforts to
obtain and maintain in full force and effect all approvals, consents, permits,
licenses and other authorizations, and any renewals thereof, from the FCC and
any appropriate State PUC, and to make all filings and reports, reasonably
necessary or required for the continued operation of the Company's and its
Subsidiaries' businesses, as and when such approvals, consents, permits,
licenses, filings or reports or other authorizations are necessary or required.
5.5 Debt Offers.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 9.1 hereof, the Company shall, within 20
days of receiving any request by Acquisition to do so (but in no event earlier
than twenty calendar days after the date hereof), commence offers to purchase,
accompanied by related solicitations of consent regarding covenant amendments,
all of the Company's outstanding 8 7/8% Senior Notes due 2001 and the Company's
outstanding 10 1/8% Senior Notes due 2005 (collectively, the "Senior Notes") on
such customary terms and conditions as are acceptable to Acquisition, in the
exercise of its judgment in making Debt Offers on commercially reasonable terms
to the Company and the holders of the Senior Notes (the "Debt Offers"). The
Company shall waive any of the conditions to the Debt Offers and make any other
changes in the terms and conditions of the Debt Offers as may be requested by
Acquisition to the extent that after giving effect to such requests the Debt
Offers will be made on commercially reasonable terms to the Company and the
holders of the Senior Notes, and the Company shall not, without Acquisition's
prior consent, which shall not be unreasonably withheld or delayed, waive any
material condition to the Debt Offers, make any changes to the terms and
conditions of the Debt Offers set forth in Schedule 5.5(a) hereto or make any
other material changes in the terms and conditions of the Debt Offers.
Notwithstanding the immediately preceding sentence, Acquisition shall not
request that the Company make any change to the terms and conditions of the Debt
Offers that decreases the price per Senior Note payable in the Debt Offers or
imposes conditions to the Debt Offers in addition to those set forth in Schedule
5.5(a) hereto that are materially adverse to
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holders of Senior Notes, unless such change was previously approved by the
Company in writing. The Company covenants and agrees that, subject to the terms
and conditions of this Agreement, including but not limited to the conditions in
the Debt Offers, it will accept for payment and pay for the Senior Notes as soon
as reasonably practicable after such conditions to the Debt Offers are satisfied
and it is permitted to do so under applicable law, provided that the Company
shall use reasonable best efforts to coordinate the timing of any such purchase
with Acquisition in order to obtain the greatest participation in the Debt
Offers.
(b) Promptly following the date of this Agreement, the Company
shall prepare, subject to advice and comments of Acquisition, an offer to
purchase for each of the issues of Senior Notes and forms of the related letters
of transmittal and summary advertisement, as well as all other information and
exhibits (collectively, the "Offer Documents"). All mailings to the holders of
Senior Notes in connection with the Debt Offers shall be subject to the prior
review, comment and approval of Acquisition (which approval shall not be
unreasonably withheld or delayed). The Company will use its reasonable best
efforts to cause the Offer Documents to be mailed to the holders of the Senior
Notes as promptly as practicable following receipt of the request from
Acquisition under paragraph (a) above to do so. The Company agrees promptly to
correct any information in the Offer Documents that shall be or have become
false or misleading in any material respect.
5.6 Notices of Certain Events. The Company shall promptly notify
Acquisition of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against the Company or any Subsidiary
which, if pending on the date of this Agreement, would have been required to
have been disclosed pursuant to Section 3.11 or which relate to the consummation
of the transactions contemplated by this Agreement; and
(d) any filings with, or notices from, or the initiation of
any complaint or other proceedings by, the FCC or any State PUC relating to the
Communications Licenses held by the Company or any of its Subsidiaries.
5.7 State Takeover Laws. The Company shall, upon the request of
Acquisition, take all reasonable steps to assist in any challenge by Acquisition
to the
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validity or applicability to the transactions contemplated by this Agreement,
including the Merger, of any state takeover law.
ARTICLE VI
COVENANTS OF ACQUISITION
Acquisition agrees that:
6.1 Confidentiality. Acquisition acknowledges and agrees that all
information received from or on behalf of the Company or any of the Company's
Subsidiaries in connection with the Merger shall be deemed received pursuant to
the Confidentiality Agreement and Acquisition shall, and shall cause its
Affiliates and representatives, to comply with the provisions of the
Confidentiality Agreement with respect to such information and the provisions of
the Confidentiality Agreement are hereby incorporated herein by reference with
the same effect as if fully set forth herein.
6.2 Indemnification; Directors' and Officers' Insurance.
(a) Acquisition agrees that all rights to indemnification now
existing in favor of any employee, agent, director or officer of the Company and
its Subsidiaries (the "Indemnified Parties") as provided in their respective
charters or bylaws, in an agreement between an Indemnified Party and the Company
or one of its Subsidiaries, or otherwise in effect on the date hereof shall
survive the Merger and shall continue in full force and effect for a period of
not less than six years from the Effective Time; provided that in the event any
claim or claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims. Acquisition also agrees to
indemnify all Indemnified Parties to the fullest extent permitted by applicable
law with respect to all acts and omissions arising out of such individuals'
services as officers, directors, employees or agents of the Company or any of
its Subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees, or otherwise on behalf of, the Company or any of its Subsidiaries,
occurring prior to the Effective Time including, without limitation, the
transactions contemplated by this Agreement. Without limitation of the
foregoing, in the event any such Indemnified Party is or becomes involved in any
capacity in any action, proceeding or investigation in connection with any
matter, including, without limitation, the transactions contemplated by this
Agreement, occurring prior to, and including, the Effective Time, Acquisition
will pay as incurred such Indemnified Party's legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith. Acquisition shall pay all expenses, including attorneys' fees, that
may be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 6.2.
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(b) Acquisition agrees that the Company and, from and after
the Effective Time, the Surviving Corporation shall cause to be maintained in
effect for not less than six years from the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company;
provided that (i) the Surviving Corporation may substitute therefor policies of
at least the same coverage containing terms and conditions which are no less
advantageous; (ii) such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
(iii) the Surviving Corporation shall not be required to pay an annual premium
in excess of 200% of the last annual premium paid by the Company prior to the
date hereof and if the Surviving Corporation is unable to obtain the insurance
required by this Section 6.2(b) it shall obtain as much comparable insurance as
possible for an annual premium equal to such maximum amount.
6.3 Employee Benefit Arrangements.
(a) Acquisition agrees that the Company will honor and, from
and after the Effective Time, Acquisition will cause the Surviving Corporation
to honor, all Employee Benefit Arrangements to which the Company or any of its
Subsidiaries is currently a party.
(b) Acquisition will cause the Surviving Corporation to take
such actions as are necessary so that, for a period of at least two years from
the Effective Time, employees of the Company and its Subsidiaries will be
provided cash compensation, employee benefit and incentive compensation and
similar plans and programs (other than equity-based compensation plans and
programs) as will provide compensation and benefits which in the aggregate are
no less favorable than those provided to such employees as of the date hereof.
(c) Nothing in this Section 6.3 shall be construed to limit
the ability of the Surviving Corporation or any of its subsidiaries to terminate
the employment of any employee (it being understood that such employment shall,
to the maximum extent permitted by law, be at will) or to review Employee
Benefit Arrangements from time to time and make such changes as it or they deem
appropriate.
6.4 Financing. Acquisition shall use commercially reasonable efforts
to consummate the Financing or alternative financing on terms no more onerous
than the terms of the Financing.
6.5 NASDAQ Listing. Acquisition will, for at least three years after
the Effective Time of the Merger, use reasonable best efforts to cause the
Common Shares to be listed on the NASDAQ National Market System and registered
under the Exchange Act.
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ARTICLE VII
COVENANTS OF ACQUISITION AND THE COMPANY
Each of the parties hereto agrees that:
7.1 Reasonable Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, in the case of the Company, subject to the limitations provided herein
regarding the fiduciary duties of the Board, and to assist and cooperate with
the other party hereto in doing, as promptly as practicable, all things
necessary or advisable under applicable laws and regulations to ensure that the
conditions set forth in Article VIII are satisfied and to consummate and make
effective the transactions contemplated by this Agreement.
If at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, including
the execution of additional instruments, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
7.2 Stockholder Meeting.
(a) Promptly upon the request of Acquisition, the Company
shall take all action necessary in accordance with the Delaware Law and its
certificate of incorporation and bylaws to call, give notice of and convene a
meeting (the "Stockholder Meeting") of its stockholders to consider and vote
upon the approval and adoption of this Agreement and the Merger and for such
other purposes as may be necessary or desirable.
(b) Promptly upon the request of Acquisition, the Company
shall prepare a Registration Statement on Form S-4 covering the Electing Shares
(the "Form S-4") and a proxy or information statement pertaining to the Merger,
which shall also constitute the prospectus included in the Form S-4 (the "Proxy
Statement/Prospectus"). Subject to the Board's determination that in its good
faith judgment, after consultation with its independent legal counsel, that the
failure to do so would result in a breach of its fiduciary obligations, the
Board shall recommend that the stockholders of the Company vote to approve and
adopt this Agreement and the Merger and any other matters to be submitted to
stockholders in connection therewith and the Company include such recommendation
in the Proxy Statement/Prospectus. Acquisition and its stockholders shall
cooperate fully with the Company in the preparation of the Proxy
Statement/Prospectus and any amendments and supplements thereto. The Proxy
Statement/Prospectus shall not be distributed, and no amendment or supplement
thereto shall be made by the Company, without the prior consent of Acquisition
and its counsel. The Company shall use its reasonable best efforts to have the
Form S-4 declared effective by the SEC as promptly as practicable and shall
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cause a definitive Proxy Statement/Prospectus to be distributed to its
stockholders entitled to vote upon the Merger as promptly as practicable
thereafter.
(c) The Company shall notify Acquisition of the receipt of the
comments of the SEC and of any requests by the SEC for amendments or supplements
to the Form S-4 or the Proxy Statement/Prospectus, or for additional
information, and shall promptly supply the Company with copies of all
correspondence between the Company (or its representatives) and the SEC (or its
staff) with respect thereto. If, at any time prior to the Meeting, any event
should occur relating to or affecting the Company or Acquisition, or to their
respective officers or directors, which event should be described in an
amendment or supplement to the Form S-4 or the Proxy Statement/Prospectus, the
parties shall promptly inform one another and shall cooperate in promptly
preparing, filing and having declared effective or clearing with the SEC and, if
required by applicable securities laws, distributing to the Company's
stockholders such amendment or supplement.
7.3 Consents.
(a) Each of the parties will use its reasonable best efforts
to obtain as promptly as practicable all consents, waivers, approvals,
authorizations or permits of any Governmental Entity or any other Person
required in connection with, and waivers of any Violations that may be caused
by, the consummation of the transactions contemplated by this Agreement.
(b) In furtherance and not in limitation of the foregoing,
Acquisition shall use its best efforts to resolve such objections, if any, as
may be asserted with respect to the transactions contemplated by this Agreement
under any antitrust, competition or trade regulatory laws, rules or regulations
of any domestic or foreign government or governmental authority ("Antitrust
Laws"). If any suit is threatened or instituted challenging any of the
transactions contemplated by this Agreement as violative of any Antitrust Law,
Acquisition shall take such action (including, without limitation, agreeing to
hold separate or to divest any of the businesses, product lines or assets of
Acquisition or any of its Affiliates controlled by it or of any of the Company,
its Subsidiaries or Affiliates) as may be required (i) by the applicable
government or governmental authority (including, without limitation, the
Antitrust Division of the United States Department of Justice or the Federal
Trade Commission) in order to resolve such objections as such government or
authority may have to such transactions under such Antitrust Law or (ii) by any
domestic or foreign court or similar tribunal, in any suit brought by a private
party or governmental authority challenging the transactions contemplated by
this Agreement as violative of any Antitrust Law, in order to avoid the entry
of, or to effect the dissolution of, any injunction, temporary restraining order
or other order that has the effect of preventing the consummation of any of such
transactions. The entry by a court, in any suit brought by a private party or
governmental authority challenging the transactions contemplated by this
Agreement as violative of any Antitrust Law, of an order or
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decree permitting the transactions contemplated by this Agreement, but requiring
that any of the businesses, product lines or assets of any of Acquisition or its
Affiliates controlled by it or the Company or its Subsidiaries or Affiliates be
divested or held separate by Acquisition, or that would otherwise limit
Acquisition's freedom of action with respect to, or its ability to retain, the
Company and its Subsidiaries or any portion thereof or any of Acquisition's or
its Affiliates' other assets or businesses, shall not be deemed a failure to
satisfy the conditions specified in Section 8.1(d) hereof.
(c) Each party hereto shall promptly inform the other party of
any material communication from the Federal Trade Commission, the Department of
Justice, the FCC or any other domestic or foreign government or governmental
authority regarding any of the transactions contemplated by this Agreement. If
any party or any Affiliate thereof receives a request for additional information
or documentary material from any such government or authority with respect to
the transactions contemplated by this Agreement, then such party will endeavor
in good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other parties, an appropriate response in
compliance with such request. Acquisition will advise the Company promptly in
respect of any understandings, undertakings or agreements (oral or written)
which Acquisition proposes to make or enter into with the Federal Trade
Commission, the Department of Justice, the FCC or any other domestic or foreign
government or governmental authority in connection with the transactions
contemplated by this Agreement.
7.4 Public Announcements. So long as this Agreement is in effect,
the Company and Acquisition agree that they will not issue any press release or
make any other public announcement concerning this Agreement, the Merger or the
transactions contemplated hereby or thereby without the prior consent of the
other party, except that the Company or Acquisition may make such public
disclosure that it believes in good faith to be required by law (in which event
such party shall notify the other party prior to making such disclosure).
7.5 Notification of Certain Matters. Acquisition and the Company
shall promptly notify the other party of (i) the occurrence or non-occurrence of
any fact or event which would be reasonably likely (x) to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time or (y) to cause any material covenant, condition or agreement
hereunder not to be complied with or satisfied in all material respects and (ii)
any failure of the Company or Acquisition, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; provided, however, that no such
notification shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder.
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7.6 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Acquisition,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company or Acquisition, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
7.7 FCC Applications.
(a) As promptly as practicable after the execution and
delivery of this Agreement, Acquisition and the Company shall prepare all
appropriate applications for FCC approval, and such other documents as may be
required, with respect to the transfer of control of the Company to Acquisition
(collectively, the "FCC Applications"). As promptly as practicable following
execution and delivery of this Agreement, the Company shall deliver to
Acquisition its completed portion of the FCC Applications. Not later than the
fifth business day following the delivery of the FCC Applications to
Acquisition, Acquisition shall file, or cause to be filed, the FCC Applications.
If the Closing shall not have occurred for any reason within any applicable
initial consummation period relating to the FCC's grant of the FCC Applications,
and neither Acquisition nor the Company shall have terminated this Agreement
pursuant to Section 9.1, Acquisition and the Company shall jointly request one
or more extensions of the consummation period of such grant. No party hereto
shall knowingly take, or fail to take, any action if the intent or reasonably
anticipated consequence of such action or failure to act is, or would be, to
cause the FCC not to grant approval of the FCC Applications or materially delay
either such approval or the consummation of the transfer of control of the
Company.
(b) As promptly as practicable after the execution and
delivery of this Agreement, Acquisition and the Company shall prepare all
required applications for approval by State PUCs, and such other documents as
may be required, with respect to the transfer of control of the Company
(collectively, the "State PUC Applications"). Not later than the twentieth
business day following execution and delivery of this Agreement, the Company
shall deliver to Acquisition its completed portion of the State PUC
Applications. Not later than the thirtieth business day following execution and
delivery of this Agreement, Acquisition and the Company shall file, or cause to
be filed, the State PUC Applications. If the Closing shall not have occurred for
any reason within any applicable consummation period relating to any State PUC's
grant of any State PUC Application, and neither Acquisition nor the Company
shall have terminated this Agreement pursuant to Section 9.1, Acquisition and
the Company shall jointly request one or more extensions of the consummation
period of such grant. No party hereto shall knowingly take, or fail to take, any
action if the intent or reasonably anticipated
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consequence of such action or failure to act is, or would be, to cause any State
PUC not to grant approval of any State PUC Application or materially delay
either such approval or the consummation of the transfer of control of the
Company.
(c) Acquisition and the Company shall each pay one-half (1/2)
of any FCC fees that may be payable in connection with the filing or granting of
approval of the FCC Applications. Each of Acquisition and Company shall bear its
own expenses in connection with the preparation and prosecution of the FCC
Applications and the State PUC Applications. Acquisition and the Company shall
each use its best efforts to prosecute the FCC Applications and the State PUC
Applications in good faith and with due diligence before the FCC and the State
PUCs and in connection therewith shall take such action or actions as may be
necessary or reasonably required in connection with the FCC Applications and the
State PUC Applications, including furnishing to the FCC and the State PUCs any
documents, materials or other information requested by the FCC and the State
PUCs in order to obtain such approvals as expeditiously as practicable.
7.8 HSR Act Matters. Promptly after the date hereof, Acquisition and
the Company (as may be required pursuant to the HSR Act) will complete all
documents required to be filed with the Federal Trade Commission and the
Department of Justice in order to comply with the HSR Act and, not later than 15
business days after the date hereof, together with the Persons who are required
to join in such filings, shall file the same with the appropriate Governmental
Entities. Acquisition and the Company shall promptly furnish all materials
thereafter required by any of the Governmental Entities having jurisdiction over
such filings, and shall take all reasonable actions and shall file and use all
reasonable efforts to have declared effective or approved all documents and
notifications with any such Governmental Entities, as may be required under the
HSR Act or other federal antitrust laws for the consummation of the Merger and
any other transactions contemplated hereby.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party. The respective
obligations of Acquisition and the Company to consummate the Merger are subject
to the satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Stockholder Approval. The stockholders of the Company
shall have duly approved the transactions contemplated by this Agreement,
pursuant to the requirements of the Company's certificate of incorporation and
applicable law.
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(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have expired or been
terminated.
(c) Form S-4. The Form S-4 shall have been declared effective
and no stop order with respect thereto shall be in effect at the Effective Time.
(d) Injunctions; Illegality. The consummation of the Merger
shall not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity entered after the parties have used reasonable best efforts to prevent
such entry and there shall not have been any statute, rule or regulation
enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity which prevents the consummation of the Merger.
8.2 Conditions Precedent to the Obligations of Acquisition.
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement that
is qualified as to materiality or Material Adverse Effect shall have been true
and correct when made and on and as of the Closing Date as if made on and as of
such date, and each of the other representations and warranties of Company
contained in this Agreement shall have been true and correct in all material
respects when made and on and as of the Closing Date as if made on and as of
such date, and Acquisition shall have received a certificate to such effect of
the Chief Executive Officer of the Company.
(b) Performance. The Company shall have performed and complied
in all material respects with all agreements and covenants required to be
performed and complied with by it under this Agreement on or prior to the
Closing Date, and Acquisition shall have received a certificate to such effect
of the Chief Executive Officer of the Company.
(c) FCC Approvals. All consents, waivers, approvals and
authorizations required to be obtained from the FCC ("FCC Transfer Approvals")
prior to the consummation of the transactions contemplated hereby shall have
been obtained by a "Final Order" (as hereinafter defined) without the imposition
of any condition that Acquisition, in its sole discretion, deems materially
adverse to the Company's or its Subsidiaries' continued operation of their
businesses from and after the Effective Time. All filings and notices required
to be made by the Company or Acquisition prior to the consummation of the
transactions contemplated hereby shall have been made. For purposes of this
Agreement, "Final Order" shall mean an action by the FCC: (i) that is not
reversed, stayed, enjoined, set aside, annulled or suspended within the
deadline, if any, provided by applicable statute or regulation,
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(ii) with respect to which no request for stay, motion or petition for
reconsideration or rehearing, application or request for review, or notice of
appeal or other judicial petition for review that is filed within such period is
pending and (iii) as to which the deadlines, if any, for filing any such
request, motion, petition, application, appeal or notice, and for the entry by
the FCC of orders staying, reconsidering or reviewing on its own motion have
expired. Notwithstanding anything to the contrary contained herein or otherwise,
Acquisition may, at its option by written notice to the Company, waive on behalf
of both parties hereto the requirement that each of the FCC Transfer Approvals
shall have become a Final Order.
(d) Debt Offers. On or prior to the Closing Date, the Company
shall have consummated the Debt Offers, unless failure to consummate the Debt
Offers was a result of a failure by Acquisition to perform any covenant or
condition contained in the Offer Documents or this Agreement or the inaccuracy
of any representation or warranty of Acquisition contained therein.
(e) Financing. Acquisition shall have obtained the Financing
substantially on the terms contemplated by the Commitment Letters or alternative
financing on terms no less favorable than those set forth in the Commitment
Letters, unless the failure to obtain such financing was the result of a failure
by Acquisition to perform any covenant or condition contained therein or the
inaccuracy of any representation or warranty of Acquisition.
(f) Option Plans. The number of Common Shares purchasable upon
the exercise of Options that have not been cancelled in accordance with Section
1.7 shall not exceed 750,000.
8.3 Conditions Precedent to the Obligations of the Company.
(a) Representations and Warranties. Each of the
representations and warranties of Acquisition contained in this Agreement that
is qualified as to materiality or Material Adverse Effect shall have been true
and correct when made and on and as of the Closing Date as if made on and as of
such date, and each of the other representations and warranties of Acquisition
contained in this Agreement shall have been true and correct in all material
respects when made and on and as of the Closing Date as if made on and as of
such date, and the Company shall have received a certificate to such effect of
the President of Acquisition.
(b) Performance. Acquisition shall have performed and complied
in all material respects with all agreements and covenants required to be
performed and complied with by it under this Agreement on or prior to the
Closing Date, and the Company shall have received a certificate to such effect
of the President of Acquisition.
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ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by the mutual written consent of Acquisition and the
Company;
(b) by Acquisition or the Company if any court or other
Governmental Entity shall have issued, enacted, entered, promulgated or enforced
any order, judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction, ruling or other action shall have become final and
nonappealable after the parties have used reasonable best efforts to prevent
such issuance, enactment, entry, promulgation or enforcement;
(c) by the Company if (i) (A) any of the representations and
warranties of the Acquisition set forth herein shall not be true and correct (in
the case of representations and warranties qualified as to materiality or
Acquisition Material Adverse Effect) or true and correct in all material
respects (in the case of other representations and warranties), in each case
when made, or (B) there shall have occurred, on the part of Acquisition, a
breach of any covenant or agreement contained in this Agreement which if not
cured would have a Material Adverse Effect and which, in the case of (A) or (B),
is not curable or, if curable, is not cured within 30 calendar days after
written notice of such breach is given by the Company to Acquisition, (ii) the
Company shall enter into a definitive written agreement with respect to an
Acquisition Transaction, with a third party, or a third party has commenced a
tender offer which, in either case, the Board of Directors of the Company
believes in good faith is more favorable to the Company's stockholders than the
transactions contemplated by this Agreement or (iii) if the Board shall have
withdrawn, modified or amended in any manner adverse to Acquisition or the
stockholders of Acquisition its approval or recommendation of this Agreement and
the Merger, or approved, recommended or endorsed any proposal for an Acquisition
Transaction with a third party;
(d) by Acquisition if (i) (A) any of the representations and
warranties of the Company set forth herein shall not be true and correct (in the
case of representations and warranties qualified as to materiality or Material
Adverse Effect) or true and correct in all material respects (in the case of
other representations and warranties), in each case when made, or (B) there
shall have occurred, on the part of the Company and its Subsidiaries, taken as a
whole, a breach of any covenant or agreement contained in this Agreement which
if not cured would have a Material
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Adverse Effect and which, in the case of (A) or (B), is not curable or, if
curable, is not cured within 30 calendar days after written notice of such
breach is given by Acquisition to the Company, (ii) the Company shall enter into
a definitive written agreement with respect to an Acquisition Transaction, with
a third party, or a third party has commenced a tender offer which, in either
case, the Board of Directors of the Company believes in good faith is more
favorable to the Company's stockholders than the transactions contemplated by
this Agreement or (iii) if the Board shall have withdrawn, modified or amended
in any manner adverse to Acquisition or the stockholders of Acquisition its
approval or recommendation of this Agreement and the Merger or approved,
recommended or endorsed any proposal for an Acquisition Transaction with a third
party; or
(e) by either party if it shall not have breached any of its
obligations hereunder on January 31, 1999; provided, however, that neither party
may terminate this Agreement pursuant to this Section 9.1(e) on or before April
30, 1999 if the conditions to Acquisition's obligations to consummate the
transactions contemplated hereunder have not been satisfied on account of the
failure to receive FCC Transfer Approvals.
9.2 Effect of Termination. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto or its respective directors, officers
or stockholders, except that the agreements contained in Sections 6.1 and 9.3
shall survive the termination hereof, and except that nothing herein shall
relieve any party from liability for any breach of this Agreement or the
Confidentiality Agreement.
9.3 Fees and Expenses.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
(b) In the event the Company shall have terminated this
Agreement pursuant to Section 9.1(c)(ii) or (iii), or Acquisition shall have
terminated this Agreement pursuant to Section 9.1(d)(ii) or (iii), then the
Company shall simultaneously with such termination reimburse Acquisition for the
documented fees and expenses of Acquisition related to this Agreement and the
transactions contemplated hereby (including, without limitation, any fees and
expenses of counsel, accountants and other professional advisors, commitment
fees and other financing costs and interest, underwriting discounts, debt tender
payments and fees, expenses and other costs of consummating and unwinding any
issuance of securities) (subject to a maximum of $25.0 million) and
simultaneously with such termination pay Acquisition a termination fee of $40
million.
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ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests and other communications to any
party hereunder shall be in writing and shall be deemed to have been duly given
when delivered in person, by overnight courier or by facsimile to the respective
parties as follows:
If to Acquisition, to:
c/o Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue
Suite 2500
New York, New York 10022-6815
Attn: Thomas E. McInerney
Facsimile: (212) 893-9575
with a copy to:
Robert A. Schwed, Esq.
Karen C. Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Facsimile: (212) 841-5725
If to the Company, to:
Centennial Cellular Corp.
50 Locust Avenue
New Canaan, Connecticut 06840
Facsimile: (203) 972-2013
Attn: Bernard P. Gallagher
with a copy to:
Toby S. Myerson, Esq.
Kenneth M. Schneider, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Facsimile: (212) 757-3990
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or such other address or facsimile number as such party may hereafter specify
for the purpose by written notice to the other parties hereto. Each such notice,
request or other communication shall be effective (i) if delivered in person,
when such delivery is made at the address specified in this Section 10.1; (ii)
if delivered by overnight courier, the next business day after such delivery is
sent to the address specified in this Section 10.1; or (iii) if delivered by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section 10.1 and the appropriate confirmation is received.
10.2 Survival of Representations and Warranties and Agreements. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive beyond
the Effective Time except for the agreements set forth in Sections 6.2 and 6.3,
which shall survive the Effective Time, and Sections 6.1 and 9.3 and this
Article X, which shall survive the termination of this Agreement.
10.3 Amendment. This Agreement may be amended by the Company and
Acquisition at any time before or after any approval of this Agreement by the
stockholders of the Company but, after any such approval, no amendment shall be
made which decreases the Merger Consideration or which adversely affects the
rights of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
10.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein by any other party or in
any document, certificate or writing delivered pursuant hereto by any other
party or (iii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
10.5 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
10.6 Governing Law. This Agreement shall be construed in accordance
with and governed by the law of the State of Delaware applicable to agreements
entered into and to be performed wholly within such State.
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10.7 Jurisdiction. Each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a federal or state court sitting in
the State of Delaware.
10.8 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
10.9 Entire Agreement; No Third-party Beneficiaries. This Agreement
and the other agreements referred to herein or executed contemporaneously
herewith constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by any party hereto. This Agreement, other than as provided in
Sections 6.2 and 6.3, is not intended to confer upon any Person other than the
parties hereto any rights or remedies.
10.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.11 Schedules. Schedule references contained in Article III of
this Agreement are for convenience only and matters disclosed pursuant to one
section, subsection or other provision of Article III are deemed disclosed for
all purposes of Article III to the extent this Agreement requires such
disclosure.
10.12 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
10.13 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND ACQUISITION
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
-44-
<PAGE>
<PAGE>
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
-45-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its respective authorized officer as of the day
and year first above written.
CCW ACQUISITION CORP.
By:
---------------------------
Name:
Title:
CENTENNIAL CELLULAR CORP.
By:
---------------------------
Name:
Title:
-46-
<PAGE>
<PAGE>
EXHIBIT 10.50
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of July 2, 1998, between CCW Acquisition
Corp., a Delaware corporation ("Acquisition"), and Century Communications Corp.,
a Delaware corporation (the "Stockholder").
WHEREAS, concurrently herewith, Acquisition and Centennial
Cellular Corp., a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"; capitalized terms used
without definition herein having the meanings ascribed thereto in the Merger
Agreement);
WHEREAS, the Stockholder is the record and beneficial owner of
the number of Shares set forth opposite the Stockholder's name in Schedule I
hereto;
WHEREAS, approval of the Merger Agreement by the Company's
stockholders is a condition to the consummation of the Merger;
WHEREAS, the Board of Directors of the Company has, prior to
the execution of this Agreement, duly and validly approved and adopted the
Merger Agreement and approved this Agreement, and such approvals and adoption
have not been withdrawn; and
WHEREAS, Acquisition is unwilling to enter into the Merger
Agreement unless the Stockholder enters into this Agreement concurrently with
the execution of the Merger Agreement, and the Stockholder desires and is
willing to induce Acquisition to enter into the Merger Agreement by its entry
into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
Section 1. Agreement to Vote; Irrevocable Proxy.
(a) The Stockholder hereby agrees that, during the period
commencing on the date hereof and continuing until the termination of this
Agreement, at any stockholders' meeting of the Company at which any of the
following matters is submitted to a vote of the stockholders, it shall vote (or
cause to be voted) its shares of Common Stock (or shall execute and deliver a
written consent pursuant to Section 228 of the Delaware Law):
(i) in favor of the Merger Agreement, the transactions
described therein and the agreements and transactions contemplated
thereby; and
<PAGE>
<PAGE>
(ii) except as otherwise agreed to in writing in advance by
Acquisition against the following actions (except as contemplated by
the Merger Agreement):
(A) any extraordinary corporate transaction, such as
a merger, consolidation or other business combination
involving the Company or any of its subsidiaries;
(B) any sale, lease or transfer of a material amount
of assets of the Company or any of its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries; and
(C) (1) any change in the majority of the persons who
constitute the Board of Directors of the Company; (2) any
change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation or
Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action
which, in the case of each of the matters referred to in
clauses (1), (2) or (3), is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or
materially adversely affect the transactions contemplated by
this Agreement and the Merger Agreement.
(b) In furtherance of the foregoing, the Stockholder hereby
constitutes and appoints Thomas E. McInerney and Anthony J. de Nicola, and each
of them, with full power of substitution, its true and lawful proxies and
attorneys-in-fact to vote the Shares held by the Stockholder as provided in
paragraph (a) above for so long as this Agreement is in effect. The Stockholder
hereby affirms that this proxy is given in connection with the Merger Agreement,
as an inducement to Acquisition to enter into the Merger Agreement and to
consummate the transactions contemplated thereby and, as such, is coupled with
an interest and is irrevocable for so long as this Agreement shall remain in
effect.
(c) The Stockholder agrees that it will not, and will not
permit any of its Affiliates to, contract to sell, sell or otherwise pledge,
encumber, transfer or dispose of any of the Shares owned beneficially or of
record by it or any interest therein or securities convertible thereinto or any
voting rights with respect thereto, other than (i) pursuant to the Merger or
(ii) with Acquisition's prior written consent.
(d) The Stockholder hereby revokes any and all previous
proxies with respect to the Stockholder's Shares or any other voting securities
of the Company.
Section 3. Cooperation; No Solicitation. The Stockholder
hereby agrees to cooperate reasonably with Acquisition and the Company in
connection with the Merger Agreement and consummation of the transactions
contemplated thereby. Acquisition agrees to cooperate reasonably with the
Stockholder in connection with any filings required to be made by the
Stockholder pursuant to the HSR Act in connection with the Merger Agreement and
2
<PAGE>
<PAGE>
consummation of the transactions contemplated thereby. The Stockholder agrees
that it will not, and will not cause or permit their respective officers,
employees, representatives and agents, directly or indirectly, to solicit,
initiate or encourage any inquiries or the making of any proposal with respect
to any Acquisition Transaction or provide information to or negotiate, explore,
otherwise engage in discussions with or in any other way cooperate with any
Person (other than Acquisition or its directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring or causing the Company to
abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement.
Section 4. Termination of Services Agreement. The Stockholder hereby
agrees that, effective as of the Effective Time, each of the Services Agreement,
effective as of August 30, 1996, between the Company and the Stockholder, and
the Extension and Renewal Agreement dated as of March 21, 1997 between the
Company and the Stockholder shall be terminated.
Section 5. Other Covenants and Agreements.
(a) Stock Transfer Agreement. The Stockholder hereby agrees to
the termination of the Stock Transfer Agreement effective as of the Effective
Time.
(b) Further Assurances. Each party shall execute and deliver
such additional instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry out and comply
with all of its obligations under this Agreement. Without limiting the
generality of the foregoing, none of the parties hereto shall enter into any
agreement or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of such party to
effectuate, carry out or comply with all of the terms of this Agreement.
(c) Release of Certain Restrictions. Effective as of the
Effective Time, the Stockholder hereby releases the Company and its Affiliates
(other than the Stockholder and its other Affiliates) from, and waives in all
respects, any obligation that may exist to the Stockholder or any of its
Affiliates anywhere in the world, (ii) not to engage, or to refrain from
engaging, in any activity anywhere in the world, or (iii) that otherwise
restricts or limits the ability of the Company or any of its Affiliates to
engage in any business anywhere in the world.
Section 6. Representations and Warranties of Acquisition. Acquisition
represents and warrants to the Stockholder as follows:
(a) This Agreement has been approved by the Board of Directors
of Acquisition and its stockholders, representing all necessary corporate action
on the part of Acquisition for the execution and performance hereof and of the
Merger Agreement.
3
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<PAGE>
(b) This Agreement has been duly executed and delivered by a
duly authorized officer of Acquisition.
(c) This Agreement constitutes a valid and binding agreement
of Acquisition, enforceable against Acquisition in accordance with its terms.
(d) The execution and delivery of this Agreement by
Acquisition does not violate or breach, and will not give rise to any violation
or breach of, the charter or bylaws of Acquisition, or, except as will not
materially impair its ability to effectuate, carry out or comply with all of the
terms of this Agreement, any law, contract, instrument, arrangement or agreement
by which Acquisition is bound.
Section 7. Representations and Warranties of the Stockholders. The
Stockholder represents and warrants to Acquisition as follows:
(a) Schedule I sets forth, opposite the Stockholder's name,
the number and type of Shares of which the Stockholder is the record and
beneficial owner. The Stockholder is the lawful owner of such Shares, free and
clear of all liens, charges, encumbrances, voting agreements and commitments of
every kind, other than this Agreement, the Stock Transfer Agreement and as
disclosed on Schedule I. Except as set forth in Schedule I and except pursuant
to the Stock Transfer Agreement, the Stockholder does not own or hold any rights
to acquire any additional Shares or other securities of the Company or any
interest therein or any voting rights with respect to any additional Shares or
any other securities of the Company or any interest therein or any voting rights
with respect to any additional Shares or any other securities of the Company.
(b) This Agreement has been approved by the Stockholder's
Board of Directors and its stockholders, representing all necessary corporate
action on the part of the Stockholder for the execution and performance hereof
by the Stockholder.
(c) This Agreement has been duly executed and delivered by a
duly authorized officer of the Stockholder.
(d) This Agreement constitutes the valid and binding agreement
of the Stockholder, enforceable against the Stockholder in accordance with its
terms.
(e) The execution and delivery of this Agreement by the
Stockholder does not violate or breach, and will not give rise to any violation
or breach, of the Stockholder's charter or bylaws, or, except as will not
materially impair the ability of the Stockholder to effectuate, carry out or
comply with all of the terms of this Agreement, any law, contract, instrument,
arrangement or agreement by which the Stockholder is bound.
4
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<PAGE>
(f) The execution and delivery of this Agreement by the
Stockholder does not create or give rise to any right in any other Person with
respect to the Shares or any other securities of the Company (including, without
limitation, voting rights and rights to purchase or sell any such Shares or
other securities) pursuant to the Stock Transfer Agreement.
(g) The execution and delivery of the proxies by the
Stockholder are adequate to approve and adopt the Merger Agreement and the
Merger without the vote or consent of any other stockholder of the Company.
Section 8. Effectiveness and Termination. This Agreement shall
terminate and be of no further force or effect (i) immediately upon termination
of the Merger Agreement pursuant to Section 9.1(a), 9.1(b), 9.1(c)(i) or 9.1(e)
thereof, (ii) six months after the termination of the Merger Agreement pursuant
to any other section thereof or (iii) at the Effective Time, whichever is
earliest. Upon such termination, except for any rights a party may have in
respect of any breach by the other party of its obligations hereunder, neither
party hereto shall have any further obligation or liability hereunder.
Section 9. Non-compete. The Stockholder agrees that on the Effective
Date it will execute and deliver a non-compete agreement with the Surviving
Corporation, pursuant to which the Stockholder will agree that, for a period of
three years from the Effective Date, the Stockholder will not engage in, or
acquire a controlling interest in, any business that competes with any of
businesses of the Company's current operations in Puerto Rico; provided,
however, that such non-compete shall not extend to or restrict in any manner the
activities of the Stockholder's existing joint venture in Puerto Rico.
Section 10. Miscellaneous.
(a) Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or seven days after being mailed by
first-class mail, postage prepaid in each case to the applicable addresses set
forth below:
If to Acquisition, to it at:
c/o Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue
Suite 2500
New York, New York 10022-6815
Facsimile: 212-893-9575
5
<PAGE>
<PAGE>
with a copy to:
Robert A. Schwed, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Facsimile: 212-841-5725
If to the Stockholder, to it at:
50 Locust Avenue
New Canaan, Connecticut 06840
Attention: Office of the President
Facsimile: 203-966-9228
with a copy to:
David Z. Rosensweig, Esq.
Leavy Rosensweig & Hyman
11 East 44th Street
New York, New York 10017
Facsimile: 212-983-2537
or to such other address as such party shall have designated by notice received
by the other party.
(b) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or, except as
expressly set forth in Section 8, terminated, except by an instrument in writing
signed by each party hereto.
(c) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties and
their respective successors and assigns; provided that, except as contemplated
by the Merger Agreement, neither the rights nor the obligations of any party may
be assigned or delegated without the prior written consent of the other party.
(d) Entire Agreement. This Agreement (together with the Merger
Agreement and the other agreements and documents expressly contemplated hereby
and thereby) embodies the entire agreement and understanding among the parties
relating to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. There are no representations,
warranties or covenants by the parties hereto relating to such subject matter
other than those expressly set forth in this Agreement and the Merger Agreement.
6
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<PAGE>
(e) Severability. If any term of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such term to the other party or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by applicable law,
provided that, in such event, the parties shall negotiate in good faith in an
attempt to agree to another provision (in lieu of the term or application held
to be invalid or unenforceable) that will be valid and enforceable and will
carry out the parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief or any requirement for a bond.
(g) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
(h) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by the other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(i) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by any person or
entity who or which is not a party hereto.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware or the
United States District Court of Delaware or any court of the State of Delaware
in any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (j) and
shall not be deemed to be a general submission to the jurisdiction of said
Courts or in the State of Delaware other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
7
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<PAGE>
(k) Governing Law. This Agreement and all disputes hereunder
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Delaware, without regard to principles of conflicts of law.
(l) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument.
(m) Expenses. Acquisition and the Stockholder shall bear its
own expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party to such dispute.
8
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
CCW ACQUISITION CORP.
By: /s/ Thomas E. McInerney
-----------------------
Title: President
CENTURY COMMUNICATIONS CORP.
By: /s/ David Z. Rosensweig
-----------------------
Title: Secretary
9
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<PAGE>
SCHEDULE I
Share Ownership
Century Communications Corp. 8,561,819 shares of Class B
Common Stock, par value $0.01 per
share
3,978 shares of Second Series
Convertible Preferred Stock, par
value $0.01 per share
10
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<PAGE>
EXHIBIT 11
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-K ANNUAL REPORT
For the Three Years Ended May 31, 1998
COMPUTATION OF LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
(In thousands, except share and per share data)
<S> <C> <C> <C>
Primary and fully diluted:
Net loss $ (120,971) $ (141,875) $ (102,117)
Dividend requirement on subsidiary convertible
redeemable preferred stock 5,225 4,850 4,256
------------ ------------ ------------
Loss applicable to common shares $ (126,196) $ (146,725) $ (106,373)
============ ============ ============
Average number of common shares and common
share equivalents outstanding:
Average number of common shares
outstanding during the year 74,770,000 74,675,000 73,748,000
Add common share equivalents - Options
to purchase common stock - net 893,000 19,000 519,000
------------ ------------ ------------
Average number of common shares and common
shares equivalents outstanding 75,663,000 (A) 74,694,000 (A) 74,267,000 (A)
============ ============ ============
Loss per common share $ (1.67)(A) $ (1.96)(A) $ (1.43)(A)
============ ============ ============
</TABLE>
(A) In accordance with SFAS No. 128, the inclusion of common share equivalents
in the computation of earnings per share need not be considered if the
effect is antidilutive. Therefore, basic loss per common share and common
share equivalents as shown on the Consolidated Statements of Operations
for the three years ended May 31, 1998 do not include common share
equivalents as their effect is antidilutive.
<PAGE>
<PAGE>
Exhibit 12
Computation of Ratio of Earnings to Fixed Charges (amounts in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------
Year Ended May 31,
1994 1995 1996 1997 1998
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss from continuing operations before income tax
benefit & minority interest $ (20,135) $ (62,741) $ (67,212) $ (70,058) $ (66,607)
========= ========= ========= ========= =========
Fixed Charges:
Interest, including amortization of debt issuance costs 102,708 118,327 143,205 157,901 172,608
Interest portion of rent expense 1,560 1,588 2,327 2,691 2,830
Preferred stock dividends on subsidiary preferred stock 5,838 4,419 4,256 4,850 5,225
--------- --------- --------- --------- ---------
Total fixed charges 110,106 124,334 149,788 165,442 180,663
========= ========= ========= ========= =========
Adjustments:
Preferred stock dividends on subsidiary preferred stock (5,838) (4,419) (4,256) (4,850) (5,225)
========= ========= ========= ========= =========
Total adjustments (5,838) (4,419) (4,256) (4,850) (5,225)
========= ========= ========= ========= =========
Earnings, as defined $ 84,133 $ 57,174 $ 78,320 $ 90,534 $ 108,831
========= ========= ========= ========= =========
Ratio of earnings to fixed charges (1) -- -- -- -- --
========= ========= ========= ========= =========
Amount by which earnings are less than fixed charges $ (25,973) $ (67,160) $ (71,468) $ (74,908) $ (71,832)
========= ========= ========= ========= =========
</TABLE>
(1) The ratio of earnings to fixed charges is less than one-to-one and,
therefore, earnings are inadequate to cover fixed charges.
<PAGE>
<PAGE>
Subsidiaries of Century Communications Corp.
<TABLE>
<CAPTION>
State of
Name of Corporation Organization
- ------------------- ------------
<S> <C>
Badger Holding Corp. Delaware
CCC-I, Inc. Delaware
CCC-II, Inc. Delaware
CCC III, Inc. Delaware
CDA Cable, Inc. Idaho
Century Advertising, Inc. Delaware
Century Advertising Sales Corp. Delaware
Century Alabama Corp. Delaware
Century Alabama Holding Corp. Delaware
Century Australia Communications Corp. Nevada
Century Australia Telecommunications Corp. Delaware
Century Bay Area Cable Corp. Delaware
Century Berkshire Cable Corp. Delaware
Century Cable of Northern California CA
Century Cable of Southern California CA
Century Cable Holding Corp. New York
Century Cable Management Corp. Conn.
Century Carolina Corp. Delaware
Century Cellular Holding Corp. New York
Century Colorado Springs Corp. Delaware
Century Communications Corp. Texas
Century Cullman Corp. Delaware
Century Enterprise Cable Corp. Delaware
Century Federal, Inc. CA
Century Granite Cable Television Corp. Delaware
Century Huntington Company Delaware
Century Indiana Corp. Wyoming
Century International Holding Corp. Nevada
Century Investment Holding Corp. Delaware
Century International Investment Corp. Nevada
Century Investors, Inc. Delaware
Century Island Associates, Inc. Delaware
Century Island Cable Television Corp. Delaware
Century Kansas Cable Television Corp. Delaware
Century Kootenai Cable Television Corp. Delaware
Century Lykens Cable Corp. Delaware
Century Mendocino Cable Television Inc. Delaware
Century Microwave Corp. Delaware
Century Mississippi Corp. Delaware
Century-ML Cable Corporation Delaware
Century Mountain Corp. Delaware
Century New Mexico Cable Television Corp. Delaware
Century Norwich Corp. Conn.
Century OCN Programming, Inc. Delaware
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Century Ohio Cable Television Corp Delaware
Century Oregon Cable Corp. Delaware
Century Pacific Cable TV Inc. Delaware
Century Programming, Inc. Delaware
Century Programming Ventures Corp. Nevada
Century Programming Ventures Holding Corp Nevada
Century Pullman Cable Television Corp. Washington
Century Radio Corp. Delaware
Century Realty Corp. Delaware
Century Shasta Cable Television Corp. Delaware
Century Shenango Cable Television, Inc. Delaware
Century Southwest Cable Television, Inc. Delaware
Century Southwest Colorado Cable Television Corp. Delaware
Century Telecommunications, Inc. CA
Century Telecommunications Venture Corp. Delaware
Century Trinidad Cable Television Corp. Delaware
Century Valley Cable Corp. Delaware
Century Venture Corporation Delaware
Century Virginia Corp. Delaware
Century Voice and Data Communications, Inc. Nevada
Century Warrick Cable Corp. Delaware
Century Washington Cable Television Inc. Delaware
Century Western Cable Corp. Nevada
Century Wyoming Cable Television Corp. Delaware
COG Creations Holding Corp. Nevada
COG Creations Corp. Nevada
Cowlitz Cablevision Inc. Washington
CT Investment Corp. Delaware
E.& E. Cable Service, Inc. W. Virginia
Enchanted Cable Corporation New Mexico
FAE Cable Management Corp. Delaware
Grafton Cable Company W. Virginia
Huntington CATV, Inc. Indiana
Imperial Valley Cablevision, Inc. Texas
Kootenai Cable, Inc. Delaware
Mickelson Media of Florida, Inc. FL
Mickelson Media, Inc. Minnesota
Owensboro on the Air, Inc. Kentucky
Paragon Cable Television, Inc. Wisconsin
Paragon Cablevision Construction Corp. Wisconsin
Paragon Cablevision Management Corp. Wisconsin
Pullman TV Cable Co., Inc. Washington
Rentavision of Brunswick Inc. Georgia
S/T Cable Corp. Delaware
Sentinel Communications of Muncie, Indiana, Inc. Indiana
Southwest Colorado Cable, Inc. Delaware
Star Cablevision, Inc. Georgia
</TABLE>
2
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<TABLE>
<S> <C>
Star Cable Inc. W. Virginia
Valley Video Inc. New York
Warrick Cablevision Inc. Indiana
Westover T.V. Cable Co., Incorporated W. Virginia
Wilderness Cable Company W. Virginia
Yuma Cablevision, Inc. Texas
Alexandria Cellular Corp. Delaware
Alexandria Cellular License Corp. Delaware
Bauce Communications, Inc. Oregon
Bauce Communications of Beaumont, Inc. Oregon
Centennial Asia Pacific Cellular Holding Corp. Nevada
Centennial Ashe Cellular Corp. Delaware
Centennial Beauregard Cellular LLC Delaware
Centennial Beauregard Holding Corp. Delaware
Centennial Benton Harbor Cellular Corp. Delaware
Centennial Benton Harbor Holding Corp. Delaware
Centennial Caldwell Cellular Corp Delaware
Centennial Cellular Corp. Delaware
Centennial Cellular Telephone Company of Coconino Delaware
Centennial Cellular Telephone Company of Del Norte Delaware
Centennial Cellular Telephone Company of Lawrence Delaware
Centennial Cellular Telephone Company of Modoc Delaware
Centennial Cellular Telephone Company of
Sacramento Valley Delaware
Centennial Cellular Telephone Company of
San Francisco Delaware
Centennial Cellular Wireless Holding Corp. New Jersey
Centennial Claiborne Cellular Corp. Delaware
Centennial Clinton Cellular Corp. Delaware
Centennial DeSoto Cellular Corp. Delaware
Centennial Hammond Cellular LLC Delaware
Centennial Iberia Holding Corp. Delaware
Centennial Jackson Cellular Corp. Delaware
Centennial Lafayette Cellular Corp. Louisiana
Centennial Lake Charles Cellular Corp. Delaware
Centennial Louisiana Holding Corp. Delaware
Centennial Michigan RSA 6 Cellular Corp. Delaware
Centennial Michigan RSA 7 Cellular Corp. Delaware
Centennial Microwave Corp. Delaware
Centennial Morehouse Cellular LLC Delaware
Centennial Puerto Rico Realty Corporation Puerto Rico
Centennial Puerto Rico Wireless Corporation Delaware
Centennial Randolph Holding Corp. Delaware
Centennial Mega Comm Holding Corp. Delaware
Centennial Wireless PCS License Corp. Delaware
Centennial Wireless PCS Operations Corp. Delaware
</TABLE>
3
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<PAGE>
<TABLE>
<S> <C>
Century Beaumont Cellular Corp. Delaware
Century Cellular Realty Corp. Delaware
Century Charlottesville Cellular Corp. Virginia
Century Charlottesville Cellular Corp. Delaware
Century El Centro Cellular Corp. California
Century Elkhart Cellular Corp. Delaware
Century Indiana Cellular Corp.
Century Lynchburg Cellular Corp. Delaware
Century Lynchburg Cellular Corp. Virginia
Century Michiana Cellular Corp. Delaware
Century Michigan Cellular Corp. Delaware
Century Montgomery Cellular Corp. Delaware
Century Roanoke Cellular Corp. Virginia
Century Roanoke Cellular Corp. Delaware
Century Rural Cellular Corp. Delaware
Century South Bend Cellular Corp. Delaware
Century Yuma Paging Corp. Delaware
Century Yuma Cellular Corp. Delaware
El Centro Cellular Corporation Delaware
Elkhart Metronet, Inc. Indiana
Hendrix Electronics, Inc. California
Hendrix Radio Communications, Inc. California
Iberia Cellular Telephone Company LLC Delaware
Lafayette Communications, Inc. Delaware
Lambda Communications, Incorporated (Incorporado) Puerto Rico
Lambda Operations Corp. Delaware
Lambda PCS Corp. Nevada
Lambda Realty Corp. Delaware
Mega Comm, Inc. Delaware
Michiana Metronet, Inc. Indiana
South Bend Metronet, Inc. Indiana
Century Colorado Springs Partnership Delaware
Century-ML Cable Venture New York
Citizens Century Cable Television Venture Delaware
Centennial Tri-State Operating Partnership Delaware
Centennial Randolph Cellular LLC Delaware
Mega Comm LLC Delaware
Century Riverside Cable Corp. Delaware
</TABLE>
4
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<PAGE>
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Stockholders
Century Communications Corp.
We consent to the incorporation by reference in Century Communications Corp.'s
Registration Statement Nos. 333-24617 and 333-43863 on Form S-3 and Registration
Statements Nos. 33-50769, 33-56375, 33-56383, 33-10947, 33-23718, 33-23690,
33-34388 and 333-51345 on Form S-8 of our report dated August 4, 1998, appearing
in the Annual Report on Form 10-K for the year ended May 31, 1998.
Deloitte & Touche LLP
Stamford, Connecticut
August 27, 1998
<PAGE>
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