<PAGE>
<PAGE>
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, 1997
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 0-19603
CENTENNIAL CELLULAR CORP.
(Exact name of registrant as specified in its charter)
Delaware 06-1242753
(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 [X]
As of August 8, 1997, there were 16,180,468 shares of Class A Common Stock
outstanding and 10,544,113 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 8, 1997 of $15 7/8 per share, was
$249,853,831.
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 1997 Annual Meeting of Shareholders are
incorporated by reference in Part III, Items 10-13 of this Annual Report on Form
10-K.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C> <C>
Item 1. Business......................................................................... 1
Item 2. Properties....................................................................... 14
Item 3. Legal Proceedings................................................................ 14
Item 4. Submission of Matters to a Vote of Security Holders.............................. 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............ 17
Item 6. Selected Consolidated Financial Data............................................. 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................... 20
Item 8. Financial Statements and Supplementary Data.......................................35
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................ 35
PART III
Item 10. Directors and Executive Officers of the Registrant............................... 35
Item 11. Executive Compensation........................................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and Management................... 36
Item 13. Certain Relationships and Related Transactions....................................36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................37
SIGNATURES.............................................................................. II-1
EXHIBIT INDEX........................................................................... II-2
</TABLE>
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Centennial Cellular Corp., a Delaware corporation ("Centennial", and
together with its direct and indirect subsidiaries, the "Company"), is primarily
engaged in the ownership and operation of wireless telephone systems. The
Company's current wireless telephone interests represent approximately 10.1
million Net Pops (as defined below). Approximately 6.5 million of these Net Pops
are represented by the Company's wireless telephone systems located in the
continental United States (the "Domestic Wireless Telephone Systems"). The
balance of approximately 3.6 million Net Pops represents the Company's wireless
telephone system in the Commonwealth of Puerto Rico (the "Puerto Rico Wireless
Telephone System").
The Company's wireless telephone systems, which include systems utilizing
both cellular and personal communications service ("PCS") licenses, provide
communications services to vehicle-installed ("mobile"), ready-to-carry
("transportable") and hand-held ("portable") wireless telephones. Wireless
telephone systems are designed to allow for significant mobility of the
subscriber. In addition to mobility, wireless telephone systems provide access
through system interconnections to local and long distance telecommunications
networks and offer other ancillary services such as voice-mail, call-waiting,
call-forwarding and conference calling. These communications services can be
integrated with a variety of competing networks.
Centennial was organized in 1988. The Company's principal executive
offices are located at 50 Locust Avenue, New Canaan, Connecticut 06840. The
Company's principal corporate office is located at 1305 Campus Parkway, Neptune,
New Jersey 07753. Its telephone number is (203) 972-2000.
THE WIRELESS TELEPHONE INDUSTRY
The Company operates its Domestic Wireless Telephone Systems pursuant to
29 cellular licenses which it owns, and operates its Puerto Rico Wireless
Telephone System pursuant to a PCS license which it owns. The Company's PCS
license also covers the U.S. Virgin Islands. Wireless telephone technology is
based upon the radio coverage of a given geographic area by a number of
overlapping "cells." Each cell contains a transmitter-receiver at a "base
station" or "cell site" that communicates by radio signal with wireless
telephones located in the cell and is connected to a mobile telephone switching
office (the "MTSO"), which, in turn, may be connected to the local landline
telephone network. Since wireless telephone systems are fully interconnected
with the landline telephone network and long distance networks, subscribers can
receive and originate both local and long distance calls from their wireless
telephones.
If a wireless telephone user leaves the service area of the wireless
telephone system during a call, the call is generally continued and carried
through a technical interface established with an adjacent system through
intersystem networking arrangements. Such an arrangement is referred to as
roaming. Wireless telephone systems operate under interconnection agreements
with various local exchange carriers and interexchange carriers, which
agreements establish the manner in which the wireless telephone system
integrates with existing telecommunication systems in a given geographic area.
1
<PAGE>
<PAGE>
THE COMPANY'S OPERATIONS
The Company operates and invests in wireless telephone systems in the
United States and in Puerto Rico.
The Company's current wireless telephone interests represent approximately
10.1 million Net Pops. Approximately 5.4 million of these Net Pops are
represented by interests in those Domestic Systems that the Company owns and
operates in three geographic clusters: the Michiana cluster in Michigan, Ohio
and Indiana; the East Texas/Louisiana cluster in Texas, Louisiana and
Mississippi; and the Southwestern cluster in California and Arizona.
Approximately 3.6 million of these Net Pops represent the Company's Puerto Rico
Wireless Telephone System. The balance of approximately 1.1 million of these Net
Pops represents minority interests in limited partnerships, controlled by other
parties ("Investment Interests").
The Michiana cluster has approximately 3.3 million Net Pops, constituting
approximately 60% of the Net Pops in markets served by the Domestic Wireless
Telephone Systems and 32% of the Company's total Net Pops. The Michiana cluster
covers portions of three major interstate highways that connect Chicago, Detroit
and Indianapolis. The East Texas/Louisiana cluster has approximately 1.9 million
Net Pops, constituting 36% of the Net Pops in markets served by the Domestic
Systems and 19% of the Company's total Net Pops. The East Texas/Louisiana
cluster covers a significant portion of interstate highway I-10 as well as
sections of Texas, Louisiana and Mississippi adjacent to the cities of Houston,
New Orleans, Shreveport and Baton Rouge. The Southwestern cluster has
approximately 230,000 Net Pops, constituting 4% of the Net Pops in markets
served by the Domestic Wireless Telephone Systems and 2.3% of the Company's
total Net Pops. This cluster encompasses the Yuma, Arizona and El Centro,
California markets located between Los Angeles to the northwest and San Diego to
the west, Phoenix to the east, and Mexicali, Mexico to the south.
The Puerto Rico Wireless Telephone System covers areas in the Island of
Puerto Rico. These markets contain approximately 3.6 million Net Pops or 36% of
the Company's total Net Pops.
As used in this Annual Report on Form 10-K, "Pops" means the population of
a market derived from the 1990 Census Report of the Bureau of the Census, United
States Department of Commerce, and "Net Pops" means a market's Pops multiplied
by the percentage interest that the Company owns in an entity licensed (a
"licensee") by the Federal Communications Commission (the "FCC") to construct or
operate a wireless telephone system in that market.
WIRELESS TELEPHONE MARKETS AND INTERESTS
The Company has focused and expects to continue to focus on acquiring
controlling ownership interests in wireless telephone systems serving markets
contiguous or proximate to its current markets. The Company's strategy of
clustering its wireless telephone operations enables it to achieve operating and
cost efficiencies, as well as joint advertising and marketing benefits.
Clustering also allows the Company to offer its subscribers more areas of
uninterrupted service as they travel through an area or state. In addition to
expanding its existing clusters, the Company may also seek to acquire interests
in wireless telephone systems in other geographic areas. The Company may also
pursue other communications businesses related to its wireless telephone and
other mobile service operations as well as other communications businesses it
determines to be desirable. The consideration for such acquisitions may consist
of shares of Centennial's Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), cash, assumption of liabilities or a combination
thereof.
2
<PAGE>
<PAGE>
The chart below sets forth certain information about the Domestic Wireless
Telephone Systems, the Puerto Rico Wireless Telephone System and the Investment
Interests as of July 31, 1997. Those Domestic Wireless Telephone Systems and the
Investment Interests which are in Metropolitan Statistical Areas ("MSAs") are
asterisked; the remainder are in Rural Service Areas ("RSAs").
<TABLE>
<CAPTION>
MARKETS OWNERSHIP POPS NET POPS
<S> <C> <C> <C>
DOMESTIC WIRELESS TELEPHONE SYSTEMS
MICHIANA CLUSTER
Kalamazoo, MI* 100.0% 293,500 293,500
Cass, MI 85.7% 288,000 246,900
Newaygo, MI 100.0% 220,200 220,200
Battle Creek, MI* 100.0% 186,000 186,000
Benton Harbor, MI* 100.0% 161,400 161,400
Jackson, MI* 92.0% 149,800 137,800
Roscommon, MI 100.0% 130,400 130,400
--------- ---------
System Subtotal 1,429,300 1,376,200
--------- ---------
Southbend, IN * 100.0% 289,200 289,200
Richmond, IN 100.0% 217,900 217,900
Newton, IN 100.0% 204,200 204,200
Elkhart-Goshen, IN* 91.4% 156,200 142,800
Williams, OH 100.0% 125,900 125,900
--------- ---------
System Subtotal 993,400 980,000
--------- ---------
Fort Wayne, IN* 100.0% 420,900 420,900
Miami, IN 100.0% 179,000 179,000
Kosciusko, IN 100.0% 160,000 160,000
Huntington, IN 100.0% 145,200 145,200
--------- ---------
System Subtotal 905,100 905,100
--------- ---------
Cluster Subtotal 3,327,800 3,261,300
--------- ---------
EAST TEXAS/LOUISIANA CLUSTER
Beauregard, LA 100.0% 372,500 372,500
Beaumont-Port Arthur, TX* 100.0% 361,200 361,200
LaFayette, LA* 94.3% 209,000 197,100
West Feliciana, LA 100.0% 170,900 170,900
Claiborne, MS 100.0% 153,900 153,900
Alexandria, LA* 92.8% 149,000 138,300
Iberville, LA 100.0% 131,000 131,000
DeSoto, LA 100.0% 121,300 121,300
Copiah, MS 100.0% 118,000 118,000
Bastrop, LA 100.0% 92,200 92,200
Caldwell, LA 100.0% 71,600 71,600
--------- ---------
Cluster Subtotal 1,950,600 1,928,000
--------- ---------
SOUTHWESTERN CLUSTER
Yuma, AZ 100.0% 120,700 120,700
El Centro, CA 100.0% 109,300 109,300
------- ---------
Cluster Subtotal 230,000 230,000
--------- ---------
Total Domestic Wireless Telephone Systems 5,508,400 5,419,300
========= =========
PUERTO RICO WIRELESS TELEPHONE SYSTEM 100.0% 3,600,000 3,600,000
========= =========
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
MARKETS OWNERSHIP POPS NET POPS
<S> <C> <C>
INVESTMENT INTERESTS
SACRAMENTO VALLEY CLUSTER 23.5%
Sacramento, CA* 1,355,100 318,100
Stockton, CA** 480,600 112,800
Modesto, CA* 370,600 87,000
Reno, NV* 254,700 59,800
Chico, CA* 182,100 42,800
Redding, CA* 147,000 34,500
Yuba City, CA* 122,600 28,800
Tehama, CA 90,700 21,300
Storey, NV 90,600 21,300
Sierra, CA 81,800 19,200
---------- ---------
Cluster Subtotal 3,175,800 745,600
---------- ---------
SAN FRANCISCO BAY AREA CLUSTER 2.9%
San Francisco, CA* 3,686,600 105,800
San Jose, CA* 1,497,600 43,000
Vallejo, CA* 451,200 13,000
Santa Rosa-Petaluma, CA* 388,200 11,100
Salinas, CA* 355,700 10,200
Santa Cruz, CA* 229,700 6,600
---------- ---------
Cluster Subtotal 6,609,000 189,700
---------- ---------
Lawrence, PA 14.3% 363,400 51,900
Coconino, AZ 21.3% 204,300 43,500
Del Norte, CA 6.9% 199,200 13,700
Modoc, CA 25.0% 57,000 14,200
Lake Charles, LA* 25.1% 168,100 42,200
---------- ---------
Total Investments Interests 10,776,800 1,100,800
========== =========
Total Domestic Wireless Telephone
Systems, Puerto Rico Wireless
Telephone System and Investment
Interests 19,885,200 10,120,100
========== ==========
</TABLE>
As of May 31, 1997, the Company's Domestic and Puerto Rico Wireless
Telephone Systems had 203,900 subscribers in the markets listed above, and for
each of fiscal 1996, 1995, 1994 and 1993 the Company had 135,000, 85,920, 49,040
and 33,600 subscribers, respectively, in such markets. The ratio of subscribers
to Net Pops remained constant from fiscal 1996 to fiscal 1997. At May 31, 1997,
the Company's pro rata share of subscribers relating to the Investment Interests
was approximately 105,000.
All the Company's systems are currently operational. A system is deemed
operational when it has met the FCC's requirements for an operating license and
has received an FCC license to commence operations.
PUERTO RICO OPERATIONS
The Company has commenced the design, construction and operation of its
Puerto Rico Wireless Telephone System. The Company has substantially completed
installation of the initial system. The Company was the successful bidder for
one of two MTA licenses to provide broadband PCS services in the Commonwealth of
Puerto Rico and the U.S. Virgin Islands and the FCC granted the 30 MHz Block B
broadband PCS license for the Puerto Rico-Virgin Islands
4
<PAGE>
<PAGE>
MTA to the Company in fiscal 1996. The licensed area represents approximately
3.6 million Net Pops.
The Company has executed an agreement with Lucent Technologies, Inc.,
pursuant to which the Company has agreed, subject to certain conditions, to
purchase equipment and installation services necessary for its initial PCS
system, which is based on Code Division Multiple Access technology. The total
cost to the Company of the acquisition and buildout of the infrastructure of the
PCS system will be approximately $150 million in the aggregate (which includes a
license fee that the Company has paid of approximately $55 million). Of this
budgeted amount, the Company has incurred costs of approximately $69 million
related to equipment and installation through fiscal year 1997 and it is
anticipated that approximately $26 million will be expended to complete the
buildout through fiscal 1999.
The Company leases certain space for equipment in Puerto Rico from
Century-ML Cable Corp. ("Century-ML"), a cable television operator which is 50%
owned by Century Communications Corp. ("Century"). Further, the Company leases
and shares capacity on the fiber optic cable television facility and network of
Century-ML for the purpose of operating as a competitive access provider. The
Company shares in the cost of construction, operation and maintenance of the
Century-ML fiber network on a pro rata basis based on the percentage of the
number of fibers of the network used by or reserved for the Company (See Item
13. "Certain Relationships and Related Transactions" and Note 1 to the
consolidated financial statements). The Company believes that the above
transactions and contemplated transactions between it and Century and Century-ML
are or will be, as the case may be, on terms no less favorable to the Company
than would be obtainable at that time in comparable transactions with
unaffiliated parties.
The Company also plans to participate in the intra-island and interstate
telecommunications market in Puerto Rico as a service provider pursuant to FCC
requirements for interstate service and pursuant to an authorization for
intra-island service issued to the Company in December 1994, as amended in July
1996, by the Public Service Commission of the Commonwealth of Puerto Rico.
PRODUCTS AND SERVICES
The Company's principal source of revenue is providing service to
wireless telephone subscribers. The services available to wireless telephone
subscribers are similar to those provided by conventional landline telephone
systems, including custom calling features such as voice mail, call forwarding,
call waiting and conference calling.
The Company is responsible for the quality, pricing and packaging of its
wireless service for each of the Domestic Wireless Telephone Systems and the
Puerto Rico Wireless Telephone System. The Company offers several pricing plans
and customers are able to choose the plan that best fits their calling needs.
The plans combine different charges for monthly access, usage, custom calling
features and, in some cases, varying amounts of pre-paid minutes of usage.
The Company also generates revenue from subscribers of other wireless
telephone systems when such subscribers ("roamers") place or receive calls over
its systems. Reciprocal agreements between the Company and other wireless
telephone system operators allow their
5
<PAGE>
<PAGE>
respective subscribers to place calls in most service areas throughout the
country. Roamers are charged usage charges that are generally at their regular
service rate.
The Company offers for sale or lease to its customers a wide variety of
wireless telephones, including mobile, transportable and fully portable wireless
telephones. The Company generally has offered significant discounts on wireless
telephones in an effort to attract customers.
MARKETING
The Company designs and implements the marketing strategy for each of
the Domestic Wireless Telephone Systems and the Puerto Rico Wireless Telephone
System. The Company uses a variety of billboard, radio and newspaper advertising
to stimulate interest in wireless telephone service. The Company's objective is
to increase its customer base, increase wireless usage and reduce subscriber
cancellations. The Company's current marketing strategy is to generate continued
net subscriber growth and to focus on customers who are likely to generate
higher monthly revenues, primarily business users. However, as a result of
broader acceptance of wireless telephone and the continued decline in the cost
of wireless equipment, subscribers may be drawn from an increasingly wider range
of occupations and demographics. In marketing wireless telephone service in the
Domestic Wireless Telephone Systems and the Puerto Rico Wireless Telephone
System, the Company stresses the quality of its wireless telephone service, easy
and rapid access to telephone services, competitive prices, state of the art
features, and the local presence of its customer service representatives and
technical staff. See Business--Customer Service." In areas where the Domestic
Wireless Telephone Systems are in markets adjacent or proximate to one another,
the Company emphasizes that its own subscribers may make calls from anywhere in
these markets without incurring fees or charges in addition to the standard
usage and service fees which often are incurred when a customer "roams" from one
market to an adjacent market owned by a third party.
The Company uses both its own internal sales force and independent
agents, dealers and resellers to obtain customers for wireless telephone service
in the Domestic Wireless Telephone Systems and the Puerto Rico Wireless
Telephone System. The Company's internal sales force is paid on a salary plus
commission basis. Sales commissions are structured to take into account the
length of the subscriber's contract, the rate plan selected and the type of
wireless telephone sold. The Company also maintains an ongoing training program
to improve the effectiveness of its internal sales force. The Company's dealers
are independent contractors paid solely on a commission basis, and include
entities whose principal business is selling wireless telephones as well as
other entities whose customers may become wireless telephone users, such as car
stereo companies, auto parts stores, appliance stores and department stores.
CUSTOMER SERVICE
The Company is committed to assuring consistently high quality customer
service. Each of the Domestic Wireless Telephone Systems and the Puerto Rico
Wireless Telephone System has a local staff, including a manager, customer
service representatives, technical engineering staff and sales representatives.
The Company has established local installation and repair facilities in all the
Domestic Wireless Telephone Systems and the Puerto Rico Wireless Telephone
System, and customers are able to report wireless telephone service problems to
a local office 24 hours a
6
<PAGE>
<PAGE>
day. The Company believes that by having local offices and installation and
repair facilities it is better able to service customers, schedule installations
and repairs and monitor the technical quality of the Domestic Wireless Telephone
Systems and the Puerto Rico Wireless Telephone System.
SYSTEM CONSTRUCTION, OPERATION AND DEVELOPMENT
Construction of wireless telephone systems is capital intensive,
requiring a substantial investment for land and improvements, buildings, towers,
MTSOs, cell site equipment, microwave equipment, engineering and installation.
Until technological limitations on total capacity are approached, additional
wireless telephone system capacity can normally be added in increments that
closely match demand and at less than the proportionate cost of the initial
capacity. The Company has also invested in MTSO equipment that provides the
Company with the ability to gradually increase capacity of wireless telephone
systems, as needed, through the provision of digital transmission.
The Company hires consulting engineers and telecommunications general
contractors to aid in the design and management of the construction and
expansion of each of the Domestic Wireless Telephone Systems and Puerto Rico
Wireless Telephone System. By doing so, the Company believes it improves the
overall system engineering and construction quality and reduces the expense and
time required to make and keep the systems operating at a high level of
technical quality.
In accordance with its strategy of developing market clusters, the
Company has selected wireless switching systems that are capable of serving
multiple markets with a single MTSO and has already implemented this strategy in
most of its markets. The Domestic Wireless Telephone Systems and Puerto Rico
Wireless Telephone System are designed to facilitate the installation of
equipment which will permit microwave interconnection between the MTSO and each
cell site. In addition, microwave facilities can be used to connect separate
wireless telephone systems to the same switch, which may reduce the total cost
of the equipment necessary to operate both systems. Where the Company has deemed
it appropriate, the Company has implemented microwave interconnection services
in the Domestic Wireless Telephone Systems and Puerto Rico Wireless Telephone
System. The other systems rely upon landline telephone connections to link cell
sites with the MTSO. Although the installation of microwave network
interconnection equipment requires a greater initial capital investment, a
microwave network enables a wireless telephone system operator to avoid the
current and future charges associated with leasing telephone lines from the
landline telephone company and generally improves system reliability. Subject to
the availability of appropriate microwave sites, the Company may replace the
leased lines in the Domestic Wireless Telephone Systems and Puerto Rico Wireless
Telephone System with microwave interconnections as the volume of calls in each
system makes the use of such microwave interconnections more cost efficient.
The Company expects the construction of its Puerto Rico Wireless
Telephone System to be capital intensive, in part because the licensed area is
large and numerous low power PCS base station transmitters are required to
provide coverage to the licensed area. The FCC has established construction
benchmarks which require that 30 MHz broadband PCS systems, such as the Puerto
Rico Wireless Telephone System, serve at least one-third of the population in
its licensed area within five years of being licensed and two-thirds of the
population in their licensed
7
<PAGE>
<PAGE>
area within ten years of being licensed. The Company believes it
is in compliance with this requirement. In addition, broadband PCS spectrum is
currently used by incumbent co-channel point-to-point microwave users. As a
general proposition, broadband PCS licensees are required to pay the costs
associated with the relocation of these existing microwave users to other
portions of the radio spectrum or other media.
FISCAL 1997 ACQUISITION
On September 12, 1996, the Company acquired 100% of the ownership
interests in the partnership owning the wireless telephone system serving the
Benton Harbor, Michigan MSA for approximately $35 million in cash. The Benton
Harbor market represents approximately 161,400 Net Pops.
PENDING DISPOSITIONS
The Company has determined to pursue a strategy to sell or otherwise
dispose of Investment Interests representing approximately 1.1 million Net Pops.
The Company has not made a final determination as to the estimated sale proceeds
or the timing of such disposition and believes that the fair market value
exceeds the net book value of the recorded assets.
COMPETITION
Competition From Other Wireless Systems. The FCC grants two 25 MHz
licenses to operate cellular telephone systems in each of 306 MSAs and of 428
RSAs. The FCC also grants two 30 MHz licenses to operate broadband PCS systems
in each of 51 defined Major Trading Areas ("MTAs") and one 30 MHz and three 10
MHz licenses in each of 493 Basic Trading Areas ("BTAs"), which are component
parts of MTAs. The Company's systems compete directly with the other wireless
licensees in each market on the basis of quality, price, area served, services
offered and responsiveness of customer service. The Company also may be placed
at a competitive disadvantage with the other licensees in a market if such
licensees provide wireless telephone service in adjacent markets.
The Company's Puerto Rico Wireless Telephone System faces primary
competition from the incumbent wireless telephone licensees in Puerto Rico,
which include the Puerto Rico Telephone Company ("PRTC"), an entity owned by the
Commonwealth of Puerto Rico, and Corecom Inc., a publicly held company.
Many of the Company's competitors are larger and may have access to more
substantial financial resources than the Company. These competitors include
Regional Bell Operating Companies, large independent telephone companies and
AT&T Wireless, among others.
Competition From Broadband PCS Systems. Among other possible uses,
broadband PCS is capable of providing a two-way mobile voice and data telephone
service that is similar to cellular service. A broadband PCS system is a
wireless communications system that utilizes digital technology that could allow
it to compete effectively with cellular systems, particularly in densely
populated areas. Digital technology provides certain advantages over analog
technology, including increased system capacity, improved overall signal quality
and increased call security.
8
<PAGE>
<PAGE>
Broadband PCS licenses are awarded by competitive bidding. A number of broadband
PCS systems are currently in operation.
It is uncertain what effect broadband PCS will have on the Company's
wireless telephone systems which it operates pursuant to cellular licenses. The
FCC revised its rules to state explicitly that cellular licensees may provide
any PCS-type services on their channels without prior notification to the FCC.
Management of the Company believes that technological advances in present
cellular telephone technology, including the use of digital technology, in
conjunction with buildout of the present cellular systems throughout the nation
with cell splitting and microcell technology, will provide essentially the same
services as the services that PCS providers are expected to provide, but there
can be no assurance that this will happen.
The FCC has also issued a 30 MHz broadband PCS license for the Puerto
Rico-U.S. Virgin Islands MTA to AT&T Wireless and the other four broadband PCS
licenses for the San Juan, Puerto Rico BTA, the Mayaguez-Aguadilla-Ponce, Puerto
Rico BTA and the U.S. Virgin Islands BTA to other entities, including a 10 MHz
license to PRTC. Once operational, these broadband PCS systems are expected to
present additional competition to the Company's PCS operations in Puerto Rico.
Other Competition. In addition to competition from cellular and
broadband PCS licensees, the Company faces competition from other current
technologies, including enhanced SMR systems, narrowband PCS systems,
satellite-based mobile telephony and even conventional landline telephone
service. Regional and nationwide one-way paging service also may be a
competitive alternative adequate for those who do not need a two-way service or
may be a service that reduces wireless telephone usage among subscribers to both
cellular and paging services.
Technological advances in the communications field continue to occur
which make it difficult to predict the extent of additional future competition
for wireless systems, but it is certain that in the future there will be more
potential substitutes for the Company's current wireless technology. There can
be no assurance that the Company will not face significant future competition or
that the Company's current wireless technology will not eventually become
obsolete.
Potential Conflicts of Interest and Competition. Century, a New Jersey
corporation, owns 81.2% of the issued and outstanding shares of Class B Common
Stock, par value $.01 per share (the "Class B Common Stock"), of Centennial and
100% of the issued and outstanding shares of the Second Series Convertible
Redeemable Preferred Stock, par value $.01 per share (the "Second Series
Convertible Redeemable Preferred Stock"), of Centennial. Citizens Utilities
Company, a Delaware corporation ("Citizens"), owns 18.8% of the issued and
outstanding shares of Class B Common Stock and 100% of the issued and
outstanding shares of the Convertible Redeemable Preferred Stock, par value $.01
per share (the "Convertible Redeemable Preferred Stock"), of Centennial.
Century's principal business is the ownership and operation of 70 cable
television systems in 25 states and Puerto Rico serving approximately 1.273
million primary basic subscribers as of May 31, 1997. Citizens is a diversified
utility company providing telephone, electric, gas, water and wastewater
services.
Century and Citizens own approximately 74% and 17%, respectively, of the
combined voting power of both classes of Common Stock of Centennial as of August
8, 1997, and if
9
<PAGE>
<PAGE>
Century and Citizens each were to convert the preferred stock owned by it,
Century would own approximately 59% and Citizens would own approximately 34% of
such voting power as of such date. The remaining shares are publicly held. As a
result of such ownership and in accordance with an agreement with Citizens,
Century has the ability to nominate at least a majority and elect all of the
directors of Centennial. Century has agreed to vote for one director to be
nominated by Citizens.
Century is the owner of 1.8% of the issued and outstanding Common Stock
of Citizens as of August 8, 1997. Leonard Tow is Chairman of the Board and Chief
Executive Officer of Century and Chairman of the Board, Chief Executive Officer
and Chief Financial Officer of Citizens. Two other directors of Century, Robert
D. Siff and Claire L. Tow, are also directors of Citizens. Citizens owns
1,807,095 shares of Class A Common Stock of Century representing approximately
6% of the issued and outstanding Class A Common Stock of Century as of August 8,
1997. Substantially all of Century's current wireless operations and investments
are conducted or held by the Company. The Company leases and shares capacity on
a fiber optic cable network for its Puerto Rico Wireless Telephone System from
Century-ML. See "Business Puerto Rico Operations." Although exceptions are
permitted by the Conflicts/Non-Compete Agreement described below, Century has
indicated to the Company that it intends to conduct all its wireless telephone
operations through the Company, subject to FCC restrictions. Citizens has agreed
with Century and the Company that Citizens will conduct all its wireless
telephone operations through the Company, except in areas where Citizens
operates or acquires landline telephone systems and areas contiguous thereto.
There can be no assurance that the Company will not lose any material expansion
opportunities as a result of such exception or any conflicts that may exist
between the interests of Citizens and the Company.
The Company, Century and Citizens have entered into a
Conflicts/Non-Compete Agreement. Pursuant to such agreement, except as described
below, neither Century nor Citizens may compete with the Company in the
acquisition of wireless telephone businesses or ownership interests therein, and
the Company will have the first opportunity to purchase any wireless telephone
business or ownership interests therein that may be presented to Citizens or
Century. Citizens has no obligation to present any such business opportunity to
the Company if the business under consideration is located in or is contiguous
to an area in which Citizens (or a subsidiary or affiliate at least 50% owned by
Citizens) owns or operates a landline telephone operation.
REGULATION
Federal Regulation. Pursuant to the Communications Act of 1934, as
amended, (the "Communications Act"), the cellular, PCS, paging, conventional
mobile telephone systems and SMR systems operated by the Company are licensed
and regulated by the FCC as Commercial Mobile Radio Service ("CMRS") facilities.
The FCC limits entities to a total of 45 MHz of licensed CMRS spectrum in any
given market area.
Cellular and PCS licenses are granted for a term of up to ten years,
after which they must be renewed. Licenses may be revoked and license renewal
applications denied for cause. It is possible that there may be competition for
a license upon the expiration of its initial license term. While there can be no
assurance that any license will be renewed, the FCC's rules provide for a
significant renewal preference to a cellular and PCS licensee that has used its
spectrum for its
10
<PAGE>
<PAGE>
intended purpose, and complied with FCC regulations and the federal
communications statutes. If a cellular and PCS licensee is awarded a renewal
expectancy, its renewal will be granted without further consideration of any
competing applications.
The FCC's rules prohibit wireless PCS licensees from imposing
restrictions on the resale of wireless service by parties who purchase blocks of
telephone numbers from an operational system and then resell them to the public.
This prohibition expires for wireless licensees five years after the date that
the last group of initial PCS licenses are granted.
The FCC also regulates a number of other aspects of the operation and
ownership of CMRS systems. There can be no assurance that any FCC requirements
currently applicable to the Company's CMRS systems will not be changed in the
future.
State and Local Regulation. Following the grant of an FCC construction
permit to an applicant, and prior to the commencement of commercial service (and
prior to construction in certain states), the holder of the permit may have to
obtain certain approvals from the appropriate regulatory bodies in the states in
which it will offer CMRS service. At present, none of the states in which the
Company's CMRS operations are located may regulate the entry of CMRS providers
or the rates charged for CMRS service. However, they can regulate other terms
and conditions of service.
The siting and construction of the CMRS facilities, including
transmitter towers, antennas and equipment shelters may be subject to state or
local zoning, land use and other local regulations. Before a system can be put
into commercial operation, the holder of a construction permit must obtain all
necessary zoning and building permit approvals for the transmitter sites and
MTSO locations.
Recent Federal and State Legislation. The Telecommunications Act of 1996
(the "1996 Act"), enacted in February 1996, contains significant provisions
aimed, in part, at opening local telecommunications markets to competition.
These provisions govern, among other telecommunications matters, the removal of
market-entry barriers and impose on incumbent local exchange carriers ("LECs")
duties to negotiate, in good faith, interconnection agreements and provide under
reasonable and nondiscriminatory terms interconnection for exchange services and
access to unbundled network elements at any technically feasible point within
the carrier's network, even to the extent that necessary equipment is located on
a LEC's premises. The 1996 Act also provides for the development of competitive
markets through provisions governing resale, number portability, dialing parity,
access to right-of-ways and numbering administration.
The overall impact of the 1996 Act on the business of the Company is
unclear and will likely remain so for the foreseeable future. The Company may
benefit from reduced costs in acquiring required communications services, such
as LEC interconnection. However, other provisions of the 1996 Act relating to
interconnection, telephone number portability, equal access and resale could
subject the Company to increased competition.
Comprehensive telecommunications reform legislation was enacted in 1996
by the Commonwealth of Puerto Rico. This legislation, titled the Puerto Rico
Telecommunications Act of 1996 (the "Puerto Rico Act"), purports to open the
Puerto Rico telecommunications market to competition and, among other things, it
establishes the Puerto Rico Telecommunications
11
<PAGE>
<PAGE>
Regulatory Board (the "Board") which has been given primary regulatory
jurisdiction in Puerto Rico over all telecommunications services, all service
providers, and all persons with a direct or indirect interest in said services
or providers. On December 12, 1996, the Board assumed jurisdiction over all
intra-island telecommunications matters.
FCC and State Proceedings. The 1996 Act imposes interconnection
obligations on all telecommunications carriers in order to facilitate the entry
of new telecommunications providers. This requirement has the potential of
creating benefits for the Company's wireless, PCS and other telecommunications
businesses. In August 1996, the FCC issued comprehensive rules regarding the
introduction of competition into the local telephone market. These rules address
most aspects of the provision of competitive local telephony services from both
facilities-based and non-facilities-based competitors, including cellular and
paging operators. The rules address the process by which potential competitors
negotiate with incumbent telephone companies for interconnection, the facilities
that must be available for interconnection, the use of components of the
incumbents' networks, the resale of services of others, and the pricing of
interconnection and other services and facilities used for offering competitive
local telephone services. The rules also provide that incumbent LECs must begin
paying the Company and other wireless providers immediately for terminating
landline-originated traffic on the wireless facilities. On appeal, the U.S.
Court of Appeals for the Eighth Circuit overturned several of the FCC's rules,
the most important of which were the pricing rules. The FCC is expected to seek
review of this decision from the Supreme Court.
Decisions relating to universal service and access charge reform have
also been released by the FCC. These decisions have been appealed.
The Company has filed a Petition for Declaratory Ruling and Preemption
with the FCC in which it seeks a ruling that the regulatory approach as well as
certain provisions of the Puerto Rico Act are preempted pursuant to Sections
253(a) and 332(c) of the Communications Act because they are inconsistent with
the pro-competition language and/or objectives of the 1996 Act, constitute
impermissible barriers to the entry of local telecommunications competition
and/or constitute impermissible regulation of CMRS entry or rates. Several other
entities subsequently filed similar petitions with the FCC. This matter is
currently pending.
On December 26, 1996, the Company, on behalf of its PCS subsidiary,
filed a petition with the Board seeking arbitration of the many unresolved
issues in the negotiation with PRTC for interconnection of the Company's PCS
network with PRTC's landline telephone network. On January 21, 1997, the
Company, filed a petition with the Board seeking arbitration of the many
unresolved issues in the negotiation with PRTC for interconnection of the
Company's fiber optic network with PRTC's landline telephone network. The two
petitions were substantially consolidated by the arbitrator and after several
sessions with the arbitrator and PRTC, the Company and its PCS subsidiary
successfully negotiated interconnection agreements with PRTC covering most of
the unresolved issues. Those agreements, which reflect considerably lower
interconnection rates than those PRTC had been charging, have been approved by
the Board and are currently in effect.
12
<PAGE>
<PAGE>
DIGITAL WIRELESS TECHNOLOGY
Over the next decade, it is expected that cellular telephones will
gradually convert from analog to digital technology. This conversion is due in
part to capacity constraints in many of the largest cellular markets, such as
Los Angeles, New York and Chicago. As carriers reach limited capacity levels,
certain calls may be unable to be completed, especially during peak hours.
Digital technology increases system capacity and offers other advantages over
analog technology, including improved overall average signal quality, improved
call security, potentially lower incremental costs for additional subscribers
and the ability to provide data transmission services. The conversion from
analog to digital technology is expected to be an industry wide process that
will take a number of years. The Company anticipates that such conversion will
take place in the normal course. Overall costs of such conversion are not yet
known.
The Company is in the process of upgrading its cellular telephone
systems from analog to digital technology and provides digital cellular
telephone service in most of its cellular telephone markets to roamers. The
implementation of digital technology will be fundamentally directed by
subscriber demand for secure and confidential communications, the introduction
of new cellular telephone services such as message waiting and calling line
identification, and the delivery of data communications. Where cell sites are
not yet at their maximum capacity of radio channels, the Company is adding
digital channels to the network incrementally based on the relative demand for
digital and analog channels. Where cell sites are at full capacity, analog
channels are being removed and redeployed to expand capacity elsewhere within
the network and replaced in such cell sites by digital channels. The
implementation of digital cellular technology over a period of several years
will involve modest incremental expenditures for switch software and possible
significant cost reductions as a result of reduced purchases of radio channels
and a reduced requirement to split existing cells. However, as indicated above,
the extent of any implementation of digital radio channels and the amount of any
cost savings ultimately to be derived therefrom will depend primarily on
subscriber demand. In the ordinary course of business, equipment upgrades at the
cell sites have involved purchasing dual mode radios capable of using both
analog and digital technology.
The benefits of digital radio channels can only be achieved if
subscribers purchase cellular telephones that are capable of transmitting and
receiving digital signals. Currently, such telephones are more costly than
analog telephones. The widespread use of digital cellular telephones is likely
to occur only over a substantial period of time and there can be no assurance
that this technology will replace analog cellular telephones. In addition, since
most of the Company's existing subscribers currently have cellular telephones
that exclusively utilize analog technology, it will be necessary to continue to
support, and if necessary increase, the number of analog radio channels within
the network for many years.
EMPLOYEES
The Company had approximately 1,100 employees as of May 31, 1997. None
of the Company's employees is represented by a labor organization. The Company
considers its relationship with its employees to be good.
13
<PAGE>
<PAGE>
ITEM 2. PROPERTIES
The Company leases office space at 50 Locust Avenue, New Canaan,
Connecticut where it has its principal executive offices. The Company also
leases office space at 1305 and 1325 Campus Parkway, Neptune, New Jersey where
it has its principal corporate office.
The properties for MTSO and cell sites in the Domestic Wireless
Telephone Systems and the Puerto Rico Wireless Telephone System are either owned
(approximately 28%) or leased (approximately 72%), typically under short-term
leases, by the Company or one of its subsidiaries or the partnership, joint
venture or corporation which holds the construction permit or license (in the
case of the Domestic Wireless Telephone Systems in which the Company has a
minority interest).
The Company considers the properties owned and leased by it to be
suitable and adequate for its business operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than routine
litigation incidental to the business, to which the Company or any of its
subsidiaries is a party to or 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 Centennial's shareholders
during the fiscal quarter ended May 31, 1997.
* * *EXECUTIVE OFFICERS OF CENTENNIAL
The names, ages and positions of the executive officers of Centennial
are listed below along with their business experience during at least the past
five years.
Executive officers of Centennial are elected annually by the Board of
Directors and serve until their successors are duly elected and qualified. Each
of the executive officers, other than Messrs. Graf, Mayberry, Cogar, Braden,
Bucks and Casey, also is an executive officer of Century and devotes such of his
business time to the Company as is necessary. There are no arrangements or
understandings between any officer and any other person pursuant to which the
officer was selected, and there are no family relationships between any
executive officers or any directors of the Company.
BERNARD P. GALLAGHER, 50, has 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. He has been a director
of Century since October 1990 and President and Chief Operating Officer of
Century since October 1989. From 1979 to October 1989, Mr. Gallagher served in
various financial and executive capacities at Comcast Corporation, a cable
television and cellular telephone company, including Vice President and
Treasurer from November 1984 to October 1989.
14
<PAGE>
<PAGE>
RUDY J. GRAF, 48, has been President, Chief Operating Officer and
a director of Centennial since August 1991, and was Vice President, Operations
of Centennial from November 1990 to August 1991. Prior to joining Centennial,
Mr. Graf served in various executive capacities, including Regional Vice
President from December 1987 to July 1990 and as Vice President and General
Manager from December 1985 to November 1987 of Metromedia Company, a cellular
telephone company.
SCOTT N. SCHNEIDER, 39, has 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. Mr. Schneider has been a director of
Century since October 1994. Mr. Schneider has been Chief Financial Officer of
Century since December 1996 and Senior Vice President and Treasurer of Century
since June 1991, and has been an Assistant Secretary of Century since October
1986. He was a Vice President of Century from October 1986 to June 1991, and was
Controller of Century from 1982 to June 1991.
MICHAEL G. HARRIS, 51, has been Senior Vice President,
Engineering of Centennial since August 1991, and was Vice President, Engineering
of Centennial from the date of its incorporation in 1988 to August 1991. Mr.
Harris has been Senior Vice President, Engineering of Century since June 1991,
and was Vice President, Engineering of Century from 1982 to June 1991. Mr.
Harris has also been Senior Vice President-Engineering of Century since June
1991.
PHILLIP MAYBERRY, 44, has been Senior Vice President - Operations
of Centennial since December 1994, and was Vice President, Operations of
Centennial from April 1990 to December 1994. From March 1989 to April 1990, Mr.
Mayberry was a Vice President and General Manager of Metro Mobile CTS, Inc., a
cellular telephone company.
THOMAS COGAR, 40, joined Centennial in September 1990 as Director
of Engineering and has been Vice President, Engineering of Centennial since
August 1991. From May 1987 to September 1990, Mr. Cogar was employed by Metro
Mobile CTS, Inc. in various technical capacities, most recently as Northeast
Manager of Technical Operations.
ROBERT J. LARSON, 38, has been Vice President - Accounting and
Administration of Centennial since March 1995. He was Vice President -
Controller of Centennial from October 1994 to March 1995 and was Controller of
Centennial from 1990 to October 1994, and was Assistant Controller of Centennial
from 1989 to 1990. Mr. Larson has been Vice President - Controller of Century
since October 1994, was Controller of Century from 1991 to 1994 and was
Assistant Controller from 1989 to 1991. Prior to joining Centennial and Century,
Mr. Larson was a manager with Touche Ross & Co., a predecessor firm of Deloitte
& Touche LLP.
ROBERT BRADEN, 51, has been Senior Vice President - Operations of
Centennial since November 1993. Prior to joining Centennial, Mr. Braden held
operating and executive positions in several telecommunications companies
including Metromedia, Omni Communications and VMX, Inc.
15
<PAGE>
<PAGE>
THOMAS E. BUCKS, 41, has been Vice President - Controller of
Centennial since March 1995. Prior to joining Centennial, Mr. Bucks was employed
by Southwestern Bell Corporation in various financial capacities, most recently
as District Manager - Financial Analysis and Planning.
DAVID Z. ROSENSWEIG, 71, has been a director and Secretary of
Centennial since the date of its incorporation in 1988 and of Century since
1985. Mr. Rosensweig has been a member of the New York law firm of Leavy
Rosensweig & Hyman, which acts as general counsel to Centennial and Century,
since May 1987. He has been a director and Secretary of Century since December
1985.
CLIFFORD A. BAIL, 42, 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 Century since January 1997.
From 1992 to 1996, Mr. Bail was a partner in the New York law firm of Leavy
Rosensweig & Hyman, which acts as general counsel to the Company and Century.
JOHN CASEY, 41, has been Vice President, Operations of Centennial
since January 1995, and was a Regional Manager of Centennial from January 1991
to December 1994. From August 1989 to December 1990, Mr. Casey was employed by
McCaw Cellular One as District General Manager.
16
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION AND HOLDERS
Centennial's Class A Common Stock has been traded in The Nasdaq
Stock Market ("Nasdaq") under the symbol CYCL since December 3, 1991. There is
no established market for the Class B Common Stock. The following table lists
the high and low sale prices of the Class A Common Stock reported on Nasdaq for
the calendar quarters indicated.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995
- ----
Third Quarter $ 20 1/8 $ 14 1/2
Fourth Quarter 19 5/8 15 7/8
1996
- ----
First Quarter 18 1/2 14 7/8
Second Quarter 17 5/8 15
Third Quarter 18 1/4 12 3/4
Fourth Quarter 15 1/4 10 3/8
1997
- ----
First Quarter 14 5/8 9 7/8
Second Quarter 16 1/2 8 5/8
Third Quarter (through August 8) 18 1/8 14 7/8
</TABLE>
As of August 8, 1997, there were approximately 237 record holders of
Centennial's Class A Common Stock. Such number does not include persons whose
shares are held of record by a bank, brokerage house or clearing agency, but
does include such banks, brokerage houses and clearing agencies. As of August 8,
1997, there were two record holders of the Class B Common Stock.
DIVIDEND POLICY
Centennial has not paid any cash dividends on its Common Stock and
currently intends for the foreseeable future to retain all earnings for use in
the Company's business. Centennial is effectively prohibited from paying cash
dividends on its common stock by the provisions of the indentures with respect
to $100 million aggregate principal amount of its publicly held 10 7/8% Senior
Notes and $250 million aggregate principal amount of its publicly held 8 7/8%
Senior Notes. The Restated Certificate of Incorporation of Centennial provides
that no cash dividends
17
<PAGE>
<PAGE>
may be paid in respect of any class of Common Stock unless there shall have been
paid or set apart for payment full cumulative dividends for all past and current
dividend periods and all past and then current sinking, purchase or retirement
fund installments, if any, on any class of preferred stock, including the
Convertible Redeemable Preferred Stock and the Second Series Convertible
Redeemable Preferred Stock, and then dividends on the Common Stock may be paid
in any fiscal quarter only to the extent of 50% of the net income of the Company
allocable to the Common Stock from continuing operations for the preceding
fiscal quarter after deduction for payment of dividends on preferred stock.
18
<PAGE>
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated financial data set forth below for each of the
five years in the period ended May 31, 1997 was derived from the Company's
audited Consolidated Financial Statements. The following information should be
read in conjunction with Management's Discussion and Analysis of Results of
Operations and Financial Condition and the Consolidated Financial Statements and
notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
----------------------------------------------------------
YEAR ENDED MAY 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues................................ $ 151,023 $ 112,197 $ 85,419 $ 56,373 $ 43,186
------- ------- ------ ------ ------
Cost of services and equipment sold..... 38,228 26,129 22,152 13,424 11,022
Selling, general and administrative..... 55,132 34,188 26,055 17,787 15,242
Depreciation and amortization........... 83,720 70,989 65,642 47,652 42,845
------- ------- ------- ------- ------
177,080 131,306 113,849 78,863 69,109
------- ------- ------- ------ ------
Operating loss.......................... (26,057) (19,109) (28,430) (22,490) (25,923)
Interest expense........................ 33,379 27,886 23,357 21,040 16,483
Gain on sale of assets.................. 3,819 8,310 --- --- ---
Income from equity investments.......... 15,180 10,473 4,670 3,645 1,926
------- ------- ------- ------- -------
Loss before income tax benefit and
minority interest.................... (40,437) (28,212) (47,117) (39,885) (40,480)
Income Tax Benefit...................... (7,295) (11,596) (14,456) (11,780) (12,796)
------- ------- ------- ------- -------
Loss before minority interest........... (33,142) (16,616) (32,661) (28,105) (27,684)
Minority interest in (income) loss of
subsidiaries.......................... (153) (15) (69) 321 1,776
----- ---- ---- --- -----
Net loss................................ $ (33,295) $ (16,631) $ (32,730) $ (27,784) $ (25,908)
========= ========== ========== ========= ==========
Dividend requirements on Preferred Stock $ 15,948 $ 13,590 $ 12,634 $ 11,678 $ 10,935
========= ========== ========== ========= ==========
Loss applicable to common shares........ $ (49,243) $ (30,221) $ (45,364) $ (39,462) $ (36,843)
========= ========== ========== ========= ==========
Loss per common share................... $ (1.83) $ (1.13) $ (1.93) $ (3.28) $ (3.28)
========= ========== ========== ========= ==========
Average number of common shares
outstanding during the period........ 26,934,000 26,770,000 23,544,000 12,033,000 11,249,000
========== ========== ========== =========== ==========
BALANCE SHEET DATA
Total assets............................ $ 844,850 $ 785,812 $ 844,384 $ 502,384 $ 470,295
Long-term debt.......................... 429,000 350,000 350,000 250,000 173,900
Common stockholders' equity............. 112,882 160,006 188,831 24,143 33,903
</TABLE>
See Notes 3 and 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.
19
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER,
POP AND SHARE DATA)
The Company is in a highly competitive business, competing with other
providers of wireless telephone service and providers of telephone services
using different and competing technologies. Since August 1988, the Company has
acquired twenty-nine wireless telephone markets in the United States that it
owns and manages (the "Domestic Wireless Telephone Systems"). In addition, on
June 23, 1995, the Company acquired one of two Metropolitan Trading Areas
("MTA") licenses to provide broadband personal communications services ("PCS")
in the Commonwealth of Puerto Rico and the U.S. Virgin Islands (the "Puerto Rico
Wireless Telephone System"). Certain of the Company's operations are in a
developmental stage, and the Company's Puerto Rico Wireless Telephone System is
in the start-up and construction stage. On December 12, 1996 the Company began
providing wireless telephone services in Puerto Rico. There is on-going
construction to complete the buildout of the system. The Puerto Rico Wireless
Telephone System's operations accounted for $5,903 in revenue and had 16,900
subscribers as of May 31, 1997.
The Company must continue to adapt its business to technological,
competitive and economic changes. It is dependent on its ability to increase its
number of subscribers, net of cancellations, and to achieve acceptable revenue
per subscriber levels in increasingly competitive markets. The Company expects
net losses to continue until such time as the Domestic Wireless Telephone
Systems, the Puerto Rico Wireless Telephone System and related investments
associated with the acquisition, construction and development of its Domestic
Wireless Telephone Systems and Puerto Rico telecommunications network plant
generate sufficient earnings to offset the costs of such activities. There can
be no assurance that profitability will be achieved in the foreseeable future.
The Company is highly leveraged. The Company requires substantial
capital to operate, construct, expand and acquire wireless telephone systems, to
build-out its recently acquired Puerto Rico telecommunications network, and to
pay debt service and preferred stock dividends. Historically, the Company has
been dependent upon borrowings, the issuance of its equity securities and
operating cash flow to provide funds for such purposes. There can be no
assurance that it will continue to have access to such sources of funds.
YEAR ENDED MAY 31, 1997 AND MAY 31, 1996
Revenue for the year ended May 31, 1997 was $151,023, an increase of
$38,826 or 35% over revenue of $112,197 for the year ended May 31, 1996,
reflecting growth in subscriptions to and increased usage of wireless telephone
service. The acquisition of one domestic wireless telephone system accounted for
approximately $4,572 or 12% of the increase in revenue. The Puerto Rico Wireless
Telephone System business contributed $5,903 or 15% of the increase in revenue.
Revenue from the sale of equipment to subscribers for the year ended May
31, 1997 increased by $209 to $2,858 or 8% as compared to the year ended May 31,
1996. The increase in such revenue was due to a larger number of telephone units
sold during the current year offset, in
20
<PAGE>
<PAGE>
part, by a reduction in the retail prices of wireless telephones.
Continued growth in revenue is dependent upon increased levels of
wireless subscriptions, maintenance of the current subscriber base, and the
average revenue per subscriber. Wireless subscribers at May 31, 1997 were
approximately 203,900, an increase of 51% from the 135,000 subscribers at May
31, 1996. Increases from new activations of 104,800 and 7,500 subscribers from
acquisitions were offset by subscriber cancellations of 43,400. The
cancellations experienced by the Company are primarily the result of competitive
factors. The Puerto Rico Wireless Telephone System had approximately 16,900
subscribers at May 31, 1997 and, as a result, accounted for approximately 25% of
the net increase in subscriptions.
Consolidated revenue per subscriber per month, based upon an average
number of subscribers, was $72 for the year ended May 31, 1997, as compared to
$74 for the year ended May 31, 1996. The average monthly revenue per subscriber
for the year ended May 31, 1997 was approximately $71 in the Domestic Wireless
Telephone Systems, as compared to approximately $121 in the Company's Puerto
Rico Wireless Telephone System. The Company's business is increasingly
competitive and, as a result, there is no assurance that average revenue per
subscriber will be maintained at historic levels. In addition, the expansion of
local service calling areas, and therefore the reduction of roaming revenue, is
expected to reduce average revenue per subscriber.
Cost of services during the year ended May 31, 1997 was $22,216, an
increase of $6,925 or 45% from the year ended May 31, 1996. The increase was due
to the variable costs associated with a larger revenue and subscription base,
and increased wireless coverage areas resulting from (i) the continued expansion
of the Company's network and acquisitions completed during the fiscal years
ended May 31, 1997 and 1996 and (ii) the commencement of wireless telephone
service in Puerto Rico. Included in cost of services during the year ended May
31, 1997 were $1,927 of costs associated with the start-up of the Company's
Puerto Rico Wireless Telephone System.
Cost of equipment sold during the year ended May 31, 1997 was $16,012,
an increase of $5,174 or 48% as compared to the year ended May 31, 1996. The
primary reason for the increase was an increase in the number of telephone units
sold, offset by a decrease in the average unit cost of telephones sold.
Selling, general and administrative expenses rose to $55,132 for the
year ended May 31, 1997, an increase of $20,944 or 61% above the expenses of
$34,188 for the year ended May 31, 1996. The Company increased its managerial,
customer service and sales staff to accommodate a larger subscription and
revenue base, anticipated growth of its domestic wireless telephone systems as
well as the commencement of wireless telephone services in Puerto Rico. Included
in selling, general and administrative expenses during the year ended May 31,
1997 were $5,086 of costs associated with the start-up of the Company's Puerto
Rico Wireless Telephone System.
The Company anticipates continued increases in the cost of services and
selling, general and administrative expenses as the growth of its existing
wireless telephone business continues. In addition, the Company expects that the
development of its recently acquired markets as well as its participation in the
Puerto Rico telecommunications network will contribute to a continued increase
in the level of expenses.
21
<PAGE>
<PAGE>
Depreciation and amortization for the year ended May 31, 1997 was
$83,720, an increase of $12,731 or 18% over the year ended May 31, 1996. The
increase results from acquisitions and capital expenditures made during fiscal
1997 and 1996 in connection with the development and network expansion of the
Company's Domestic Wireless Telephone Systems and Puerto Rico Wireless Telephone
System. Depreciation and amortization related to the Puerto Rico Wireless
Telephone System was $6,328 or 50% of the increase.
The operating loss for the year ended May 31, 1997 was $26,057, an
increase of $6,948 or 36% from the loss of $19,109 for the year ended May 31,
1996.
During the year ended May 31, 1997, the Company sold certain equipment
resulting in a gain of $3,819. During the year ended May 31, 1996, the Company
sold its 72.2% interest in the wireless telephone system serving the
Charlottesville, VA MSA for a cash purchase price of approximately $9,914. The
Company recognized a gain of $4,176 as a result of the sale (see "Acquisitions,
Exchanges, and Dispositions"). In addition, the Company recognized a gain of
$4,092 upon the sale of marketable securities acquired and sold during fiscal
1996.
Interest expense was $33,379 for the year ended May 31, 1997, an
increase of $5,493 or 20% from the year ended May 31, 1996. The increase in
interest expense is the result of interest charged on additional borrowings for
the Benton Harbor, MI acquisition, working capital needs and the construction
and operation of the Puerto Rico telecommunications network as well as a
decrease in capitalized interest charges related to the pre-operational stage of
the Company's Puerto Rico PCS business. Capitalized interest for the year ended
May 31, 1997 was $2,752, a decrease from the capitalized interest of $5,200 for
the year ended May 31, 1996. Gross interest costs for the year ended May 31,
1997 and May 31, 1996 were $36,131 and $33,086, respectively. The average debt
outstanding during the year ended May 31, 1997 was $374,893, an increase of
$24,893 as compared to the average debt level of $350,000 during the year ended
May 31, 1996. The Company's weighted average interest rate decreased to 9.3% for
the year ended May 31, 1997 from 9.5% for the year ended May 31, 1996.
After income attributable to minority interests in subsidiaries for the
year ended May 31, 1997, a pretax loss of $40,590 was incurred, as compared to a
pretax loss of $28,227 for the year ended May 31, 1996. The income tax benefit
of $7,295 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. The tax benefits are
non-cash in nature.
The net loss of $33,295 for the year ended May 31, 1997 represents an
increase of $16,664 or 100% from the net loss of $16,631 for the year ended May
31, 1996. The Puerto Rico PCS business accounted for 52% of the consolidated net
loss for the year ended May 31, 1997 as compared to 6% for 1996.
YEAR ENDED MAY 31, 1996 AND MAY 31, 1995
Revenue for the year ended May 31, 1996 was $112,197, an increase of
$26,778 or 31% over revenue of $85,419 for the year ended May 31, 1995. The
increase in revenue was primarily the result of growth in subscriptions to and
the resulting increased usage of domestic wireless telephone service.
Acquisitions accounted for increased revenue of $21,279 for fiscal 1996,
22
<PAGE>
<PAGE>
which increase more than offset a decline in revenue from domestic wireless
systems which were sold or exchanged of $12,756.
Revenue from the sale of wireless telephones to subscribers for the year
ended May 31, 1996 decreased by $1,486 to $2,649 or 36% as compared to the
$4,135 recorded in the fiscal year ended May 31, 1995. The decrease in such
revenue was due to a reduction in the retail prices of wireless telephones
offset, in part, by a larger number of telephone units sold during the current
fiscal year.
Continued growth in revenue is dependent upon increased levels of
wireless subscriptions as well as maintenance of the current subscriber base.
Domestic wireless subscribers at May 31, 1996 were approximately 135,000. During
the twelve month period ended May 31, 1996, the Company's domestic wireless
subscriber base was affected by (i) acquisitions of wireless telephone markets,
(ii) the exchange and disposition of wireless telephone markets and (iii)
internal growth of subscribers in systems which the Company owned and operated
at May 31, 1995.
On a proforma basis, after giving effect to dispositions and exchanges
of wireless telephone systems at May 31, 1995, the Company's wireless
subscribers were 85,900 as compared to 135,000 at May 31, 1996, an increase of
49,100 subscribers or 57%. The increase in subscribers, after giving effect to
the exchanged and disposed markets, was the result of 64,600 new activations and
17,400 subscribers from acquisitions made during the fiscal year ended May 31,
1996. The increases were partially offset by subscriber cancellations of 32,900.
Subscriber activity during the twelve months ended May 31, 1996 is summarized in
the table below:
<TABLE>
<CAPTION>
Proforma effect of
Actual Exchanged/disposed Markets
------ --------------------------
<S> <C> <C>
Beginning subscribers, May 31, 1995 112,500 85,900
Activation's 65,600 64,600
Cancellations (33,700) (32,900)
Acquired 17,400 17,400
Disposed/Exchanged (26,800) -
------- -------
Ending Subscribers, May 31, 1996 135,000 135,000
======= =======
</TABLE>
Revenue per subscriber per month, based upon an average number of
subscribers for the year ended May 31, 1996, was $74 as compared to $68 for the
year ended May 31, 1995. The increase in monthly revenue per subscriber was
primarily due to the recent acquisitions of wireless markets which currently
have, on average, higher levels of roaming revenue per subscriber. Further, the
adjacency of these markets to existing wireless systems permit the Company to
expand its local calling areas, thereby capturing additional revenue from its
resident subscriber base. Secondarily, markets which were exchanged and disposed
of during the year ended May 31, 1996 had, on average, lower monthly revenue per
subscriber than the Company's currently owned and managed markets.
The average monthly revenue per subscriber in recently acquired markets
during the year ended May 31, 1996 was approximately $80 as compared to
approximately $73 in average monthly revenue per subscriber in the Company's
other owned and managed markets. Average
23
<PAGE>
<PAGE>
monthly revenue per subscriber in markets which were exchanged or disposed of
was approximately $54 at June 30, 1995.
Cost of services during the year ended May 31, 1996 was $15,291, an
increase of $2,483 or 19% from the year ended May 31, 1995. The reason for the
increase was the variable costs associated with a larger revenue and
subscription base, as well as increased wireless coverage areas resulting from
the continued expansion of the Company's network. Included in cost of services
during the fiscal year ended May 31, 1996 were $195 of pre-operating costs
associated with the start-up of the Company's Puerto Rico Wireless Telephone
System.
Cost of equipment sold during the year ended May 31, 1996 was $10,838,
an increase of $1,494 or 16 % as compared to the year ended May 31, 1995. The
primary reason for the increase was an increase in the number of telephone units
sold offset by a decrease in the average unit cost of telephones sold.
Selling, general and administrative expenses rose to $34,188, an
increase of $8,133 or 31% above the $26,055 for the year ended May 31, 1995. The
increase was the result of an increase in the Company's managerial, customer
service and sales staff to accommodate the larger subscription and revenue base,
and anticipated growth of its wireless telephone business. Included in selling,
general and administrative expenses during the fiscal year ended May 31, 1996
were $218 of pre-operating costs associated with the start-up of the Company's
Puerto Rico Wireless Telephone System.
The Company's Puerto Rico Wireless Telephone System was in the
construction stage and not yet operational during fiscal 1996. During the year
ended May 31, 1996, the Company capitalized approximately $5,200 of interest
costs associated with the acquisition of the PCS license.
Depreciation and amortization for the year ended May 31, 1996 was
$70,989, an increase of $5,347 or 8% over the year ended May 31, 1995. The
increase results from acquisitions completed during fiscal 1996 and 1995, as
well as capital expenditures made during fiscal 1996 and 1995 in connection with
the development and network expansion of the Company's Domestic Wireless
Telephone Systems.
As a result of the factors discussed above, the operating loss for the
year ended May 31, 1996 was $19,109, a decrease of $9,321 or 33% from the loss
of $28,430 for the year ended May 31, 1995.
Interest expense was $27,886 for the year ended May 31, 1996, an
increase of $4,529 or 19% from the year ended May 31, 1995. The increase was the
result of interest charged on additional borrowings for capital expenditures,
working capital, investment in the Puerto Rico telecommunications network
(including the license of $54,672) and debt service, offset by the
capitalization of $5,200 of interest costs related to the Company's PCS license.
On May 11, 1995, the Company issued $100,000 of ten year senior notes at an
interest rate of 10 1/8% (see Liquidity and Capital Resources). As a result, the
average debt outstanding during the year ended May 31, 1996 was $350,000, an
increase of $94,247 as compared to an average debt level of $255,753 during the
year ended May 31, 1995. The Company's weighted average interest rate increased
to 9.5% for the year ended May 31, 1996 from 9.2% for the year ended May 31,
1995.
24
<PAGE>
<PAGE>
During the year ended May 31, 1996, the Company sold its 72.2% interest
in the wireless telephone system serving the Charlottesville, VA. MSA for a cash
purchase price of approximately $9,914, subject to adjustment. The Company
recognized a gain of $4,176 as a result of the sale (see Acquisitions, Exchanges
and Dispositions). In addition, the Company recognized a gain of $4,092 upon the
sale of marketable securities acquired and sold during the 1996 fiscal year.
After income attributable to minority interests in subsidiaries for the
year ended May 31, 1996, a pretax loss of $28,227 was incurred as compared to a
pretax loss of $47,186 in the year ended May 31, 1995. The income tax benefit of
$11,596 for the year ended May 31, 1996 represents an adjustment to the deferred
tax liability of the Company, offset by current state and local taxes for the
period. The tax benefits are non-cash in nature and are attributable to the
Company's acquisitions and results of operations.
The net loss of $16,631 for the year ended May 31, 1996 represents a
decline of $16,099 or 49% from the net loss for the year ended May 31, 1995. The
Company expects net losses to continue until such time as the Domestic Wireless
Telephone Systems, the Puerto Rico Wireless Telephone System and related
investments associated with the acquisition, construction and development of its
Domestic Wireless Telephone Systems and Puerto Rico telecommunications network
plant generate sufficient earnings to offset the costs described above.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended May 31, 1997, earnings were less than fixed charges
by $43,189. Fixed charges consist of interest expense, including amortization of
debt issue costs and capitalized interest, and the portion of rents deemed
representative of the interest portion of leases. The amount by which earnings
were less than fixed charges includes non-cash charges of $83,720 relating to
depreciation and amortization.
As of May 31, 1997, the Company had $177,292 of property, plant and
equipment (net) placed in service. During the year ended May 31, 1997, the
Company made capital expenditures of $88,990, primarily to continue the
expansion of the coverage areas of existing properties, the upgrade of its cell
site and call switching equipment and its Puerto Rico telecommunications
network. During the year ended May 31, 1997, the buildout of the Company's
Puerto Rico telecommunications network required capital expenditures of $50,069
or 56% of the Company's total capital expenditures. The Company's future
commitments for such property and equipment include the addition of cell sites
to expand coverage, as well as enhancements to the existing infrastructure of
its wireless systems. During the twelve months ended May 31, 1998 the Company
anticipates domestic wireless capital expenditure requirements of approximately
$30,000. The Company currently estimates that the remaining cost to build out
the infrastructure of its PCS network will be approximately $26,300 to be
expended through fiscal 1999. In order to meet the continued level of capital
investment, the Company is exploring various sources of external financing
including, but not limited to, bank financing, joint ventures, partnerships and
placement of debt or equity securities of the Company.
In this regard, the Company entered into a $50,000 credit facility with
Citibank, N.A. on September 12, 1996, which was amended April 22, 1997 (as so
amended, the "Amended Credit Facility"). The commitment of the lenders under
such Amended Credit Facility may be increased
25
<PAGE>
<PAGE>
to $90,000 at the election of the lenders. As of July 30, 1997 the commitment
was increased to $75,000. The Amended Credit Facility terminates on January 31,
2001. Approximately $35,000 of the Amended Credit Facility was used to fund the
Benton Harbor, Michigan wireless telephone system acquisition (see
"Acquisitions, Exchanges and Dispositions"), and has since been repaid.
The Amended Credit Facility may be used for working capital and general
corporate purposes. The interest rate payable on borrowings under the Amended
Credit Facility is based, at the election of the Company, on (a) the Base Rate,
as defined, plus a margin of 2%, or (b) the Eurodollar Base Rate, as defined,
plus a margin of 3%. The Amended Credit Facility is secured by the pledge of
the stock of certain of the Company's subsidiaries not otherwise subject to
restrictions under its Senior Note Indentures, including the subsidiary which
operates the Benton Harbor system. The Amended Credit Facility is further
guaranteed by certain subsidiaries holding Investment Interests. The Amended
Credit Facility restricts the incurrence of certain additional debt by the
Company and limits the Company's ability to pay dividends. As of May 31, 1997,
$5,000 was outstanding under the Amended Credit Facility. The Company was in
compliance with the covenants of the Amended Credit Facility at May 31, 1997.
Additionally, on April 25, 1997, Centennial Puerto Rico Wireless
Corporation , a wholly owned subsidiary of the Company ("CPRW"), entered into a
four-year $130,000 revolving credit facility with Citibank, N.A. which converts
into a four-year term loan on April 25, 2001 (the "Puerto Rico Credit
Facility"). The proceeds from the Puerto Rico Credit Facility will be used by
CPRW and its direct and indirect subsidiaries primarily to finance the
construction and operation of PCS, competitive access and telecommunications
networks in Puerto Rico and the United States Virgin Islands. The proceeds will
also be used by CPRW for working capital and general corporate purposes and was
used to pay certain cash dividends to the Company as permitted by the Puerto
Rico Credit Facility. The interest rate payable on borrowings under the Puerto
Rico Credit Facility is based on, at the election of CPRW, (a) the "Base Rate",
as defined, plus a margin of 1.50% or (b) the "Eurodollar Rate", as defined,
plus a margin of 2.50%, adjusted for the maintenance of certain specified
leverage ratios, as applicable. The Puerto Rico Credit Facility, which is
non-recourse to the Company, is secured by substantially all of the assets of
CPRW and its direct and indirect subsidiaries and requires CPRW to meet and
maintain certain financial and operating covenants, including the maintenance of
certain minimum annualized cash flows, as defined, the maintenance of certain
ratios of operating cash flow to debt service and total outstanding debt to
operating cash flow and performance requirements including minimum subscriber
levels. The Puerto Rico Credit Facility restricts the use of borrowing, limit
the incurrence of certain additional indebtedness by CPRW and limits CPRW's
ability to declare and pay dividends to the Company and management fees to
affiliates. Breach of such covenants would constitute a default under the
facility in which event Citibank, N.A. could accelerate all amounts outstanding
thereunder, and exercise certain other rights and remedies as a secured
creditor. At May 31, 1997, $74,000 was outstanding under the Puerto Rico Credit
Facility.
The Company has outstanding two classes of preferred stock which are
held by Citizens Utilities Co.. ("Citizens") and Century Communications Corp.
("Century"). The preferred stock issues carried no cash dividend requirements
through August 31, 1996 but accreted liquidation preference and redemption value
at the rate of 7.5% per annum, compounded quarterly, until then. The fully
accreted liquidation preference and redemption value of the shares held by
Citizens and Century at August 31, 1996 was $186,287 and $7,252, respectively.
Beginning September 1, 1996, the holders of the preferred stock were entitled to
receive cash dividends at
26
<PAGE>
<PAGE>
the rate of 8.5% per annum. Assuming no change in the number of shares of such
classes outstanding, the annual dividend payments, commencing in fiscal 1997, to
be made with respect to the preferred stock, if and when declared by the
Company's Board of Directors, will be $15,834 and $616, respectively. Both
classes of preferred stock are subject to mandatory redemption in fiscal 2007.
Any unpaid dividends continue to accumulate without additional cost to the
Company. On December 19, 1996 and May 8, 1997, the Company paid quarterly cash
dividends to Citizens and Century of $3,959 and $154, respectively. The Company
will determine, from time to time, the timing, amount, or distribution (if any)
of additional preferred stock dividends.
In order to meet its obligations with respect to its operating needs,
capital expenditures, debt service and preferred stock obligations, it is
important that the Company continue to improve operating cash flow. In order to
do so, the Company's revenue must increase at a faster rate than operating
expenses. Increases in revenue will be dependent upon continuing growth in the
number of subscribers and maximizing revenue per subscriber. The Company has
continued the development of its managerial, administrative and marketing
functions, and is continuing the construction of wireless systems in its
existing and recently acquired markets in order to achieve these objectives.
There is no assurance that growth in subscribers or revenue will occur. In
addition, the Company's participation in the Puerto Rico telecommunications
business is expected to be capital intensive, requiring additional network
buildout costs of approximately $26,300 through fiscal 1999. Further, due to the
start-up nature of the Puerto Rico telecommunications network, the Company
expects that it will require additional cash investment to fund its operations
over the next several years. The Puerto Rico telecommunications network is
expected to be highly competitive with the two existing wireless telephone
providers, as well as the other Puerto Rico telecommunications license holders.
There is no assurance that the Puerto Rico telecommunications network
will generate cash flow or reach profitability. Even if the Company's operating
cash flow increases, it is anticipated that cash generated from the Company's
Domestic Wireless Telephone Systems and Puerto Rico telecommunications network
will not be sufficient in the next several years to cover interest, the
preferred stock dividend requirements that commenced in fiscal 1997 and required
capital expenditures.
The Company anticipates that shortfalls may be made up either through
debt and equity issuances or additional financing arrangements that may be
entered into by the Company. Although to date the Company has been able to
obtain such financing on satisfactory terms, there can be no assurance that this
will continue to be the case in the future.
The Company has filed a shelf registration statement with the Securities
and Exchange Commission (the "SEC") for up to 8,000,000 shares of its Class A
Common Stock that may be offered from time to time in connection with
acquisitions. The registration statement was declared effective by the SEC on
July 7, 1994. As of August 8, 1997, 4,239,231 shares remain available for future
acquisitions.
The Company has filed a shelf registration statement with the SEC for
the issuance of $500,000 of the Company's debt securities which was declared
effective by the SEC on April 6, 1995. The debt securities may be issued from
time to time in series on terms to be specified in one or more prospectus
supplements at the time of the offering. If so specified with respect to
27
<PAGE>
<PAGE>
any particular series, the debt securities may be convertible into shares of the
Company's Class A Common Stock. As of August 8, 1997, $400,000 of debt
securities remained available for issuance.
Although the net cash provided by operating activities for the year
ended May 31, 1997 was not sufficient to fund the Company's expenditures for
property, plant and equipment of $88,990, funds required were available from
cash on hand. The principal source of such cash was financing activities
completed in prior fiscal years. The Company will continue to rely on various
financing activities to fund these requirements. Based upon current market
conditions, the Company expects that cash flows from operations 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.
ACQUISITIONS, EXCHANGES AND DISPOSITIONS
The Company's primary acquisition strategy is to acquire controlling
ownership interests in wireless systems serving markets contiguous or proximate
to its current markets. The Company's strategy of clustering its wireless
operations in contiguous and proximate geographic areas enables it to achieve
operating and cost efficiencies as well as joint advertising and marketing
benefits. Clustering also allows the Company to offer its subscribers more areas
of uninterrupted service as they travel through an area or state. In addition to
expanding its existing clusters, the Company may also seek to acquire interests
in wireless systems in other geographic areas. The Company may also pursue other
communications businesses related to its wireless telephone and other mobile
service operations, as well as other communications businesses it determines to
be desirable. The consideration for such acquisitions may consist of shares of
Centennial's Class A Common Stock, par value $.01 per share, cash, assumption of
liabilities, or a combination thereof.
On September 12, 1996, the Company acquired for approximately $35,000 in
cash, 100% of the ownership interests in the partnership owning the wireless
telephone system serving the Benton Harbor, Michigan MSA. The Benton Harbor
market represents approximately 161,400 Net Pops. "Net Pops" means a market's
Pops multiplied by the percentage interest that Centennial owns in an entity
licensed by the FCC to construct or operate a cellular telephone system (or to
provide personal communications services) in that market and "Pops" means the
population of a market based upon the final 1990 Census Report of the Bureau of
the Census, United States Department of Commerce.
On October 31, 1995, the Company acquired (i) a 94.3% interest in the
wireless telephone system serving the Lafayette, Louisiana MSA, representing
approximately 205,700 Net Pops, in exchange for the Company's wireless telephone
system serving the Jonesboro, Arkansas RSA (comprising approximately 205,000 Net
Pops), the license rights and assets located in and covering the Desoto and Red
River Parishes of Louisiana 3 RSA (comprising approximately 34,700 Net Pops),
the license rights and assets located in and covering a section of Morehouse
Parish of Louisiana 2 RSA (comprising approximately 24,100 Net Pops) and a cash
payment by the Company of approximately $5,580, subject to adjustment, and (ii)
an additional 14.3% minority interest in the Elkhart, Indiana RSA, a market in
which the Company now has a 91.4% interest and an additional 12.7% equity
investment interest in the Lake Charles, Louisiana MSA, a market in which the
Company now has a 25.1% interest, for a cash payment of approximately $2,951.
28
<PAGE>
<PAGE>
On June 30, 1995, the Company acquired the wireless telephone systems
serving (a) Newtown, LaPorte, Starke, Pulaski, Jasper and White, Indiana, (b)
Kosciusko, Noble, Steuben and Lagrange, Indiana, (c) Williams, Defiance, Henry
and Paulding, Ohio and (d) Copiah, Simpson, Lawrence, Jefferson Davis, Walthall
and Marion, Mississippi, representing an aggregate of approximately 608,100 Net
Pops. The above-described systems were acquired by the Company in exchange for
the Company's wireless telephone systems serving the Roanoke, Virginia MSA, the
Lynchburg, Virginia MSA, North Carolina RSA #3 and Iowa RSA #5, representing an
aggregate of approximately 644,000 Net Pops. Simultaneously with the
consummation of the transaction described above, the Company sold its 72.2%
interest in the wireless telephone system serving the Charlottesville, Virginia
MSA, representing an aggregate of approximately 94,700 Net Pops, for a cash
purchase price of approximately $9,914, subject to adjustment. The Company
recognized a gain of approximately $4,176 as a result of the sale.
The Company was the successful bidder for one of two Metropolitan
Trading Area ("MTA") licenses (granted June 23, 1995) to provide broadband PCS
in the Commonwealth of Puerto Rico and the U.S. Virgin Islands. The licensed
area represents approximately 3,623,000 Net Pops. The amount of the final bid
submitted and paid by the Company was $54,672.
The Company has determined to pursue a strategy to sell or otherwise
dispose of substantially all of its minority equity investments in wireless
telephone systems representing approximately 1,100,000 Net Pops and has retained
an investment banker to assist it in such disposition. The Company has not yet
made a final determination as to the estimated sale proceeds or the timing of
such disposition.
COMMITMENTS AND CONTINGENCIES
On December 21, 1994, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions, from time to time, of up to 1,000,000 shares of Class A Common
Stock, depending on prevailing market conditions. Subsequent to May 31, 1997,
the Company purchased 244,000 shares of its own Class A Common Stock in the open
market for a purchase price of $3,902. These shares have been accounted for
as Treasury Shares in fiscal 1998.
The Company also plans to exercise its right to acquire the minority
interests held by Century in the Cass and Jackson, Michigan systems for the
prices paid by Century for such minority interests in the acquisition of such
systems ($2,000 and $1,000, respectively). Upon completion of these
transactions, the Company will own 100% of these systems.
The Company is controlled by Century through its ownership of the
Company's Class B Common Stock representing approximately 74% of the voting
power and approximately 32% of the equity of the Company as of August 8, 1997.
The Company and Century entered into a Services Agreement, effective August 30,
1996 (the "Services Agreement"), pursuant to which Century through its personnel
provides such design, construction, management, operational, technical and
maintenance services to the Company as may be necessary, or as Century
determines may be appropriate, for the wireless telephone, paging and related
systems owned and operated by the Company. Such services have historically been
provided to the Company by Century. As consideration for the services rendered
and to be rendered under the Services Agreement, the Company will pay Century
the annual sum of $1,000 plus direct out of pocket
29
<PAGE>
<PAGE>
expenses. The Services Agreement has a term of five years but Centennial may, in
its discretion, terminate the agreement at the end of each year during the five
year term. The Company has recorded expenses of $750 under the Services
Agreement for the year ended May 31, 1997. Such amount is recorded within
Accrued Expenses on the Company's consolidated balance sheet at May 31, 1997.
The Company leases certain space for equipment in Puerto Rico from
Century-ML Cable Corp. "Century-ML", a cable television operator which is 50%
owned by Century. Further, the Company leases and shares capacity on the fiber
optic cable television facility and network of Century- ML for the purpose of
operating as a competitive access provider. The Company shares in the cost of
construction, operation and maintenance of the Century-ML fiber network on a
pro-rata basis based on the percentage of the number of fibers of the network
used by or reserved for the Company. During fiscal 1997, the Company recorded a
deferred asset and a related payable to an affiliate in its consolidated balance
sheet in the amount of $6,000 to reflect certain costs incurred by the Company
to reimburse Century-ML for the Company's share of the costs of constructing the
fiber optic network. These costs were incurred by the Company in order to secure
the use of the fiber optic network as required by the Facilities Agreement. (See
Note 1 to the consolidated financial statements)
30
<PAGE>
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER, POP 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 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 and 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.
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' EQUITY
The Company has reported net losses of $(33,295), $(16,631) and
$(32,730) for the fiscal years ended May 31, 1997, 1996 and 1995 respectively.
Operating loss was $(26,057), $(19,109) and $(28,430) for the respective
periods. Interest expense was $33,379, $27,886 and $23,357 for the respective
periods. The Company expects net losses to continue until such time as the
Domestic Wireless Telephone Systems, the Puerto Rico Wireless Telephone System
and related investments associated with the acquisition, construction and
development of its Domestic Wireless Telephone Systems and Puerto Rico Wireless
Telephone System generate sufficient earnings to offset the cost of such
activities. There can be no assurance that profitability will be achieved in the
foreseeable future.
Reflecting net losses in prior periods, the common stockholders' equity
as stated on the Company's consolidated balance sheet at May 31, 1997 was
$112,882. The Company's assets, including its cellular telephone and PCS
licenses, 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 wireless telephone business is capital intensive. The Company
requires substantial capital to operate, construct, expand and acquire cellular
telephone systems; to build out and operate its Puerto Rico Wireless Telephone
System; and to service its debt. Historically, the Company has been dependent
upon borrowings, operating cash flow and the issuance of its equity securities
to provide funds for such purposes. The Company will be dependent on external
financing measures to meet its operating, debt service, dividend and capital
expenditure requirements. Some of the measures which the Company may from time
to time consider include
31
<PAGE>
<PAGE>
but are not limited to: bank financing, joint ventures, partnerships and public
and private placement of its debt or equity securities.
In recent years, the Company has incurred substantial indebtedness in
connection with the acquisition, construction and start-up expenses of wireless
telephone systems. At May 31, 1997, the Company had an aggregate of $429,000
outstanding principal amount of debt securities. The Indentures (as defined
below) for the Company's outstanding issues of publicly-held debt, as well as
certain credit facilities, impose certain restrictions including the incurrence
of additional indebtedness. See "Restrictive Covenants; Consequences of Default"
below.
For the year ended May 31, 1997, earnings were less than fixed charges
by $43,189. Such amounts reflect non-cash charges of $83,720, relating to
depreciation and amortization.
HIGHLY COMPETITIVE INDUSTRY
The Company's ability to maintain or increase its offering of wireless
telephone 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 communications service enterprises. Competition for customers in each of
the Company's markets is principally on the basis of the technical quality of
service, price, size of area covered, services and enhancements offered, and
responsiveness of customer service. Many of the Company's competing entities
have financial resources which are substantially greater than those of the
Company and its partners in such markets.
In addition to competition from cellular and broadband PCS licensees,
there is also competition from a variety of other technologies. See Item 1.
"Business/Competition/Competing Technologies." Continuing technological advances
in the communications field make it impossible to predict the extent of
additional future competition for wireless systems, but it is certain that in
the future there will be more potential substitutes for wireless service. There
can be no assurance that the Company will not face significant future
competition or that the Company's current wireless technology will not
eventually become obsolete.
HIGHLY REGULATED INDUSTRY
The licensing, ownership, construction, operation and sale of
controlling interests in wireless telephone systems are regulated by the FCC.
Certain aspects of wireless telephone system ownership, sale, construction, and
operation (including, but not limited to, rates and the resale of wireless
service) may be subject to public utility or other state and municipal
regulation in the areas in which the Company provides service. Changes in the
regulation of wireless telephone system operators or their activities (such as
increased price regulation by state authorities or a decision by the FCC to
permit more than two licensees in each service area) could adversely affect the
business and operating results of the Company.
In addition, FCC licenses are required to provide wireless telephone
service and are subject to renewal and compliance requirements. Non-compliance
may result in fines, termination of the license or a denial by the FCC of an
application to renew the license. There may be competition for FCC licenses upon
the expiration of their initial ten-year terms, and there can be no assurance
that
32
<PAGE>
<PAGE>
any FCC license will be renewed. The transfer of a license or any controlling
interest in a license is subject to prior approval by the FCC.
NEW INDUSTRY; DEVELOPING AND CHANGING TECHNOLOGIES; SUBSCRIBER CANCELLATIONS
Although over 600 wireless telephone systems are operational in the
United States and other countries, the industry has only a limited operating
history. As a result, there is uncertainty concerning the future of the industry
and the potential demand for wireless telephone service by the public. In
addition, the success of the Company's operations may be adversely affected by
matters beyond its control, such as changes in technology, decisions by the
federal government as to spectrum allocation and competition, and the future
cost of wireless telephones. The Company and the industry have also been
affected by high rates of subscriber cancellations that require continuing
replacement of the customer base in order to maintain subscription levels and
revenues.
RESTRICTIVE COVENANTS; CONSEQUENCES OF DEFAULT
The Company's financing arrangements place certain limitations on the
Company. The Amended Credit Facility is secured by the pledge of the stock of
certain of the Company's subsidiaries not otherwise subject to restrictions
under its Senior Note Indentures, including the subsidiary which operates the
Benton Harbor system. The Amended Credit Facility is further guaranteed by
certain subsidiaries holding Investment Interests. The Amended Credit Facility
restricts the incurrence of certain additional debt by the Company and limits
the Company's ability to pay dividends. The Puerto Rico Credit Facility, which
is non-recourse to the Company, is secured by substantially all of the assets of
CPRW and its direct and indirect subsidiaries and requires CPRW to meet and
maintain certain financial and operating covenants, including the maintenance of
certain minimum annualized cash flows, as defined, the maintenance of certain
ratios of operating cash flow to debt service and total outstanding debt to
operating cash flow and performance requirements including minimum subscriber
levels. The facility restricts the use of borrowing, limit the incurrence of
certain additional indebtedness by CPRW and limits CPRW's ability to declare and
pay dividends to the Company and management fees to affiliates. Failure to
satisfy such covenants would constitute a default under the facility in which
event Citibank, N.A. could accelerate all amounts outstanding thereunder, and
exercise certain other rights and remedies as a secured creditor.
On November 15, 1993, the Company repaid in full $182,700 of long-term
debt outstanding under the Company's credit facility with a consortium of banks
(the "Consortium Credit Facility") using the proceeds of the sale of $250,000
aggregate principal amount of 8 7/8% Senior Notes due 2001 (the "8 7/8% Notes")
and the commitment under the Consortium Credit Facility was extinguished. The
Company is required to make semi-annual payments of interest on the 8 7/8% Notes
at the rate of 8 7/8% per annum. On May 11, 1995, the Company issued $100,000
aggregate principal amount of 10 1/8% Senior Notes due 2005 (the "10 1/8%
Notes"). The Company is required to make semi-annual payments of interest on the
10 1/8% Notes at the rate of 10 1/8% per annum. The terms of the indentures with
respect to the 8 7/8% Notes and the 10 1/8% Notes (the "Indentures") require the
Company to meet and maintain certain financial and operating covenants and
achieve performance requirements. The indentures also restrict the Company from
directly or indirectly declaring or paying any dividends on its presently or
subsequently issued common stock; limits the ability of the Company to incur
additional indebtedness and limits any distributions of assets to its
stockholders.
33
<PAGE>
<PAGE>
The Company was in compliance with all of the above covenants as of May
31, 1997. The Company presently expects to remain in compliance with such
covenants, but there can be no assurance to such effect.
CONTROL BY CERTAIN STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Century has a controlling interest in the Company. See Item 1
"Business/General." The Company, Century and Citizens have entered into a Stock
Transfer Agreement (the "Stock Transfer Agreement") which restricts the voting
and sale by either Century or Citizens of any of their shares of Convertible
Preferred Stock, Second Series Convertible Preferred Stock and Class B Common
Stock, as well as the shares of Class A Common Stock into which such Class B
Common Stock, Convertible Preferred Stock or Second Series Convertible Preferred
Stock may be converted. In addition, the Stock Transfer Agreement gives the
Company a right of first refusal to purchase such shares under certain
circumstances. There can be no assurance that the Company would be able to fund
any such purchases if the opportunity arose.
As a result of its share ownership and in accordance with the terms of
the Stock Transfer Agreement, Century is able to nominate at least a majority
and elect all of the directors of the Company. All directors of the Company are
affiliated with either Century or Citizens. No plans currently exist to nominate
or elect any additional directors who are not affiliated with either Century or
Citizens.
The control of the Company by Century, the provisions of the Company's
Restated Certificate of Incorporation regarding the voting rights of holders of
the Company's Common Stock and preferred stock and the restrictions imposed by
the Stock Transfer Agreement as to voting and sales (as discussed above) may,
individually and collectively, render more difficult non-negotiated tender
offers or other efforts to obtain control of the Company and therefore deprive
stockholders of opportunities to sell shares at prices higher than those
prevailing in the market.
ACQUISITIONS AND INVESTMENTS
Opportunities for growth through acquisitions and investments in the
Company's wireless telephone and other communications businesses, and future
operating results and the success of acquisitions and investments within and
outside the United States may be subject to the effects of, and changes in, U.S.
and foreign trade and monetary policies, laws and regulations, political and
economic developments, inflation rates, and the effects of taxes and operating
conditions.
OPERATING HAZARDS AND UNINSURED RISKS
While the Company maintains insurance against certain of the risks
associated with its wireless telephone and other communications businesses, the
occurrence of a significant event for which the Company is not fully insured
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 cellular telephone or other communications businesses of the Company, or
security ratings.
34
<PAGE>
<PAGE>
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,
the FCC or the SEC may affect the Company's results of operations or financial
position.
INVESTMENT INTERESTS; CAPITAL CALLS
With respect to any system in which the Company now or in the future
holds an Investment Interest, the Company has limited ability to direct the
operation of such system and if it does not meet a capital call, the Company's
ownership interest in such system may be diluted. Capital calls with respect to
the Investment Interests for the fiscal years ended May 31, 1997, 1996 and 1995
were approximately, $2,878, $1,463, and $3,783, respectively. The Company has,
to date, paid all capital calls that it has received. Although the Company
anticipates that such capital calls will decrease over time, there can be no
assurance that such capital calls will, in fact, decrease. Capital calls may
also be issued in connection with acquisitions by the respective limited
partnerships. The Company intends to fund its pending and future capital calls
from internally generated funds, bank borrowings or the issuance of additional
debt or equity securities. There can be no assurance that the Company will be
able to pay such capital calls when due.
* * * * *
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 "(a)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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the fiscal year ended May 31, 1997, the Company was not involved
in any disagreement with its independent certified public accountants on
accounting principles or practices or on financial statement 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 1997
Annual Meeting of Shareholders (the "Proxy Statement"), to be filed with the
Securities and Exchange Commission pursuant to Rule 14a-6 under the Securities
Exchange Act of 1934, as amended, and is incorporated in this Item 10 by
reference. The information with respect to the executive officers of the Company
required to be
35
<PAGE>
<PAGE>
included pursuant to this Item 10 is included under the caption "Executive
Officers of Centennial" 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 captions "Executive
Compensation" and "Certain Relationships and Related Transactions" 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 and Class B 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
required to be included pursuant to this Item 12 will be included under the
captions "Principal Shareholders of the Company", "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 Company leases space for the MTSO serving the southwestern cluster
and space on an antenna tower in the southwestern cluster from Century for an
aggregate current annual rent of approximately $1,000 pursuant to an oral
month to month lease agreement. Further, the Company leases certain warehouse
space in Puerto Rico to Century-ML for a current annual rent of approximately
$23,000 pursuant to a written lease agreement. The Company leases and
shares capacity on the fiber optic cable television facility and network of
Century-ML for the purpose of operating as a competitive access provider. The
Company shares in the cost of construction, operation and maintenance of the
Century-ML fiber network on a pro rata basis based on the percentage of the
number of fibers of the network used by or reserved for the Company. During
fiscal 1997, the Company recorded a deferred asset and a related payable to an
affiliate in its consolidated balance sheet in the amount of $6 million to
reflect certain costs incurred by the Company to reimburse Century-ML for the
Company's share of the costs of constructing the fiber optic network. These
costs were incurred by the Company in order to secure the use of the fiber optic
network as required by the Facilities Agreement. (See Note 1 to the consolidated
financial statements.)
The Company is controlled by Century through its ownership of the
Company's Class B common Stock representing approximately 74% of the voting
power and approximately 32% of the equity of the Company as of August 8, 1997.
The Company and Century entered into a Services Agreement, effective August 30,
1996 (the "Services Agreement"), pursuant to which Century through its personnel
provides design, construction, management, operational, technical and
maintenance for the wireless telephone, paging and related systems owned and
operated by the Company. Such services also include providing all the services
necessary for the monitoring, to the extent possible, of the activities of the
limited partnerships in which the Company has the Investment Interests in such
manner as to protect the interests of the Company. Such services have
historically been provided to the Company by Century. As consideration for the
services
36
<PAGE>
<PAGE>
rendered and to be rendered under the Services Agreement, the Company
will pay Century the annual sum of $1 million and will reimburse Century for all
costs incurred by Century or its affiliates (excluding the Company and its
subsidiaries) that are directly attributable to the design, construction,
management, operation and maintenance of the Wireless Telephone Systems or to
the performance by Century of its other duties under the Services Agreement.
Additional 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 and Class B 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 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.
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:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report ............................. F-1
Consolidated Balance Sheets............................... F-2
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Common Stockholders'
Equity.................................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-8
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
Schedule I. Condensed Financial Information of Registrant
3. EXHIBITS
See Item 14(c) below.
(b) REPORTS ON FORM 8-K
The Company did not file a Report on Form 8-K during the fiscal quarter
ended May 31, 1997.
(c)EXHIBITS
37
<PAGE>
<PAGE>
The following documents are filed as part of this Annual Report on Form
10-K:
3.1 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 6(a)(i) to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended August 31, 1993 and incorporated herein by
reference).
3.2 By-laws of the Registrant as revised through February 11, 1992, (filed
as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year
ended May 31, 1992 and incorporated herein by reference).
4.1 Registration Rights Agreement, dated August 30, 1991, among the
Registrant, Century Holding and Citizens Utilities Company (filed as
Exhibit 4.2 to the 1991 Form S-1 and incorporated herein by reference,
said 1991 Form S-1 having been filed with the Commission on September
27, 1991).
4.2 Stock Transfer Agreement, dated August 30, 1991, among the Registrant,
Century Holding and Citizens Utilities Company (filed as Exhibit 4.3 to
Amendment No. 1 to the 1991 Form S-1 and incorporated herein by
reference, said Amendment No. 1 having been filed with the Commission on
October 7, 1991).
4.3 Senior Indenture, dated as of November 15, 1993, between the Registrant
and Bank of Montreal Trust Company, as Trustee, (filed as Exhibit 4.1 to
the Registrant's Current Report on Form 8-K dated November 15, 1993, and
incorporated herein by reference, said Current Report on Form 8-K having
been filed with the Commission on November 15, 1993).
4.4 First Supplemental Indenture, dated as of November 15, 1993, between the
Registrant and Bank of Montreal Trust Company, as Trustee, (filed as
Exhibit 4.2 to the Registrant's Current Report on Form 8-K dated
November 15, 1993, and incorporated herein by reference, said Current
Report on Form 8-K having been filed with the Commission on November 15,
1993).
4.5 Second Supplemental Indenture, dated as of May 11, 1995, between the
Registrant and Bank of Montreal Trust Company, as Trustee, (filed as
Exhibit 4.3(c) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995 and incorporated herein by reference).
4.6 $130,000,000 Credit Agreement, dated as of April 25, 1997, among
Centennial Puerto Rico Wireless Corporation, as Borrower, Citibank,
N.A., as Administrative Agent and CIBC Inc., Credit Lyonnais, New York
Branch and Societe Generale, New York Branch, as Co-Agents.
4.7 Amendement No. 1, dated as of April 22, 1997, between the Registrant and
Citibank, N.A., individually and as Administrative Agent.
10.1 Conflicts/Non-Compete Agreement among the Registrant, Century Holding,
Century and Citizens Utilities Company, dated as of August 30, 1991,
(filed as Exhibit 10.1 to
38
<PAGE>
<PAGE>
Amendment No. 1 to the 1991 Form S-1 and incorporated herein by
reference, said Amendment No. 1 having been filed with the Commission on
October 7, 1991).
10.2 Extension and Renewal Agreement, dated March 21, 1997, effective as of
August 30, 1996, between Century Cellular Holding Corp. and the
Registrant (filed as an exhibit to the Registrant's quarterly report on
Form 10-Q for the quarterly period ended February 28, 1997 and
incorporated herein by reference).
10.3 Conditional Buy-Sell Agreement for Cellular Markets 151-305 and Joint
Agreement, as amended, (filed as Exhibit 10.7 to the 1991 Form S-1 and
incorporated herein by reference, said 1991 Form S-1 having been filed
with the Commission on September 27, 1991).
*10.4 1991 Stock Option Plan, as amended, (filed as Exhibit 10.10 to the 1991
Form S-1 and incorporated herein by reference, said 1991 Form S-1 having
been filed with the Commission on September 27, 1991).
*10.5 Incentive Award Plan, as amended, (filed on Exhibit 10.11 to the 1991
Form S-1 and incorporated herein by reference, said 1991 Form S-1 having
been filed with the Commission on September 27, 1991).
*10.6 1991 Employee Stock Purchase Plan, as amended, (filed as Exhibit 10.8 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1994 and incorporated herein by reference).
*10.7 1993 Management Equity Incentive Plan, (filed as Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994 and incorporated herein by reference).
*10.8 1993 Non-Employee/Officer Directors' Stock Option Plan, (filed as
Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended May 31, 1994 and incorporated herein by reference).
*10.9 1991 Stock Equivalent Plan (filed as Exhibit 10.13 to the 1991 Form S-1
and incorporated herein by reference, said 1991 Form S-1 having been
filed with the Commission on September 27, 1991).
10.10 Agreement establishing Sacramento Valley Limited Partnership, as
amended, among PacTel Mobile Access, Roseville Telephone Co., Citizens
Utilities Company of California and Contel Mobilcom, Inc., (filed as
Exhibit 10.14 to the 1991 Form S-1 and incorporated herein by reference,
said 1991 Form S-1 having been filed with the Commission on September
27, 1991).
10.11 Agreement establishing GTE Mobilnet of San Francisco Limited
Partnership, as amended, (filed as Exhibit 10.15 to the 1991 Form S-1
and incorporated herein by reference, said 1991 Form S-1 having been
filed with the Commission on September 27, 1991).
39
<PAGE>
<PAGE>
*10.12 Employment Agreement dated as of January 1, 1994 between the
Registrant and Rudy J. Graf, (filed as Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994 and incorporated herein by reference).
*10.13 Employment Agreement dated as of January 1, 1994 between the
Registrant and Phillip Mayberry, (filed as Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1994 and incorporated herein by reference).
*10.14 Employment Agreement dated as of January 1, 1994 between the
Registrant and Thomas Cogar, (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1994 and incorporated herein by reference).
*10.15 Employment Agreement, dated as of September 1, 1995, between the
Registrant and Robert Braden (filed as Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996 and incorporated herein by reference).
'D'10.16 Facilities Agreement dated as of January 2, 1995 between Century ML
Cable Venture and Century-ML Cable Corporation.
'D'10.17 $50,000,000 Credit Agreement, dated as of September 12 ,1996, between
the Registrant and Citibank, N.A. (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1996 and incorporated herein by reference).
'D'11 Computation of loss per common share.
'D'12 Computation of ratios.
'D'21 Subsidiaries of the Registrant.
'D'23.1 Consent of Deloitte & Touche LLP.
'D'27 Financial Data Schedule.
- ----------------------------
* Constitutes a management contract or compensatory plan or arrangement.
'D' Filed herewith.
40
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Centennial Cellular Corp.
New Canaan, Connecticut
We have audited the accompanying consolidated balance sheets of
Centennial Cellular Corp. and Subsidiaries as of May 31, 1997 and 1996, and the
related consolidated statements of operations, common stockholders' equity and
cash flows for each of the three years in the period ended May 31, 1997. 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
misstatements. 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 Centennial Cellular Corp.
and Subsidiaries as of May 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
July 25, 1997
F-1
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
May 31,
-----------------------
1997 1996
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 43,415 $ 67,297
Accounts receivable, less allowance for doubtful
accounts of $2,130 and $1,471, respectively 29,991 20,210
Prepaid expenses and other current assets 4,836 2,158
-------- --------
TOTAL CURRENT ASSETS 78,242 89,665
PROPERTY, PLANT AND EQUIPMENT - net 177,292 91,417
EQUITY INVESTMENT IN WIRELESS SYSTEMS - net 94,153 100,204
DEBT ISSUANCE COSTS, less accumulated amortization
of $3,606 and $2,081, respectively 9,863 7,738
CELLULAR TELEPHONE LICENSES, less accumulated
amortization of $213,739 and $164,786, respectively 285,202 300,206
PERSONAL COMMUNICATIONS SERVICE LICENSE, less
accumulated amortization of $755 and 0, respectively 62,004 60,007
GOODWILL, less accumulated amortization of $23,185
and $19,343, respectively 130,065 133,907
OTHER ASSETS - net 8,029 2,668
-------- --------
TOTAL $844,850 $785,812
======== ========
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
May 31,
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,754 $ --
Accrued expenses and other current liabilities 61,056 26,132
Payable to affiliate 442 956
--------- ---------
TOTAL CURRENT LIABILITIES 63,252 27,088
LONG-TERM DEBT 429,000 350,000
DEFERRED LIABILITY 2,200 2,200
DEFERRED INCOME TAXES 43,977 56,588
COMMITMENTS AND CONTINGENCIES (Note 10)
PREFERRED STOCK:
Convertible redeemable preferred stock (at aggregate liquidation value which
approximates the fair market value), par value of $.01 per share, 102,187 shares
authorized, issued and outstanding shares (redemption value of
$1,823.00 per share) 186,287 182,813
Second series convertible redeemable preferred stock (at aggregate liquidation
value which approximates the fair market value), par value $.01 per share, 3,978
shares authorized, issued and outstanding shares (redemption value of
$1,823.00 per share) 7,252 7,117
Senior preferred stock, par value $.01 per share, dividend rate 14%,
250,000 shares authorized, none issued -- --
Additional preferred stock, par value $.01 per share,
10,000,000 shares authorized, 3,978 shares issued as second series
convertible redeemable preferred stock -- --
COMMON STOCKHOLDERS' EQUITY:
Common stock par value $.01 per share:
Class A, 1 vote per share, 100,000,000 shares authorized, issued
and outstanding 16,492,884 and 16,461,858 shares, respectively 165 165
Class B, 15 votes per share, 50,000,000 shares authorized,
issued and outstanding 10,544,113 shares 105 105
Additional paid-in capital 369,704 383,533
Accumulated deficit (252,291) (218,996)
--------- ---------
117,683 164,807
Less: Cost of 88,809 Class A common shares in treasury (1,801) (1,801)
Shareholder note receivable (3,000) (3,000)
--------- ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 112,882 160,006
--------- ---------
TOTAL $ 844,850 $ 785,812
========= =========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Service revenue $ 146,354 $ 105,461 $ 78,516
Equipment sales 2,858 2,649 4,135
Interest income 1,811 4,087 2,768
------------ ------------ ------------
151,023 112,197 85,419
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of services 22,216 15,291 12,808
Cost of equipment sold 16,012 10,838 9,344
Selling, general and administrative 55,132 34,188 26,055
Depreciation and amortization 83,720 70,989 65,642
------------ ------------ ------------
177,080 131,306 113,849
------------ ------------ ------------
OPERATING LOSS (26,057) (19,109) (28,430)
INTEREST EXPENSE 33,379 27,886 23,357
GAIN ON SALE OF ASSETS 3,819 8,310 --
INCOME FROM EQUITY INVESTMENTS 15,180 10,473 4,670
------------ ------------ ------------
LOSS BEFORE INCOME TAX BENEFIT
AND MINORITY INTEREST (40,437) (28,212) (47,117)
INCOME TAX BENEFIT (7,295) (11,596) (14,456)
------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST (33,142) (16,616) (32,661)
MINORITY INTEREST IN INCOME OF SUBSIDIARIES (153) (15) (69)
------------ ------------ ------------
NET LOSS $ (33,295) $ (16,631) $ (32,730)
============ ============ ============
DIVIDEND ON PREFERRED STOCK $ 15,948 $ 13,590 $ 12,634
============ ============ ============
LOSS APPLICABLE TO COMMON SHARES $ (49,243) $ (30,221) $ (45,364)
============ ============ ============
LOSS PER COMMON SHARE $ (1.83) $ (1.13) $ (1.93)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING DURING THE PERIOD 26,934,000 26,770,000 23,544,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
(Amounts In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
------------------------------
Class A Class B Additional
----------------------------- ---------------------------- Paid-In
Shares Dollars Shares Dollars Capital
------------ -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at June 1, 1994 $5,540,381 $ 55 7,271,802 $ 73 $ 198,526
Common Stock issued in
conjunction with
acquisitions 7,023,383 70 -- -- 122,029
Common Stock issued in
conjunction with
incentive plans 79,609 1 -- -- 159
Common Stock issued in
conjunction with
rights offering 3,098,379 31 3,272,311 32 86,715
Vesting of stock options -- -- -- -- 940
Net Loss -- -- -- -- --
Accretion in liquidation
value of preferred stock -- -- -- -- (12,634)
---------- ----------- ---------- ---------- -------
Balance at May 31, 1995 15,741,752 157 10,544,113 105 395,735
Common Stock issued in
conjunction with
incentive plans 493,441 5 -- -- 448
Common Stock issued in
conjunction with
acquisitions 226,665 3 -- -- --
Vesting of stock options -- -- -- -- 940
Net loss -- -- -- -- --
Accretion in liquidation
value of preferred stock -- -- -- -- (13,590)
---------- ----------- ---------- ----------- -----------
Balance at May 31, 1996 16,461,858 $ 165 10,544,113 $ 105 $ 383,533
Common Stock issued in
conjunction with
incentive plans 31,026 -- -- -- 132
Preferred stock dividends -- -- -- -- (15,948)
Income tax benefit-stock
options exercised -- -- -- -- 1,987
Net loss
---------- ----------- ---------- ----------- -----------
Balance at May 31, 1997 16,492,884 $ 165 10,544,113 $ 105 $ 369,704
========== =========== ========== =========== ===========
<CAPTION>
Shareholder
Treasury Note Accumulated
Stock Receivable Deficit Total
---------- ------------ -------------- ---------
<S> <C> <C> <C> <C>
Balance at June 1, 1994 $ (1,801) $ (3,075) $(169,635) $ 24,143
Common Stock issued in
conjunction with
acquisitions -- 75 -- 122,174
Common Stock issued in
conjunction with
incentive plans -- -- -- 160
Common Stock issued in
conjunction with
rights offering -- -- -- 86,778
Vesting of stock options -- -- -- 940
Net Loss -- -- (32,730) (32,730)
Accretion in liquidation
value of preferred stock -- -- -- (12,634)
--------- --------- --------- ---------
Balance at May 31, 1995 (1,801) (3,000) (202,365) 188,831
Common Stock issued in
conjunction with
incentive plans -- -- -- 453
Common Stock issued in
conjunction with
acquisitions -- -- -- 3
Vesting of stock options -- -- -- 940
Net loss -- -- (16,631) (16,631)
Accretion in liquidation
value of preferred stock -- -- -- (13,590)
--------- --------- --------- ---------
Balance at May 31, 1996 $ (1,801) $ (3,000) (218,996) $ 160,006
Common Stock issued in
conjunction with
incentive plans -- -- -- 132
Preferred stock dividends -- -- -- (15,948)
Income tax benefit-stock
options exercised -- -- -- 1,987
Net loss (33,295) (33,295)
--------- --------- --------- ---------
Balance at May 31, 1997 $ (1,801) $ (3,000) $(252,291) $ 112,882
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Cash received from subscribers and others $ 173,781 $ 130,196 $ 94,569
Cash paid to suppliers, employees and
governmental agencies (116,016) (73,694) (61,675)
Interest paid (30,809) (32,220) (22,504)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,956 24,282 10,390
--------- --------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 5,200 -- --
Capital expenditures (88,990) (38,082) (17,538)
Acquisition of other assets (629) (1,673) (1,167)
Acquisition/disposition and exchange of wireless telephone systems (34,908) 396 (49,173)
Acquisition of personal communications service license (2,752) (44,813) (11,069)
Distribution received from equity investments 6,863 6,870 2,896
Capital contributed to equity investments (2,878) (1,463) (3,783)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (118,094) (78,765) (79,834)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt 119,000 -- 100,000
Repayment of long-term debt (40,000) -- --
Debt issuance costs paid (3,650) (304) (4,414)
Dividends paid (8,226) -- --
Proceeds from issuance of Class A and B Common Stock and
treasury stock purchases 132 456 87,136
--------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 67,256 152 182,722
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (23,882) (54,331) 113,278
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 67,297 121,628 8,350
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 43,415 $ 67,297 $ 121,628
========= ========= =========
See notes to consolidated financial statements
F-6
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Amounts in thousands)
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------
1997 1996 1995
------------ ---------- ---------
<S> <C> <C> <C>
Reconciliation of net loss to net cash provided by
operating activities:
Net loss $(33,295) $(16,631) $(32,730)
-------- -------- --------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 83,720 70,989 65,642
Minority interest in income (loss) of subsidiaries 153 15 69
Deferred income tax - decrease (10,623) (13,000) (15,995)
Equity in undistributed earnings of investee companies (15,180) (10,473) (4,670)
Gain on sale on assets (3,819) (4,176) --
Other 1,925 (4,131) 570
Change in assets and liabilities net
of effects of acquired/exchanged wireless telephone
systems:
Accounts receivable - (increase) (3,393) (4,689) (5,318)
Prepaid expenses and other current assets -
(increase)/decrease (2,614) (511) 70
Accounts payable and accrued expenses -
increase 7,337 4,902 1,448
Customer deposits and prepayments -
increase 2,745 1,987 1,304
-------- -------- --------
Total adjustments 60,251 40,913 43,120
-------- -------- --------
Net cash provided by operating activities $ 26,956 $ 24,282 $ 10,390
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-7
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995
(Amounts in thousands, except subscriber and share data)
1. SIGNIFICANT ACCOUNTING POLICIES
Description of business - Centennial Cellular Corp. ("Centennial" and
together with its subsidiaries and partnership interests, the "Company")
operates wireless telephone systems which produce high quality, high capacity
communications to and from vehicle-installed, ready-to-carry and hand-held
wireless telephones ("wireless telephones"). Wireless telephone systems are
designed to allow for mobility of the subscriber. In addition to mobility,
wireless telephone systems provide access through system interconnections to
local and long distance telecommunications networks and offer other ancillary
services such as voice mail, call waiting, call forwarding and conference
calling. These communications services can be integrated with a variety of
competing networks. Wireless telephone service is provided to subscribers
through a variety of price plans, the most common being a monthly fixed charge
plus additional variable charges per minute of airtime used.
The Company operates and invests in wireless telephone systems in the
United States (the "Domestic Wireless Telephone Systems" or "Domestic Wireless")
and on December 12, 1996 the Company began providing wireless telephone service
in Puerto Rico (the "Puerto Rico Wireless Telephone System" or "Puerto Rico
Wireless"). The Company operates its Domestic Wireless Telephone Systems
pursuant to 29 cellular licenses which it owns. The Company operates its Puerto
Rico Wireless Telephone System pursuant to a Major Trading Area ("MTA") Personal
Communications Service ("PCS") license to provide broadband PCS in the
Commonwealth of Puerto Rico and the U.S. Virgin Islands. The Company also plans
to participate in the alternative access business in Puerto Rico.
Principles of consolidation - The consolidated financial statements
include the accounts of the Company and all of its subsidiaries and partnership
interests from their respective incorporation or acquisition dates. All material
intercompany transactions and balances have been eliminated.
Property, plant and equipment - Property, plant and equipment is stated
at cost. Depreciation is computed by the straight-line method over the estimated
useful lives of the assets:
Wireless telephone transmission and distribution systems
and related equipment 10 years
Miscellaneous equipment and furniture and fixtures. 5-15 years
Cellular telephone and PCS Licenses - Licenses consist of amounts
allocated under purchase accounting from the purchase price of acquired assets.
Cellular telephone licenses are amortized over a ten-year life using the
straight-line method. The PCS license is being amortized over a forty-year life
using the straight line method commencing with the date of operations, December
12, 1996 (See Valuation of long lived assets). During the fiscal years ended
May 31, 1997 and 1996, the Company capitalized interest costs of $2,752 and
$5,200, respectively, related to the acquisition of the PCS license.
Equity investments in cellular 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. The difference
between the cost of such investment and the underlying book value of $123,024 is
amortized over ten years (See Note 6).
Goodwill - The excess of purchase price over the estimated fair value of
tangible and intangible net assets acquired is being amortized using the
straight-line method over 40 years (See Valuation of long lived assets).
Other Assets - Included in other assets at May 31, 1997 is a $6,000
deferred charge, net of accumulated amortization of $110, which represent
certain costs incurred by the Company in relation to the Facilities Agreement
with Century-ML dated January 2, 1995 (the "Facilities Agreement") (See Note 8
"Transactions with Affiliated Companies").
F-8
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995
(Amounts in thousands, except subscriber and share data)
These costs are being amortized over the life of the Facilities Agreement (25
years).
Income taxes - The Company accounts for income taxes in accordance with
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 - Loss per common share is calculated on a fully
diluted basis and includes 0, 0, and 507,141 shares of common stock equivalents
for the years ended May 31, 1997, 1996 and 1995, respectively.
Revenue recognition - Wireless telephone service income includes earned
subscriber service revenues and charges for installations and connections, net
of land line charges of $ $28,049, $20,000, and $15,030 in 1997, 1996 and 1995,
respectively. Subscriber services paid in advance are recognized as income when
earned.
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
valuation considers current market values of wireless 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 the
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.
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.
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. The
carrying amounts of the Company's credit facilities approximate their fair
values because of their variable interest rates.
Statement of cash flows - Short-term investments classified as cash
equivalents in the consolidated financial statements consist principally of
overnight deposits and commerical paper with acquired maturities of three months
or less.
Reclassifications - Certain prior year balances have been reclassified
to conform with the current year presentation.
New Accounting pronouncements - In 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", which is effective for financial statements ending after
December 15, 1997. This statement supersedes Accounting Principles Board Opinion
No. 15 and replaces the presentation of primary Earnings Per Share ("EPS") on
the face of the statement of operations for all entities with complex capital
structures, and provides guidance on other computational changes. Had the
provisions of the statement been effective for the current year, the following
proforma EPS amounts would have been disclosed:
1997 1996 1995
---- ---- ----
Basic Loss Per Share $ (1.83) $ (1.13) $ (1.97)
======== ======== ========
F-9
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995
(Amounts in thousands, except subscriber and share data)
No disclosures of Diluted EPS would be required due to the anti-dilutive
effect of the Company's equity instruments.
The Financial Accounting Standards Board issued 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 June 1997." The Company believes these
statements will not have a material impact on the Consolidated Financial
Statements of the Company when adopted in fiscal 1998.
Other
The Company adopted the provisions of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" effective June 1, 1994. Under
SFAS 115, the Company must classify its debt and marketable securities in one of
three categories: trading, available-for-sale, or held-to-maturity. The Company
has classified equity securities as "Available for Sale". Securities available
for sale are stated at fair value with unrealized gains and losses excluded from
earnings and reported as a separate component of stockholders' equity.
2. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In connection with the completion of the acquisitions made during the
years ended May 31, 1996 and 1995, the Company recorded approximately $9,120,
and $30,920, respectively, in goodwill and in deferred income taxes, resulting
from differences between the book and tax basis of certain assets acquired (See
Note 3).
During the year ended May 31, 1996, the Company reclassified $2,774 of
property, plant and equipment, $2,801 of goodwill, $160 of other assets, $476 of
accounts receivable and $672 of accounts payable to cellular telephone license
as a result of the exchange of cellular markets described at Note 3.
3. ACQUISITIONS/EXCHANGES/SALE
During the three years ended May 31, 1997, the Company
acquired/exchanged/sold the net assets and interests in wireless telephone and
PCS licenses as follows:
<TABLE>
<CAPTION>
Amounts allocated to
-------------------------------------
Number of Cellular
Year Ended systems (net) Total net telephone and PCS Property, plant
May 31 acquired/exchanged/sold purchase price licenses and equipment
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1 $ 34,908 $ 33,429 $ 1,234
1996 (1) $ (1,296) $ 8,517 $ (5,048)
1995 11 $ 228,532 $ 214,088 $ 11,658
</TABLE>
These transactions have been included in the accompanying consolidated
financial statements from the respective dates of acquisition. The Company has
recorded the purchase price of the cellular telephone systems at the fair value
of acquired assets on the date of acquisition with the excess purchase price
being recorded as cellular telephone licenses and goodwill.
The Company was the successful bidder for one of two MTA licenses
(granted June 23, 1995) to provide broadband PCS services in the Commonwealth of
Puerto Rico and the U.S. Virgin Islands. The licensed area represents
approximately 3,600,000 Net Pops. The amount of the final bid submitted and paid
by the Company was $54,672. The Company used a
F-10
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995
(Amounts in thousands, except subscriber and share data)
portion of the net proceeds from the sale of the 10 1/8% Senior Notes due 2005
to pay a portion of the purchase price for the license (See Note 7).
The Company also plans to participate in the alternative access business
in Puerto Rico pursuant to FCC requirements for interstate service and pursuant
to an authorization issued to the Company in December, 1994 by the Public
Service Commission of the Commonwealth of Puerto Rico for intrastate service.
On September 12, 1996, the Company acquired, for approximately $34,908
in cash, 100% of the ownership interests in the partnership owning the wireless
telephone system serving the Benton Harbor, Michigan MSA. The Benton Harbor
market represents approximately 161,400 Net Pops. Approximately $33,429 of the
purchase price was allocated to cellular telephone license.
On October 31, 1995, the Company acquired (i) a 94.3% interest in the
wirelessnon-wireline cellular telephone system serving the Lafayette, Louisiana
MSA, representing approximately 205,700 Net Pops, in exchange for the Company's
wirelessnon-wireline cellular telephone system serving the Jonesboro, Arkansas
RSA (comprising approximately 205,000 Net Pops), the license rights and assets
located in and covering Desoto and Red River Parishes of Louisiana 3 RSA
(comprising approximately 34,700 Net Pops), the license rights and assets
located in and covering a section of Morehouse Parish of Louisiana 2 RSA
(comprising approximately 24,100 Net Pops) and a cash payment by the Company of
approximately $5,580, subject to adjustment, and (ii) an additional 14.3%
minority interest in the Elkhart, Indiana RSA and an additional 12.7% minority
interest in the Lake Charles, Louisiana MSA for a cash payment of approximately
$2,951.
On June 30, 1995, the Company acquired the wireless telephone
systems serving (a) Newtown, LaPorte, Starke, Pulaski, Jasper and White,
Indiana, (b) Kosciusko, Noble, Steuben and Lagrange, Indiana (c) Williams,
Defiance, Henry and Paulding, Ohio and (d) Copiah, Simpson, Lawrence, Jefferson
Davis, Walthall and Marion, Mississippi, representing an aggregate of
approximately 608,100 Net Pops. The above-described systems were acquired by the
Company in exchange for the Company's wirelessnon-wireline cellular telephone
systems serving the Roanoke, Virginia MSA, the Lynchburg, Virginia MSA, North
Carolina RSA #3 and Iowa RSA #5, representing an aggregate of approximately
644,000 Net Pops. Simultaneously with the consummation of the transaction
described above, the Company sold its 72.2% interest in the wireless
telephone system serving the Charlottesville, Virginia MSA, representing
an aggregate of approximately 94,700 Net Pops, for a cash purchase price of
approximately $9,914, subject to adjustment. The Company recognized a gain of
approximately $4,176 as a result of the sale.
During the year ended May 31, 1995, the Company completed ten wireless
telephone system acquisitions for a total purchase price of $173,860
consisting of $51,761 in cash (including the assumption of acquired current
liabilities) and 7,023,383 shares of Class A Common Stock valued at $122,099.
The Company purchased one PCS license for $54,672. An additional 226,665 shares
of Class A Common Stock were issued during fiscal 1996 to satisfy a post closing
adjustment to the purchase price of one of the acquisitions completed during the
year ended May 31, 1995.
F-11
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
4. PRO FORMA INFORMATION
The summary pro forma information includes the operations of the Company
and completed acquisitions in each case as if such acquisitions/exchanges/sales
had been consummated as of June 1, 1994.
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------
(Unaudited)
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Revenues $ 152,293 $ 116,081 $ 92,629
Net Loss $ (32,255) $ (18,891) $ (31,498)
Loss per common share $ (1.79) $ (1.21) $ (1.87)
</TABLE>
Pro forma loss per common share for the years ended May 31, 1997, 1996
and 1995 is calculated on a fully diluted basis using the pro forma average
number of common shares outstanding during the period, including common stock
equivalents.
5. ACCOUNT ANALYSIS
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
May 31,
-----------------------
1997 1996
---------- ---------
<S> <C> <C>
Land $ 1,752 $ 1,606
Wireless telephone transmission and distribution systems
and related equipment 198,324 107,675
Miscellaneous equipment and furniture and fixture 15,627 7,606
--------- ---------
215,703 116,887
Less accumulated depreciation (38,411) (25,470)
--------- ---------
$ 177,292 $ 91,417
========= =========
</TABLE>
Depreciation expense was approximately $17,684, $8,851, and $6,889 for
the years ended May 31, 1997, 1996 and 1995, respectively. Approximately $4,743
of accumulated depreciation was written off as a result of the sale of equipment
during the year ended May 31, 1997.
Accrued expenses and other current liabilities consists of the following:
<TABLE>
<CAPTION>
May 31,
-------------------
1997 1996
------- -------
<S> <C> <C>
Accrued interest payable $ 3,482 $ 2,299
Customer deposits & prepayments 7,727 4,961
Accrued roamer service 4,247 3,746
Accrued dividend on preferred Stock 4,113 --
Accrued fiber buildout 6,000 --
Accrued unpaid invoices 9,620 --
Accrued miscellaneous 25,867 15,126
------- -------
Total $61,056 $26,132
======= =======
</TABLE>
F-12
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
6. EQUITY INVESTMENT IN WIRELESS SYSTEMS
In conjunction with the Jonesboro/Lafayette systems exchange, the
Company acquired an additional 12.7% minority interest in the Lake Charles,
Louisiana MSA for a cash payment of approximately $1,106.
The following summarizes the assets, liabilities and partners' capital,
and results of operations of the seven wireless partnerships in which the
Company's investments are accounted for by the equity method. All amounts have
been derived from the individual wireless partnerships' financial statements
through December 31, 1996 and adjusted for interim financial activity from the
wireless partnerships' calendar year end to the Company's fiscal year end.
<TABLE>
<CAPTION>
May 31,
----------------------
1997 1996
--------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current $117,062 $ 93,533
Noncurrent 481,308 414,182
-------- --------
$598,370 $507,715
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities $ 58,659 $ 65,944
Noncurrent liabilities 2,936 3,320
Partners' capital 536,775 438,451
-------- --------
$598,370 $507,715
======== ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended May 31,
------------------
1997 1996 1995
--------- -------- ---------
(unaudited)
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Revenues $ 520,873 $ 455,392 $ 347,731
Costs and expenses 386,397 331,822 275,903
Other (income) expense (120) (604) (1,217)
Net income $ 134,596 $ 124,174 $ 73,045
========= ========= =========
Centennial Cellular Corp. share of
partnership net income $ 15,180 $ 10,473 $ 4,670
========= ========= =========
</TABLE>
The following presents the Company's ownership percentage of the
Wireless Partnerships in which the Company's investments are accounted for by
the equity method as of May 31, 1997:
Wireless Partnership % ownership
--------------------- -----------
Lake Charles CellTel Co. 25.1%
Sacramento-Valley Limited Partnership 23.5%
Modoc RSA Limited Partnership 25.0%
Coconino, Arizona RSA Limited Partnership 21.3%
Cal-One Cellular Limited Partnership 6.9%
Pennsylvania RSA-6 (I) and (II) Limited Partnership 14.3%
GTE Mobilnet of California Limited Partnership 2.9%
F-13
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
The Company uses the equity method of accounting to record the
investments in partnerships. Under the equity method, the partnership
investments were initially recorded at cost and are adjusted for distributions
received from the partnerships, additional capital contributions, and the
Company's share of the partnership's results of operations.
An analysis of the Company's consolidated investments is as follows:
<TABLE>
<S> <C>
Investment in Partnerships at June 1, 1994 $112,876
Add: Additional capital contributions paid 3,783
Company's share of Partnerships' net income 4,670
Additional investments in Partnerships 37
Less: Amortization of Investment - cost in excess of underlying
book value (12,190)
Partnerships' distributions to the Company (2,896)
-------
Investment in Partnerships at May 31, 1995 106,280
Add: Additional capital contributions paid 1,463
Company's share of Partnerships' net income 10,473
Additional investment in Partnerships 1,105
Less: Amortization of Investment - cost in excess of underlying
book value (12,247)
Partnerships' distribution to the Company (6,870)
-------
Investment in Partnerships at May 31, 1996 100,204
Add: Additional capital contributions paid 2,878
Company's share of Partnerships' net income 15,180
Less: Amortization of Investment - cost in excess of underlying
book value (12,290)
Partnerships' distributions to the Company, including receivable of $4,956 (11,819)
-------
Investment in Partnerships at May 31, 1997 $94,153
=======
</TABLE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
May 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
8 7/8% Senior Notes due 2001 $250,000 $250,000
10 1/8% Senior Notes due 2005 100,000 100,000
Amended Credit Facility, Domestic 5,000 --
Puerto Rico Credit Facility 74,000 --
Current maturities -- --
-------- --------
$429,000 $350,000
======== ========
</TABLE>
On November 15, 1993, the Company issued $250,000 of eight-year
unsecured Senior Notes (the "8 7/8% Notes"). The interest on the 8 7/8% Notes is
payable semi-annually at an interest rate of 8 7/8%. The interest will be
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 the Company, 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:
Year Percentage
---- ----------
1999 105.25%
2000 103.50%
2001 101.75%
F-14
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
The proceeds of the 8 7/8% Notes were used to retire all outstanding
bank debt. At November 15, 1993, the amount was $182,700. Costs associated with
the bond offering of $4,898 were capitalized and are being amortized on a
straight-line basis over the life of the issue. At May 31, 1997 and 1996, the 8
7/8% Notes were trading at 99.47% and 93.74% of par or $248,675 and $234,350,
respectively.
On May 11, 1995, the Company 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 the Company'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 of approximately $4,614 were capitalized and will be amortized on a
straight line basis over the life of the issue. At May 31, 1997 and 1996, the
notes were trading at 104.25% and 98.72% of par or $104,250 and $98,720,
respectively.
Both the 8 7/8% and 10 1/8% Notes restrict the Company from directly or
indirectly declaring or paying any dividends on its presently or subsequently
issued common stock, limit the ability of the Company to incur additional
indebtedness and limit any distributions of assets to its stockholders. At May
31, 1997, the Company was in compliance with all covenants of the Notes.
The Company entered into a $50,000 credit facility with Citibank, N.A.
on September 12, 1996, which was amended April 22, 1997 (the "Amended Credit
Facility"). The commitment of the lenders under such Amended Credit Facility may
be increased to $90,000 at the election of the lenders. As of July 30, 1997 the
commitment was increased to $75,000. The Amended Credit Facility terminates on
January 31, 2001. Approximately $35,000 of the Amended Credit Facility was used
to fund the Benton Harbor, Michigan wireless telephone system acquisition (see
"Acquisitions, Exchanges and Dispositions"), and has since been repaid. The
facility may be used for working capital and general corporate purposes. Costs
associated with the establishment of the Amended Credit Facility of
approximately $648 were capitalized and are being amortized on a straight-line
basis over one and a half years. The interest rate payable on borrowings under
the Amended Credit Facility is based, at the election of the Company, on (a) the
Base Rate, as defined, plus a margin of 2% or (b) the Eurodollar Base Rate, as
defined, plus a margin of 3%. The Amended Credit Facility is secured by the
pledge of the stock of certain of the Company's subsidiaries not otherwise
subject to restrictions under its Senior Note Indentures, including the
subsidiary which operates the Benton Harbor system. The Amended Credit Facility
is further guaranteed by certain subsidiaries holding Investment Interests. The
Amended Credit Facility restricts the incurrence of certain additional debt by
the Company and limits the Company's ability to pay dividends. As of May 31,
1997, $5,000 was outstanding under the Amended Credit Facility. The Company was
in compliance with the covenants of the Amended Credit Facility at May 31, 1997.
On April 25, 1997, Centennial Puerto Rico Wireless Corporation , a
wholly owned subsidiary of the Company ("CPRW"), entered into a four-year
$130,000 revolving Credit Facility with Citibank, N.A. which converts into a
four-year term loan on April 25, 2001 (the "Puerto Rico Credit Facility"). The
proceeds from the Puerto Rico Credit Facility will be used by CPRW and its
direct and indirect subsidiaries primarily to finance the construction and
operation of PCS, competitive access and telecommunications networks in Puerto
Rico and the United States Virgin Islands. The proceeds will also be used by
CPRW for working capital and general corporate purposes and was used to pay
certain cash dividends to the Company as permitted by the Puerto Rico Credit
Facility. Costs associated with the establishment of the Puerto Rico Credit
Facility of approximately $3,002 were capitalized and are being amortized on a
straight-line basis over four years. The interest rate payable on borrowings
under the Puerto Rico Credit Facility is based on, at the election of CPRW, (a)
the "Base Rate", as defined, plus a margin of 1.50% or (b) the "Eurodollar
Rate", as defined, plus a margin of 2.50%, adjusted for the maintenance of
certain specified leverage ratios, as applicable. The Puerto Rico Credit
Facility, which is non-recourse to the Company, is secured by substantially all
of the assets of CPRW and its direct and indirect subsidiaries and requires CPRW
to
F-15
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
meet and maintain certain financial and operating covenants, including the
maintenance of certain minimum annualized cash flows (as defined), the
maintenance of certain ratios of operating cash flow to debt service and total
outstanding debt to operating cash flow and performance requirements including
minimum subscriber levels. The Puerto Rico Credit Facility restricts the use of
borrowing, limits the incurrence of certain additional indebtedness by CPRW and
limits CPRW's ability to declare and pay dividends to the Company and management
fees to affiliates. Failure to satisfy such covenants would constitute a default
under the Puerto Rico Credit Facility in which event Citibank, N.A. could
accelerate all amounts outstanding thereunder, and exercise certain other rights
and remedies as a secured creditor. At May 31, 1997, $74,000 was outstanding
under the Puerto Rico Credit Facility.
8. TRANSACTIONS WITH AFFILIATED COMPANIES
The Company and Century Communications Corp. ("Century"), owner of
approximately 32% of Centennial's common stock, currently maintain combined
workers compensation and general group health, life, property, casualty and
other insurance policies. The premiums are allocated between the Company and
Century based upon the actual cost of each respective company's coverage. The
Company believes that the amounts payable by the Company under such arrangement
are more favorable than the premiums the Company would pay if it were to obtain
coverage under a separate policy. The Company's cost of such insurance was
approximately $727, $1,688, and $1,160 for the fiscal years ended May 31,
1997, 1996 and 1995 respectively, all of which was paid in full during the
current fiscal year. In fiscal years 1996 and 1995 the Company and Century also
maintained combined group health, life and casualty coverage.
The Company is controlled by Century through its ownership of the
Company's Class B Common Stock representing approximately 74% of the voting
power and approximately 32% of the equity of the Company. The Company and
Century entered into a Services Agreement, effective August 30, 1996
(the "Services Agreement"), pursuant to which Century, through its
personnel, provides design, construction, management, operational, technical and
maintenance for the wireless telephone, paging and related systems owned and
operated by the Company. Such services also include providing all the services
necessary for the monitoring, to the extent possible, of the activities of the
limited partnerships in which the Company has Investment Interests in such
manner as to protect the interests of the Company. Such services have
historically been provided to the Company by Century. As consideration for the
services rendered and to be rendered under the Services Agreement, the Company
will pay Century the annual sum of $1,000 and will reimburse Century for all
costs incurred by Century or its affiliates (excluding the Company and its
subsidiaries) that are directly attributable to the design, construction,
management, operation and maintenance of the wireless telephone systems or to
the performance by Century of its other duties under the Services Agreement.
For the year ended May 31, 1997, the Company has recorded expenses of $750 under
the Services Agreement. Such amount is recorded within Accrued Expenses on the
Company's consolidated balance sheet at May 31, 1997.
The Company leases space for the mobile telephone switching office
("MTSO") serving the southwestern cluster and space on an antenna tower in the
southwestern cluster from Century for an aggregate current annual rent of
approximately $1 pursuant to an oral month to month lease agreement. Further,
the Company leases certain warehouse space in Puerto Rico to Century-ML for a
current annual rent of approximately $23 pursuant to a written lease agreement.
The Company leases and shares capacity on the fiber optic cable television
facility and network of Century-ML for the purpose of operating as a competitive
access provider. The Company shares in the cost of construction, operation and
maintenance of the Century-ML fiber network on a pro rata basis based on the
percentage of the number of fibers of the network used by or reserved for the
Company.
During fiscal 1997, the Company recorded a deferred asset and related
payable to an affiliate in its consolidated balance sheet in the amount of
$6,000 for the Company's share of the costs of constructing the fiber optic
network of
F-16
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
Century ML. These costs were incurred by the Company in order to secure the use
of the fiber optic network as required by the Facilities Agreement (See Note 1).
Leavy Rosensweig & Hyman, of which David Z. Rosensweig, a director and
Secretary of the Company, is a member, serves as general counsel to the Company
and Century. The Company paid approximately $656, $518, and $757 for legal
services to Leavy, Rosensweig & Hyman for the fiscal years ended May 31, 1997,
1996, and 1995, respectively.
9. INCOME TAXES
The provision (benefit) for income taxes are summarized as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
---------------------------------
1997 1996 1995
-------- --------- -------
<S> <C> <C> <C>
Current (State) $ 3,328 $ 1,404 $ 1,539
Deferred (Federal and State) (10,623) (13,000) (15,995)
-------- -------- --------
$ (7,295) $(11,596) $(14,456)
======== ======== ========
</TABLE>
Deferred income taxes result primarily from non-deductible depreciation
and amortization resulting from book and tax basis differences of acquired
subsidiaries.
The effective income tax rate of the Company differs from the statutory
rate as a result of the following items:
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
Computed tax benefit at federal statutory rate
on the loss before income taxes and minority
interest $(14,153) $ (9,874) $(16,491)
Non-deductible amortization resulting from
acquired subsidiaries 1,346 1,253 1,481
Minority interest in subsidiary (income) (54) (5) (24)
State and local income tax provision (benefit),
net of federal income tax benefit (569) (199) 578
Non recognized benefit of loss of Puerto Rico subsidiary 926 -- --
Other, including the utilization of accumulated net
operating losses and establishment of valuation allowance for certain
net operating losses 5,209 (2,771) --
----- ------
$ (7,295) $(11,596) $(14,456)
======== ======== ========
</TABLE>
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,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
---------------------
Tax loss carryforward $ 44,839 $ 38,186
Other 461 --
Valuation allowance (11,758) (6,873)
-------- --------
$ 33,542 $ 31,313
======== ========
Deferred Tax Liabilities:
-------------------------
Amortization of intangible assets $ 58,442 $ 77,879
Depreciation of fixed assets 19,077 10,022
-------- --------
$ 77,519 $ 87,901
======== ========
Net deferred tax liabilities $ 43,977 $ 56,588
======== ========
</TABLE>
The valuation allowance recorded at May 31, 1997 and 1996 represents the
portion of recorded tax loss
F-17
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
carryforwards for which it is more likely than not that the benefit of such
carryforwards will not be realized.
The net deferred tax liabilities at May 31, 1997 and 1996 of $43,977 and
$56,588, respectively, have been classified as deferred income taxes on the
consolidated balance sheet.
At May 31, 1997, the Company and its subsidiaries had approximately
$105,372 of net operating loss carryforwards for federal income tax purposes,
expiring through May 31, 2012 some of which are subject to limitation on their
future utilization under Section 382 of the Internal Revenue Code of 1986.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
There are no material legal proceedings, other than routine litigation
incidental to the business, to which the Company or any of its subsidiaries is a
party to or which any of their property is subject.
Registration Statements
The Company filed a shelf registration statement with the SEC for up to
8,000,000 shares of its Class A Common Stock that may be offered from time to
time in connection with acquisitions. The registration statement became
effective July 14, 1994. As of August 8, 1997, 4,239,231 shares remain
available for future acquisitions.
On April 5, 1995, the Company filed a shelf registration statement with
the SEC for the issuance of $500,000 of the Company's debt securities. The debt
securities may be issued from time to time in series on terms to be specified in
one or more prospectus 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 8, 1997,
$400,000 of debt securities remains available for issuance.
Pending Acquisitions
The Company plans to exercise its right to acquire the minority
interests held by Century Federal Inc., an affiliate of Century ("Century
Federal"), in the Cass and Jackson, Michigan systems for the prices paid by
Century Federal for such minority interests in the acquisitions of such systems
($2,000 and $1,000, respectively). Upon completion of these transactions, the
Company will own 100% of these systems.
On December 21, 1994, the Company announced that its Board of Directors
authorized the repurchase in the open market and in privately negotiated
transactions, from time to time, of up to 1,000,000, shares of Class A Common
Stock, depending on prevailing market conditions. Subsequent to May 31, 1997 the
Company purchased 244,000 shares of its own class A Common Stock in the open
market for a purchase price of $3,902. These shares have been accounted for as
Treasury Shares in fiscal 1998. Subsequent to May 31, 1997, the Company
announced that its Board of Directors authorized the repurchase in the open
market and in privately negotiated transactions of up to an additional 3,000,000
shares of its Class A Common Stock, depending on prevailing market conditions.
F-18
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
Equity Investments in Wireless Telephone Systems
The Company has determined to pursue a strategy to sell or otherwise
dispose of its minority equity investments in wireless telephone systems
representing approximately 1,100,000 Net Pops. The Company has not yet made a
final determination as to the estimated sale proceeds or the timing of such
disposition and believes that the fair market value exceeds the net book value
of the recorded assets at May 31, 1997.
Lease Commitments
The Company's annual lease obligations and expenses under operating
leases were approximately $4,230, $2,023, and $1,642 for each of the years
ended May 31, 1997, 1996 and 1995, respectively. The majority of these operating
leases are short-term in nature and may be canceled by either party if
appropriate notice is given.
11. PREFERRED STOCK AND COMMON STOCK
Common Stock
The voting rights with respect to the two classes of the Company's
common stock are as follows: Class A shares entitle the holder to one vote per
share, Class B shares entitle the holder to fifteen votes per share.
Shares of Class B common stock are convertible into shares of Class A
common stock on a one-for-one basis.
The Company is restricted from paying dividends on its common stock by
its debt covenants (see Note 7).
Preferred Stock
On August 30, 1991, the Company completed a merger (the "Merger") with
Citizens Cellular Company, a wholly-owned subsidiary of Citizens ("Citizens
Cellular"). In connection with the Merger, the Company issued the Convertible
Redeemable Preferred Stock valued at $128,450 and 1,367,099 shares of Class B
Common Stock representing 18.8% of the then common equity. The Convertible
Redeemable Preferred Stock is convertible on or after the third anniversary from
the date of issuance into 2,972,335 shares of Class A or B Common Stock.
Although the Convertible Redeemable Preferred Stock carrieds no cash dividend
requirement during the first five years through August 31, 1996, the shares
accreted liquidation preference and redemption value at the rate of 7.5% per
annum, compounded quarterly, until then. The fully accreted liquidation
preference and redemption value of such preferred stock at August 31,1996 was
$186,287. The accretion for the years ended May 31, 1997, 1996, and 1995 and
1994 totaled approximately $3,475, $13,080, and $12,161, respectively. Beginning
September 1, 1996, the holders of the Convertible Redeemable Preferred Stock
were entitled to receive cash dividends at the rate of 8.5% per annum.
In connection with an amendment to the New Services Agreement, which was
entered into in connection with the Merger, the Company issued to Century the
Second Series Convertible Redeemable Preferred Stock valued at $5,000. The
Second Series Convertible Redeemable Preferred Stock has terms identical to
those of the Convertible Redeemable Preferred stock discussed above. The fully
accreted liquidation preference and redemption value of such preferred stock at
August 31, 1996 was $7,252. The accretion for the years ended May 31, 1997,
1996, and 1995 totaled approximately $135, $510 and, $473, respectively.
F-19
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
Assuming no change in the number of shares of such classes outstanding,
the annual dividend payments, commencing in fiscal 1997, to be made with respect
to the preferred stock, if and when declared by the Company's Board of
Directors, will be $15,834 and $616, respectively. Both classes of preferred
stock are subject to mandatory redemption in fiscal 2007. Any unpaid dividends
continue to accumulate without additional cost to the Company. On December 19,
1996 and May 8, 1997 the Company paid quarterly cash dividends to Citizens and
Century of $3,959 and $154, respectively. The Company will determine, from time
to time, the timing, amount, or distribution (if any) of additional preferred
stock dividends.
Grant of Stock Options
In connection with the Merger, 38 stock options issued by Citizens
Cellular were converted into options to purchase 276,328 shares of Class A
Common Stock at an option price of $.01 per share. Such options, all
non-qualified, were issued at $.01 per share, and vest in equal amounts, on a
cumulative basis, over a period of five years. The difference between the
estimated fair market value of the stock at the date of grant of $17 over the
option price was recorded as a purchase price adjustment.
On May 24, 1991 and August 30, 1991, the Company awarded options to
purchase 396,313 and 1,817 shares, respectively, of Class A Common Stock to
directors, officers and employees. A total of twenty-six people were included in
the grant. Such options, all non-qualified, were issued at $.01 per share, and
vest in equal amounts, on a cumulative basis, over a period of five years. As of
May 31, 1997 and 1996 none of these options were outstanding.
Rights Offering
On July 22, 1994, the Company successfully completed a rights offering
involving the distribution to holders of record of its Class A Common Stock
outstanding on July 7, 1994 (the "Record Date") transferable subscription rights
(the "Rights") to subscribe for and purchase an aggregate of 3,098,379
additional shares of Class A Common Stock based on 6,887,287 shares of Class A
Common Stock outstanding on the Record Date for a subscription price of $14.00
per share. Record date stockholders received 0.45 right for each share of Class
A Common Stock owned by them and were entitled to purchase one share of Class A
Common Stock for each full right held. Holders of Rights purchased an aggregate
of 2,988,478 of the 3,098,379 shares of Class A Common Stock available for
purchase pursuant to the basic subscription privilege. The balance of 109,901
shares of Class A Common Stock were sold pursuant to the oversubscription
privilege and were distributed pro rata among the holders of Rights who
requested an aggregate of 235,746 additional shares pursuant to the
oversubscription privilege. Lehman Brothers Inc. acted as dealer manager for the
rights offering.
The Company also distributed to Century and Citizens Cellular, the
holders of record of all of the shares of Class B Common Stock outstanding as of
the Record Date, nontransferable subscription rights (the "Class B Rights") to
subscribe for and purchase an aggregate of approximately 3,272,311 additional
shares of Class B Common Stock. Century and Citizens Cellular each exercised all
of the Class B Rights distributed to them. Each share of Class B Common Stock is
convertible into one share of Class A Common Stock at any time at the option of
the holder. The net proceeds of approximately $86,500 from the rights offering
(after deducting soliciting fees and expenses of approximately $2,700) are
available to be used by the Company for general corporate purposes, including
the financing of capital expenditures and acquisitions.
F-20
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
12. COMPENSATION PLANS AND ARRANGEMENTS
1991 Employee Stock Option Plan
The Company's 1991 Employee Stock Option Plan (the "Employee Stock
Option Plan") as amended, provides for the grant of options to purchase up to
2,025,000 shares of Class A Common Stock reserved thereunder to directors,
officers and other key employees of the Company. The Employee Stock Option Plan
permits the issuance of "incentive stock options," as defined in Section 422A of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as
non-qualified stock options and stock appreciation rights. The Employee Stock
Option Plan is administered by the Employee Stock Option Committee of the Board
of Directors which determines the recipients and provisions of options granted
under the Employee Stock Option Plan, including the option price, term and
number of shares subject to option. The Board of Directors may amend the
Employee Stock Option Plan, but the approval of the stockholders is necessary to
increase the total number of shares that may be issued or transferred under the
Employee Stock Option Plan, to change the minimum purchase price for shares
subject to options, to change the maximum period during which options or stock
appreciation rights may be exercised or to extend the period during which
options or stock appreciation rights may be granted under the Employee Stock
Option Plan. Generally, the option price of incentive and non-statutory stock
options granted may be as determined by the Employee Stock Option Committee, but
must be at least equal to the fair market value of the shares on the date of
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 outstanding Common Stock, the exercise price of any
incentive stock option must be at least 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 not be longer than five years. Options become exercisable at such time or
times as the Employee Stock Option Committee may determine when it grants
options. The Employee Stock Option Plan permits the exercise of options by the
payment of cash or delivery of shares of Class A Common Stock equal in fair
market value on the date of exercise to the exercise price. Options granted
under the Employee Stock Option Plan are not transferable by the holder.
Since December 27, 1991, the Company has awarded options to purchase
approximately 1,722,782 shares of Class A Common Stock under the Employee Stock
Option Plan to approximately 59 employees of the Company, including executive
officers and directors. During the fiscal years ended May 31, 1997, 1996 and
1995 the number of such options awarded were approximately 925,782, 0, and
452,000, respectively. All option shares issued under the plan were adjusted
subsequent to May 31, 1994 to account for the dilutive effect of the Company's
stock rights offering (see Note 11). At May 31, 1997, 364,274 options were
exercisable.
Director Option Plan
The Company's Non-Employee/ Officer Director Option Plan (the "Director
Option Plan") was adopted on October 27, 1993. The Director Option Plan provides
for the grant of non-qualified options to purchase up to 50,000 shares of Class
A Common Stock to non-employee/officer directors, who are not employees of the
Company or its subsidiaries. Options for 1,000 shares of Class A Common Stock
shall be automatically granted under the Director Option Plan on the date of the
annual meeting of shareholders of the Company in each of the years 1993 through
2002. The Board of Directors may amend the Director 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 Director Option Plan, to change the
minimum purchase price for shares subject to options, to change the maximum
period during which options may be exercised or to extend the period during
which options may be granted under the Director Option Plan. Generally, the
option price of non-qualified stock options granted may be as determined by the
Director Option Committee, but must be at least equal to 100% of the fair market
value
F-21
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
of the shares on the date of the grant.
Options become exercisable at the rate of 20% per year beginning with
the first anniversary of the date of the grant. The Director Option Plan permits
the exercise of options by payments of cash or Class A Common Stock equal in
value to the option price. Options granted under the Director Option Plan are
not transferable by the holder other than by will or the laws of descent and
distribution. As of May 31, 1997, 14,200 options were awarded. No options had
been exercised as of May 31, 1997.
A summary of the status of the Company's stock options as of May 31,
1995, 1996 and 1997 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Number Price
------ ---------
<S> <C> <C> <C>
1995 Outstanding at June 1, 1994 933,947 $ 4.76
Granted December 9, 1994 455,000 $ 15.76
Exercised (79,609) $ 2.02
Cancelled (12,386) $ 12.78
---------
Outstanding at May 31, 1995 1,296,952 $ 8.71
1996 Granted 4,000 $ 18.25
Exercised (423,665) $ 1.00
Cancelled (155,715) $ 5.35
---------
Outstanding at May 31, 1996 721,572 $ 13.98
1997 Granted 1,362,282 $ 11.57
Exercised (1,704) $ 9.75
Cancelled (929,296) $ 14.40
---------
Options outstanding as of May 31, 1997 1,152,854 $ 10.80
========= =========
Options exercisable at May 31, 1997 485,473 $10.47
========= =========
</TABLE>
The following table summarizes information about options outstanding at May 31,
1997:
<TABLE>
<CAPTION>
Range of Number Weighted Average Number
Exercise Outstanding Remaining Weighted Average Exercisable Weighted Average
Prices at 5/31/97 Contractual Life Exercise Price at 5/31/97 Exercise Price
---------- ---------- ---------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
$9.75-$13.5 1,142,656 8.23 years $10.73 481,556 $10.40
$17-$20 10,198 2.50 years 18.43 3,917 18.72
--------- ---------- ------ ------- ------
1,152,854 8.17 years $10.80 485,473 $10.47
========= ========== ====== ======= ======
</TABLE>
1991 Employee Stock Purchase Plan
The Company has reserved 200,000 shares of Class A Common Stock for
issuance under the 1991 Employee Stock Purchase Plan (the "Purchase Plan").
Under the Purchase Plan, eligible employees (which generally includes all
full-time
F-22
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
employees of the Company) are able to subscribe 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 payroll deduction
period relating to an offering under the Purchase Plan. Payment of the purchase
price of the shares is to be made in installments through payroll deductions,
with no right of prepayment. The Purchase Plan is administered by the
Compensation Committee of the Board of Directors. Rights to purchase shares of
Class A Common Stock under the Purchase Plan may not be transferred by the
recipient and may be forfeited in the event of the recipient's termination of
employment. As of May 31, 1997, approximately 1,100 employees and officers of
the Company were eligible to participate in the Purchase Plan. As of May 31,
1997, approximately 31,120 shares were subscribed for under the Purchase Plan.
Equity Incentive Plan
The Company's 1993 Equity Incentive Plan (the "Equity Plan") was adopted
by the Board of Directors and approved by the stockholders on October 27, 1993.
The plan permits the issuance of up to 100,000 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 Compensation Committee of the Company's Board of Directors. The plan
authorizes the Committee to grant stock based awards that include but are not
limited to, restricted stock, performance shares and deferred stock. The
Committee 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, any 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. As
of May 31, 1997, 85,500 shares were issued for awards under the Equity Plan.
The estimated fair value of options granted during 1997 and 1996 were
$3.49 per share and $5.81 per share, respectively. 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 its stock
option, and stock purchase plans. Had compensation cost for the Company's stock
option plans and stock purchase plan 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 net loss and net loss per common share
for the years ended May 31, 1997 and 1996 would have been increased to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Loss applicable to Common shares:
As reported $(49,243) $(30,221)
Pro forma $(49,921) $(30,237)
Loss per common share:
As reported $(1.83) $(1.13)
Pro forma $(1.85) $(1.13)
</TABLE>
The fair value of options granted under the Company's stock option plans during
fiscal 1997 and 1996 was estimated on the dates of grant using the Black-Scholes
options-pricing model with the following weighted average assumption used:
expected volatility of 36.78%, risk free interest rate of 6%, and expected lives
of option grants of 3 years. Pro-forma compensation cost related to shares
purchased under the 1991 Employee Stock Purchase Plan is measured based on the
discount from market value. No pro-forma compensation cost was included in the
pro-forma amounts above related to
F-23
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
82,500 shares of restricted stock granted and purchased under the Equity
Incentive Plan for the year ended May 31, 1996. Those restricted shares vest 5
years after the date of grant.
Incentive Award Plan
The Incentive Award Plan (the "Incentive Plan") permits the grant of
awards to key employees of the Company, which may include employee-directors and
officers, payable in cash or shares of Class A Common Stock. The Company has
reserved 200,000 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 of the Board of Directors, which
selects the recipients of awards as well as the amount of such awards and any
restriction on such awards. The Board of Directors may amend the Incentive Plan.
Awards granted under the Incentive Plan may not be transferred by the recipient
and may be forfeited in the event of the recipient's termination of employment.
As of May 31, 1997, approximately 1,100 employees, officers and directors of the
Company were eligible to participate in the Incentive Plan. No awards have been
made under the Incentive Plan.
1991 Stock Equivalent Plan
The Company's 1991 Stock Equivalent Plan (the "Equivalent Plan") permits
the grant of units of Class A Common Stock Equivalents ("units") to key
employees of the Company, including officers and directors. The Equivalent Plan
is administered by the Compensation Committee of the Board of Directors, which
selects the employees to be granted units, determines the number of units
covered by each grant, determines 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 Equivalent
Plan. Payments for units may be made by the Company in cash or in shares of
Class A Common Stock at the fair market value of the Class A Common Stock on the
date of payment. The Company has reserved 200,000 shares of Class A Common Stock
for issuance under the Equivalent Plan. As of May 31, 1997, approximately 1,100
employees, officers and directors of the Company were eligible to participate in
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. As of May 31, 1997, no
units had been granted under the Equivalent Plan.
Retirement Plan
Effective January 1, 1994, the Company adopted a 401K defined
contribution retirement plan covering employees of its wholly owned
subsidiaries. If a participant decides to contribute, a portion of the
contribution is matched by the Company. Total expense under the plan was
approximately $221, $134, and $115 for the years ended May 31, 1997, 1996 and
1995, respectively.
Note 13. Segment Information
The Company's consolidated financial statements include two distinct
business segments. The Domestic Wireless segment owns, operates and invests in
wireless telephone systems. The Company's Puerto Rico Wireless segment began
providing wireless telephone service in Puerto Rico on December 12, 1996. The
Company also plans to participate in the alternative access business in Puerto
Rico.
F-24
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
Information about the Company's operations in its two business segments
for the year ended May 31, 1997 and May 31, 1996 is as follows:
<TABLE>
<CAPTION>
Year Ended May 31, 1997 1996
- ----------------- ---------- ---------
<S> <C> <C>
Gross revenues:
Domestic Wireless $ 145,120 $ 112,197
Puerto Rico Wireless 5,903 --
--------- ---------
$ 151,023 $ 112,197
========= =========
Operating (loss):
Domestic Wireless $ (11,311) $ (18,615)
Puerto Rico Wireless (14,746) (494)
--------- ---------
$ (26,057) $ (19,109)
========= =========
Net loss:
Domestic Wireless $ (16,081) $ (15,585)
Puerto Rico Wireless (17,214) (1,046)
--------- ---------
$ (33,295) $ (16,631)
========= =========
Assets, at end of period:
Domestic Wireless $ 694,207 $ 710,222
Puerto Rico Wireless 150,643 75,590
--------- ---------
$ 844,850 $ 785,812
========= =========
Depreciation and amortization:
Domestic Wireless $ 77,392 $ 70,910
Puerto Rico Wireless 6,328 79
--------- ---------
$ 83,720 $ 70,989
========= =========
Capital expenditures:
Domestic Wireless $ 38,921 $ 22,604
Puerto Rico Wireless 50,069 15,478
--------- ---------
$ 88,990 $ 38,082
========= =========
</TABLE>
F-25
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended May 31, 1997, 1996 and 1995 (Amounts
in thousands, except subscriber and share data)
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------
August 31, November 30, February 28, May 31,
1994 1994 1995 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 17,542 $ 21,455 $ 21,967 $ 24,455
Operating loss (6,245) (6,836) (8,372) (6,977)
Net loss (6,942) (8,466) (11,394) (5,928)
Net loss per common share (.58) (.47) (.57) (.35)
<CAPTION>
Three Months Ended
----------------------------------------------------------------------
August 31, November 30, February 29, May 31,
1995 1995 1996 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 26,922 $ 27,713 $ 27,938 $ 29,624
Operating loss (4,704) (4,822) (6,571) (3,012)
Net (loss) income (3,418) (7,349) (8,807) 2,943
Net loss per common share (.25) (.40) (.45) (.03)
Three Months Ended
----------------------------------------------------------------------
August 31, November 30, February 28, May 31,
1996 1996 1997 1997
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 32,365 $ 35,359 $ 39,174 $ 44,125
Operating loss (3,399) (4,712) (8,046) (9,900)
Net loss (6,107) (6,121) (9,486) (11,581)
Net loss per common share (.36) (.38) (.50) (.58)
</TABLE>
F-26
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Centennial Cellular Corp.
New Canaan, Connecticut
We have audited the consolidated financial statements of Centennial Cellular
Corp. and subsidiaries (the "Company") as of May 31, 1997 and 1996 for each of
the three years in the period ended May 31, 1997, and have issued our report
thereon dated July 25, 1997; such report is included elsewhere in this Form
10-K. Our audits also included the financial statement schedules listed in Item
14. These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Deloitte & Touche LLP
Stamford, Connecticut
July 25, 1997
F-27
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Service revenue $ 140,674 $ 105,461 $ 78,516
Equipment sales 2,643 2,649 4,135
Interest income 1,803 4,087 2,768
------------ ------------ ------------
145,120 112,197 85,419
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of services 19,061 15,291 12,808
Cost of equipment sold 15,441 10,838 9,344
Selling, general and administrative 44,537 33,757 26,004
Depreciation and amortization 77,392 70,910 65,632
------------ ------------ ------------
156,431 130,796 113,788
------------ ------------ ------------
OPERATING LOSS (11,311) (18,599) (28,369)
INTEREST EXPENSE 30,911 27,334 23,355
GAIN ON SALE OF ASSETS 3,819 8,310 --
INCOME (LOSS) FROM EQUITY INVESTMENTS (2,034) 9,411 4,607
------------ ------------ ------------
LOSS BEFORE INCOME TAX BENEFIT
AND MINORITY INTEREST (40,437) (28,212) (47,117)
INCOME TAX BENEFIT (7,295) (11,596) (14,456)
------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST (33,142) (16,616) (32,661)
MINORITY INTEREST IN INCOME OF SUBSIDIARIES (153) (15) (69)
------------ ------------ ------------
NET LOSS $ (33,295) $ (16,631) $ (32,730)
------------ ------------ ------------
ACCUMULATED DEFICIT, BEGINNING OF YEAR $ (218,996) $ (202,365) $ 169,635
------------ ------------ ------------
ACCUMULATED DEFICIT, END OF YEAR $ (252,291) $ (218,996) $ (202,365)
============ ============ ============
</TABLE>
See notes to condensed financial statements
F-28
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------------
1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Cash received from Subscribers and others $ 169,242 $ 130,196 $ 94,569
Cash paid to suppliers, employees and governmental agencies (103,255) (73,460) (61,637)
Interest Paid (29,068) (31,668) (22,502)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,919 25,068 10,430
--------- --------- ---------
INVESTING ACTIVITIES:
Proceeds from Sale of equipment 5,200 -- --
Capital expenditures (38,921) (23,594) (17,321)
Acquisition of other assets (489) (1,643) (1,160)
Acquisition/exchange of wireless telephone systems (34,908) 396 (49,173)
Acquisition of personal communications service license 60,006 (44,813) (11,069)
Cash advances to subsidiary (54,507) (15,327) (264)
Capital returned from equity investments 6,863 6,870 2,896
Capital contributed to equity investments (2,877) (1,463) (3,783)
--------- --------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (59,633) (79,574) (79,874)
--------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from long-term debt 45,000 100,000
Principal payments on long-term debt (40,000) --
Debt issuance costs paid (648) (304) (4,414)
Proceeds from issuance of Class A and B Common Stock 132 456 87,136
Dividends paid on preferred stock (8,226)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,742) (152) 182,194
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (26,456) (54,354) 113,278
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 67,274 121,628 8,350
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 40,818 $ 67,274 $ 121,628
========= ========= =========
</TABLE>
See notes to condensed financial statements
F-29
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------------
1997 1996 1995
---------- --------- ----------
<S> <C> <C> <C>
Reconciliation of net loss to net cash provided by
operating activities:
Net loss $(33,295) $(16,631) $ (32,730)
-------- -------- --------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 77,392 70,910 65,632
Minority interest in income of subsidiaries 153 15 69
Deferred income tax-decrease (10,623) (13,000) (15,995)
Equity in undistributed earnings of investee companies 2,034 (9,411) (4,607)
Gain on sale of assets (3,819) (4,176)
Other 1,800 (4,131) 570
Change in assets and liabilities net of effects of acquired/exchanged
wireless telephone systems:
Accounts receivable - (increase) (2,158) (4,689) (5,318)
Prepaid expense and other current assets - (increase)/decrease (2,103) (411) 72
Accounts payable and accrued expenses - increase 4,855 4,605 1,433
Customer deposits and prepayments - increase 2,683 1,987 1,304
-------- -------- --------
Total adjustments 70,214 41,699 43,160
-------- -------- --------
Net Cash Provided by Operating Activities $ 36,919 $ 25,068 $ 10,430
======== ======== ========
</TABLE>
See notes to condensed financial information
F-30
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 40,819 $ 67,274
Accounts receivable 28,753 20,210
Prepaid expenses and other current assets 4,226 2,056
--------- ---------
TOTAL CURRENT ASSETS 73,798 89,540
PROPERTY PLANT AND EQUIPMENT - net 102,230 75,808
EQUITY INVESTMENT IN WIRELESS SYSTEMS - net 75,814 99,079
DEBT ISSUANCE COSTS 6,986 7,738
CELLULAR TELEPHONE LICENSES 285,202 30O,206
PERSONAL COMMUNICATIONS SERVICE LICENSE -- 60,007
GOODWILL 130,065 133,907
OTHER ASSETS 1,961 2,631
DUE FROM SUBSIDIARY 7,321 15,594
--------- ---------
TOTAL ASSETS $ 683,377 $ 784,510
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,692 $ --
Accrued Interest Payable 2,880 2,299
Other Accrued expenses 25,922 17,758
Customers' deposits and prepayments 7,665 4,961
Payable to affiliate 399 768
--------- ---------
TOTAL CURRENT LIABILITIES 38,558 25,786
LONG-TERM DEBT 355,000 350,000
DEFERRED LIABILITY 2,200 2,200
DEFERRED INCOME TAXES 43,977 56,588
PREFERRED STOCK:
Convertible redeemable preferred stock 186,287 182,813
Second series convertible redeemable preferred stock 7,252 7,117
COMMON STOCKHOLDERS' EQUITY:
Common stock 270 270
Additional paid-in capital 306,925 383,533
Accumulated deficit (252,291) (218,996)
--------- ---------
54,904 164,807
Less: Cost of Common shares in treasury (1,801) (1,801)
Shareholder note receivable (3,000) (3,000)
--------- ---------
TOTAL COMMON STOCKHOLDERS' EQUITY 50,103 160,006
--------- ---------
TOTAL $ 683,377 $ 784,510
========= =========
</TABLE>
See notes to condensed financial information
F-31
<PAGE>
<PAGE>
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANICAL INFORMATION
(Amounts in thousands)
1. BASIS OF PRESENTATION
The attached condensed financial information of Registrant represents
the financial statements of Centennial Cellular Corp. and subsidiaries exclusive
of Puerto Rico Wireless. Within this condensed financial information, the
Registrant's investment in Puerto Rico Wireless has been accounted for using the
equity method. Within the Company's consolidated financial statements, however,
the financial statements of Puerto Rico Wireless have been consolidated for
financial reporting purposes. The inclusion of the attached condensed financial
information of Registrant is required due to certain restrictions placed on the
net assets of Puerto Rico Wireless under the Puerto Rico Wireless Credit
Facility (See note 7 to Consolidated Financial Statements).
2. PERSONAL COMMUNICATIONS SERVICE LICENSE ("PCS")
On October 29, 1996 the Federal Communications Commission granted
consent to the assignment of the PCS license acquired in March 1995 from the
Registrant to Puerto Rico Wireless. On December 13, 1996, the Registrant
contributed to Puerto Rico Wireless the PCS license and certain PCS property and
equipment as follows:
Property, plant and equipment $ 3
PCS license 62,605
--------
Total assets contributed $ 62,608
========
3. LONG-TERM DEBT
See Note 7 to the consolidated financial statements for details of long-term
debt.
F-32
<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, 1997 to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 15th day of August, 1997.
CENTENNIAL CELLULAR CORP.
By: /s/ Bernard P. Gallagher
-----------------------------------
Bernard P. Gallagher
Chairman and 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, 1997
has been signed below by the following persons in the capacities indicated on
the 15th day of August, 1997.
<TABLE>
<CAPTION>
Title
------
<S> <C>
/s/ Bernard P. Gallagher Chairman, Chief Executive Officer and Director
- ------------------------------------- (Principal Executive Officer)
Bernard P. Gallagher
/s/Scott N. Schneider Senior Vice President, Treasurer, Chief Financial
- ------------------------------------- Officer, Chief Accounting Officer and Director
Scott N. Schneider (Principal Financial and Accounting Officer)
/s/Daryl A. Ferguson
- ------------------------------------- Director
Daryl A. Ferguson
/s/Rudy J. Graf
- ------------------------------------- Director
Rudy J. Graf
/s/William M. Kraus
- ------------------------------------- Director
William M. Kraus
/s/David Z. Rosensweig
- ------------------------------------- Director
David Z. Rosensweig
- ------------------------------------- Director
Peter J. Solomon
/s/Frank Tow
- ------------------------------------- Director
Frank Tow
II-1
</TABLE>
<PAGE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
------ --------
3.1 Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 6(a)(i) to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter
ended August 31, 1993 and incorporated herein by
reference).
3.2 By-laws of the Registrant as revised through February
11, 1992, (filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the year ended May 31,
1992 and incorporated herein by reference).
4.1 Registration Rights Agreement, dated August 30, 1991,
among the Registrant, Century Holding and Citizens
Utilities Company (filed as Exhibit 4.2 to the 1991
Form S-1 and incorporated herein by reference, said
1991 Form S-1 having been filed with the Commission on
September 27, 1991).
4.2 Stock Transfer Agreement, dated August 30, 1991, by
and among the Registrant, Century Holding and Citizens
Utilities Company (filed as Exhibit 4.3 to Amendment
No. 1 to the 1991 Form S-1 and incorporated herein by
reference, said Amendment No. 1 having been filed with
the Commission on October 7, 1991).
4.3 Senior Indenture, dated as of November 15, 1993,
between the Registrant and Bank of Montreal Trust
Company, as Trustee, (filed as Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated November
15, 1993, and incorporated herein by reference, said
Current Report on Form 8-K having been filed with the
Commission on November 15, 1993).
4.4 First Supplemental Indenture, dated as of November 15,
1993, between the Registrant and Bank of Montreal
Trust Company, as Trustee, (filed as Exhibit 4.2 to
the Registrant's Current Report on Form 8-K dated
November 15, 1993, and incorporated herein by
reference, said Current Report on Form 8-K having been
filed with the Commission on November 15, 1993).
4.5 Second Supplemental Indenture, dated as of May 11,
1995, between the Registrant and Bank of Montreal
Trust Company, as Trustee, (filed as Exhibit 4.3(c) to
the Registrant's Annual Report on Form 10-K for the
fiscal year ended May 31, 1995 and incorporated herein
by reference).
II-2
<PAGE>
<PAGE>
Exhibit
Number Exhibit
------ --------
4.6 $130,000,000 Credit Agreement, dated as of April 25,
1997, among Centennial Puerto Rico Wireless
Corporation, as Borrower, Citibank, N.A., as
Administrative Agent and CIBC Inc., Credit Lyonnais,
New York Branch and Societe Generale, New York Branch,
as Co-Agents.
4.7 Amendment No. 1, dated as of April 22, 1997, between
the Registrant and Citibank, N.A., individually and as
Administrative Agent.
10.1 Conflicts/Non-Compete Agreement by and among the
Registrant, Century Holding, Century and Citizens
Utilities Company, dated as of August 30, 1991, (filed
as Exhibit 10.1 to Amendment No. 1 to the 1991 Form
S-1 and incorporated herein by reference, said
Amendment No. 1 having been filed with the Commission
on October 7, 1991).
10.2 Extension and Renewal Agreement, dated March 21, 1997,
effective as of August 30, 1996, between Century
Cellular Holding Corp. and the Registrant (filed as
an exhibit to the Registrant's quarterly report on
Form 10-Q for the quarterly period ended February 28,
1997 and incorporated herein by reference).
10.3 Conditional Buy-Sell Agreement for Cellular Markets
151-305 and Joint Agreement, as amended, (filed as
Exhibit 10.7 to the 1991 Form S-1 and incorporated
herein by reference, said 1991 Form S-1 having been
filed with the Commission on September 27, 1991).
*10.4 1991 Stock Option Plan, as amended, (filed as Exhibit
10.10 to the 1991 Form S-1 and incorporated herein by
reference, said 1991 Form S-1 having been filed with
the Commission on September 27, 1991).
*10.5 Incentive Award Plan, as amended, (filed as Exhibit
10.11 to the 1991 Form S-1 and incorporated herein by
reference, said 1991 Form S-1 having been filed with
the Commission on September 27, 1991).
*10.6 1991 Employee Stock Purchase Plan, as amended, (filed
as Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994 and
incorporated herein by reference).
*10.7 1993 Management Equity Incentive Plan, (filed as
Exhibit 10.9 to the Registrant's Annual Report on Form
10-K for the fiscal year ended May 31, 1994 and
II-3
<PAGE>
<PAGE>
Exhibit
Number Exhibit
------ --------
incorporated herein by reference).
*10.8 1993 Non-Employee/Officer Directors' Stock Option
Plan, (filed as Exhibit 10.10 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
May 31, 1994 and incorporated herein by reference).
*10.9 1991 Stock Equivalent Plan (filed as Exhibit 10.13 to
the 1991 Form S-1 and incorporated herein by
reference, said 1991 Form S-1 having been filed with
the Commission on September 27, 1991).
10.10 Agreement establishing Sacramento Valley Limited
Partnership, as amended, among PacTel Mobile Access,
Roseville Telephone Co., Citizens Utilities Company of
California and Contel Mobilcom, Inc., (filed as
Exhibit 10.14 to the 1991 Form S-1 and incorporated
herein by reference, said 1991 Form S-1 having been
filed with the Commission on September 27, 1991).
10.11 Agreement establishing GTE Mobilnet of San Francisco
Limited Partnership, as amended, (filed as Exhibit
10.15 to the 1991 Form S-1 and incorporated herein by
reference), said 1991 Form S-1 having been filed with
the Commission on September 27, 1991).
*10.12 Employment Agreement dated as of January 1, 1994
between the Registrant and Rudy J. Graf, (filed as
Exhibit 10.14 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994 and
incorporated herein by reference).
*10.13 Employment Agreement dated as of January 1, 1994
between the Registrant and Phillip Mayberry, (filed as
Exhibit 10.15 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994 and
incorporated herein by reference).
*10.14 Employment Agreement dated as of January 1, 1994
between the Registrant and Thomas Cogar, (filed as
Exhibit 10.16 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994 and
incorporated herein by reference).
*10.15 Employment Agreement, dated as of September 1, 1995,
between the Registrant and Robert Braden (filed as
Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended May 31, 1996 and
incorporated herein by reference).
II-4
<PAGE>
<PAGE>
Exhibit
Number Exhibit
------ --------
'D'10.16 Facilities Agreement dated as of January 2, 1995
between Century ML Cable Venture and Century-ML Cable
Corporation.
'D'10.17 $50,000,000 Credit Agreement, dated as of September 12
,1996, between the Registrant and Citibank, N.A.
(filed as Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 31, 1996 and incorporated herein by reference).
'D'11 Computation of loss per common share.
'D'12 Computation of ratios.
'D'21 Subsidiaries of the Registrant.
'D'23.1 Consent of Deloitte & Touche LLP.
'D'27 Financial Data Schedule.
- ----------------------
* Constitutes a management contract or compensatory
plan or arrangement.
'D' Filed herewith.
II-5
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ... 'D'
<PAGE>
<PAGE>
EXECUTION COUNTERPART
*****************************************************************
U.S. $130,000,000
CREDIT AGREEMENT
Dated as of April 25, 1997
Among
CENTENNIAL PUERTO RICO WIRELESS CORPORATION
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
CITIBANK, N.A.
as Administrative Agent
and
CIBC INC.
CREDIT LYONNAIS,
NEW YORK BRANCH
and
SOCIETE GENERALE,
NEW YORK BRANCH
as Co-Agents
*****************************************************************
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS.................................... 1
SECTION 1.01. Certain Defined Terms............................................... 1
SECTION 1.02. Computation of Time Periods......................................... 27
SECTION 1.03. Accounting Terms.................................................... 27
ARTICLE II
AMOUNTS AND TERMS OF THE CREDITS................................... 28
SECTION 2.01A. The Advances........................................................ 28
SECTION 2.01B. Letters of Credit................................................... 28
SECTION 2.02. Making the Advances................................................. 33
SECTION 2.03. Fees................................................................ 35
SECTION 2.04. Reduction of the Commitments........................................ 36
SECTION 2.05. Repayment of Advances............................................... 36
SECTION 2.06. Interest on the Advances............................................ 36
SECTION 2.07. Interest Rate Determination and
Protection....................................................... 39
SECTION 2.08. Voluntary Conversion of Advances.................................... 41
SECTION 2.09. Prepayments of Advances............................................. 41
SECTION 2.10. Increased Costs, Etc................................................ 44
SECTION 2.11. Illegality.......................................................... 45
SECTION 2.12. Payments and Computations........................................... 46
SECTION 2.13. Taxes............................................................... 47
SECTION 2.14. Sharing of Payments, Etc............................................ 50
SECTION 2.15. Additional Interest on Eurodollar Rate
Advances......................................................... 50
SECTION 2.16. Use of Proceeds..................................................... 51
ARTICLE III
CONDITIONS OF LENDING............................................... 51
SECTION 3.01. Conditions Precedent to Initial
Advances......................................................... 51
SECTION 3.02. Conditions Precedent to Each Borrowing.............................. 55
SECTION 3.03. Determinations Under Section 3.01................................... 56
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...................................... 56
SECTION 4.01. Representations and Warranties of the
Borrower......................................................... 56
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V
COVENANTS OF THE BORROWER........................................... 65
SECTION 5.01. Affirmative Covenants............................................... 65
SECTION 5.02. Negative Covenants.................................................. 72
SECTION 5.03. Reporting Requirements.............................................. 78
ARTICLE VI
EVENTS OF DEFAULT................................................... 81
SECTION 6.01. Events of Default................................................... 81
SECTION 6.02. Collateral Account.................................................. 87
ARTICLE VII
THE ADMINISTRATIVE AGENT............................................ 88
SECTION 7.01. Authorization and Action............................................ 88
SECTION 7.02. Administrative Agents' Reliance, Etc................................ 88
SECTION 7.03. The Administrative Agent and its
Affiliates....................................................... 89
SECTION 7.04. Lender Credit Decision.............................................. 90
SECTION 7.05. Indemnification by Lenders.......................................... 90
SECTION 7.06. Successor Administrative Agent...................................... 91
SECTION 7.07. Amendments to Loan Documents........................................ 91
SECTION 7.08. Co-Agents........................................................... 92
ARTICLE VIII
MISCELLANEOUS....................................................... 92
SECTION 8.01. Amendments, Etc..................................................... 92
SECTION 8.02. Notices, Etc........................................................ 93
SECTION 8.03. No Waiver; Remedies................................................. 93
SECTION 8.04. Costs and Expenses.................................................. 93
SECTION 8.05. Right of Set-off.................................................... 94
SECTION 8.06. Binding Effect...................................................... 95
SECTION 8.07. Assignments and Participations...................................... 95
SECTION 8.08. Indemnification by the Borrower..................................... 99
SECTION 8.09. Confidentiality.....................................................100
SECTION 8.10. Governing Law.......................................................101
SECTION 8.11. Execution in Counterparts...........................................101
SECTION 8.12. WAIVER OF JURY TRIAL................................................101
SECTION 8.13. Submission to Jurisdiction; Waivers.................................101
SECTION 8.14. Acknowledgments.....................................................102
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Schedule I - List of Applicable Lending Offices
Schedule 4.01(k) - List of Subsidiaries
Schedule 4.01(w) - List of Telecommunications Approvals
Schedule 4.01(z) - List of Collateral
Schedule 4.01(bb) - List of Capital Stock
Schedule 4.01(cc) - Intellectual Property Matters
Exhibit A - Form of Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D-1 - Form of Subsidiary Guaranty
Exhibit D-2 - Form of Obligor Pledge Agreement
Exhibit D-3 - Form of Holdings Pledge Agreement
Exhibit E - Form of Borrowing Base Certificate
Exhibit F - Form of Leverage Ratio Certificate
Exhibit G - Form of Solvency Certificate
Exhibit H - Form of No Default Certificate
Exhibit I - Form of Compliance Certificate
Exhibit J - Form of Century-ML Consent and Agreement
Exhibit K - Form of Process Agent Acceptance
</TABLE>
<PAGE>
<PAGE>
CREDIT AGREEMENT
Dated as of April 25, 1997
CENTENNIAL PUERTO RICO WIRELESS CORPORATION, a Delaware
corporation (the "Borrower"), the banks (the "Banks") listed on the signature
pages hereof, and CITIBANK, N.A. ("Citibank"), as administrative agent (the
"Administrative Agent") for the Banks hereunder, agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Additional Contributed Equity" means the Contributed Equity made
after the date hereof.
"Additional Puerto Rico Security Documents" has the meaning
assigned to such term in Section 5.01(o) hereof.
"Advance" means an advance by a Lender to the Borrower as part of
a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate
Advance, each of which shall be a "Type" of Advance.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such first Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Aggregate Financing Amount" means, at any time, the sum of (i)
the aggregate principal amount of the Advances outstanding at such time
plus (ii) the aggregate principal amount of any Tax-Advantaged Debt
outstanding at such time plus (iii) the aggregate amount of Letter of
Credit Liabilities at such time (excluding the aggregate undrawn amount
of Letters of Credit to the extent such amount is in support of
principal of any Tax-Advantaged Debt outstanding at such time).
"Annualized EBITDA" means, for any Fiscal Period,
EBITDA for such Fiscal Period multiplied by two; provided,
Credit Agreement
<PAGE>
<PAGE>
- 2 -
that solely for purposes of the calculation of the Leverage Ratio as
used in Section 5.01(j) on any date falling during the period commencing
on June 1, 1998 and ending on November 30, 1998, Annualized EBITDA shall
mean the product of (a) EBITDA for the Fiscal Quarter ending on or most
recently ended prior to such date plus sales, marketing, advertising and
equipment subsidy expenses for such Fiscal Quarter multiplied by (b)
four.
"Applicable Eurodollar Margin" has the meaning
specified in Section 2.06(a)(ii).
"Applicable Lending Office" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of a Base Rate Advance
and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance.
"Approved Telecommunications Property" means (a) a personal
communications services system, as defined in 47 C.F.R. ss.24.5,
authorized by the FCC to operate as Broadband PCS, as defined in 47
C.F.R. ss.24.5, in the frequency blocks Block A, Block B or Block C, as
defined in 47 C.F.R. ss.24.229, or (b) a Cellular System, as defined in
47 C.F.R. ss.22.99, authorized by the FCC in the Cellular Radiotelephone
Service, as defined in 47 C.F.R. ss.22.99, to operate pursuant to 47
C.F.R. Subpart H on Channel Block A or Channel Block B in an MSA or RSA,
as defined in 47 C.F.R. ss.ss.22.909 and 22.905.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by each
Issuing Bank and the Administrative Agent, in substantially the form of
Exhibit C hereto.
"Bank" has the meaning specified in the recital of
parties to this Agreement.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal
or state law (including any such law of Puerto Rico) for the relief of
debtors.
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum
shall at all times be equal to the higher of:
Credit Agreement
<PAGE>
<PAGE>
- 3 -
(a) the rate of interest announced publicly by Citibank in
New York, New York, from time to time, as Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of one percent
or, if there is no nearest 1/16 of one percent, to the next
higher 1/16 of one percent) of (i) 1/2 of one percent per annum,
plus (ii) the rate per annum obtained by dividing (A) the latest
three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average (adjusted to the basis of a year of 365
or 366 days, as the case may be) being determined weekly on each
Monday (or, if any such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported
by certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be
suspended or terminated, on the basis of quotations for such
rates received by Citibank from three New York certificate of
deposit dealers of recognized standing selected by Citibank, by
(B) a percentage equal to 100% minus the average of the daily
percentages specified during such three-week period by the Board
of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in
New York City with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
nonpersonal time deposits in the United States, plus (iii) the
average during such three-week period of the annual assessment
rates estimated by Citibank for determining the then current
annual assessment payable by Citibank to the Federal Deposit
Insurance Corporation (or any successor) for insuring U.S. dollar
deposits of Citibank in the United States; and
(c) 1/2 of one percent per annum above the
Federal Funds Rate.
"Base Rate Advance" means an Advance which bears interest as
provided in Section 2.06(a)(i).
Credit Agreement
<PAGE>
<PAGE>
- 4 -
"Borrowing" means a borrowing consisting of simultaneous Advances
of the same Type made by each of the Lenders pursuant to Section 2.01A.
"Borrowing Base" means, as at any date, the sum of (i)
$100,000,000 plus (ii) (A) the amount of Additional Contributed Equity
received by the Borrower on or after the date hereof minus the amount of
any dividends (excluding the Initial Distributions) and other payments
referred to in Section 5.02(g) hereof paid by the Borrower on or after
the date hereof multiplied by (B) 1.75 minus (iii) the sum of (A) any
optional or mandatory Commitment reductions plus (B) the outstanding
principal amount of any Permitted Vendor Financing.
"Borrowing Base Certificate" means a certificate of a Financial
Officer of the Borrower, substantially in the form of Exhibit E hereto
and appropriately completed.
"Borrowing Base Release Date" shall mean the date on which the
Administrative Agent receives the second of two Periodic Certificates as
at the end of two consecutive Fiscal Quarters demonstrating that the
Leverage Ratio on each date covered by such Periodic Certificates was
less than 10.0:1.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings
are carried on in the London interbank market.
"Capital Stock" of any Person means any and all share, interests,
rights to purchase, warrants, options, participations or other
equivalents of or interests in the common or preferred equity (however
designated) of such Person, including, without limitation, partnership
interests.
"Capitalized Lease Obligation" means, with respect to any Person
for any period, an obligation of such Person to pay rent or other
amounts under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP; and the amount of such
obligation shall be the capitalized amount shown on the balance sheet of
such Person as determined in accordance with GAAP.
Credit Agreement
<PAGE>
<PAGE>
- 5 -
"CAP System" means a system that provides long-distance carriers
or end-users with an alternative to the traditional local phone company
for local transmission of private line and transport and special access
telecommunications services in Puerto Rico and the Virgin Islands.
"Cash Equivalents" means (i) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of
the United States in each case maturing within one year from the date of
acquisition thereof, (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof maturing within one
year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Services or Moody's Investors Service,
(iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Ratings Services or at least P-1 from
Moody's Investors Service, (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition
thereof issued by any commercial bank organized under the laws of the
United States of America or any state thereof or the District of
Columbia or any U.S. Branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than
$250,000,000, (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications
specified in clause (iv) above, (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above, and (vii) corporate debt
obligations maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having an investment grade
rating from Standard & Poor's Ratings Services and Moody's Investors
Service.
"Centennial Cellular" means Centennial Cellular Corp.,
a Delaware corporation.
"Century-ML" means Century-ML Cable Corporation, a
Delaware corporation.
Credit Agreement
<PAGE>
<PAGE>
- 6 -
"Century-ML Consent and Agreement" means a consent and agreement
entered into by the parties to the Facilities Agreement and the
Administrative Agent, substantially in the form of Exhibit J hereto.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time.
"Citibank" means Citibank, N.A., a national banking
association.
"Collateral" means the following items, whether now or
hereafter acquired:
(i) all Network Assets;
(ii) all Capital Stock issued by the Obligors;
(iii) all rights under interconnection agreements and
operating agreements (including, without limitation, the
Interconnection Agreements, the Facilities Agreement and the
Marketing Agreements) to which the Borrower or any of the
Subsidiaries is a party on the date hereof, as modified and
supplemented and from time to time in effect;
(iv) all rights under interconnection agreements and
operating agreements (including, without limitation, the
Interconnection Agreements, the Facilities Agreement and the
Marketing Agreements) to which the Borrower or any of the
Subsidiaries becomes a party after the date hereof, as modified
and supplemented and from time to time in effect, subject to the
ability of the Borrower or such Subsidiary, as the case may be,
to grant a security interest in such agreements after having used
its best efforts to obtain any necessary consents; and
(v) substantially all other tangible and intangible
property and rights of the Borrower and its Subsidiaries to the
extent that each of the same has an individual book value in
excess of $100,000.
"Collateral Account" has the meaning specified in
Section 6.02.
Credit Agreement
<PAGE>
<PAGE>
- 7 -
"Commitment" has the meaning specified in
Section 2.01A.
"Commitment Percentage" shall mean, with respect to any Lender,
the ratio of (a) the amount of the Commitment of such Lender to (b) the
aggregate amount of the Commitments of all of the Lenders.
"Compliance Certificate" means a certificate of a Financial
Officer of the Borrower, substantially in the form of Exhibit I hereto
and appropriately completed.
"Consent and Agreement" means the Century-ML Consent
and Agreement or the PRTC Consent and Agreement.
"Consolidated" refers to the consolidation of accounts of the
Borrower with the accounts of its Subsidiaries, all in accordance with
GAAP, including principles of consolidation, consistent with those
applied in the preparation of the Consolidated financial statements
referred to in Section 4.01(e).
"Contributed Equity" means, as of any date, the amount of common
equity theretofore contributed by an Eligible Equity Contributor to the
Borrower in cash.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type
pursuant to Section 2.07, 2.08, 2.10 or 2.11.
"Copyright Collateral" shall mean all Copyrights, whether now
owned or hereafter acquired by any Obligor, including each Copyright
identified in Schedule 4.01(cc) hereto.
"Copyrights" shall mean all copyrights, copyright registrations
and applications for copyright registrations, including, without
limitation, all renewals and extensions thereof, the right to recover
for all past, present and future infringements thereof, and all other
rights of any kind whatsoever accruing thereunder or pertaining thereto.
"Credit Extension" means a Borrowing or the issuance of
a Letter of Credit.
"Credit Parties" means, collectively, the Obligors and
Holdings.
Credit Agreement
<PAGE>
<PAGE>
- 8 -
"CSI" means Citicorp Securities, Inc., a Delaware
corporation.
"Debt" of any Person means (i) indebtedness for borrowed money or
for the deferred purchase price of property or services in respect of
which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise
assures a creditor against loss (including Permitted Vendor Financing),
(ii) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, including, but not limited to, commercial
paper, (iii) obligations, contingent or otherwise, under acceptance,
letter of credit or similar facilities, (iv) Capitalized Lease
Obligations of such Person, and (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) through (iv) above; provided that Debt shall
not include trade accounts payable unless payment thereof has been
deferred by agreement beyond the customary period in the industry.
"Debt Issuance" means any incurrence, issuance or sale of Debt by
the Borrower or any of its Subsidiaries, other than Debt permitted by
any of paragraphs (i) through (v), (vii) and (viii) of Section 5.02(b).
"Default" means an Event of Default or an event which, with the
giving of notice or lapse of time or both, would constitute an Event of
Default.
"Disposition" has the meaning assigned to such term in
Section 2.09(b)(ii).
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office of
such Lender as such Lender may from time to time specify to the Borrower
and the Administrative Agent.
"EBITDA" means, for any period, the sum of the
Consolidated net income or loss for such period, excluding
Credit Agreement
<PAGE>
<PAGE>
- 9 -
gains and losses from extraordinary items, of the Borrower and its
Subsidiaries plus the sum of Interest Expense, depreciation,
amortization expense and provision for income taxes to the extent
deducted in computing such net income or loss.
"Eligible Assignee" means a Person (a) (i) that is (A) a
commercial bank organized under the laws of the United States, or any
State thereof, and having total assets in excess of $500,000,000; (B) a
commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development
("OECD"), or a political subdivision of any such country, and having
total assets in excess of $500,000,000, provided that such bank is
acting through a branch or agency located in the United States or
another country which is also a member of OECD; or (C) a Lender or an
affiliate of any Lender immediately prior to an assignment and (ii)
whose long-term public senior debt securities are rated at least "BBB-"
by Standard & Poor's Ratings Services or at least "Baa" by Moody's
Investors Service, Inc.; or (b) that is approved by the Borrower (whose
approval shall not be unreasonably withheld), the Administrative Agent
and the Lenders.
"Eligible Equity Contributor" means Holdings or any Affiliate of
Holdings, other than the Borrower or any Subsidiary of the Borrower.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, investigation, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit, including without limitation (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
Environmental Law and (b) any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief resulting from Hazardous Materials or arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any federal, state or local law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award relating to the environment,
Credit Agreement
<PAGE>
<PAGE>
- 10 -
health, safety or Hazardous Materials, including, without limitation,
CERCLA, the Resource Conservation and Recovery Act, the Hazardous
Materials Transportation Act, the Clean Water Act, the Toxic Substances
Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic
Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and
the Occupational Safety and Health Act.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"Equity Issuance" means (a) any issuance or sale by the Borrower
after the date hereof of (i) any of its capital stock (other than any
such capital stock issued to directors, officers or employees of the
Borrower or any of its Subsidiaries), (ii) any warrants or options
exercisable in respect of its capital stock (other than any warrants or
options issued to directors, officers or employees of the Borrower or
any of its Subsidiaries) or (iii) any other security or instrument
representing an equity interest (or the right to obtain any equity
interest) in the Borrower, or (b) the receipt by the Borrower after the
date hereof of any capital contribution (whether or not evidenced by any
equity security issued by the recipient of such contribution).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of Title IV
of ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Event" with respect to any Person means (a) the occurrence
of a reportable event, within the meaning of Section 4043 of ERISA, with
respect to any Plan of such Person or any of its ERISA Affiliates unless
the 30-day notice requirement with respect to such event has been waived
by the PBGC; (b) the provision by the administrator of any Plan of such
Person or any of its ERISA Affiliates of a notice of intent to terminate
such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in Section 4041(e)
Credit Agreement
<PAGE>
<PAGE>
- 11 -
of ERISA); (c) the cessation of operations at a facility of such Person
or any of its ERISA Affiliates in the circumstances described in Section
4062(e) of ERISA; (d) the withdrawal by such Person or any of its ERISA
Affiliates from a Multiple Employer Plan during a plan year for which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e) the failure by such Person or any of its ERISA Affiliates to make a
payment to a Plan required under Section 302(f)(1) of ERISA; (f) the
adoption of an amendment to a Plan of such Person or any of its ERISA
Affiliates requiring the provision of security to such Plan, pursuant to
Section 307 of ERISA; or (g) the institution by the PBGC of proceedings
to terminate a Plan of such Person or any of its ERISA Affiliates,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition described in Section 4042 of ERISA that could constitute
grounds for the termination of, or the appointment of a trustee to
administer, such Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of such
Lender as such Lender may from time to time specify to the Borrower and
the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum at which deposits in
U.S. dollars are offered by the principal office of Citibank in London,
England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to Citibank's Eurodollar Rate
Advance comprising part of such Borrowing and for a period equal to such
Interest Period. The Eurodollar Rate for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing shall be
determined by the Administrative Agent on the basis of applicable rates
furnished to and received by the Administrative Agent from Citibank two
Business Days
Credit Agreement
<PAGE>
<PAGE>
- 12 -
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.07.
"Eurodollar Rate Advance" means an Advance which bears interest
as provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for
each Eurodollar Rate Advance comprising part of the same Borrowing means
the reserve percentage applicable two Business Days before the first day
of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest
rate on Eurodollar Rate Advances is determined) having a term equal to
such Interest Period.
"Events of Default" has the meaning specified in
Section 6.01.
"Excess Cash Flow" means, for any Fiscal Quarter, the
amount by which
(i) EBITDA for such Fiscal Quarter exceeds
(ii) the sum of
(A) the Consolidated amount of all Interest Expense
paid to third parties by the Borrower and its Subsidiaries
during such Fiscal Quarter on account of Debt,
(B) the Consolidated amount of all income taxes
paid by the Borrower and its Subsidiaries during such
Fiscal Quarter,
(C) the Consolidated amount of all principal
amounts required to be paid during such Fiscal Quarter
with respect to Debt of the Borrower and its Subsidiaries,
and
(D) the amount equal to the capital
Credit Agreement
<PAGE>
<PAGE>
- 13 -
expenditures made by the Borrower and its
Subsidiaries for such Fiscal Quarter.
"Face Amount" means, with respect to any Letter of Credit, the
undrawn face amount thereof or, if such Letter of Credit is a revolving
letter of credit, the maximum face amount to which such Letter of Credit
may at any time be reinstated.
"Facilities Agreement" means the Facilities Agreement dated as of
January 2, 1995 between the Borrower, Century ML Cable Venture and
Century-ML, as the same shall be modified and supplemented and in effect
from time to time.
"FCC" means the Federal Communications Commission or
any successor thereto.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Financial Officer" means, as to any Person, the chief executive
officer, the chief financial officer, the treasurer or the principal
accounting officer of that Person.
"Fiscal Period" means the period of two consecutive Fiscal
Quarters ended on the last day of May, August, November or February, as
the case may be.
"Fiscal Quarter" means the period of three calendar months ending
on the last day of May, August, November or February, as the case may
be.
"Fiscal Year" means the period from and including June 1 of any
calendar year to and including May 31 of the next succeeding calendar
year (made up of four Fiscal Quarters), and when followed by the
designation of a year
Credit Agreement
<PAGE>
<PAGE>
- 14 -
shall mean such period ending on May 31 of such year.
"GAAP" means, as of any date, generally accepted accounting
principles in the United States as of the date hereof and not including
any interpretations or regulations that have been proposed but that have
not become effective.
"Guarantors" means each Person (other than the Administrative
Agent) that is or becomes a party to the Subsidiary Guaranty.
"Hazardous Materials" means (a) petroleum or petroleum products,
natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and radon gas, (b) any
substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants, contaminants" or "pollutants," or words of similar
import, under any Environmental Law and (c) any other substance exposure
to which is regulated under any Environmental Law.
"Holdings" means Centennial Cellular Wireless Holding
Corp., a New Jersey corporation.
"Holdings Pledge Agreement" means a Pledge Agreement,
substantially in the form of Exhibit D-3 hereto, between Holdings and
the Administrative Agent, as the same shall be modified and supplemented
and in effect from time to time.
"Initial Distributions" means cash dividends by the Borrower
during the period commencing on the date of the initial Credit Extension
and ending on August 31, 1997 in an aggregate amount not exceeding the
amount of Contributed Equity on the date of the initial Credit Extension
minus $55,000,000.
"Insufficiency" means, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together
with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b) all licenses or user or
Credit Agreement
<PAGE>
<PAGE>
- 15 -
other agreements granted to any Obligor with respect to any of the
foregoing, in each case whether now or hereafter owned or used
including, without limitation, the licenses or other agreements with
respect to the Copyright Collateral, the Patent Collateral or the
Trademark Collateral, listed in Schedule 4.01(cc) hereto; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials
standards, processing standards, performance standards, catalogs,
computer and automatic machinery software and programs; (d) all field
repair data, sales data and other information relating to sales or
service of products now or hereafter manufactured; (e) all accounting
information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer
programs used for the compilation or printout of such information,
knowledge, records or data; and (f) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held by any Obligor.
"Interconnection Agreements" means (a) the Interconnection
Agreement dated March 18, 1997 between Centennial Wireless PCS
Operations Corp. and PRTC and (b) the Interconnection Agreement dated
March 18, 1997 between Lambda Communications, Incorporado, and PRTC,
each of which has been duly approved by the PRTRB and a copy of each of
which has been furnished to the Lenders prior to the date hereof, as the
same shall be modified and supplemented and in effect from time to time.
"Interest Coverage Ratio" means, for any Fiscal Period, the ratio
of (a) Annualized EBITDA for such Fiscal Period to (b) Interest Expense
for the period of four consecutive Fiscal Quarters ending on the last
day of such Fiscal Period.
"Interest Expense" means the sum of all amounts payable by the
Borrower and its Subsidiaries on account of interest, amortization of
debt discount and expense, and commitment, letter of credit, agency and
other fees with respect to Total Debt.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the date
of such Advance or the date of the
Credit Agreement
<PAGE>
<PAGE>
- 16 -
Conversion of any Advance into such an Advance and ending on the last
day of the period selected by the Borrower pursuant to the provisions
below and, thereafter, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day
of the period selected by the Borrower pursuant to the provisions below.
The duration of each such Interest Period shall be one, two, three or
six months, in each case as the Borrower may, upon notice received by
the Administrative Agent not later than 11:00 A.M. (New York City time)
on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(i) the Borrower may not select any Interest Period which
ends after any principal repayment installment date unless, after
giving effect to such selection, the aggregate unpaid principal
amount of Base Rate Advances and Advances having Interest Periods
which end on or prior to such principal repayment installment
date shall be at least equal to the principal amount of Advances
due and payable on and prior to such date;
(ii) Interest Periods commencing on the same date for
Advances comprising part of the same Borrowing shall be of the
same duration; and
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day
of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided, that, if such extension would
cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day.
"Investments" of any Person means all investments by such Person
in other Persons (including Affiliates) in the forms of loans (including
guarantees), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for
consideration of Debt, Capital Stock or other securities and all other
items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
Credit Agreement
<PAGE>
<PAGE>
- 17 -
"Issuing Bank" means, at any time of determination, a Lender that
is the issuer of a Letter of Credit outstanding at such time under
Section 2.01B hereof or that is owed a Reimbursement Obligation at such
time arising from a drawing under a Letter of Credit issued by it,
together with its successors and assigns in such capacity.
"LEC System" means a system providing local telephone services
within a local exchange in Puerto Rico and the Virgin Islands.
"Lenders" means the Banks listed on the signature pages hereof
and each Eligible Assignee that shall become a party hereto pursuant to
Section 8.07.
"Letter of Credit" has the meaning specified in
Section 2.01B hereof.
"Letter of Credit Documents" shall mean, with respect to any
Letter of Credit, collectively, any application therefor and any other
agreements, instruments, guarantees or other documents (whether general
in application or applicable only to such Letter of Credit) governing or
providing for (a) the rights and obligations of the parties concerned or
at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations, each as the same may be modified
and supplemented and in effect from time to time.
"Letter of Credit Liability" shall mean, at any time and in
respect of any Letter of Credit, the sum of (a) the Face Amount of such
Letter of Credit (excluding, if such Letter of Credit is a revolving
letter of credit, any portion thereof subject to reinstatement upon the
payment of Reimbursement Obligations of the Borrower at such time due
and payable) plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of the Borrower at such time due and payable
in respect of all drawings made under such Letter of Credit. For
purposes of this Agreement, a Lender (other than the issuer of such
Letter of Credit) shall be deemed to hold a Letter of Credit Liability
in an amount equal to its participation interest in the related Letter
of Credit under Section 2.01B(b), and such issuer shall be deemed to
hold a Letter of Credit Liability in an amount equal to its retained
interest in the related Letter of Credit after giving effect to the
acquisition by the Lenders other than such issuer of their participation
Credit Agreement
<PAGE>
<PAGE>
- 18 -
interests under said Section 2.01B(b).
"Leverage Ratio" means, as of any date, the ratio of
(a) Total Debt as of such date to
(b) Annualized EBITDA for the most recent Fiscal Period
which ends on or before such date.
"License Subsidiaries" means Centennial Wireless
PCS License Corp., a Delaware corporation, and Lambda
Communications, Incorporado, a Puerto Rico corporation.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor, any lien or security interest created in connection
with a sale/leaseback transaction and any easement, right of way or
other encumbrance on title to real property.
"Loan Documents" means this Agreement, the Notes, the
Letter of Credit Documents, the Consent and Agreements and
the Support Documents.
"Majority Lenders" means at any time Lenders holding at least 51%
of the then aggregate unpaid principal amount of the Notes and Letter of
Credit Liabilities held by the Lenders, or, if no such principal amount
is then outstanding, Lenders having at least 51% of the Commitments.
"Margin Stock" has the meaning specified in
Regulation U.
"Marketing Agreement" means a material operating or material
marketing agreement between any Obligor and any other party (including,
without limitation, any such agreement with Century-ML).
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance or properties of the Borrower and its Subsidiaries taken as
a whole.
"Material Adverse Effect" means a material adverse effect on (a)
the business, condition (financial or otherwise), operations,
performance or properties of the
Credit Agreement
<PAGE>
<PAGE>
- 19 -
Borrower and its Subsidiaries taken as a whole, (b) the rights and
remedies of the Administrative Agent or any Lender under any Loan
Document or (c) the ability of any Credit Party to perform its
obligations under any Loan Document to which it is or is to be a party.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a) (3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions, such plan being maintained pursuant to
one or more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined
in Section 4001(a) (15) of ERISA, which (i) is maintained for employees
of the Borrower or an ERISA Affiliate and at least one Person other than
the Borrower and its ERISA Affiliates or (ii) was so maintained and in
respect of which the Borrower or an ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Net Cash Proceeds" means:
(a) with respect to any Debt Issuance or Equity Issuance,
the aggregate amount of cash received from time to time by or on
behalf of such Person in connection with such transaction after
deducting therefrom only reasonable and customary brokerage
commissions, underwriting fees and discounts, legal fees,
finder's fees, rating agency fees and other similar fees and
commissions; and
(b) with respect to any Disposition, the aggregate amount
of cash received from time to time by or on behalf of the
respective seller in connection with such Disposition after
deducting therefrom only
(x) reasonable and customary brokerage commissions,
legal fees, finder's fees, rating agency fees and other
similar fees and commissions,
(y) the amount of taxes payable in connection with or
as a result of such Disposition and
Credit Agreement
<PAGE>
<PAGE>
- 20 -
(z) the amount of any Debt secured by a Lien on the
assets that are the subject of such Disposition and that, by
the terms of such Disposition, is required to be repaid upon
such Disposition,
in each case to the extent, but only to the extent, that the
amounts so deducted are, no later than the Relevant Time (as
defined in the following sentence), actually paid to a Person
that is not an Affiliate of the Person making such payment (other
than payments made to a director of any Person in his capacity as
a member or partner of a law firm or partnership rendering legal
services to such Person; provided that the terms of such
compensation are fair and reasonable and no less favorable to
such Person than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate) and are properly
attributable to such transaction or to the asset that is the
subject thereof. For purpose of the preceding sentence, "Relevant
Time" means (i) in the case of the foregoing clauses (a) and
(b)(x) the date falling 30 days after the receipt of cash from
the relevant Debt Issuance, Equity Issuance or Disposition, (ii)
in the case of the foregoing clause (b)(y), the date that the
respective taxes are legally due and (iii) in the case of the
foregoing clause (b)(z), the date of receipt of cash for the
relevant Disposition.
"Network Assets" means all base stations, switching stations,
towers, antennas, and other cell-site equipment, all rights under the
Facilities Agreement, all leasehold rights and all Telecommunications
Approvals, and all other Property, in each case that are integral to the
operation of the Telecommunications Networks.
"Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of Exhibit A hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Advances made by such Lender.
"Notice of Borrowing" has the meaning specified in
Section 2.02(a).
"Obligor Pledge Agreement" means a Pledge Agreement,
substantially in the form of Exhibit D-2 hereto, between the
Credit Agreement
<PAGE>
<PAGE>
- 21 -
Borrower, Lambda Communications, Incorporado, and the Administrative
Agent, as the same shall be modified and supplemented and in effect from
time to time.
"Obligors" means, collectively, the Borrower and the
Guarantors.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by any Obligor, including each Patent identified in
Schedule 4.01(cc) hereto.
"Patents" shall mean all patents and patent applications,
including, without limitation, the inventions and improvements described
and claimed therein together with the reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
all income, royalties, damages and payments now or hereafter due and/or
payable under and with respect thereto, including, without limitation,
damages and payments for past or future infringements thereof, the right
to sue for past, present and future infringements thereof, and all
rights corresponding thereto throughout the world.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PCS System" means a wireless telecommunications system licensed
by the FCC under 47 C.F.R. Part 24 for operation in the "B" frequency
block (1.865/1.880 GHz and 1.945/1.960 GHz) to provide any or all of a
family of digital, wireless mobile or portable and fixed radio
communications services to individuals and businesses in Puerto Rico and
the Virgin Islands.
"Periodic Certificate" has the meaning specified in
Section 2.06(c).
"Permitted Investments" means (a) any Investment in the Borrower
or in a Person that, on the date hereof, is a Subsidiary; and (b) any
Investment in Cash Equivalents.
"Permitted Vendor Financing" means Debt incurred for the deferred
purchase price of property or services related to the installation,
operation and replacement of telecommunications equipment; provided that
(a) at the time of incurrence thereof (and after giving effect thereto)
(x) no Default shall have occurred and be continuing and (y) on a pro
forma basis, the Borrower would be in
Credit Agreement
<PAGE>
<PAGE>
- 22 -
compliance with Section 5.01(j) if such Debt was outstanding on the last
day of the Fiscal Period ending on or most recently ended prior to the
date of such incurrence and Section 5.01(i) and 5.01(k) if such Debt was
outstanding throughout the period of four Fiscal Quarters ending on such
date; (b) none of the principal of such Debt shall be required to be
repaid prior to February 28, 2006; (c) the interest rate borne by such
indebtedness does not exceed 12% per annum, (e) any Liens granted to
secure repayment of such Debt shall cover only the equipment being
financed and (f) the other material terms of such Debt and of any
agreement entered into and or any instrument issued in connection
therewith are no less favorable in any material respect to the Borrower
or the Lenders than the terms and conditions of this Agreement.
"Person" means an individual, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or
agency thereof.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Pro-Forma Debt Service Coverage Ratio" means, as of any date of
determination, the ratio of (i) Annualized EBITDA of the Borrower and
its Subsidiaries for the Fiscal Period ending on or most recently ended
prior to such date to (ii) the sum of (A) projected Interest Expense for
the period of four Fiscal Quarters commencing on or most recently
commenced prior to such date (or, if such date is the last day of a
Fiscal Quarter, commencing on the next day) (calculated using the
weighted average of interest rates at the time of calculation and at the
principal outstanding at the time of calculation after giving effect to
any scheduled payments of principal during such four Fiscal Quarters)
plus (B) the aggregate principal amounts of all Debt required to be paid
during such period of four Fiscal Quarters by the Borrower and its
Subsidiaries.
"Property" means any right or interest in or to property of any
kind whatsoever, whether real, personal (including, without limitation,
cash) or mixed and whether tangible or intangible.
"PRPSC" means the Puerto Rico Public Service
Credit Agreement
<PAGE>
<PAGE>
- 23 -
Commission.
"PRTC" means the Puerto Rico Telephone Company, a Delaware
corporation, which owns and operates a telephone system in and about
Puerto Rico, all the outstanding shares of the common stock of which are
owned by the Puerto Rico Telephone Authority, a body corporate and
politic constituting a public corporation and governmental
instrumentality of Puerto Rico.
"PRTC Consent and Agreement" means a consent and agreement
entered into by the parties to the Interconnection Agreements and the
Administrative Agent, satisfactory to the Administrative Agent in form
and substance in the reasonable exercise of discretion.
"PRTRB" means the Telecommunications Regulatory Board
of Puerto Rico created by Act No. 213 of the Legislature of
Puerto Rico approved September 12, 1996, or any successor
thereto.
"Puerto Rico" means the Commonwealth of Puerto Rico.
"Puerto Rico Security Documents" means each power of attorney,
mortgage, assignment, security agreement and other document executed or
to be executed and delivered by any Credit Party to grant and perfect
the security interests required by Section 5.01(n) and enforce the
rights of the Administrative Agent thereunder for the benefit of the
Lenders, in each case in form and substance satisfactory to the
Administrative Agent in the reasonable exercise of its discretion and as
such documents may be amended or otherwise modified from time to time.
"Register" has the meaning specified in
Section 8.07(c).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reimbursement Obligations" means, at any time, the obligations
of the Borrower then outstanding, or that may thereafter arise in
respect of all Letters of Credit then outstanding, to reimburse amounts
paid by the Issuing Banks in respect of any drawings under Letters of
Credit.
Credit Agreement
<PAGE>
<PAGE>
- 24 -
"Required Reduction" has the meaning specified in
Section 2.09(c).
"Security Documents" means the Additional Puerto Rico Security
Documents, the Puerto Rico Security Documents, the Obligor Pledge
Agreement and the Holdings Pledge Agreement, in each case as the same
shall be modified and supplemented and in effect from time to time.
"Senior Notes Indenture" means the Indenture dated as of November
15, 1993 between Centennial Cellular, as issuer, and Bank of Montreal
Trust Company, as trustee, as amended pursuant to a First Supplemental
Indenture dated as of November 15, 1993 and by a Second Supplemental
Indenture dated as of May 11, 1995 and as said Indenture shall, subject
to Section 5.02(i), be further modified and supplemented and in effect
from time to time.
"Single Employer Plan" means a single employer plan, as defined
in Section 4001(a) (15) of ERISA, which (i) is maintained for employees
of the Borrower or an ERISA Affiliate and no Person other than the
Borrower and its ERISA Affiliates or (ii) was so maintained and in
respect of which the Borrower or an ERISA Affiliate could have liability
under Section 4069 of ERISA in the event such plan has been or were to
be terminated.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is
not less than the total amount of its liabilities (including, without
limitation, liabilities on all claims, whether or not reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured)
of such Person, (b) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay the
probable liability of such Person on its existing debts as they become
absolute and matured, (c) such Person is able to realize upon its assets
and pay its debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business, (d)
such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature and (e) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction,
for which such Person's
Credit Agreement
<PAGE>
<PAGE>
- 25 -
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in each respective industry in
which such Person is engaged; it being understood that in applying the
foregoing criteria in respect of any Person:
(i) the value of the property and assets of such Person
includes the value of its interest in its Subsidiaries and any
rights to contribution (whether by equity or loan) from any of
its Affiliates, and
(ii) its ability to pay its debts and liabilities may be
measured by reference to, among other things, amounts received or
to be received in respect of any such property or assets.
"Subordinated Debt" means Debt (i) for which the Borrower is
directly and primarily liable, (ii) in respect of which none of its
Subsidiaries is contingently or otherwise obligated, (iii) none of the
principal of which shall be required to be repaid prior to February 28,
2006, (iv) that bears interest at a rate per annum not in excess of 12%
and (v) that is subordinated to the obligations of the Borrower to pay
principal of and interest on the Loans, Reimbursement Obligations and
Notes hereunder on terms, and pursuant to documentation containing other
terms (including interest, covenants and events of default), in form and
substance satisfactory to the Majority Lenders.
"Subscriber" means a Person purchasing wireless, long distance
access or wireline services from the Borrower or a Subsidiary using the
Telecommunications Networks of the Borrower and its Subsidiaries and
whose account is not more than 90 days past due, provided, however, that
if any Person purchases wireless services that include more than one
telephone number, the number of Subscribers will be determined by the
number of active telephone numbers for such Person.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation,
partnership or other entity (irrespective of whether or not at the time
securities or other ownership interests of any
Credit Agreement
<PAGE>
<PAGE>
- 26 -
other class or classes of such corporation, partnership or other entity
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person. Unless the context
otherwise requires, each reference herein to a Subsidiary shall mean a
Subsidiary of the Borrower.
"Subsidiary Guaranty" means a Subsidiary Guaranty, substantially
in the form of Exhibit D-1 hereto, between the Subsidiaries of the
Borrower from time to time party thereto and the Administrative Agent,
as the same shall be modified and supplemented and in effect from time
to time.
"Support Documents" means, collectively, the Subsidiary Guaranty,
the Security Documents and all Uniform Commercial Code financing
statements and other registration instruments required by this
Agreement, the Subsidiary Guaranty or the Security Documents to be filed
with respect to the security interests created pursuant to the Security
Documents.
"Tax-Advantaged Debt" means Debt of the Borrower (i) owing to the
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority (AFICA) in connection with (and
not exceeding the aggregate principal amount of) Debt issued by said
Authority the proceeds of which are used for the direct benefit of the
Borrower and its Subsidiaries; or (ii) evidenced by securities issued by
the Borrower pursuant to a commercial paper program of other debt
instruments that qualify as an Eligible Investment under section 2(j) of
the Puerto Rico Industrial Incentives Acts, Regulation 5105 issued by
the Commissioner of Financial Institutions of the Commonwealth of Puerto
Rico, as amended from time to time, and any successor regulation with
respect to the subject matter thereof issued by any governmental
authority having jurisdiction in the matter; provided that in each of
the cases referred to in the foregoing clauses (i) and (ii) such Debt of
the Borrower or (in the case of the foregoing clause (ii)) of said
Authority is supported by one or more Letters of Credit issued
hereunder.
"Telecommunications Approval" means any mobile telephone,
specialized mobile radio, messaging, personal communications service,
microwave or other license, permit, authorization, certificate,
franchise, consent, approval or
Credit Agreement
<PAGE>
<PAGE>
- 27 -
waiver granted or issued by the FCC, the PRPSC or the PRTB, including,
without limitation, any of the foregoing authorizing or permitting the
acquisition, construction or operation of a cellular telephone system,
mobile telephone system, personal communications service system,
microwave network, messaging system or a local exchange network or
competitive access or transport network.
"Telecommunications Networks" means, collectively, the PCS
Systems, the CAP Systems and the LEC Systems of the Borrower and its
Subsidiaries.
"Termination Date" means the fourth anniversary of the date
hereof, or the earlier date of termination in whole of the Commitments
pursuant to Section 2.04 or 6.01.
"Total Debt" means, as of any date, the Consolidated Debt of the
Borrower and its Subsidiaries, including, without limitation,
Capitalized Lease Obligations, guaranties, obligations with respect to
letters of credit and trade accounts payable for which payment has been
deferred by agreement beyond the customary period in the industry.
"Trademark Collateral" shall mean all Trademarks, whether now
owned or hereafter acquired by any Obligor, including each Trademark
identified in Schedule 4.01(cc) hereto. Notwithstanding the foregoing,
the Trademark Collateral does not and shall not include any Trademark
that would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.
"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications
for trademark and service mark registrations, including, without
limitation, all renewals of trademark and service mark registrations,
all rights corresponding thereto throughout the world, the right to
recover for all past, present and future infringements thereof, all
other rights of any kind whatsoever accruing thereunder or pertaining
thereto, together, in each case, with the product lines and goodwill of
the business connected with the use of, and symbolized by, each such
trade name, trademark and service mark.
"Type" has the meaning specified in the definition of
Credit Agreement
<PAGE>
<PAGE>
- 28 -
"Advance" in this Section 1.01.
"Virgin Islands" means the United States Virgin
Islands.
"Voting Power" means, with respect to any Voting Stock issued by
any Person, the number of votes that the holders of such Voting Stock
are ordinarily, in the absence of contingencies, entitled to cast for
the election of a majority of the directors (or Persons performing
similar functions) of such Person, even though the right so to vote has
been suspended by the happening of such a contingency.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or Persons performing similar functions) of such
Person, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly Owned Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly
owned or controlled by such Person or one or more Wholly Owned
Subsidiaries of such Person or by such Person and one or more Wholly
Owned Subsidiaries of such Person.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e), as modified from
time to time by changes in accounting principles which are required by generally
accepted accounting principles in effect from time to time.
Credit Agreement
<PAGE>
<PAGE>
- 29 -
ARTICLE II
AMOUNTS AND TERMS OF THE CREDITS
SECTION 2.01A. The Advances. Each Lender severally agrees, on the
terms and conditions hereinafter set forth, to make Advances to the Borrower
from time to time on any Business Day during the period from the date hereof
until the Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the signature
pages hereof or, if such Lender has entered into any Assignment and Acceptance,
set forth for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section
2.04 (such Lender's "Commitment"), provided that in no event shall (a) the
Aggregate Financing Amount exceed the aggregate amount of the Commitments as in
effect from time to time or (b) the Aggregate Financing Amount exceed the
aggregate amount of the Borrowing Base as in effect from time to time prior to
the Borrowing Base Release Date. Each Borrowing shall be in an aggregate amount
not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and shall consist of Advances of the same Type made on the same day by the
Lenders ratably according to their respective Commitments. Within the limits of
each Lender's Commitment, the Borrower may borrow, prepay pursuant to Section
2.09(a) and reborrow under this Section 2.01A.
SECTION 2.01B. Letters of Credit. Subject to the terms and
conditions of this Agreement, the Commitments may be utilized, upon the request
of the Borrower, in addition to the Advances provided for by Section 2.01A
hereof, by the issuance by a Lender or Lenders designated by the Borrower of
letters of credit (collectively, "Letters of Credit") for account of the
Borrower or any of its Subsidiaries (as specified by the Borrower), provided
that in no event shall (i) the Aggregate Financing Amount exceed the aggregate
amount of the Commitments as in effect from time to time, (ii) the Aggregate
Financing Amount exceed the Borrowing Base as in effect from time to time prior
to the Borrowing Base Release Date, (iii) the outstanding aggregate amount of
all Letter of Credit Liabilities exceed $125,000,000, (iv) the expiration date
of any Letter of Credit extend beyond the Termination Date or (v) any Lender be
required to issue any Letter of Credit without its consent (which it may grant
or withhold in its sole discretion). The following additional provisions shall
apply to Letters of Credit:
Credit Agreement
<PAGE>
<PAGE>
- 30 -
(a) The Borrower shall give the Administrative Agent at least ten
Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than 30 days
preceding the Termination Date) each Letter of Credit is to be issued,
the account party or parties therefor and the Lender that will issue
such Letter of Credit and describing in reasonable detail the proposed
terms of such Letter of Credit (including the beneficiary thereof) and
the nature of the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a commercial
letter of credit or a standby letter of credit). Upon receipt of any
such notice, the Administrative Agent shall advise the prospective
Issuing Bank of the contents thereof.
(b) On each day during the period commencing with the issuance of
any Letter of Credit and until such Letter of Credit shall have expired
or been terminated, the Commitment of each Lender shall be deemed to be
utilized for all purposes of this Agreement in an amount equal to such
Lender's Commitment Percentage of the Face Amount of such Letter of
Credit. Upon the issuance of any Letter of Credit hereunder, each Lender
(other than the issuer thereof) shall automatically acquire a
participation in the respective Issuing Bank's liability under such
Letter of Credit in an amount equal to such Lender's Commitment
Percentage of such liability, and each Lender (other than the issuer
thereof) thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be
unconditionally obligated to such Issuing Bank to pay and discharge when
due, its Commitment Percentage of such Issuing Bank's liability under
such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of
any demand for payment under such Letter of Credit, the respective
Issuing Bank shall promptly notify the Borrower (through the
Administrative Agent) of the amount to be paid by such Issuing Bank as a
result of such demand and the date on which payment is to be made by
such Issuing Bank to such beneficiary in respect of such demand.
Notwithstanding the identity of the account party of any Letter of
Credit, the Borrower hereby unconditionally agrees to pay and reimburse
the Administrative Agent for account of such Issuing Bank for the amount
of each demand for payment under such Letter of Credit that is in
substantial compliance with the provisions of such Letter of Credit at
or prior to the date on which payment is to be made by such
Credit Agreement
<PAGE>
<PAGE>
- 31 -
Issuing Bank to the beneficiary thereunder, without presentment, demand,
protest or other formalities of any kind and irrespective of any claim,
set-off, defense or other right which the Borrower or any of its
Subsidiaries or Affiliates may have at any time against such Issuing
Bank or any other Person, under all circumstances.
(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.01B, the Borrower shall advise the
Administrative Agent whether or not the Borrower intends to borrow
hereunder to finance its obligation to reimburse the respective Issuing
Bank for the amount of the related demand for payment and, if it does,
submit a notice of such borrowing as provided in Section 2.02(a) hereof.
(e) Each Lender (other than the issuer of such Letter of Credit)
shall pay to the Administrative Agent for account of the issuer of a
Letter of Credit at its address referred to in Section 8.02 in U.S.
dollars and in same day funds, the amount of such Lender's Commitment
Percentage of any payment under such Letter of Credit upon notice by
such issuer (through the Administrative Agent) to such Lender requesting
such payment and specifying such amount. Each such Lender's obligation
to make such payment to the Administrative Agent for account of any
Issuing Bank under this paragraph (e), and each Issuing Bank's right to
receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation,
the failure of any other Lender to make its payment under this paragraph
(e), the financial condition of the Borrower (or any other account
party), the existence of any Default or the termination of the
Commitments. Each such payment to an Issuing Bank shall be made without
any offset, abatement, withholding or reduction whatsoever. If any
Lender shall default in its obligation to make any such payment to the
Administrative Agent for account of an Issuing Bank, for so long as such
default shall continue the Administrative Agent may at the request of
such Issuing Bank withhold from any payments received by the
Administrative Agent under this Agreement or any Note for account of
such Lender the amount so in default and, to the extent so withheld, pay
the same to such Issuing Bank in satisfaction of such defaulted
obligation.
(f) Upon the making of each payment by a Lender to an Issuing
Bank pursuant to paragraph (e) above in respect of any Letter of Credit,
such Lender shall, automatically and
Credit Agreement
<PAGE>
<PAGE>
- 32 -
without any further action on the part of the Administrative Agent, such
Issuing Bank or such Lender, acquire (i) a participation in an amount
equal to such payment in the Reimbursement Obligation owing to such
Issuing Bank by the Borrower hereunder and under the Letter of Credit
Documents relating to such Letter of Credit and (ii) a participation in
a percentage equal to such Lender's Commitment Percentage in any
interest or other amounts payable by the Borrower hereunder and under
such Letter of Credit Documents in respect of such Reimbursement
Obligation (other than the commissions, charges, costs and expenses
payable to such Issuing Bank pursuant to paragraph (g) of this Section
2.01B). Upon receipt by an Issuing Bank from or for account of the
Borrower of any payment in respect of any Reimbursement Obligation or
any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) such Issuing Bank
shall promptly pay to the Administrative Agent for account of each
Lender entitled thereto, such Lender's Commitment Percentage of such
payment, each such payment by such Issuing Bank to be made in the same
money and funds in which received by such Issuing Bank. In the event any
payment received by any Issuing Bank and so paid to the Lenders
hereunder is rescinded or must otherwise be returned by such Issuing
Bank, each Lender shall, upon the request of such Issuing Bank (through
the Administrative Agent), repay to such Issuing Bank (through the
Administrative Agent) the amount of such payment paid to such Lender,
with interest at the rate specified in paragraph (j) of this Section
2.01B.
(g) The Borrower shall pay to the Administrative Agent for
account of each Lender (ratably in accordance with their respective
Commitment Percentages) a letter of credit fee in respect of each Letter
of Credit in an amount equal to the Applicable Eurodollar Margin in
effect from time to time multiplied by the daily average Face Amount of
such Letter of Credit for the period from and including the date of
issuance of such Letter of Credit (i) in the case of a Letter of Credit
that expires in accordance with its terms, to and including such
expiration date and (ii) in the case of a Letter of Credit that is drawn
in full or is otherwise terminated other than on the stated expiration
date of such Letter of Credit, to but excluding the date such Letter of
Credit is drawn in full or is terminated (such fee to be non-refundable,
to be paid in arrears on the last day of each May, August, November and
February and on the Termination Date and to be calculated for any day
after
Credit Agreement
<PAGE>
<PAGE>
- 33 -
giving effect to any payments made under such Letter of Credit on such
day). In addition, the Borrower shall pay to each Issuing Bank (x) a
fronting fee in respect of each Letter of Credit in such amount as shall
be separately agreed upon between the Borrower and such Issuing Bank and
(y) all commissions, charges, costs and expenses in the amounts
customarily charged by such Issuing Bank from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, each
Issuing Bank shall deliver (through the Administrative Agent) to each
Lender and the Borrower a notice describing the aggregate amount of all
Letters of Credit outstanding at the end of such month. Upon the request
of any Lender from time to time, each Issuing Bank shall deliver any
other information reasonably requested by such Lender with respect to
each Letter of Credit issued by such Issuing Bank then outstanding.
(i) The issuance by each Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in Article III
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to such Issuing Bank consistent
with its then current practices and procedures with respect to letters
of credit of the same type and (ii) the Borrower shall have executed and
delivered such applications, agreements and other instruments relating
to such Letter of Credit as such Issuing Bank shall have reasonably
requested consistent with its then current practices and procedures with
respect to letters of credit of the same type, provided that in the
event of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security
Document, the provisions of this Agreement and the Security Documents
shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section
2.01B on the due date therefor, such Lender shall pay interest to the
respective Issuing Bank (through the Administrative Agent) on such
amount from and including such due date to but excluding the date such
payment is made at a rate per annum equal to the Federal
Credit Agreement
<PAGE>
<PAGE>
- 34 -
Funds Rate, provided that if such Lender shall fail to make such payment
to such Issuing Bank within three Business Days of such due date, then,
retroactively to the due date, such Lender shall be obligated to pay
interest on such amount at the rate provided for in Section 2.06(b).
(k) The issuance by any Issuing Bank of any modification or
supplement to any Letter of Credit hereunder shall be subject to the
same conditions applicable under this Section 2.01B to the issuance of
new Letters of Credit, and no such modification or supplement shall be
issued hereunder unless either (i) the respective Letter of Credit
affected thereby would have complied with such conditions had it
originally been issued hereunder in such modified or supplemented form
or (ii) each Lender shall have consented thereto.
The Borrower hereby indemnifies and holds harmless each Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Administrative Agent may
incur (or that may be claimed against such Lender or the Administrative Agent by
any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by any Issuing Bank under
any Letter of Credit; provided that the Borrower shall not be required to
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of such Issuing Bank in
determining whether a request presented under any Letter of Credit complied with
the terms of such Letter of Credit or (y) in the case of such Issuing Bank, such
Issuing Bank's failure to pay under any Letter of Credit after the presentation
to it of a request strictly complying with the terms and conditions of such
Letter of Credit unless such payment was enjoined by court order. Nothing in
this Section 2.01B is intended to limit the other obligations of the Borrower,
any Lender or the Administrative Agent under this Agreement.
SECTION 2.02. Making the Advances.
(a) Each Borrowing shall be made on notice, given not later than
11:00 A.M. (New York City time) on the third (or, in the case of a Base Rate
Advance, the first) Business Day prior to the date of the proposed Borrowing, by
the Borrower to the Administrative Agent, which shall give to each Lender prompt
notice thereof by telecopier, telex or cable. Each such notice
Credit Agreement
<PAGE>
<PAGE>
- 35 -
of an Borrowing (a "Notice of Borrowing") shall be by telecopier, telex or
cable, confirmed immediately by mail or delivery in writing, in substantially
the form of Exhibit B hereto, specifying therein the requested (i) date of such
Borrowing, (ii) Type of Advances comprising such Borrowing, (iii) aggregate
amount of such Borrowing, and (iv) in the case of a Borrowing comprised of
Eurodollar Rate Advances, initial Interest Period for each such Advance. Each
Lender shall, before 11:00 A.M. (New York City time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at its address referred to in Section 8.02, in same day
funds, such Lender's ratable portion of such Borrowing. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Administrative Agent will make such funds
available to the Borrower at the Administrative Agent's aforesaid address.
(b) Anything contained herein to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if
the aggregate amount of such Borrowing is less than $5,000,000 or if the
obligation of the Lenders to make Eurodollar Rate Advances shall then be
suspended pursuant to Section 2.07 and (ii) no more than ten Borrowings may be
outstanding at anytime.
(c) Each Notice of Borrowing shall be irrevocable and binding on
the Borrower. In the case of any Borrowing which the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on such
date.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02
Credit Agreement
<PAGE>
<PAGE>
- 36 -
and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Administrative Agent, such Lender and the Borrower severally agree to repay
to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Advances comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make the Advance to be made by
it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Fees.
(a) Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee on the
average daily unused portion of such Lender's Commitment from the date hereof in
the case of each Bank and from the effective date specified in the Assignment
and Acceptance pursuant to which it became a Lender in the case of each other
Lender until the Termination Date at the rate of (i) 0.500% per annum during
each period in which the applicable Leverage Ratio is greater than 8.0:1, (ii)
0.375% per annum during each period in which the applicable Leverage Ratio is
less than or equal to 8.0:1 and greater than 6.0:1, and (iii) 0.250% per annum
during each period in which the applicable Leverage Ratio is less than or equal
to 6.0:1, payable on the last day of each November, February, May and August
during the term of such Lender's Commitment, commencing on the date hereof and
on the Termination Date. Each retroactive change in the Leverage Ratio pursuant
to Section 2.06(d) shall be given retroactive effect in determining the
applicable commitment fee rate pursuant to this Section 2.03(a) for a period of
time identical to that given such retroactive change in the Leverage Ratio. If
any such
Credit Agreement
<PAGE>
<PAGE>
- 37 -
retroactive change occurs in the commitment fee rate payable for a period for
which the Borrower has already paid commitment fees, then any overpayment of
commitment fees by the Borrower resulting therefrom shall be credited to future
commitment fee or other payment obligations of the Borrower and any underpayment
of commitment fees by the Borrower resulting therefrom shall be paid by the
Borrower to the Administrative Agent for the account of the Lenders upon demand
by the Administrative Agent.
(b) Agency Fee. The Borrower shall pay to the Administrative
Agent, for its own account, such fees in respect of its services hereunder as
shall from time to time be separately agreed upon between the Borrower and the
Administrative Agent.
SECTION 2.04. Reduction of the Commitments.
(a) Mandatory. The Commitments of the Lenders shall
be automatically and permanently reduced as provided by
Section 2.09(c).
(b) Optional. The Borrower shall have the right, upon at least 5
Business Days' notice to the Administrative Agent, to terminate in whole or
permanently reduce ratably in part the unused portions of the respective
Commitments of the Lenders, provided that each partial reduction shall be in the
aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof.
SECTION 2.05. Repayment of Advances. The Borrower shall repay the
principal amount of each Advance outstanding at the close of business on the
Termination Date made to it owing to each Lender on each of the principal
installment dates listed below commencing May 31, 2001 and ending February 28,
2005 and the amount to be paid on each such principal repayment installment date
shall equal the product obtained by multiplying (x) the unpaid principal amount
of such Advance outstanding at the close of business on the Termination Date by
(y) the percentage set forth below for that principal repayment installment
date:
Credit Agreement
<PAGE>
<PAGE>
- 38 -
<TABLE>
<CAPTION>
Last Business Last Business Last Business Last Business
Day of Day of Day of Day of
Year February May August November
---- -------- --- ------ -----------
<S> <C> <C> <C> <C>
2001 XXX 3.00% 4.00% 5.00%
2002 6.00% 6.50% 6.50% 7.00%
2003 7.00% 7.00% 7.00% 7.00%
2004 7.00% 7.00% 7.00% 7.00%
2005 6.00% XXX XXX XXX
</TABLE>
provided, however, that the last such installment shall be in the amount
necessary to repay in full the unpaid principal amount of such Advance.
SECTION 2.06. Interest on the Advances.
(a) Ordinary Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance owing to each Lender in accordance with
the Note to the order of such Lender at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a
Base Rate Advance, a rate per annum equal at all times equal to the sum
of the Base Rate in effect from time to time plus 1.50%, provided that
if the applicable Leverage Ratio shall be greater than zero and fall
within any of the ranges set forth below then the Borrower shall pay a
rate per annum equal at all times to the sum of the Base Rate in effect
from time to time plus the applicable margin set forth below:
(A) 1.25% per annum during each period in which the
applicable Leverage Ratio is greater than 10.0:1,
(B) 1.00% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 10.0:1 and
greater than 9.0:1,
(C) 0.875% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 9.0:1 and
greater than 8.0:1,
(D) 0.750% per annum during each period in which the
applicable Leverage Ratio is less than or equal to
Credit Agreement
<PAGE>
<PAGE>
- 39 -
8.0:1 and greater than 7.0:1,
(D) 0.625% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 7.0:1 and
greater than 6.0:1,
(E) 0.375% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 6.0:1 and
greater than 5.0:1,
(F) 0.125% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 5.0:1 and
greater than 4.0:1, and
(G) 0% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 4.0:1,
payable in arrears on the last day of each May, August, November and
February during such periods and on the date such Base Rate Advance
shall be Converted or paid in full.
(ii) Eurodollar Rate Advance. During such periods as such Advance is
a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance equal to the sum of the Eurodollar
Rate for such Interest Period for such Advance plus 2.50%, provided that
if the applicable Leverage Ratio shall be greater than zero and fall
within any of the ranges set forth below then the Borrower shall pay a
rate per annum equal at all times to the sum of the Eurodollar Rate for
such Interest Period for such Advance plus the applicable margin set
forth below (the "Applicable Eurodollar Margin"):
(A) 2.25% per annum during each period in which the
applicable Leverage Ratio is greater than 10.0:1,
(B) 2.00% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 10.0:1 and
greater than 9.0:1,
(C) 1.875% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 9.0:1 and
greater than 8.0:1,
(D) 1.750% per annum during each period in which the
applicable Leverage Ratio is less than or equal to
Credit Agreement
<PAGE>
<PAGE>
- 40 -
8.0:1 and greater than 7.0:1,
(D) 1.625% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 7.0:1 and
greater than 6.0:1,
(E) 1.375% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 6.0:1 and
greater than 5.0:1,
(F) 1.125% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 5.0:1 and
greater than 4.0:1, and
(G) 0.875% per annum during each period in which the
applicable Leverage Ratio is less than or equal to 4.0:1,
payable in arrears on the last day of such Interest Period and, if such
Interest Period is greater than three months, on the last day of each
three-month period during such Interest Period.
(b) Default Interest. The Borrower shall pay interest on the
unpaid principal amount of each Advance that is not paid when due and on the
unpaid amount of all interest, fees and other amounts payable hereunder that is
not paid when due, payable on demand, at a rate per annum equal at all times to
(i) in the case of any amount of principal, the greater of (x) 2% per annum
above the rate per annum required to be paid on such Advance immediately prior
to the date on which such amount became due and (y) 2% per annum above the rate
per annum on a hypothetical Borrowing consisting of a Eurodollar Rate Advance in
a principal amount equal to the principal amount of such defaulted Advance and
having consecutive Interest Periods of three months' duration, the first day of
the initial Interest Period for such hypothetical Eurodollar Rate Advance being
deemed to occur on the first day on which such defaulted Advance shall not have
been paid when due and (ii) in the case of all other amounts, 2% per annum above
the Base Rate in effect from time to time.
(c) Leverage Ratio Certificates. The Borrower shall deliver a
certificate, in substantially the form of Exhibit F, to the Administrative Agent
on each date on which financial statements are delivered pursuant to Sections
5.03(c) and 5.03(d) (each such certificate being a "Periodic Certificate"). Each
Periodic Certificate shall certify the Leverage Ratio in effect
Credit Agreement
<PAGE>
<PAGE>
- 41 -
on the last day of the most recent Fiscal Period which ends on or before the
date on which such certificate is delivered.
(d) Effective Dates for Leverage Ratios. Each Leverage Ratio
certified in any Periodic Certificate shall (absent manifest error) become
effective on the date such certificate is delivered in compliance with this
Agreement. The Leverage Ratio certified for the date on which such certificate
is delivered shall apply to each date thereafter until the delivery in
compliance with this Agreement of the next Periodic Certificate called for by
Section 2.06(c). If the Borrower fails to deliver financial statements and the
related Periodic Certificate when required by Section 5.03(c), then the
applicable Leverage Ratio shall be the Leverage Ratio in effect on the last day
of the Fiscal Period in respect of which such Periodic Certificate should have
been delivered and shall continue in effect until a Periodic Certificate in
compliance with this Section 2.06 is delivered.
SECTION 2.07. Interest Rate Determination and Protection.
(a) Citibank agrees to furnish to the Administrative Agent timely
information for the purpose of determining each Eurodollar Rate.
(b) The Administrative Agent shall give prompt notice to the
Borrower and the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the
applicable rate, if any, furnished by Citibank for the purpose of determining
the applicable interest rate under Section 2.06(a)(ii).
(c) If Citibank does not furnish timely information to the
Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate
Advances,
(i) the Administrative Agent shall forthwith notify the Borrower
and the Lenders that the interest rate cannot be determined for such
Eurodollar Rate Advances,
(ii) each such Advance will automatically, on the last day of the
then existing Interest Period therefor, Convert into a Base Rate Advance
(or if such Advance is then a Base Rate Advance, will continue as a Base
Rate Advance), and
(iii) the obligation of the Lenders to make, or to
Credit Agreement
<PAGE>
<PAGE>
- 42 -
Convert Advances into, Eurodollar Rate Advances shall be suspended until
the Administrative Agent shall notify the Borrower and the Lenders that
the circumstances causing such suspension no longer exist.
(d) If, with respect to any Eurodollar Rate Advances, the
Majority Lenders notify the Administrative Agent that the Eurodollar Rate for
any Interest Period for such Advances will not adequately reflect the cost to
such Majority Lenders of making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base
Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such
suspension no longer exist.
(e) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
the Borrower will be deemed to have selected, for the Interest Period
immediately succeeding the then existing Interest Period therefor, an Interest
Period for such Advance of three months' duration.
(f) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $5,000,000, such Eurodollar Rate
Advances shall automatically Convert into Base Rate Advances, and on and after
such date the right of the Borrower to Convert such Base Rate Advances into
Eurodollar Rate Advances shall terminate; provided, however, that, if and so
long as each such Eurodollar Rate Advance shall have the same Interest Period as
Eurodollar Rate Advances comprising another Borrowing or other Borrowings, and
the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall
equal or exceed $5,000,000, the Borrower shall have the right to continue all
such Advances as, or to Convert all such Advances into, Eurodollar Rate Advances
having
Credit Agreement
<PAGE>
<PAGE>
- 43 -
such Interest Period.
SECTION 2.08. Voluntary Conversion of Advances. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.07, 2.10
and 2.11, Convert all Advances of one Type comprising the same Borrowing into
Advances of the other Type; provided, however, that any Conversion of any
Eurodollar Rate Advances into Base Rate Advances shall be made on, and only on,
the last day of an Interest Period for such Eurodollar Rate Advances. Each such
notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the Advances to be Converted, and (iii) if
such Conversion is into Eurodollar Rate Advances, the duration of the Interest
Period for each such Advance.
SECTION 2.09. Prepayments of Advances.
(a) Optional. The Borrower may, upon at least five Business Days'
notice to the Administrative Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Advances comprising part
of the same Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (x) each partial prepayment shall be in an aggregate
principal amount not less than $5,000,000 or a larger multiple of $1,000,000
and, if made after the Termination Date, shall be applied ratably to the
respective principal repayment installments of the Advances and (y) in the event
of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be
obligated to reimburse the Lenders in respect thereof pursuant to Section
8.04(b).
(b) Mandatory.
(i) Borrowing Base. Until the Borrowing Base Release Date, the
Borrower shall from time to time prepay the Advances (and/or provide
cover for Letter of Credit Liabilities as specified in paragraph (d)
below) in such amounts as shall be necessary so that at all times the
Aggregate Financing Amount shall not exceed the Borrowing Base, such
amount to be applied, first, to Advances outstanding and, second, as
cover for Letter of Credit
Credit Agreement
<PAGE>
<PAGE>
- 44 -
Liabilities outstanding.
(ii) Sales of Assets. Without limiting the obligation of the
Borrower to obtain the consent of the Majority Lenders pursuant to
Section 5.02(e) to any sale, lease, transfer or other disposition (each,
a "Disposition") of any asset of the Borrower or any Subsidiary (other
than sales of assets in the ordinary course of business) not otherwise
permitted hereunder, in the event that the Borrower or any Subsidiary
shall receive Net Cash Proceeds of any Disposition, the Borrower will
prepay the Advances (and/or provide cover for Letter of Credit
Liabilities as specified in Section 2.09(d)), and the Commitments shall
be subject to automatic reduction, in an aggregate amount equal to 100%
of such Net Cash Proceeds, such prepayment and reduction to be effected
in each case in the manner and to the extent specified in Section
2.09(c).
(iii) Excess Cash Flow. Not later than the date 60 days after the end
of each Fiscal Quarter of the Borrower ending on or after May 31, 2001,
the Borrower shall prepay the Advances (and/or provide cover for Letter
of Credit Liabilities as specified in Section 2.09(d)), and the
Commitments shall be subject to automatic reduction, in an aggregate
amount equal to the excess of 50% of Excess Cash Flow for such Fiscal
Quarter, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in Section 2.09(c).
(iv) Debt Issuance. Upon any Debt Issuance, the Borrower shall
prepay the Advances (and/or provide cover for Letter of Credit
Liabilities as specified in Section 2.09(d)), and the Commitments shall
be subject to automatic reduction, in an aggregate amount equal to 100%
of the Net Cash Proceeds thereof, such prepayment and reduction to be
effected in each case in the manner and to the extent specified in
Section 2.09(c).
(v) Notice. The Borrower shall give the Administrative Agent at
least five Business Days' prior written notice of each prepayment of
Advances (and/or provision of cover for Letter of Credit Liabilities)
and reduction of Commitments required by this Section 2.09(b) stating
the aggregate amount (or in the case of Section 2.09(b)(i), stating the
approximate aggregate amount) thereof and the date on which the same
shall be made; provided that failure by the Borrower to give such
Credit Agreement
<PAGE>
<PAGE>
- 45 -
notice shall not relieve the Borrower of its obligation to make such
prepayment of Advances (and/or provision of cover for Letter of Credit
Liabilities) and reduction of Commitments.
(c) Application of Prepayment Proceeds. Prepayments of Advances
(and/or provision of cover for Letter of Credit Liabilities) and reductions of
Commitments (each, a "Required Reduction") described in the above paragraphs of
this Section 2.09 (other than in paragraph (b)(i) above) shall be effected as
follows:
(i) if the date of such Required Reduction falls on or before the
Termination Date, the Commitments shall be automatically reduced in an
amount equal to the amount of the Required Reduction (and to the extent
that, after giving effect thereto, the Aggregate Financing Amount would
exceed the Commitments, the Borrower shall, first, prepay Advances and,
second, provide cover for Letter of Credit Liabilities as specified in
Section 2.09(d), in an aggregate amount equal to such excess); and
(ii) if the date of the Required Reduction falls after the
Termination Date, the amount of the Required Reduction shall be applied
to the installments of the Advances then outstanding pro rata in
accordance with the amounts of such installments.
(d) Cover for Letter of Credit Liabilities. In the event that the
Borrower shall be required pursuant to this Section 2.09, or pursuant to Section
6.01, to provide cover for Letter of Credit Liabilities, the Borrower shall
effect the same by paying to the Administrative Agent immediately available
funds in an amount equal to the required amount, which funds shall be retained
by the Administrative Agent in the Collateral Account (as provided therein as
collateral security in the first instance for the Letter of Credit Liabilities)
until such time as the Letters of Credit shall have been terminated and all of
the Letter of Credit Liabilities paid in full.
SECTION 2.10. Increased Costs, Etc.
(a) If, due to either (i) the introduction of or any change in or
in the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost
Credit Agreement
<PAGE>
<PAGE>
- 46 -
to any Lender of agreeing to make or making, funding or maintaining Eurodollar
Rate Advances, then, if such costs are or will be charged to customers of such
Lender generally, the Borrower shall from time to time, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased costs setting forth in reasonable detail the
calculations used in determining such increased costs, submitted to the Borrower
and the Administrative Agent by such Lender, shall be conclusive and binding for
all purposes, absent manifest error. Notwithstanding anything to the contrary
contained in this subsection (a), a Lender shall only be entitled to receive
reimbursement for such increased costs to the extent incurred within 90 days
prior to, and at any time after, the date on which such Lender gives to the
Borrower a notice that an event has occurred as a result of which such increased
costs will arise or a notice that the Borrower is obligated to pay increased
costs, whichever first occurs.
(b) If, due to either (i) the introduction of any change in or in
the interpretation of any law or regulation occurring on or after the date
hereof or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
issued on or after the 90th day prior to the date hereof, any Lender determines
that there shall be any increase in the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender as a
result of or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, then, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), the Borrower shall
immediately pay to the Administrative Agent for the account of such Lender, from
time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender or such corporation in the light of such circumstances,
to the extent that such Lender reasonably determines such increase in capital to
be allocable to the existence of such Lender's commitment to lend hereunder. A
certificate as to such amounts setting forth in reasonable detail the
calculations used in determining such amounts, submitted to the Borrower and the
Administrative Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error. Notwithstanding anything to the contrary
contained in this subsection (b), a Lender shall only be entitled to receive
reimbursement for such additional amounts pursuant to this subsection (b) to the
extent incurred within 90 days prior to,
Credit Agreement
<PAGE>
<PAGE>
- 47 -
and at any time after, the date on which such Lender gives to the Borrower a
notice that an event has occurred as a result of which such additional amounts
will arise or a notice that the Borrower is obligated to pay such additional
amounts, whichever first occurs.
(c) Upon the occurrence and during the continuance of any Event
of Default, (i) each Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance
and (ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
(d) Any Lender claiming any additional amounts payable pursuant
to Section 2.10(a) and 2.10(b) shall, upon request from the Borrower delivered
to such Lender and the Administrative Agent specifying an Eligible Assignee
willing and able to assume and accept all such Lender's right and obligations
under this Agreement and the other Loan Documents, assign, in accordance with
the provisions of Section 8.07, all of its rights and obligations under this
Agreement and the other Loan Documents to another Lender or an Eligible Assignee
in consideration for (i) the payment by such assignee to the Lender of the
principal of, and interest on, the Note or Notes of such Lender accrued to the
date of such assignment, together with any and all other amounts owing to such
Lender under any provision of this Agreement or the other Loan Documents accrued
to the date of such assignment and (ii) the release of such Lender from any
further liability hereunder. The processing and recordation fee required under
Section 8.07(a) shall be paid by the Borrower under this Section 2.10(d).
SECTION 2.11. Illegality. Notwithstanding any other provisions of
this Agreement, if the introduction of or any change in or in the interpretation
of any law or regulation shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful, for any Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrower through the Administrative Agent, accompanied by an opinion of
counsel to such Lender (which counsel may be in-house counsel) with respect to
such illegality, (i) each Eurodollar Rate Advance will automatically, upon such
demand, Convert into a Base Rate Advance and (ii) the obligation of the Lenders
to make, or to Convert Advances into, Eurodollar Rate Advances shall be
suspended until
Credit Agreement
<PAGE>
<PAGE>
- 48 -
the Administrative Agent shall notify the Borrower that such Lender has
determined that the circumstances causing such suspension no longer exist.
SECTION 2.12. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the
Notes not later than 11:00 A.M. (New York City time) on the day when due in U.S.
dollars to the Administrative Agent at its address referred to in Section 8.02
in same day funds. The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal, interest,
commitment fees or letter of credit fees ratably (other than amounts payable
pursuant to Sections 2.10, 2.13 or 2.15) to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of
any other amount payable to any Lender to such Lender for the account of its
Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement; provided, however, so long as an Event of Default shall
have occurred and be continuing under Section 6.01(a) or the Advances shall have
been declared or shall become due and payable in accordance with the last
paragraph of Section 6.01, then the Administrative Agent will cause to be
distributed all funds relating to the payment of principal or interest in
respect of Advances received by the Administrative Agent from the Borrower
ratably to the Lenders based on the Advances then outstanding. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 8.07(c), from and after
the effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under the Notes in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under any
Note held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate or the
Federal Funds Rate shall be made by the Administrative Agent on the basis of a
year of 365 or 366 days, as the case may be, and all computations of interest
based on the
Credit Agreement
<PAGE>
<PAGE>
- 49 -
Eurodollar Rate, of the commitment fees of the letter of credit fees and of the
letter of credit Fronting fees shall be made by the Administrative Agent, and
all computations of interest pursuant to Section 2.15 shall be made by a Lender
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but (except to the extent provided in Section 2.01B(g))
excluding the last day) occurring in the period for which such interest or fees
are payable. Each determination by the Administrative Agent (or, in the case of
Section 2.15 by a Lender) of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fee, as the case
may be; provided, however, if such extension would cause payment of interest on
or principal of Eurodollar Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(e) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes.
(a) Any and all payments by the Borrower hereunder or under the
Notes shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto imposed by, or by any taxing authority
of or in, Puerto Rico, the United States of America, any subdivision of either
thereof, excluding, in the case of each Lender and the
Credit Agreement
<PAGE>
<PAGE>
- 50 -
Administrative Agent, taxes imposed on its net income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its net
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the Administrative Agent, (i) the
sum payable shall be increased so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.13) such Lender or the Administrative Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement, the Notes and/or the Support Documents (hereinafter referred to
as "Other Taxes").
(c) The Borrower will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.13) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date such Lender or
the Administrative Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent, at its address referred to in
Section 8.02, the original or a certified copy of a receipt evidencing payment
thereof. If no Taxes are payable in respect of any payment hereunder or under
Credit Agreement
<PAGE>
<PAGE>
- 51 -
the Notes, the Borrower will furnish to the Administrative Agent, at such
address, a certificate from each appropriate taxing authority, or an opinion of
counsel acceptable to the Administrative Agent, in either case stating that such
payment is exempt from or not subject to Taxes.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each initial Lender and on the date of the
Assignment and Acceptance pursuant to which it becomes a Lender in the case of
each other Lender, and from time to time thereafter if requested in writing by
the Borrower or the Administrative Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower and the
Administrative Agent with Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender is entitled to benefits under an income tax treaty
to which the United States is a party which reduces the rate of withholding tax
on payments of interest or certifying that the income receivable pursuant to
this Agreement is effectively connected with the conduct of a trade or business
in the United States. If the form provided by a Lender at the time such Lender
first becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from "Taxes" as defined in Section 2.13(a).
(f) For any period with respect to which a Lender has failed to
provide the Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which a form originally was required to be provided, or if such form
otherwise is not required under the first sentence of subsection (e) above),
such Lender shall not be entitled to indemnification under Section 2.13(a) or
2.13(c) with respect to Taxes imposed by the United States; provided, however,
should a Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as the Lender shall
reasonably request to assist the Lender to recover such Taxes.
(g) Notwithstanding any contrary provisions of this Agreement, in
the event that a Lender that originally provided such form as may be required
under Section 2.13(e) thereafter ceases to qualify for complete exemption from
United States withholding tax, such Lender may assign its interest under this
Credit Agreement
<PAGE>
<PAGE>
- 52 -
Agreement to any assignee and such assignee shall be entitled to the same
benefits under this Section 2.13 as the assignor provided that the rate of
United States withholding tax applicable to such assignee shall not exceed the
rate then applicable to the assignor.
(h) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.13 shall survive the payment in full of principal and interest
hereunder and under the Notes.
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Advances made by it (other
than pursuant to Section 2.10, 2.13 or 2.15) in excess of its ratable share of
payments on account of the Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances made by them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, if all or
any portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation.
SECTION 2.15. Additional Interest on Eurodollar Rate Advances.
The Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Advance until such principal amount is paid in full, at an interest rate per
annum equal at all times to the
Credit Agreement
<PAGE>
<PAGE>
- 53 -
remainder obtained by subtracting (i) the Eurodollar Rate for such Interest
Period for such Advance from (ii) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
of such Lender for such Interest Period, payable on each date on which interest
is payable on such Advance. Such additional interest shall be determined by such
Lender and notified to the Borrower through the Administrative Agent.
SECTION 2.16. Use of Proceeds. The proceeds of each Advance shall
be used by the Borrower (i) to finance payment of the Initial Distributions;
(ii) to finance working capital requirements of the Borrower and its
Subsidiaries; (iii) to finance the construction and operation of personal
communications, competitive access and telecommunications networks in Puerto
Rico and the United States Virgin Islands by the Borrower and its Subsidiaries
and (iv) for general corporate purposes.
ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to Initial Advances. The
obligation of each Lender to make its initial Advance, and the obligation of
each Issuing Bank to issue its initial Letter of Credit, on the occasion of the
initial Credit Extension hereunder is subject to the following conditions
precedent:
(a) The Administrative Agent shall have received the Notes
payable to the order of each of the Lenders, respectively, duly executed
by the Borrower.
(b) The Lenders shall be reasonably satisfied with the
organizational and legal structure and capitalization of the Borrower
and each Subsidiary, including the terms and conditions of (i) the
charter, bylaws, partnership agreement and other organizational
documents, and each class of capital stock or other equity interest, of
the Borrower and each Subsidiary, (ii) of each agreement or instrument
relating to such structure (including, without limitation, intercompany
tax sharing, cost sharing and management agreements) or capitalization
and (iii) existing Debt (including, without limitation, equipment vendor
financing) of the Borrower and each Subsidiary.
Credit Agreement
<PAGE>
<PAGE>
- 54 -
(c) The Borrower shall have paid all accrued fees and expenses of
the Administrative Agent and CSI (including the accrued fees and
disbursements of special New York counsel and special Puerto Rico
counsel to the Administrative Agent and CSI).
(d) The Administrative Agent shall have received the following,
each dated the date of the initial Borrowing hereunder (unless otherwise
specified) in form and substance satisfactory to the Administrative
Agent and in sufficient copies for each Lender:
(i) With respect to each Credit Party that is a
corporation, (A) a copy of the certificate or articles of
incorporation, as amended, of such Credit Party, certified by the
Secretary of State or other appropriate official of the
jurisdiction of its organization as of a date reasonably near the
initial Borrowing; (B) a certificate of the Secretary of the
Borrower certifying (I) that attached thereto is a true and
complete copy of the bylaws of each Credit Party as in effect on
the date of such certificate and as in effect at all times since
a date prior to the date of the resolutions described in item
(II) below, (II) that attached thereto is a true and complete
copy of the resolutions adopted by the Board of Directors of each
Credit Party authorizing the execution, delivery and performance
of such of the Loan Documents to which such Credit Party is a
party, and each other document or instrument which is to be
delivered by it in connection with this Agreement after the date
hereof and (in the case of the Borrower) authorizing the
Borrowings hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect,
(III) that the certificate or articles of incorporation of the
Credit Parties have not been amended since the date of the last
amendment thereto shown on the certificate furnished pursuant to
clause (A) above and (IV) as to the incumbency and specimen
signature of each of the officers of each Credit Party executing
the Loan Documents to which such Credit Party is to be a party,
or any other document or instrument delivered in connection
therewith; (C) a copy of a certificate of the Secretary of State
of the jurisdiction of incorporation and the jurisdiction doing
business of each Credit Party as of a date reasonably near the
initial Borrowing certifying that
Credit Agreement
<PAGE>
<PAGE>
- 55 -
(I) such Credit Party has paid all franchise taxes to the date of
such certificate and (II) such Credit Party is duly incorporated,
in good standing and authorized to engage in business, as the
case may be, under the laws of the applicable jurisdiction; and
(D) all documents evidencing other necessary corporate action and
governmental and third party consents and approvals, if any,
reasonably requested by any Lender through the Administrative
Agent.
(ii) With respect to each Credit Party that is a partnership
or other entity (other than a corporation), copies of the
partnership agreement and other organizational document, together
with such proof of authority, as shall be equivalent to those
delivered pursuant to the foregoing clause (i) and as shall have
been reasonably requested by the Administrative Agent or any
Lender through the Administrative Agent.
(iii) The Subsidiary Guaranty duly executed and delivered by
each Subsidiary of the Borrower.
(iv) The Holdings Pledge Agreement duly executed
and delivered by Holdings.
(v) The Obligor Pledge Agreement duly executed and
delivered by the Borrower and Lambda Communications, Incorporado.
(vi) The Puerto Rico Security Documents required by Section
5.01(n) to be executed and delivered on the date of the initial
Credit Extension duly executed and delivered by each Obligor
stated to be a party thereto in proper form for filing, when such
filing is required by applicable law, and the payment of all
required documentary stamps, recording fees, taxes and all other
costs and expenses relating to the filing and recordation of such
Puerto Rico Security Documents.
(vii) A certificate of a Financial Officer of the Borrower, in
substantially the form of Exhibit G, attesting that each of the
Borrower and each of its Subsidiaries is Solvent after giving
effect to the transactions contemplated hereby.
(viii) A Borrowing Base Certificate as at the date
of the initial Borrowing hereunder.
Credit Agreement
<PAGE>
<PAGE>
- 56 -
(ix) A certificate of a Financial Officer of the Borrower as
to the matters set forth in clauses (i) and (ii) of Section
3.02(a) substantially in the form of Exhibit H hereto.
(x) A favorable opinion of Leavy Rosensweig & Hyman,
special New York counsel for the Credit Parties, in form and
substance satisfactory to the Administrative Agent (and each
Obligor hereby instructs such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(xi) A favorable opinion of Lausell, Carlo & Goble, special
Puerto Rico counsel for the Credit Parties, in form and substance
satisfactory to the Administrative Agent (and each Obligor hereby
instructs such counsel to deliver such opinion to the Lenders and
the Administrative Agent).
(xii) A favorable opinion of Fleischman & Walsh, special
communications counsel for the Credit Parties, in form and
substance satisfactory to the Administrative Agent (and each
Obligor hereby instructs such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(xiii) A favorable opinion of Milbank, Tweed, Hadley & McCloy,
counsel for the Administrative Agent, in form and substance
satisfactory to the Administrative Agent (and the Administrative
Agent hereby instructs such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(xiv) A favorable opinion of Fiddler, Gonzalez & Rodriguez,
special Puerto Rico counsel for the Administrative Agent, in form
and substance satisfactory to the Administrative Agent (and the
Administrative Agent hereby instructs such counsel to deliver
such opinion to the Lenders and the Administrative Agent).
(xv) An acceptance of its appointment as agent for the
service of process, in substantially the form of Exhibit K, duly
executed and delivered by Centennial Cellular.
(e) The Lenders shall have received evidence
Credit Agreement
<PAGE>
<PAGE>
- 57 -
satisfactory to them that all approvals of governmental authorities and
regulatory bodies and third party consents (including, without
limitation, all Telecommunications Approvals and any consents or
approvals from the PRTC) that are necessary or desirable for the
execution, delivery and performance by each Credit Party of each Loan
Document to which it is a party, the consummation of the transactions
contemplated thereby and the completion of the build-out, activation and
operational capacity of the PCS System contemplated by Section 3.01(f)
have been obtained by the Borrower and its Subsidiaries, are in full
force and effect and have become final.
(f) The Lenders shall have received evidence satisfactory to them
that the build-out and activation of the PCS System has been completed
and that the operational capacity of the PCS System is sufficient to
provide service to at least 80% of the population of Puerto Rico.
(g) The Lenders shall have received and be satisfied with the
terms and conditions of the Interconnection Agreements, the Facilities
Agreement and of each Marketing Agreement.
(h) The Borrower will have Contributed Equity on the date of the
initial Borrowing (after giving effect to any Initial Distribution to be
made on such date) of not less than $55,000,000.
(i) The Administrative Agent shall have received evidence that,
by virtue of the Security Documents, and the filing or registration of
all required documents and the taking of all other required action, it
shall have for the benefit of the Lenders a perfected security interest
in all of the Collateral to the extent then required by Section 5.01(n)
subject to no equal or prior Lien.
(j) The Administrative Agent shall have received the Century-ML
Consent and Agreement entered into by the parties thereto.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance on the occasion of each Borrowing
(including the initial Borrowing), and the obligation of each Issuing Bank to
issue any Letter of Credit (including the initial Letter of Credit) shall be
subject to the further conditions precedent that on the date of such Credit
Credit Agreement
<PAGE>
<PAGE>
- 58 -
Extension (a) the following statements shall be true (and each of the giving of
the applicable Notice of Borrowing, the required for such Letter of Credit, the
acceptance by the Borrower of the proceeds of such Borrowing and the issuance of
such Letter of Credit pursuant to such request, as the case may be, shall
constitute a representation and warranty by the Borrower that on the date of
such Borrowing such statements are true):
(i) The representations and warranties contained in Section 4.01
and in each other Loan Document are correct on and as of the date of
such Credit Extension, before and after giving effect to such Credit
Extension, and to the application of the proceeds therefrom, as though
made on and as of such date,
(ii) No Default has occurred and is continuing, or would result from
such Credit Extension or from the application of the proceeds therefrom,
(iii) If such Credit Extension falls before the Borrowing Base
Release Date, the Aggregate Financing Amount does not exceed the
Borrowing Base (and the Borrower shall deliver to the Administrative
Agent together with the relevant Notice of Borrowing or request for a
Letter of Credit a Borrowing Base Certificate demonstrating that fact),
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by the
Loan Documents shall have received notice from such Lender prior to the initial
Credit Extension specifying its objection thereto and, if such initial Credit
Extension is a Borrowing, such Lender shall not have made available to the
Administrative Agent such Lender's ratable portion of such Borrowing.
Credit Agreement
<PAGE>
<PAGE>
- 59 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents and warrants as follows:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, (ii) is duly
qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the conduct
of its business requires it to so qualify or be licensed except where
the failure to so qualify or be licensed would not have a Material
Adverse Effect and (iii) has all requisite corporate power and authority
to own or lease and operate its properties and to carry on its business
as now conducted and as proposed to be conducted. All of the outstanding
capital stock of the Borrower has been validly issued and is fully paid
and non-assessable.
(b) The execution, delivery and performance by each Obligor of
each of the Loan Documents to which it is or is to be a party, and the
consummation of the transactions contemplated thereby, are within the
corporate or other powers of such Obligor, have been duly authorized by
all necessary corporate or other action, and do not (i) contravene the
charter, bylaws, partnership agreement or other organizational document
of the Borrower or any of its Subsidiaries, (ii) violate any law, rule,
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination or award, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Borrower or any of its
Subsidiaries or any of its properties, or (iv) except as otherwise
required by the Security Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of
the Borrower or any of its Subsidiaries. None of the Borrower nor any of
its Subsidiaries is in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or in
breach of any such contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument, the violation or breach of which is
Credit Agreement
<PAGE>
<PAGE>
- 60 -
reasonably likely to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
(including, without limitation, the FCC and the PRTRB) is required for
the due execution, delivery and performance by the Obligors of any of
the Loan Documents, or any Borrowing or request for a Letter of Credit
hereunder or for the ownership or control by the Borrower of all
Subsidiaries or for the ownership or control by any Subsidiary of any
other Subsidiary, except for filings and recordings in respect of the
Liens created pursuant to the Security Documents, each of which has been
duly issued or obtained and is in full force and effect.
(d) This Agreement is and the Notes and each other Loan Document
to which any Obligor is a party when delivered hereunder will be, legal,
valid and binding obligations of such Obligor enforceable against such
Obligor in accordance with their respective terms, subject, in the case
of enforceability, (i) to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally and (ii) to the effect of general principles
of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law).
(e) The Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at May 31, 1996 and as at the date of
the latest interim financial statements issued by the Borrower prior to
the date hereof and the related Consolidated and consolidating
statements of income and cash flows of the Borrower and its Subsidiaries
for the fiscal year and interim period, respectively, then ended, copies
of each of which have been furnished to each Lender, fairly present the
Consolidated and consolidating financial condition of the Borrower and
its Subsidiaries as at such respective dates and the Consolidated and
consolidating results of operations of the Borrower and its Subsidiaries
for the fiscal year and interim period ended on such respective dates,
all in accordance with generally accepted accounting principles
consistently applied, and since the later of the date of such interim
financial statements or the date of the most recent financial statements
of the Borrower delivered under Section 5.03(d), there has been no
Material Adverse Change.
Credit Agreement
<PAGE>
<PAGE>
- 61 -
(f) The Consolidated and consolidating forecasted statements of
income and cash flows of the Borrower and its Subsidiaries for each
Fiscal Years ending May 31, 1997 through May 31, 2005, copies of which
have been furnished to each Lender, were prepared in good faith on the
basis of the assumptions stated therein, which assumptions were
reasonable in light of conditions existing at the time of delivery of
such forecasts, and represented, at the time of delivery, the Borrower's
best estimate of its future financial performance.
(g) No information, exhibit, report, document, certificate or
written statement, including this Agreement, furnished in writing to any
Lender by or on behalf of the Borrower or any Subsidiary to the
Administrative Agent or any Lender in connection with the negotiation of
the Loan Documents or pursuant to the terms of the Loan Documents
contained as of the date so furnished any untrue statement of a material
fact or omitted as of the date so furnished to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which such information, exhibit, report or other
written information is or is to be used, not misleading, nor did such
information, exhibits, reports, documents, certificates and statements,
taken as a whole, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading. There is no fact known to the Borrower
or officers of the Borrower which the Borrower has not disclosed to the
Lenders in writing which in the reasonable judgment of the Borrower and
such officers would have a Material Adverse Effect.
(h) There is no pending or threatened action or proceeding
against the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, that, if adversely determined, is
reasonably likely to have a Material Adverse Effect or that purports to
affect any Loan Document or any of the transactions contemplated
thereby.
(i) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
Credit Extension will be used to purchase or carry any Margin Stock or
to extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
Credit Agreement
<PAGE>
<PAGE>
- 62 -
(j) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of the Borrower
only or of the Borrower and its Subsidiaries on a Consolidated basis)
subject to the provisions of Section 5.02(f), 5.02(g) or 5.02(h) or
subject to any restriction contained in any agreement or instrument
between the Borrower and any Lender or any affiliate of any Lender
relating to Debt will be Margin Stock.
(k) Set forth on Schedule 4.01(k) hereto is a complete and
accurate list of all Subsidiaries of the Borrower, showing as of the
date hereof or thereof (as to each such Subsidiary) the jurisdiction of
its organization, whether such Subsidiary is a corporation, partnership
or other entity, the number, and class or type, of ownership interest
issued by such Subsidiary (and, in the case of a corporation, the shares
of each class of capital stock authorized and the number of such shares
outstanding), on the date hereof, and the percentage of the outstanding
ownership interest of each such class or type owned (directly or
indirectly) by the Borrower and the number of shares or other ownership
interest covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights at the date hereof.
Each such Subsidiary (i) is a corporation, partnership or other
entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) is duly qualified and
in good standing in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed except where the failure to so qualify or be
licensed would not have a Material Adverse Effect and (iii) has all
requisite power and authority to own or lease and operate its properties
and to carry on its business as now conducted and as proposed to be
conducted. The outstanding capital stock of each Wholly Owned Subsidiary
that is a corporation has been validly issued, is fully paid and
non-assessable, and the ownership interests in all Subsidiaries held by
the Borrower and its Subsidiaries is free and clear of all Liens, except
those permitted by Sections 5.02(e) and (f).
(l) The operations and properties of the Borrower and each of its
Subsidiaries comply in all material respects with all Environmental
Laws, all necessary Environmental Permits have been obtained and are in
effect for the
Credit Agreement
<PAGE>
<PAGE>
- 63 -
operations and properties of the Borrower and its Subsidiaries, the
Borrower and its Subsidiaries are in compliance in all material respects
with all such Environmental Permits, and, to the knowledge of the
Borrower, no circumstances exist that could (i) form the basis of an
Environmental Action against the Borrower, any of its Subsidiaries or
any of their properties that could have a Material Adverse Effect or
(ii) cause any such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental
Law.
(m) None of the properties of the Borrower or any of its
Subsidiaries is listed or proposed for listing on the National
Priorities List under CERCLA or on the Comprehensive Environmental
Response, Compensation and Liability Information System maintained by
the Environmental Protection Agency or any analogous state list of sites
requiring investigation or cleanup or is adjacent to any such property,
and no underground storage tanks, as such term is defined in 42 U.S.C.
ss. 6991, are located on any property of the Borrower or any of its
Subsidiaries or, to the best of its knowledge, on any adjoining
property.
(n) Neither the Borrower nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the application of the proceeds or repayment
thereof by the Borrower, nor the consummation of the other transactions
contemplated hereby, will violate any provision of such Act or any rule,
regulation or order of the Securities and Exchange Commission
thereunder.
(o) The Borrower and its Subsidiaries are, and each of
them is, Solvent.
(p) As of the date hereof and as of the date of the initial
Credit Extension, there exist no credit agreements, indentures, purchase
agreements, obligations in respect of letters of credit, guarantees or
other instruments presently in effect (including, but not limited to,
Capitalized Lease Obligations and Debt owed by the Borrower to
Affiliates) providing for, evidencing, securing or otherwise relating to
any Debt of the Borrower or any of its Subsidiaries other than Debt
under the Loan Documents.
Credit Agreement
<PAGE>
<PAGE>
- 64 -
(q) There are no Liens of any nature whatsoever on any properties
of the Borrower nor any Subsidiary other than (i) those permitted by
Section 5.02(e) or 5.02(f) and (ii) nonconsensual Liens which could not,
individually or in the aggregate, have a Material Adverse Effect.
(r) None of the Borrower or any Subsidiary is a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter, corporate restriction, or
restriction set forth in its respective partnership agreement or other
organizational document, which is reasonably likely to have a Material
Adverse Effect.
(s) (i) The Borrower and each Subsidiary have filed all tax
returns (Federal, State and local) required to be filed, and paid all
taxes shown thereon to be due, including interest and penalties, or
provided adequate reserves for payment thereof, and (ii) the Borrower
and each Subsidiary have timely filed all reports and applications
required by the FCC or the PRTRB, in each case except such filings the
failure of which to file is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect.
(t) The Borrower and each Subsidiary is in compliance with the
requirements of all applicable laws, rules, regulations, orders and
licensing requirements of all governmental authorities (including,
without limitation, all Telecommunications Approvals) except to the
extent that any such non-compliance could not have a Material Adverse
Effect; and none of the Borrower or any Subsidiary is the subject of any
outstanding citation, order or investigation by the FCC, the PRTRB or
the PRPSC which could have a Material Adverse Effect, and no such
citation, order or investigation, to the knowledge of the Borrower or
any Subsidiary, is contemplated by the FCC or the PRTRB.
(u) Neither the Borrower nor any ERISA Affiliate has either a
Multiemployer Plan or a Plan, other than a Multiemployer Plan or a Plan
to which the Majority Lenders have given their consent after the date
hereof.
(v) All of the material properties, equipment and systems owned,
leased or managed by the Borrower and its Subsidiaries are, and (to the
best knowledge of the Borrower) all such property, equipment and systems
to be
Credit Agreement
<PAGE>
<PAGE>
- 65 -
acquired or added in connection with any contemplated system expansion
or construction will be, in all material respects, in good repair,
working order and condition and are and will be in compliance with all
terms and conditions of all Telecommunications Approvals and all
standards or rules imposed by the FCC or the PRTRB, or as imposed under
any agreements with telephone companies and customers, except for any
such non-compliance that could not result in a Material Adverse Effect.
(w) Each of the Borrower and its Subsidiaries has obtained all
material Telecommunications Approvals necessary or desirable for the
conduct of its business and operations as currently or as proposed to be
conducted.
Schedule 4.01(w) attached hereto accurately and completely lists
all Telecommunications Approvals granted or assigned to the Borrower or
any Subsidiary, or under which the Borrower and its Subsidiaries have
the right to operate Telecommunications Networks on the date hereof. The
Telecommunications Approvals listed on said Schedule 4.01(w) include all
material authorizations, licenses and permits issued by the FCC that are
required or necessary for the operation of the Telecommunications
Networks of the Borrower and its Subsidiaries, and the conduct of the
business of the Borrower and its Subsidiaries with respect to such
Telecommunications Networks, as now conducted or proposed to be
conducted. The Telecommunications Approvals listed in said Schedule
4.01(w) are issued in the name of a License Subsidiary are on the date
hereof validly issued and in full force and effect without conditions
except for such conditions as are generally applicable to holders of
such Telecommunications Approvals, and the Borrower and its Subsidiaries
will have fulfilled and performed in all material respects all of their
obligations with respect thereto and have full power and authority to
operate thereunder.
No event has occurred and is continuing which could (i) result in
the imposition of a material forfeiture or the revocation, termination
or adverse modification of any Telecommunications Approvals or (ii)
materially and adversely affect any rights of the Borrower or any of its
Subsidiaries thereunder; the Borrower has no reason to believe and has
no knowledge that the Telecommunications Approvals presently held by the
Borrower or any of its Subsidiaries will not be renewed in the ordinary
course; and
Credit Agreement
<PAGE>
<PAGE>
- 66 -
each of the Borrower and its Subsidiaries has sufficient time,
materials, equipment, contract rights and other required resources to
complete, in a timely fashion and in full, the construction and
activation of their Telecommunications Networks in Puerto Rico in
compliance with all applicable technical standards and construction
requirements and deadlines. The current ownership and operation by each
of the Borrower and its Subsidiaries of such Telecommunications Networks
complies with the Communications Act of 1934, as amended, and all rules,
regulations and policies of the FCC, the PRTRB or any other governmental
authority, except for such non-compliance that could not result in a
Material Adverse Effect.
(x) The Borrower and each Subsidiary is in compliance in all
material respects with the requirements of the Interconnection
Agreements, the Facilities Agreement and the Marketing Agreements. The
Borrower and each Subsidiary is in compliance in all material respects
with the requirements of (and no default has occurred under) all other
contracts, agreements, indentures, mortgages, leases and other
instruments binding on it or its property, assets or operations the
violation of which could have a Material Adverse Effect.
(y) The Borrower and its Subsidiaries own and have on the date
hereof good and marketable title (subject only to Liens permitted by
Section 5.02(a)) to the properties and assets shown to be owned in the
financial statements referred to in Section 4.01(e) (other than
properties and assets disposed of in the ordinary course of business or
otherwise permitted to be disposed of pursuant to Section 5.02(e)). The
Borrower and its Subsidiaries own and have on the date hereof good and
marketable title to, and enjoy on the date hereof peaceful and
undisturbed possession of, all properties and assets (subject only to
Liens permitted by Section 5.02(a)) that are necessary for the operation
and conduct of its business and presently and as proposed to be
conducted.
(z) Set forth on Schedule 4.01(z) attached hereto is a list, as
of the date hereof, of all Collateral (excluding (i) all items of
equipment each of which has a value of less than $100,000 and (ii) all
accounts receivable), indicating in each case whether the respective
property is owned or leased, the identity of the owner or lessee and the
location of the respective property.
Credit Agreement
<PAGE>
<PAGE>
- 67 -
(aa) Each Obligor is the sole beneficial owner of the Collateral in
which it will purport to grant a security interest under the Security
Documents to which it is or will be a party. The pledge and security
interests to be created by the Security Documents will, at the time of
the initial Borrowing and at all times thereafter, constitute a first
priority perfected pledge and security interest in and to all of such
Collateral, all to the extent required by Section 5.01(n).
(bb) The Capital Stock of each Obligor represented by the
certificates listed on Schedule 4.01(bb) attached hereto is duly
authorized, validly existing, fully paid and non-assessable and none of
such Capital Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the respective issuer
of such Capital Stock, upon the transfer of such Capital Stock (except
for any such restriction contained in a Loan Document). Such Capital
Stock constitutes all of the issued and outstanding shares of capital
stock of any class of the issuer thereof. Said Schedule 4.01(bb)
correctly identifies, as at the date hereof, the respective issuers of
such Capital Stock, the respective class and par value of the shares
comprising such Capital Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
(cc) Schedules 4.01(cc) -1, -2 and -3 hereto, respectively, set
forth under the name of each Obligor a complete and correct list of all
Copyrights, Patents and Trademarks owned by such Obligor on the date
hereof; except pursuant to licenses and other user agreements entered
into by such Obligor in the ordinary course of business, that are listed
in Schedule 4.01(cc)-4 hereto, such Obligor owns and possesses the right
to use, and has done nothing to authorize or enable any other Person to
use, any Copyright, Patent or Trademark listed in said Schedules
4.01(cc) -1, -2 and -3, and all registrations listed in said Schedules
4.01(cc) -1, -2 and -3 are valid and in full force and effect; except as
may be set forth in said Schedule 4.01(cc)-4, such Obligor owns and
possesses the right to use all Copyrights, Patents and Trademarks. Said
Schedule 4.01(cc)-4 sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property
on the date hereof. To such Obligor's knowledge, (i) except as set forth
in said Schedules 4.01(cc)-4, there is no violation by others of any
right of
Credit Agreement
<PAGE>
<PAGE>
- 68 -
such Obligor with respect to any Copyright, Patent or Trademark listed
in said Schedules 4.01(cc) -1, -2 and -3, respectively, under the name
of such Obligor and (ii) such Obligor is not infringing in any respect
upon any Copyright, Patent or Trademark of any other Person; and no
proceedings have been instituted or are pending against such Obligor or,
to such Obligor's knowledge, threatened, and no claim against such
Obligor has been received by such Obligor, alleging any such violation,
except as may be set forth in said Schedule 4.01(cc)-4. Such Obligor
does not own any Trademarks to which the last sentence of the definition
of Trademark Collateral applies.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance or
any other amount hereunder shall remain unpaid or any Lender shall have any
Commitment hereunder or any Letter of Credit shall be outstanding, the Borrower
will, unless the Majority Lenders shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable
laws, rules, regulations, orders and licensing requirements, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property except to the extent contested in good faith and
by appropriate proceedings and with respect to which adequate reserves
for payment have been established.
(b) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(c) Corporate Existence and Approvals. Obtain, preserve and
maintain, and cause each Subsidiary to obtain, preserve and maintain (i)
its corporate existence, rights, franchises (including
Telecommunications Approvals) and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified, and cause each
Subsidiary to
Credit Agreement
<PAGE>
<PAGE>
- 69 -
qualify and remain qualified, as a foreign corporation in each
jurisdiction in which such qualification is necessary or desirable in
view of its business and operations or the ownership of its properties;
provided, however, nothing herein contained shall prevent any merger or
consolidation permitted by Section 5.02(d) and (ii) all approvals,
authorizations, licenses, franchises (including Telecommunications
Approvals) and other permissions of all governmental, judicial,
regulatory and other agencies and authorities necessary to enable the
Borrower and each Subsidiary to operate and maintain its property,
business and operations as the same is currently being carried on or as
it may hereafter be carried on in accordance with the Loan Documents.
(d) Visitation Rights. At any reasonable time and from time to
time upon reasonable notice, permit the Administrative Agent or any of
the Lenders or any agents or representatives thereof, to examine and
make copies of and abstracts from the records and books of account of,
and visit the properties of, the Borrower and any of its Subsidiaries,
and to discuss the affairs, finances and accounts of the Borrower and
any of its Subsidiaries with any of their officers or directors and with
their independent certified public accountants.
(e) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles consistent with those applied
in the preparation of the financial statements referred to in Section
4.01(e), reflecting all financial transactions of the Borrower and each
such Subsidiary.
(f) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, to the extent
that the management of the Borrower in its reasonable business judgment
deems such maintenance and preservation necessary or reasonably useful
in the proper conduct of the business of the Borrower and such
Subsidiary, all of its properties that are used or useful in the conduct
of its business in good working order and condition, ordinary wear and
tear excepted; and at all times do or cause to be done, and cause each
Subsidiary to do or cause to be done, all things necessary to obtain,
preserve,
Credit Agreement
<PAGE>
<PAGE>
- 70 -
renew and keep in full force and effect all franchises (including
Telecommunications Approvals), licenses, patents, copyrights,
trademarks, service marks or trade names material to the conduct of its
businesses.
(g) Maintenance of Corporate Separateness. Conduct its business
and operations and the business and operations of each Subsidiary
separately from that of all other Persons (including, without
limitation, Affiliates of the Borrower), including, without limitation,
(i) not commingling funds or other assets of the Borrower or any
Subsidiary with the funds or other assets of any such other Person; (ii)
maintaining separate corporate and financial records and observing all
corporate formalities for the Borrower and each Subsidiary; (iii)
causing each Subsidiary to pay its liabilities from its assets or from
the assets of the Borrower or another Subsidiary; and (iv) causing each
Subsidiary to conduct its dealings with third parties in its own name
and as a separate and independent entity.
(h) Certain Obligations Respecting Subsidiaries.
(i) Subsidiary Guarantors. In the event that the
Borrower or any of its Subsidiaries shall form or acquire
any new Subsidiary after the date hereof, the Borrower will
cause such new Subsidiary:
(x) to execute and deliver to the Administrative Agent an
instrument in the form of Annex 1 to the Subsidiary Guaranty
(and, thereby, to become a party to the Subsidiary Guaranty as a
"Guarantor" thereunder);
(y) to take such action (including, without limitation,
delivering such shares of stock and executing and delivering such
Uniform Commercial Code financing statements) as shall be
necessary to create and perfect valid and enforceable first
priority Liens, consistent with Section 5.01(n) and the
provisions of the Security Documents, on substantially all of the
Property of such new Subsidiary as collateral security for the
obligations of such new Subsidiary under the Subsidiary Guaranty,
and to execute and deliver such supplemental Security Documents
as the Administrative Agent shall request; and
(z) to deliver such proof of corporate action,
incumbency of officers, opinions of counsel and other
Credit Agreement
<PAGE>
<PAGE>
- 71 -
documents as is consistent with those delivered by the Borrower
pursuant to Section 3.01 hereof or as the Administrative Agent
shall have reasonably requested.
(ii) Ownership of Subsidiaries. The Borrower will, and will
cause each of its Subsidiaries to, take such action from time to time as
shall be necessary to ensure that each of its Subsidiaries is a Wholly
Owned Subsidiary. In the event that any additional shares of stock shall
be issued by any Subsidiary, or the Borrower or any of its Subsidiaries
shall otherwise acquire the shares of any Subsidiary, the Borrower
agrees forthwith to deliver (or cause to be delivered) to the
Administrative Agent pursuant to the Obligor Pledge Agreement the
certificates evidencing such shares of stock, accompanied by undated
stock powers executed in blank and to take such other action as the
Administrative Agent shall request to perfect the security interest
created therein pursuant to the Obligor Pledge Agreement.
(iii) Certain Restrictions. The Borrower will not permit any
of its Subsidiaries to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining,
or imposes materially adverse conditions upon, the incurrence or payment
of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale,
assignment, transfer or other disposition of Property, other than any
such prohibition or restraint (x) arising pursuant to an indenture,
agreement, instrument or other arrangement providing for Liens permitted
by Section 5.02(a), so long as such prohibition or restraint shall only
cover the Property that is subject to such Lien and no other Property,
(y) set forth in any agreement providing for the disposition of Property
(so long as such prohibition or restraint relates only to such Property
to be disposed of) or (z) set forth in any of the Loan Documents.
(i) Pro-Forma Debt Service Coverage Ratio. Maintain a
Pro-Forma Debt Service Coverage Ratio of not less than
1.05:1 at all times on and after May 31, 2000.
(j) Leverage Ratio. Maintain, as of the last day of
Credit Agreement
<PAGE>
<PAGE>
- 72 -
each Fiscal Quarter whose last day occurs during any period set out
below, a Leverage Ratio less than the ratio set out below next to such
period:
<TABLE>
<CAPTION>
Period Ratio
------- -----
<S> <C>
from June 1, 1998 through November 30, 1998 13.00:1
from December 1, 1998 through May 31, 1999 10.00:1
from June 1, 1999 through November 30, 1999 8.00:1
from December 1, 1999 through February 28, 2000 7.00:1
from March 1, 2000 through May 31, 2000 6.00:1
from June 1, 2000 through November 30, 2000 5.00:1
from December 1, 2000 and thereafter 4.00:1
</TABLE>
(k) Interest Coverage Ratio. Maintain, as of the last day of each
Fiscal Quarter whose last day occurs during any period set out below, an
Interest Coverage Ratio not less than the ratio set out below next to
such period:
<TABLE>
<CAPTION>
Period Ratio
------ ------
<S> <C>
from December 1, 1998 through May 31, 1999 1.05:1
from June 1, 1999 through November 30, 1999 1.50:1
from December 1, 1999 through February 28, 2000 1.75:1
from March 1, 2000 through May 31, 2000 2.00:1
from June 1, 2000 through November 30, 2000 2.25:1
from December 1, 2000 and thereafter 2.50:1
</TABLE>
(l) Subscriber Levels. Maintain, as of each date
specified below, a number of Subscribers not less than the
number set out below next to such date:
Period Level
August 31, 1997 10,000
November 30, 1997
25,000
February 28, 1998
35,000
May 31, 1998
45,000
August 31, 1998
and at all times thereafter 55,000
Credit Agreement
<PAGE>
<PAGE>
- 73 -
(m) Compliance with Environmental Laws. Comply, and cause each of
its Subsidiaries and all lessees and other Persons occupying its
property to comply, in all material respects, with all Environmental
Laws and Environmental Permits applicable to its operations and
properties; obtain and renew all Environmental Permits necessary for its
operations and properties; and conduct, and cause each of its
Subsidiaries to conduct, any investigation, study, sampling and testing,
and undertake any cleanup, removal, remedial or other action necessary
to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental
Laws; provided, however, that neither the of Borrower nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances.
(n) Collateral; Consents. As and to the extent set forth below in
this paragraph (n), each Obligor will grant to the Administrative Agent,
for the benefit of the Lenders, a Lien on the items of Property referred
to below. Such Liens shall constitute valid and enforceable perfected
liens superior to and prior to the rights of all other persons and
subject to no other Liens other than Liens permitted by Section 5.02(a).
The Puerto Rico Security Documents or other instruments related thereto
shall be duly recorded or filed at the times set forth below in such
manner and in such places as are required by law to establish, perfect,
preserve and protect the Liens in favor of the Administrative Agent, for
the benefit of the Lenders, and all taxes, fees and other charges
payable in connection therewith shall be paid in full at such times:
(i) At the time of the initial Credit Extension:
(A) all switches and related equipment of
the Obligors connecting the Telecommunications
Networks to the facilities of PRTC;
(B) the Facilities Agreement, the Interconnection
Agreements, all office leases to which any Obligor is a
party, and all other material agreements to which any
Obligor is a party;
Credit Agreement
<PAGE>
<PAGE>
- 74 -
(C) all outstanding capital stock issued by
any Obligor;
(D) all items listed on Schedules 4.01(cc)
-1, -2 and -3; and
(E) all leases for cell sites to which any
Obligor is a party; and
(ii) At the earlier of the date that the Uniform Commercial
Code of Puerto Rico (the "PRUCC") becomes effective or July 31,
1997: all Collateral comprised of equipment, inventory and
accounts receivable, and all other Collateral in which a security
interest may be created and perfected under the PRUCC without
undue cost or burden.
Further, the Borrower agrees to use commercially reasonable efforts to
obtain the PRTC Consent and Agreement and such other consents, estoppels
and other agreements from landlords and other counterparties under
leases and other agreements as are contemplated by the Puerto Rico
Security Documents as promptly as practicable after the initial Credit
Extension hereunder.
(o) Additional Puerto Rico Security Documents. As and to the
extent requested from time to time by the Administrative Agent or the
Majority Lenders, the Borrower shall cause each Obligor operating in
Puerto Rico to grant to the Administrative Agent, for the benefit of the
Lenders, a Lien in respect of any Collateral held by such Obligor not
otherwise covered by the Puerto Rico Security Documents (collectively,
the "Additional Puerto Rico Security Documents"). Such Lien shall be
granted pursuant to documentation reasonably satisfactory in form and
substance to the Administrative Agent and shall constitute valid and
enforceable perfected liens superior to and prior to the rights of all
other persons and subject to no other Liens except for Liens permitted
by Section 5.02(a). The Additional Puerto Rico Security Documents or
other instruments related thereto shall be duly recorded or filed in
such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Administrative
Agent, for the benefit of the Lenders, required to be granted pursuant
to the Additional Puerto Rico Security Documents and all taxes, fees and
other charges payable in connection therewith shall be paid in
Credit Agreement
<PAGE>
<PAGE>
- 75 -
full.
(p) Facilities Agreement. The Borrower agrees (i) to request
under Section 1 of the Facilities Agreement to lease such additional
capacity, cable and fibers on the Fiber Network (as defined therein) as
may be necessary, in the reasonable commercial judgment of the Borrower,
for the operation of the Telecommunications Networks, (ii) to notify the
Administrative Agent of any failure of either other party thereto to
comply with its obligations thereunder in any material respect and (iii)
to take such action, if any, as may be reasonably requested by the
Majority Lenders in their reasonable commercial judgment to enforce its
rights and remedies against such other party in respect of any such
failure to comply with such obligations in any material respect provided
that any such action shall not be prohibited by law or by the Facilities
Agreement.
SECTION 5.02. Negative Covenants. So long as any Advance or any
other amount hereunder shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower will not, without the written consent of the
Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or
permit any Subsidiary to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its properties, whether personal or
real, and whether tangible or intangible, now owned or hereafter
acquired, or sign or file, or permit any Subsidiary to sign or file,
under the Uniform Commercial Code of any jurisdiction, a financing
statement that names the Borrower or any Subsidiary as debtor, or sign,
or permit any Subsidiary to sign, any security agreement authorizing any
secured party thereunder to file such financing statement, or assign, or
permit any Subsidiary to assign, any right to receive income, excluding,
however, from the operation of the foregoing restrictions, Liens:
(i) for taxes, assessments or governmental charges or
levies on property of the Borrower or any Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings and for which adequate reserves have been
established;
(ii) imposed by law, such as carrier's,
Credit Agreement
<PAGE>
<PAGE>
- 76 -
warehouseman's and mechanic's liens and other similar
liens arising in the ordinary course of business;
(iii) arising out of pledges or deposits under worker's
compensation laws or similar legislation, arising in the ordinary
course of business;
(iv) constituting easements, rights of way and other
encumbrances on title to real property that do not render title
to the property encumbered thereby unmarketable or materially
adversely affect the use of such property for its present
purposes;
(v) arising in connection with Permitted Vendor
Financing and encumbering only the assets, thereby
acquired by the Borrower or any Subsidiary;
(vi) securing Capitalized Lease Obligations
permitted by Section 5.02(c) and encumbering only the
assets leased; or
(vii) constituting purchase money Liens on or in property
acquired or held by the Borrower or any Subsidiary in the
ordinary course of business to secure the purchase price of such
property or to secure Debt incurred solely for the purpose of
financing the acquisition of such property, or Liens existing on
such property at the time of its acquisition; provided that the
Debt secured thereby does not exceed the purchase price thereof;
provided, however, the aggregate principal amount of the Debt secured by
the Liens referred to in clauses (vi) and (vii) shall not exceed
$5,000,000 at any one time outstanding.
(b) Debt. Create, incur, assume or suffer to exist,
or permit any Subsidiary to create, incur, assume or suffer
to exist, any Debt, except
(i) Debt under the Loan Documents;
(ii) Debt owing by a Subsidiary to the Borrower or
to another Subsidiary;
(iii) Debt secured by any Lien permitted by
Section 5.02(a)(vi) or (vii);
Credit Agreement
<PAGE>
<PAGE>
- 77 -
(iv) Permitted Vendor Financing;
(v) Debt consisting of (A) guarantees by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (B)
guarantees by the Borrower of the obligations of any Subsidiary;
(vi) Subordinated Debt in an aggregate principal amount not
exceeding $50,000,000 at any time outstanding; provided that at
the time of incurrence thereof (and after giving effect thereto)
(x) no Default shall have occurred and be continuing and (y) on a
pro forma basis, the Borrower would be in compliance with Section
5.01(j) if such Subordinated Debt was outstanding on the last day
of the Fiscal Period ending on or most recently ended prior to
the date of such incurrence and Sections 5.01(i), 5.01(j) and
5.01(k) if such Subordinated Debt was outstanding throughout the
period of four Fiscal Quarters ending on such date;
(vii) Tax-Advantaged Debt; or
(viii) other Debt in an aggregate principal amount not
exceeding $5,000,000 at any time outstanding.
(c) Lease Obligations. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any obligations as lessee for the rental or hire of other real or
personal property of any kind under operating leases having a term of
one year or more which would cause the aggregate direct and contingent
liabilities of the Borrower and its Subsidiaries, on a Consolidated
basis, in respect of all such obligations payable in any period of 12
consecutive calendar months to exceed $5,000,000.
(d) Mergers, Etc. Merge or consolidate with or into, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets
(whether now owned or hereafter acquired) to, any Person, or permit or
cause any of its Subsidiaries to do so, except that (i) any of its
Wholly-Owned Subsidiaries (other than a License Subsidiary) may merge or
consolidate with or into, or dispose of assets to, or acquire assets of,
any of its other Wholly-Owned
Credit Agreement
<PAGE>
<PAGE>
- 78 -
Subsidiaries and (ii) any of its Subsidiaries (other than a License
Subsidiary) may merge into, or dispose of assets to, the Borrower,
provided in each case that, immediately prior to and after giving effect
to such transaction, no event shall have occurred or be continuing which
constitutes an Event of Default or which, with the giving of notice or
lapse of time or both, would constitute an Event of Default and in the
case of any such merger to which such Borrower is a party, such Borrower
is the surviving corporation.
(e) Sales, Etc. of Assets. Sell, assign, lease, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell, assign,
lease, transfer or otherwise dispose of, any of its assets, including
(without limitation) substantially all assets constituting the business
of a division, branch or other unit operation, except:
(i) for sales of assets for cash in the ordinary
course of its business,
(ii) for disposition of obsolete equipment no
longer needed in the conduct of the Borrower's or such
Subsidiary's business,
(iii) in a transaction permitted by subsection (d)
of this Section 5.02.
(f) Investments in Other Persons. On or after the date hereof
make, or permit any Subsidiary to make, any Investment in any Person
(including, but not limited to, its officers and employees) other than
Permitted Investments.
(g) Dividends, Etc. Declare or pay any dividends, purchase,
redeem, retire, defease or otherwise acquire for value any of its
capital stock or any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding, return any capital to its
stockholders as such, make any distribution of assets, capital stock,
warrants, rights, options, obligations or securities to its stockholders
as such, or permit any of its Subsidiaries to do any of the foregoing,
except that, in compliance with all applicable requirements of law, (i)
any Subsidiary may declare and make payment of cash and stock dividends,
return capital and make distributions of assets to the Borrower or to
other Subsidiaries, (ii) the Borrower may declare and deliver
distributions payable only in common stock of the
Credit Agreement
<PAGE>
<PAGE>
- 79 -
Borrower and (iii) the Borrower may declare and pay cash dividends to
Holdings as follows:
(x) the Borrower may pay the Initial
Distributions,
(y) if (both immediately before and immediately after
giving effect thereto) no Default shall have occurred and be
continuing, the Leverage Ratio is less than 5.0:1 and the
Borrower would be in compliance with the requirements of Sections
5.01(i), 5.01(j) and 5.01(k) hereof (determined on a pro forma
basis under the assumption that Debt in an amount equal to the
amount of such dividend had been incurred at the beginning of,
and had remained outstanding during, the relevant Fiscal Period
for which such requirements are calculated), the Borrower may pay
dividends in any Fiscal Quarter in an aggregate amount not
exceeding 50% of Excess Cash Flow for the immediately preceding
Fiscal Quarter, and
(z) if (both immediately before and immediately after
giving effect thereto) no Default shall have occurred and be
continuing, the Borrower may pay dividends in an aggregate amount
not exceeding the Net Cash Proceeds of an Equity Issuance
received by the Borrower on or before the date falling 30 days
prior to the payment of such dividends.
(h) Change in Fiscal Year or Charter Amendment. Change, or permit
any Subsidiary to change, its fiscal year from the Fiscal Year or amend,
or permit any Subsidiary to amend, its certificate of incorporation or
bylaws.
(i) Nature of Business. Engage, or permit any Subsidiary to
engage, in any business other than owning and operating
Telecommunications Networks; or permit any License Subsidiary to engage
in any line or lines of business activity other than holding
Telecommunications Approvals; or permit the Telecommunications Approvals
to be held in the name of any Person other than a License Subsidiary.
(j) Transactions with Affiliates. Engage, or permit any
Subsidiary to engage, in any transaction with an Affiliate (other than a
Subsidiary) of the Borrower on terms less favorable to the Borrower or
such Subsidiary than would be obtainable at the time in comparable
transactions of the
Credit Agreement
<PAGE>
<PAGE>
- 80 -
Borrower or such Subsidiary with Persons not Affiliates; or, without
limiting the generality of the foregoing, engage, or permit any
Subsidiary to engage, in any transaction with Century-ML or any
Affiliate of Century-ML (other than the Borrower or any Subsidiary of
the Borrower) on terms less favorable to the Borrower or such Subsidiary
than would be obtainable at the time in comparable transactions of the
Borrower or such Subsidiary with Persons not Affiliates.
(k) Restriction on Negative Pledges. Enter into or suffer to
exist, or permit any of its Subsidiaries to enter into or suffer to
exist, any agreement prohibiting or conditioning the creation or
assumption of any Lien of any nature upon any of its property or assets
in favor of the Administrative Agent and the Lenders other than in
connection with any Debt permitted by Section 5.02(b)(iii) or
5.02(b)(iv) to the extent such agreement is applicable only to the
property on which a Lien is permitted under Section 5.02(a)(v), (vi) or
(vii).
(l) Accounting Changes. Make or permit, or permit any
of its Subsidiaries to make or permit, any change in
accounting policies or reporting practices, except as
required by generally accepted accounting principles.
(m) Prepayments, Etc. of Debt. Prepay, redeem, purchase, defease
or otherwise satisfy prior to the scheduled maturity thereof in any
manner, or make any payment in violation of any subordination terms of,
any Debt, other than (i) the prepayment of the Advances in accordance
with the terms of this Agreement and (ii) regularly scheduled or
required repayments or redemptions of Debt, provided that any such
required prepayment or redemption does not require the Borrower to pay
any "make-whole" or other premium in connection with such prepayment or
redemption.
(n) Amendments to Certain Documents. Amend, modify or change, or
agree to any amendment, modification or change, of any term or condition
of, or give any consent, waiver or approval under, (i) any agreement,
instrument or other document governing or evidencing any Permitted
Vendor Financing or Subordinated Debt, (ii) the Interconnection
Agreements, (iii) any Marketing Agreement, (iv) the Consent and
Agreements or (v) the Facilities Agreement.
(o) Issuance of Stock. The Borrower will not suffer
Credit Agreement
<PAGE>
<PAGE>
- 81 -
or permit any Subsidiary, directly or indirectly, to issue any stock of
such Subsidiary, except (a) to the Borrower, (b) to a Wholly Owned
Subsidiary of the Borrower or (c) to qualified directors if and to the
minimum extent required by applicable law.
(p) Management Fees. The Borrower will not, and will not permit
any of its Subsidiaries to, pay management or consulting fees to
Holdings, Century-ML or their respective Affiliates other than (i)
reimbursement to Holdings of actual out-of-pocket expenses to the extent
incurred for the direct and exclusive benefit of the Borrower and its
Subsidiaries that in any case do not exceed (x) $500,000 per Fiscal Year
from the period from the date hereof through May 31, 2000 and (y)
$1,000,000 per Fiscal Year thereafter and (ii) under the Facilities
Agreement and any Marketing Agreement.
SECTION 5.03. Reporting Requirements. So long as any amount
hereunder shall remain unpaid or any Lender shall have any Commitment hereunder,
the Borrower will, unless the Majority Lenders shall otherwise consent in
writing, furnish to the Administrative Agent for distribution to the Lenders:
(a) as soon as possible and in any event within five Business
Days after the occurrence of each Default continuing on the date of such
statement, a statement of a Financial Officer of the Borrower setting
forth details of such Default and the action which the Borrower has
taken or proposes to take with respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each calendar month, a Consolidated and consolidating
statement of revenues for the Borrower and its Subsidiaries for such
month, and of the Subscribers of the Borrower and its Subsidiaries as at
the last day of such month;
(c) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower, Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and the
related Consolidated and consolidating statements of operations,
statements of retained earnings and statements of cash flows of such
Persons for such quarter and for the period commencing at the end of the
previous Fiscal Year and ending
Credit Agreement
<PAGE>
<PAGE>
- 82 -
with the end of such quarter, all in reasonable detail and duly
certified (subject to normal year-end audit adjustments) by a Financial
Officer of the Borrower as having been prepared in accordance with
generally accepted accounting principles consistent with those applied
in the preparation of the financial statements referred to in Section
4.01(e);
(d) as soon as available and in any event within 90 days after
the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such year for the Borrower and its Subsidiaries, including
therein Consolidated and consolidating balance sheets of such Persons in
each case as at the end of such Fiscal Year and the related Consolidated
and consolidating statements of operations, statements of retained
earnings and statements of cash flows of such Persons for such Fiscal
Year, which Consolidated financial statements of the Borrower and its
Subsidiaries shall have been duly certified by Deloitte & Touche or
other independent certified public accountants of recognized standing
reasonably acceptable to the Majority Lenders which certificate shall be
accompanied by a statement of such accounting firm to the Administrative
Agent stating that in the course of the regular audit of the business of
the Borrower and its Subsidiaries, which audit was conducted by such
accounting firm in accordance with generally accepted auditing
standards, nothing came to their attention that caused them to believe
the Borrower was not in compliance with Section 5.01, insofar as such
Section relates to accounting matters, and which other financial
statements shall have been duly certified by a Financial Officer of the
Borrower as having been prepared in accordance with generally accepted
accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e);
(e) concurrently with any delivery of financial statements under
clause (c) or (d) above, a Compliance Certificate as at the end of (and
for) the respective Fiscal Periods covered by such financial statements;
(f) promptly after the commencement thereof, notice of all
actions, suits and proceedings of the type described in Section 4.01(h)
before any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and notice of an adverse
development in any such action, suit or proceeding (including any such
Credit Agreement
<PAGE>
<PAGE>
- 83 -
action, suit or proceeding in existence on the date hereof);
(g) promptly after the sending thereof, copies of all proxy
statements, financial statements and reports which the Borrower or any
Subsidiary sends to its stockholders;
(h) promptly after the filing thereof, copies of all regular,
periodic and special reports, and all registration statements, which the
Borrower or any Subsidiary files with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, with any national securities exchange or with the FCC or the
PRTRB;
(i) promptly after the filing or receiving thereof, copies of all
reports and notices which the Borrower or any Subsidiary files under
ERISA with the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which the Borrower or any Subsidiary receives
from such Corporation or Department;
(j) as soon as available and in any event within 45 days after
the end of each Fiscal Quarter, a report identifying any
Telecommunications Approval that has been lost, surrendered or canceled
during such period, and within 10 Business Days of the receipt of the
Borrower or any of its Subsidiaries of notice that any
Telecommunications Approval has been lost or canceled, copies of any
such notice accompanied by a report describing the measures undertaken
by the Borrower or any of its Subsidiaries to prevent such loss or
cancellation (and the anticipated impact, if any, that such loss or
cancellation will have upon the business of the Borrower and its
Subsidiaries);
(k) within 15 days after any change occurs with respect to any
information regarding any Subsidiary contained in the most recent
schedule furnished under this Section 5.03(j) or, if no such schedule
has been furnished, in Schedule 4.01(k), a schedule, in substantially
the form of Schedule 4.01(k), setting forth as of the date such schedule
is furnished the information described in the first sentence of Section
4.01(k);
(l) as soon as available and in any event within 60 days after
the end of each Fiscal Quarter of each Fiscal Year of the Borrower, a
Borrowing Base Certificate as at the last day of such Fiscal Quarter.
Credit Agreement
<PAGE>
<PAGE>
- 84 -
(m) the receipt of any notice from the FCC or the PRTRB of the
imposition of any forfeiture against the Borrower or any of its
Subsidiaries or the designation of a hearing or the initiation of any
proceeding which could result in the expiration without renewal,
termination, revocation, suspension, modification or impairment of any
Telecommunications Approval now or hereafter held by the Borrower or any
of its Subsidiaries;
(n) to the extent the Borrower has knowledge thereof, notice of
the enactment or promulgation, or the impending enactment or
promulgation, after the date hereof of any Federal, state or local
statute, regulation or ordinance, or judicial or administrative decision
or order, relating to the cellular telephone, mobile radio telephone,
personal communication, local exchange or competitive access service
industries generally or affecting the Borrower or any of its
Subsidiaries specifically that could reasonably be expected to have a
Material Adverse Effect; and
(o) such other information respecting the business or properties
or the condition or operations, financial or otherwise, of the Borrower
or any Subsidiary, as the Administrative Agent or any Lender may from
time to time reasonably request.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Borrower shall (i) fail to pay or prepay any principal of
any Advance or Reimbursement Obligation when the same becomes due and
payable or (ii) fail to pay any other amount hereunder when the same
becomes due and payable and, in the case of this clause (ii), such
failure shall continue unremedied for three or more Business Days; or
(b) Any representation or warranty made or deemed made by any
Credit Party in or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe
Credit Agreement
<PAGE>
<PAGE>
- 85 -
any term, covenant or agreement contained in Section 5.02
(other than Section 5.02(h) or (l)) or 5.03(a); or
(ii) The Borrower shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed, other than those listed in subsections (a) or
(c)(i) above, if such failure shall remain unremedied for 30 days after
the earlier of (A) written notice thereof shall have been given to the
Borrower by the Administrative Agent or any Lender and (B) the
Borrower's knowledge of such failure; provided that a breach by the
Borrower of any or all of its financial covenants set forth in Sections
5.01(i), (j) or (k) may be cured (and thus shall be deemed not to have
occurred) if, within five Business Days after the occurrence of such
breach, the Borrower shall have received from an Eligible Equity
Contributor capital contributions in the form of cash or Approved
Telecommunications Properties (whether or not in connection with the
issuance by the Borrower to such Eligible Equity Contributor of
additional shares of its capital stock) which, if such capital
contributions had been received by the Borrower prior to the last day of
the Fiscal Period with respect to which the Borrower has breached any
such financial covenants, would have resulted in the Borrower's
compliance with all such covenants whether or not so breached (deeming,
for the purpose of this determination, any such cash capital
contributions received from such Eligible Equity Contributor to be an
addition to the net income component of EBITDA of the Borrower and its
Subsidiaries for such Fiscal Period); provided further, however, that
the cure mechanism described in this subclause (c) shall not be
available to the Borrower (x) more than four times during the term of
this Agreement or (y) to cure the breach of any financial covenant
occurring as of the last day of any Fiscal Period if such provision was
availed of to cure any such breach of financial covenant occurring as of
the last day of the immediately preceding Fiscal Period; or
(d) Any Credit Party fails to observe, perform or comply with any
of its other agreements or covenants in, or provision of, any Loan
Document to which it is a party, and such default or breach continues
for a period of 30 days after there has been given to the Borrower by
the Administrative Agent, or to the Borrower and the Administrative
Agent by any Lender, a written notice specifying such default or breach
and requiring it to be
Credit Agreement
<PAGE>
<PAGE>
- 86 -
remedied and stating that such notice is a "Notice of
Default" hereunder; or
(e) The Borrower or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt (but excluding Debt
evidenced by the Notes) of the Borrower or such Subsidiary (as the case
may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt, and the
aggregate amount of all such Debt with respect to which any such failure
shall have occurred and be continuing shall equal or exceed $5,000,000
(such Debt in such aggregate amount being referred to herein as
"Material Debt"); or any other event shall occur or condition shall
exist under any agreement or instrument relating to any Material Debt
and shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the
maturity of such Material Debt; or any such Material Debt shall be
declared to be due and payable, or required to be prepaid (other than by
a regularly scheduled required prepayment), redeemed, purchased or
defeased, or an offer to prepay, redeem, purchase or defease such
Material Debt shall be required to be made, in each case prior to the
stated maturity thereof; or
(f) Any judgment or order for the payment of money in excess of
$5,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) (i) Century-ML shall suffer the cancellation, non-renewal or
adverse modification of any one or more approvals, authorizations,
licenses, franchises or other permissions of any governmental, judicial,
regulatory or other agencies if such cancellation, non-renewal or
adverse modification renders the continued performance by it of its
obligations under the Facilities Agreement unlawful, or the Facilities
Agreement shall be terminated, shall expire or shall be materially
adversely modified, unless the Borrower
Credit Agreement
<PAGE>
<PAGE>
- 87 -
shall have secured alternative arrangements satisfactory to the Majority
Lenders to substitute for benefits provided by the Facilities Agreement
for the operation by the Borrower of the Telecommunications Networks or
(ii) either Interconnection Agreement shall be revoked or terminated,
shall expire or shall be materially adversely modified, unless the
Borrower shall have secured alternative arrangements satisfactory to the
Majority Lenders to substitute for the benefits of such Interconnection
Agreement for the operation by the Borrower of the Telecommunications
Networks; or
(h) Any Obligor shall generally not pay its debts as they become
due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Credit Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any Bankruptcy Law, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted or consented to by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days,
or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official for, it or
for any substantial part of its property) shall occur; or any Credit
Party shall take any corporate action to authorize any of the actions
set forth above in this paragraph (h); or
(i) Any material provision of any Loan Document shall for any
reason cease to be binding on or enforceable against the respective
Credit Party party thereto; or
(j) There shall occur any Material Adverse Change; or
(k) Any ERISA Event shall have occurred with respect to a Plan
and the sum of the Insufficiency of such Plan and the Insufficiency of
any and all other Plans with respect to which an ERISA Event shall have
occurred and then exist (or, in the case of a Plan with respect to which
an ERISA Event described in clause (iii) through (vi) of the definition
of
Credit Agreement
<PAGE>
<PAGE>
- 88 -
ERISA Event shall have occurred and then exist, the liability related
thereto) is equal to or greater than $5,000,000; or
(l) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount which, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Borrower and its ERISA Affiliates as Withdrawal Liability, exceeds
$5,000,000 or requires payments exceeding $5,000,000 per annum; or
(m) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the
aggregate annual contributions of the Borrower and its ERISA Affiliates
to all Multiemployer Plans which are then in reorganization or being
terminated have been or will be increased over the amounts contributed
to such Multiemployer Plans for the respective plan year of each such
Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding $5,000,000;
or
(n) The Borrower or any Subsidiary shall suffer the cancellation,
non-renewal or adverse modification of any one or more
Telecommunications Approvals, provided, however, that such a
cancellation, non-renewal or adverse modification shall not constitute
an Event of Default if (i) the cancellation, non-renewal or adverse
modification is not reasonably likely to have a Material Adverse Effect,
or (ii) in the instance of a cancellation, non-renewal or expiration, an
application for reinstatement, renewal or extension has been duly made
by the Borrower or the Subsidiary concerned and is being diligently
pursued by the Borrower or such Subsidiary and the Borrower or such
Subsidiary is not prohibited by a final order of a court of competent
jurisdiction from continuing to provide service under such
Telecommunications Approval during the pendency of such application and
such Telecommunications Approval has not been granted to another Person,
or (iii) in the instance of a cancellation, the Borrower or the
Subsidiary concerned is not prohibited by final order of a court of
competent jurisdiction from continuing to provide service under such
Credit Agreement
<PAGE>
<PAGE>
- 89 -
Telecommunications Approval, and such Telecommunications
Approval has not been granted to another Person; or
(o) The Lien created by any Security Document shall at any time
not constitute a valid and perfected Lien on the collateral intended to
be covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than
Liens permitted under Section 5.02(a) hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Support Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by any Credit Party; or
(p) Any Change of Control (under and as defined in the Senior
Notes Indenture as in effect on the date hereof) shall occur and be
continuing, or Century Communications Corp. and Citizens Utilities
Company (or Subsidiaries of either of the foregoing) shall cease to hold
in the aggregate Voting Stock of Centennial Cellular carrying at least
51% of the Voting Power of all Voting Stock of Centennial Cellular, or
Centennial Cellular (or its Subsidiaries) shall cease to hold in the
aggregate at least Voting Stock of Holdings carrying at least 51% of the
Voting Power of all Voting Stock of Holdings, or Holdings (or its
Subsidiaries) shall cease to hold in the aggregate Voting Stock of the
Borrower carrying at least 51% of the Voting Power of all Voting Stock
of the Borrower; or
(q) The Borrower and its Subsidiaries fail to maintain
operational capacity of the PCS System sufficient to provide service to
at least 80% of the population of Puerto Rico for a period of 45 or more
consecutive days;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the Commitment of each Lender to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Majority Lenders, by notice to the Borrower, declare the Advances, all
interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Advances,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any
Credit Agreement
<PAGE>
<PAGE>
- 90 -
kind, all of which are hereby expressly waived by the Borrower; provided,
however, in the event of an Event of Default referred to in paragraph (h) of
this Section 6.01, (A) the Commitment of each Lender to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
In addition, upon the occurrence and during the continuance of
any Event of Default (if the Administrative Agent has declared the principal
amount then outstanding of, and accrued interest on, the Advances and all other
amounts payable by the Borrower hereunder and under the Notes to be due and
payable), the Borrower agrees that it shall, if requested by the Administrative
Agent or the Majority Lenders through the Administrative Agent (and, in the case
of any Event of Default referred to in paragraph (g) or (h) of this Section 6.01
with respect to the Borrower, forthwith, without any demand or the taking of any
other action by the Administrative Agent or such Lenders) provide cover for the
Letter of Credit Liabilities by paying to the Administrative Agent immediately
available funds in an amount equal to the then aggregate Face Amount of all
Letters of Credit, which funds shall be held by the Administrative Agent in the
Collateral Account as collateral security in the first instance for the Letter
of Credit Liabilities and be subject to withdrawal only as provided in Section
6.02 hereof.
SECTION 6.02. Collateral Account.
(a) The Borrower hereby establishes with the Administrative Agent
a separate cash collateral account (the "Collateral Account") in the name and
under the control of the Administrative Agent into which there shall be
deposited from time to time such amounts as required to be paid to the
Administrative Agent under Section 2.09(d) hereof and the last paragraph of
Section 6.01 hereof.
(b) As collateral security for the prompt payment in full when
due (whether at stated maturity, upon mandatory or optional prepayment, pursuant
to requirements for cash collateral or otherwise) of the Reimbursement
Obligations, interest thereon, and all obligations of the Borrower under the
Letter of Credit Documents relating to Letters of Credit and under Section
6.02(f) hereof (whether or not then outstanding or due and payable) (such
obligations being herein collectively called the "Secured Obligations"), the
Borrower hereby pledges and grants to the
Credit Agreement
<PAGE>
<PAGE>
- 91 -
Administrative Agent, for the benefit of the Issuing Banks, the Lenders and the
Administrative Agent as provided herein, a security interest in all of its
right, title and interest in and to the Collateral Account and the balances from
time to time in the Collateral Account (including the investments and
reinvestments therein provided for below). The balances from time to time in the
Collateral Account shall not constitute payment of any Secured Obligations until
applied by the Administrative Agent as provided herein. Anything in this
Agreement to the contrary notwithstanding, funds held in the Collateral Account
shall be subject to withdrawal only as provided in this Section 6.02.
(c) Amounts on deposit in the Collateral Account shall be
invested and reinvested by the Administrative Agent in such Cash Equivalents as
the Borrower shall determine in its sole discretion, provided that (i) failing
receipt by the Administrative Agent of instructions from the Borrower, the
Administrative Agent may invest and reinvest such amounts as the Administrative
Agent shall determine in its sole discretion and (ii) the approval of the
Administrative Agent shall be required for the investments and reinvestments to
be made during any period while a Default has occurred and is continuing. All
such investments and reinvestments shall be held in the name and be under the
control of the Administrative Agent.
(d) If an Event of Default shall have occurred and be continuing,
the Administrative Agent may (and, if instructed by the Majority Lenders, shall)
in its (or their) discretion at any time and from time to time elect to
liquidate any such investments and reinvestments and credit the proceeds thereof
to the Collateral Account and apply or cause to be applied such proceeds and any
other balances in the Collateral Account to the payment of any of the Secured
Obligations due and payable.
(e) If (i) no Default has occurred and is continuing and (ii) all
of the Secured Obligations have been paid in full but Letters of Credit remain
outstanding, the Administrative Agent shall, from time to time, at the request
of the Borrower, deliver to the Borrower, against receipt but without any
recourse, warranty or representation whatsoever, such of the balances in the
Collateral Account as exceed the Face Amount of all outstanding Letters of
Credit. When all of the Secured Obligations shall have been paid in full and all
Letters of Credit have expired or been terminated, the Administrative Agent
shall promptly deliver to the Borrower, against receipt but without any
recourse, warranty or representation whatsoever, the
Credit Agreement
<PAGE>
<PAGE>
- 92 -
balances remaining in the Collateral Account.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement or any other Loan Document
(including, without limitation, enforcement or collection of the Notes), the
Administrative Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Majority Lenders, and such instructions shall be binding upon all Lenders;
provided, however, that the Administrative Agent shall not be required to take
any action which exposes the Administrative Agent to personal liability or which
is contrary to any Loan Document or applicable law. The Administrative Agent
agrees to give each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Administrative Agents' Reliance, Etc. None of the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender which is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with any Loan Document or for any financial
projection
Credit Agreement
<PAGE>
<PAGE>
- 93 -
or other information furnished by the Borrower before or after the execution of
this Agreement; (iv) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
any Loan Document on the part of the Borrower or any other Person or to inspect
the property (including the books and records) of the Borrower; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with any Loan Document or any other instrument or
document furnished pursuant hereto; and (vi) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 7.03. The Administrative Agent and its Affiliates. With
respect to its Commitment and the Advances made by it and the Notes issued to
it, the Administrative Agent, in its capacity as a Lender hereunder, shall have
the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Administrative Agent; and the term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include the
Administrative Agent in its individual capacity. The Administrative Agents and
its affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower,
any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if the Administrative
Agent was not the Administrative Agent and without any duty to account therefor
to the Lenders.
SECTION 7.04. Lender Credit Decision.
(a) Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
Credit Agreement
<PAGE>
<PAGE>
- 94 -
decisions in taking or not taking action under this Agreement.
(b) Without limiting the foregoing, each Lender acknowledges that
the Administrative Agent is not responsible for the forecasts and projections
received from time to time by such Lender whether or not such forecasts or
projections were prepared by the Borrower, any other Obligor, the Administrative
Agent or any other party or based on information provided by any such party. The
Administrative Agent makes no representation or warranty whatsoever as to the
truth, accuracy or content of the information contained therein.
SECTION 7.05. Indemnification by Lenders. The Lenders agree to
indemnify the Administrative Agent (to the extent not reimbursed by the
Borrower), ratably according to the respective principal amounts of the Notes
then owing to each of them (or if no Notes are at the time outstanding or if any
Notes are held by persons which are not Lenders ratably according to the
respective amounts of their Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from gross negligence or willful misconduct on the part of the Administrative
Agent. Without limitation of the foregoing, each Lender agrees to reimburse the
Administrative Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any other Loan Document, or in
connection with any refinancing or restructuring of the credit arrangements
provided pursuant to the Loan Documents, including, without limitation, in the
nature of a workout or of any insolvency or bankruptcy proceedings to the extent
that the Administrative Agent is not reimbursed for such expenses by the
Borrower.
SECTION 7.06. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower and may be removed
Credit Agreement
<PAGE>
<PAGE>
- 95 -
at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent so long as all of the long-term public senior
debt securities of such successor Administrative Agent are rated at least "BBB-"
by Standard & Poor's Corporation or "Baa3" by Moody's Investors Service, Inc. at
the time of its acceptance of appointment as successor Administrative Agent. If
no successor Administrative Agent shall have been so appointed by the Majority
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized under the laws
of the United States of America or of any State thereof, having a combined
capital and surplus of at least $50,000,000 and all of whose long-term public
senior debt securities are rated at least "BBB-" by Standard & Poor's
Corporation or at least "Baa3" by Moody's Investors Service, Inc. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
SECTION 7.07. Amendments to Loan Documents. Except as otherwise
provided in Section 8.01 with respect to this Agreement, the Administrative
Agent may, with the prior consent of the Majority Lenders (but not otherwise),
consent to any modification, supplement or waiver under any of the Loan
Documents, provided that, without the prior consent of each Lender, the
Administrative Agent shall not (except as provided herein or in the Support
Documents) (i) release any collateral or otherwise terminate any Lien under any
Security Document providing for collateral security, (ii) agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien provided that it obtains the consent of
the
Credit Agreement
<PAGE>
<PAGE>
- 96 -
Majority Banks thereto), (iii) alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents or
(iv) release any Guarantor under the Subsidiary Guaranty from its guarantee
obligations thereunder, except that no such consent shall be required to, and
the Administrative Agent shall, release any collateral or otherwise terminate
any Lien covering Property (and to release any such Guarantor) that is the
subject of either a disposition of Property permitted hereunder or a disposition
to which the Majority Lenders have consented.
SECTION 7.08. Co-Agents. Without limiting any of their
obligations hereunder as Lenders, none of the Persons identified as a "Co-Agent"
on the cover page hereof shall have any rights or obligations in their capacity
as a "Co-Agent".
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Notes, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (a)
waive any of the conditions specified in Article III, (b) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action hereunder or (f)
amend this Section 8.01; and provided further that no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement or any Note and no
amendment, waiver or consent shall, unless in writing and signed by an Issuing
Bank in addition to the Lenders required above to take such action, affect the
rights or duties of such Issuing Bank under this
Credit Agreement
<PAGE>
<PAGE>
- 97 -
Agreement.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address at c/o Century
Communications Corp., 50 Locust Avenue, New Canaan, Connecticut 06840, telecopy
no. 203-972-2013, Attention: Chief Financial Officer, with a copy to David Z.
Rosensweig, Esq., Leavy Rosensweig & Hyman, 11 East 44th Street, New York, New
York 10017, telecopy no. 212-983-2537; if to any Bank, at its Domestic Lending
Office specified opposite its name on Schedule I hereto; if to any other Lender,
at its Domestic Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender; and if to the Administrative Agent, at its
address at 399 Park Avenue, New York, New York 10043, Attention: Global Media
and Communications; or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties. All such
notices and communications shall be effective when received by the addressee
thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses.
(a) The Borrower agrees to pay on demand all reasonable costs and
expenses in connection with the preparation, execution, delivery, administration
(other than routine administrative expenses), modification and amendment of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, (A) all due diligence, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent with respect thereto and with
respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement and/or the other Loan Documents, or the
perfection, protection or preservation of rights or interests under the Loan
Documents, with respect to
Credit Agreement
<PAGE>
<PAGE>
- 98 -
negotiations with any Credit Party or with other creditors of any Credit Party
or any of its Subsidiaries arising out of any Default or any events or
circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto. The Borrower further agrees to pay on demand all
costs and expenses, if any (including, without limitation, reasonable counsel
fees and expenses) of the Administrative Agent and each of the Lenders, in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise and whether or not resulting in a settlement of any claim,
proceeding or case) of, or legal advice in respect of rights and
responsibilities under, this Agreement, the Notes and the other documents to be
delivered hereunder or in connection with the refinancing or restructuring of
the credit arrangements provided pursuant to the Loan Documents, including,
without limitation, in the nature of a workout or insolvency or bankruptcy
proceedings, including, without limitation, reasonable counsel fees and expenses
in connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender other than on the last day of the Interest Period for such Advance, as a
result of a payment or Conversion pursuant to Section 2.07(f) or 2.11,
prepayment pursuant to Section 2.08, acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or expenses
which it may reasonably incur as a result of such payment or Conversion,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance. A certificate as to such amounts,
submitted to the Borrower and the Administrative Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender is hereby authorized at any time and
Credit Agreement
<PAGE>
<PAGE>
- 99 -
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
any Note held by such Lender, whether or not such Lender shall have made any
demand under this Agreement or such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this Section 8.05 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower and the
Administrative Agent and when the Administrative Agent shall have been notified
by each Lender that such Lender has executed it and thereafter shall be binding
upon and inure to the benefit of the Borrower, the Administrative Agent and each
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lenders.
SECTION 8.07. Assignments and Participations.
(a) Each Lender may and, if demanded by the Borrower (following a
demand by the Lender pursuant to Section 2.10(a) and 2.10(b)) upon at least 5
Business Days' notice to such Lender and the Administrative Agent, shall assign
to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Note or Notes held by it and its Letter of Credit
Liabilities); provided, however, (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and obligations under this
Agreement, (ii) except in the case of assignments to affiliates or other
Lenders, the amount of the Commitment or (if the Commitments have terminated)
the outstanding Advances and Letter of Credit Liabilities of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $5,000,000 and shall be an integral multiple of
$1,000,000,
Credit Agreement
<PAGE>
<PAGE>
- 100 -
unless and to the extent that the Administrative Agent agrees otherwise, (iii)
each such assignment shall be to an Eligible Assignee acceptable to the Issuing
Banks, (iv) each such assignment made as a result of a demand by the Borrower
shall be arranged by the Borrower after consultation with the Administrative
Agent and shall be either an assignment of all of the rights and obligations of
the assigning Lender under this Agreement or an assignment of a portion of such
rights and obligations made concurrently with another such assignment or other
such assignments that together cover all of the rights and obligations of the
assigning Lender under this Agreement, (v) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower unless and until
such Lender shall have received one or more payments from either the Borrower or
one or more Eligible Assignees in an aggregate amount at least equal to the
aggregate outstanding principal amount of the Advances and participations in
outstanding Reimbursement Obligations owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, (vi) the parties to
each such assignment shall execute and deliver to the Administrative Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,000 and (vii) the assigning Lender shall give the Borrower
not less than five Business Days' prior notice of such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least 5 days after the execution and delivery thereof to the Administrative
Agent, (x) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and (y) the Lender assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the Lender assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Credit Agreement
<PAGE>
<PAGE>
- 101 -
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with any Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant to any Loan Document; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other instrument
or document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under any Loan Document; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under any Loan Document as are delegated to them by the terms
hereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of any Loan Document are required to
be performed by it as a Lender.
(c) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee representing that
Credit Agreement
<PAGE>
<PAGE>
- 102 -
it is an Eligible Assignee, together with any Note or Notes subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a new Note to
the order of such Eligible Assignee in an amount equal to the Commitment assumed
by it pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained a Commitment hereunder, a new Note to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder. Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the effective
date of such Assignment and Acceptance and shall otherwise be in substantially
the form of Exhibit A hereto.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, (i) such Lender's
obligations under this Agreement (including, without limitation, its Commitment
to the Borrower hereunder and the Advances owing to it and the Note or Notes
held by it) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the Borrower, the Administrative Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (iv) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of any Loan Document, or any consent to any departure by
any Obligor therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Advances or any fees
or other amounts payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Advances or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or
Credit Agreement
<PAGE>
<PAGE>
- 103 -
proposed assignee or participant, any information relating to any Credit Party
furnished to such Lender by or on behalf of the Borrower; provided that, prior
to any such disclosure, the assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any confidential
information relating to the Borrower received by it from such Lender.
(g) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.08. Indemnification by the Borrower. The Borrower
agrees to indemnify and hold harmless the Administrative Agent, each Lender and
CSI and each of their respective affiliates, and each of their respective
officers, directors, employees, agents, advisors, representatives, and
controlling persons (each, an "Indemnified Party") from and against any and all
claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, expenses and disbursements (including, without
limitation, fees and disbursements of counsel and reasonable allocated costs of
in-house counsel) of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against any Indemnified Party in connection with or
arising out of, or in connection with the preparation of a defense of, (a) any
investigation, litigation, or proceeding related to any acquisition or proposed
acquisition by the Borrower, or by any Subsidiary or Affiliate of the Borrower,
of all or any portion of the stock or substantially all the assets of any
Person, (b) any other investigation, litigation or proceeding involving the
Holdings, Century-ML or any of their respective Affiliates or (c) any failure by
Century-ML or Century ML Cable Venture to perform any of its obligations under
the Facilities Agreement or any representation by either of them under the
Facilities Agreement proving to have been untrue when made, in each case whether
or not such investigation, litigation or proceeding is brought by the Borrower
or any of its Affiliates or any of their directors, shareholders or creditors or
an Indemnified Party is otherwise a party thereto, except to the extent that
such claim, damage, liability, obligation, loss, penalty, action, judgment,
suit, cost, expense or disbursement is found in a final judgment by a court of
competent jurisdiction to have resulted from (i) the gross negligence or willful
misconduct
Credit Agreement
<PAGE>
<PAGE>
- 104 -
of such Indemnified Party or such Indemnified Party's affiliates, or (ii) if
such Indemnified Party is the Administrative Agent, a Lender, CSI or any of
their respective affiliates, the gross negligence or willful misconduct of such
Indemnified Party's officers, directors, employees, agents, advisors,
representatives and controlling persons or (iii) if such Indemnified Party is an
officer, director, employee, agent, advisor, representative or controlling
person of another Indemnified Party, the gross negligence or willful misconduct
of such other Indemnified Party.
SECTION 8.09. Confidentiality. In connection with the negotiation
and administration of this Agreement and the other Loan Documents, the Borrower
has furnished and will from time to time furnish to the Administrative Agent and
the Lenders (each, a "Recipient") written information which is identified to the
Recipient in writing when delivered as confidential (such information, other
than any such information which (i) was publicly available, or otherwise known
to the Recipient, at the time of disclosure, (ii) subsequently becomes publicly
available other than through any act or omission by the Recipient or (iii)
otherwise subsequently becomes known to the Recipient other than through a
Person whom the Recipient knows to be acting in violation of his or its
obligations to the Borrower, being hereinafter referred to as "Confidential
Information"). The Recipient will treat confidentially any Confidential
Information in accordance with such procedures as the Recipient applies
generally to information of that nature. It is understood, however, that the
foregoing will not restrict the Recipient's ability to freely exchange such
Confidential Information with (i) directors, employees, auditors, accountants or
counsel of such Recipient or its affiliates and (ii) current or prospective
assignees of and participants in the Recipient's position herein, but in the
case of prospective assignees of and participants in the Recipient's position
herein, the Recipient's ability to so exchange Confidential Information shall be
conditioned upon any such prospective assignee's or participant's entering into
an understanding as to confidentiality similar to this provision. It is further
understood that the foregoing will not prohibit the disclosure of any or all
Confidential Information if and to the extent that such disclosure may be
required (i) by a regulatory agency or otherwise in connection with an
examination of the Recipient's records by appropriate authorities, (ii) pursuant
to court order, subpoena or other legal process or in connection with any
pending or threatened litigation, (iii) pursuant to any order, regulation or
ruling applicable to such Recipient or at the express direction of any other
authorized governmental agency, (iv) as may be required or appropriate in any
report,
Credit Agreement
<PAGE>
<PAGE>
- 105 -
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Recipient or to the
Federal Reserve Board or the FDIC or similar organizations (whether in the
United States or elsewhere) or their successors, (v) otherwise as required by
law, or (vi) in order to protect its interests or its rights or remedies
hereunder or under the other Loan Documents; in the event of any required
disclosure under clause (ii), (iii), (iv) or (v) above, the Recipient agrees to
use reasonable efforts to inform the Borrower as promptly as practicable.
SECTION 8.10. Governing Law. This Agreement and the
Notes shall be governed by, and construed in accordance with, the
laws of the State of New York.
SECTION 8.11. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.12. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
SECTION 8.13. Submission to Jurisdiction; Waivers. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) The Borrower hereby agrees that service of all writs, process
and summonses in any such suit, action or proceeding brought in the
State of New York may be made upon Centennial Cellular Corp., presently
located at 50 Locust Avenue, New Canaan, CT 06840, (the "Process
Agent"), and the Borrower hereby confirms and agrees that the Process
Agent has been duly and irrevocably appointed as its agent
and true and lawful attorney-in-fact in its name, place and
Credit Agreement
<PAGE>
<PAGE>
- 106 -
stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give
any notice of any such service of process to the Borrower shall not
impair or affect the validity of such service or of any judgment based
thereon.
(c) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(d) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail return receipt requested (or any substantially similar
form of mail), postage prepaid, to the Borrower at its address set forth
in Section 8.02 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto with a copy to Leavy
Rosensweig & Hyman, 11 East 44th Street, New York, New York 10017,
Attention: David Z. Rosensweig, Esq.; and
(e) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
SECTION 8.14. Acknowledgments. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Notes and
the other Loan Documents;
(b) none of the Administrative Agents or Lenders has any
fiduciary relationship to the Borrower, and the relationship between the
Administrative Agent and Lenders, on one hand, and Borrower, on the
other hand, is solely that of debtor and creditor; and
(c) no joint venture exists among the Borrower and the
Lenders.
Credit Agreement
<PAGE>
<PAGE>
- 107 -
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER
CENTENNIAL PUERTO RICO WIRELESS
CORPORATION
By:
-----------------------------------
Title:
Credit Agreement
<PAGE>
<PAGE>
- 108 -
ADMINISTRATIVE AGENT
CITIBANK, N.A.,
as Administrative Agent
By:
-------------------------------
Title: Attorney-In-Fact
BANKS
Commitment
- ----------
$60,000,000 CITIBANK, N.A.
By:
-------------------------------
Title: Attorney-In-Fact
$20,000,000 CIBC INC.
By:
-------------------------------
Title:
$20,000,000 CREDIT LYONNAIS, NEW YORK BRANCH
By:
-------------------------------
Title:
$20,000,000 SOCIETE GENERALE, NEW YORK BRANCH
By:
-------------------------------
Title:
$10,000,000 LTCB TRUST COMPANY
By:
-------------------------------
Title:
Credit Agreement
<PAGE>
<PAGE>
Schedule I
Lender Domestic Lending Office
- ------ -----------------------
Citibank, N.A. Citibank, N.A.
399 Park Avenue
New York, New York 10043
CIBC Inc. CIBC Inc.
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Credit Lyonnais, Credit Lyonnais, New York Branch
New York Branch 1301 Avenue of the Americas
New York, New York 10019
Societe Generale, Societe Generale, New York Branch
New York Branch 1221 Avenue of the Americas
New York, New York 10020
LTCB Trust Company LTCB Trust Company
165 Broadway, 49th Floor
New York, New York 10006
Schedule I
<PAGE>
<PAGE>
EXECUTION COUNTERPART
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of April 22, 1997, between CENTENNIAL
CELLULAR CORP., a corporation duly organized and validly existing under the laws
of the State of Delaware (the "Borrower"); each of the lenders that is a
signatory hereto (individually, a "Lender" and, collectively, the "Lenders");
and CITIBANK, N.A., a national banking association ("Citibank"), as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "Administrative Agent").
The Borrower, Citibank and the Administrative Agent are parties
to a Credit Agreement dated as of September 12, 1996 (the "Credit Agreement"),
providing, subject to the terms and conditions thereof, for loans to be made by
the Lenders to the Borrower in an aggregate principal amount not exceeding
$50,000,000. The Borrower, the Lenders and the Administrative Agent wish to
amend the Credit Agreement in certain respects and accordingly hereto hereby
agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the
conditions precedent specified in Section 4 below, but effective as of the date
hereof, the Loan Documents shall be amended as follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby.
2.02. Section 1.01 of the Credit Agreement shall be amended by
amending in their entirety the following definitions to read as follows:
"'Support Documents' means, collectively, the Subsidiary
Guaranty, the Pledge Agreements, such mortgages and/or other security
agreements as may be required by Section 5.01(f)(iv) hereof and all
Uniform Commercial Code financing statements (and similar registration
instruments in other jurisdictions)
Amendment No. 1
---------------
<PAGE>
<PAGE>
-2-
required by this Agreement, the Subsidiary Guaranty, the Pledge
Agreements and such mortgages and/or other security agreements to be
filed with respect to the security interests created pursuant thereto."
"'Termination Date' means January 31, 2001 or the earlier date of
termination in whole of the Commitments pursuant to Section 2.04 or
6.01."
2.03. The first sentence of Section 2.01 of the Credit Agreement
shall be amended to read as follows:
"Each Lender severally agrees, on the terms and conditions hereinafter
set forth, to make Advances to the Borrower from time to time on any
Business Day during the period from the date hereof until the
Termination Date in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Lender's name on the
signature pages hereof or, if such Lender has entered into any
Assignment and Acceptance, set forth for such Lender in the Register
maintained by the Administrative Agent pursuant to Section 8.07(c), as
such amount may be reduced pursuant to Section 2.04 (such Lender's
'Commitment'); provided that the Borrower shall not be entitled to
receive any Advances hereunder if, after giving effect thereto and to
any concurrent payment or prepayment of other Debt, the aggregate
outstanding principal amount of Advances, and other Debt resulting from
all Debt Issuances after the date hereof, would exceed $90,000,000."
2.04. A new Section 2.01A shall be added to the Credit reading as
follows:
"SECTION 2.01A Increase in Commitments .
"(a) In the event that the Borrower wishes to increase the
aggregate amount of the Commitments, it may offer one or more Eligible
Assignees (each, an 'Additional Lender') the opportunity to participate
in all or a portion of such increase; provided that (i) aggregate amount
of the Commitments of all Additional Lenders shall be in an amount not
greater than $40,000,000 and (ii) the Borrower shall be entitled to
request an increase of the Commitments pursuant to this Section 2.01A
not more than once.
Amendment No. 1
---------------
<PAGE>
<PAGE>
-3-
"(b) Any Additional Lender which the Borrower selects to
offer participation in the increased Commitments and which elects to
become a party to this Agreement and obtain a Commitment in an amount so
offered and accepted by it pursuant to Section 2.01A shall become a
Lender for all purposes and to the same extent as if originally a party
hereto and shall be bound by and entitled to the benefits of this
Agreement, and the signature pages hereof shall be deemed to be amended
to add the name and Commitment of such Additional Lender, provided that
amount of the Commitment of each Additional Lender shall be in an
integral multiple of $5,000,000 that is greater than or equal to
$10,000,000.
"(c) If any Additional Lender becomes a Lender pursuant to
Section 2.01A(b) hereof, on the effective date thereof (the
'Re-Allocation Date'), each Person that is a Lender before giving effect
thereto (an 'Existing Lender') shall assign to such Additional Lender,
by means of the execution and delivery by such Existing Lender and such
Additional Lender of an Assignment and Acceptance, of an interest in the
principal of and accrued interest on each of such Existing Lender's
Advances in an amount such that, after giving effect thereto, the
aggregate principal of and accrued interest on all of the Advances of
all of the Lenders shall be held pro rata according the respective
amounts of their Commitments. Concurrent with such assignment (and as a
condition precedent thereto), each Existing Lender shall receive in
consideration for such assignment cash in an amount equal to the
aggregate amount of the principal of and accrued interest on the
Advances so assigned by it.
"(d) Notwithstanding the foregoing, no increase in the
aggregate Commitments hereunder pursuant to this Section 2.01A shall be
effective unless:
"(i) each Additional Lender prior to becoming a
Lender hereunder shall have entered into an agreement in form and
substance satisfactory to the Borrower and the Administrative
Agent pursuant to which such Additional Lender undertakes a
Commitment, and from and after the Re-Allocation Date, such
Additional Lender shall be a "Lender" for all purposes of this
Agreement;
"(ii) the Borrower shall have given the
Administrative Agent notice of such increase at least
Amendment No. 1
---------------
<PAGE>
<PAGE>
-4-
five Business Days prior to the Re-Allocation Date;
"(iii) The Borrower shall have delivered to the
Administrative Agent for each Additional Lender a new promissory
note of the Borrower in substantially the form of Exhibit A to
the Credit Agreement, dated the date of the Notes delivered
pursuant to Section 3.01(a), payable to the order of the
Additional Lender in a principal amount equal to its Commitment
and otherwise duly completed, and each of such promissory notes
(the 'New Notes') delivered to the Additional Lenders shall
constitute a 'Note' hereunder.
"(iv) The Administrative Agent shall have received
the following documents, each of which shall be satisfactory to
the Administrative Agent in form and substance:
"(A) Certified copies of the charter and by-laws
(or equivalent documents) of the Borrower (or, in the
alternative, a certification to the effect that none of
such documents has been modified since delivery thereof on
the Closing Date) and of all corporate authority for the
Borrower (including, without limitation, board of director
resolutions and evidence of the incumbency of officers for
the Borrower) with respect to such increase and the
execution, delivery and performance of the New Notes (and
the Administrative Agent and each Lender may conclusively
rely on such certificate until it receives notice in
writing from the Borrower to the contrary).
"(B) An opinion of Leavy Rosensweig & Hyman,
counsel to the Borrower, reasonably satisfactory to the
Additional Lender and the Administrative Agent (and the
Borrower hereby instructs such counsel to deliver such
opinion to the Lenders and the Administrative Agent).
"(C) Such other documents as the Administrative
Agent or the Additional Lender or special New York counsel
to the Administrative Agent may reasonably request."
Amendment No. 1
---------------
<PAGE>
<PAGE>
-5-
2.05. Section 2.09(b)(i) of the Credit Agreement shall be amended
to read as follows:
"(i) Debt and Equity Issuance. The Borrower shall, on each date
on which the Borrower or any Subsidiary (other than a Guarantor)
receives any Net Cash Proceeds from any Debt Issuance (other than any
Excluded Debt Issuance (as defined below)) or Equity Issuance, prepay
the Advances in an aggregate principal amount equal to such Net Cash
Proceeds (or, if less, the aggregate unpaid principal amount of all
Advances), together with accrued interest to the date of such prepayment
on the principal amount prepaid and all amounts then owing under Section
8.04(b) in respect of such prepayment. For purposes of the preceding
sentence, 'Excluded Debt Issuance' means a Debt Issuance (other than a
Borrowing) the terms of which are not materially more restrictive or
burdensome to the Borrower and its Subsidiaries than the terms and
conditions hereof if (and to the extent that), after giving effect
thereto, the aggregate principal amount of all outstanding Debt
resulting from Debt Issuances after the date hereof plus an amount (not
less than zero) equal to (A) the aggregate principal amount of all
Advances minus (B) $50,000,000 is less than $40,000,000."
2.06. Section 5.01(f) of the Credit Agreement shall be amended to
read as follows:
"(f) Additional Post-Closing Covenants.
(i) In the event that the Borrower or any Subsidiary uses the
proceeds of any Advances to purchase any business or any equity interest
in any business, then not later than 5 Business Days after the date of
such acquisition the Borrower will (A) (unless the Borrower or such
Subsidiary purchases a minority equity interest in such business (a
'Minority Equity Interest')) cause all FCC Licenses, if any, so
purchased to be held in the name of a special purpose, direct, Wholly
Owned Subsidiary of the New Holding Company (as defined below)
satisfying the conditions of this paragraph (f) (each such Subsidiary, a
'License Subsidiary'), (B) (unless the Borrower or such Subsidiary
purchases a Minority Equity Interest) cause all assets and contract
rights, other than FCC Licenses, so purchased to be held in the name of
a special purpose, direct, Wholly Owned Subsidiary of the New Holding
Company (each such Subsidiary, an 'Operating Subsidiary'), (C) cause
each such
Amendment No. 1
---------------
<PAGE>
<PAGE>
-6-
License Subsidiary and the related Operating Subsidiary to execute and
deliver a license management agreement in form and substance
satisfactory to the Majority Lenders pursuant to which such Operating
Subsidiary will agree to manage, on behalf of such License Subsidiary,
the FCC Licenses held by such License Subsidiary, (D) cause all of the
capital stock of each License Subsidiary and each Operating Subsidiary
and all of the Minority Equity Interests, if any, to be owned by a
special purpose, direct Wholly Owned Subsidiary of the Borrower (the
'New Holding Company' and, together with the License Subsidiaries and
the Operating Subsidiaries, the 'New Companies'), (E) cause each New
Company to become a Guarantor by causing such New Company to execute and
deliver an instrument substantially in the form of Annex 1 to the
Subsidiary Guaranty and (F) cause the New Holding Company to grant to
the Administrative Agent for the benefit of the Lenders to secure the
payment of such the New Holding Company's obligations under the
Subsidiary Guaranty a perfected pledge, subject to no other Lien, of the
capital stock of or other equity interests in such License Subsidiary
and such Operating Company, and of all of the Minority Equity Interests,
if any, under a Pledge Agreement.
(ii) The Borrower will not permit any License Subsidiary to become
directly or indirectly obligated in respect of any Debt (other than Debt
under the Support Documents, or to engage in any line or lines of
business activity or to hold any property other than (i) FCC Licenses
and (ii) other property not having an aggregate fair market value in
excess of $10,000 at any one time.
(iii) The Borrower will not permit any Operating Subsidiary to become
directly or indirectly obligated in respect of any Debt other than (x)
Debt under the Support Documents, (y) Debt owing to the New Holding
Company and (z) other Debt not exceeding $500,000 in aggregate principal
amount at any one time outstanding.
(iv) Not later than 30 days after following any request by the
Administrative Agent, the Borrower shall furnish to the Administrative
Agent a list in reasonable detail of all equipment, fixed assets, real
property, leases, contracts and other property and rights owned or held
by each Operating Subsidiary and, promptly (and in no event more than 10
Business Days) after the Administrative Agent shall request
Amendment No. 1
---------------
<PAGE>
<PAGE>
-7-
the same, any Operating Subsidiary to execute and deliver, and to cause
each of its Subsidiaries to execute and deliver, to the Administrative
Agent such mortgages, assignments, security agreements and other
instruments from time to time in such form as shall be requested by the
Administrative Agent in order to create Liens on such of the property
and rights of such Operating Subsidiary as the Administrative Agent may
specify.
(v) In connection with any of the actions required by the
foregoing provisions of this Section 5.01(f), the Borrower shall cause
to be delivered to the Administrative Agent such corporate documents,
legal opinions, governmental and third party consents and other
supporting documentation as the Administrative Agent may reasonably
request.
(vi) The Borrower will cause all New Companies to be
'Unrestricted Subsidiaries' under and as defined in the Senior Notes
Indenture at all times."
2.07. The references in the Subsidiary Guaranty (including Annex
1 thereto) and in Exhibit D-1 to the Credit Agreement (including Annex 1
thereto) to "$50,000,000" shall be amended to read "$90,000,000".
Section 3. Representations and Warranties. The Borrower
represents and warrants to the Lenders that the representations and warranties
set forth in Section 4 of the Credit Agreement are true and complete on the date
hereof as if made on and as of the date hereof and as if each reference in said
Section 4 to "this Agreement" included reference to this Amendment No. 1.
Section 4. Conditions Precedent. As provided in Section 2 above
and Section 5 below, the amendments to the Credit Agreement set forth in said
Section 2 shall become effective, as of the date hereof, and the Administrative
Agent shall take the actions required by Section 5 hereof, upon the satisfaction
of the following conditions precedent:
4.01. Execution by All Parties. This Amendment No. 1 shall have
been executed and delivered by each of the parties hereto, and consented to by
each of the Guarantors.
4.02. Payment of Fees. The Borrower shall have paid to Citibank
such fees as it shall have agreed to pay to Citibank in
Amendment No. 1
---------------
<PAGE>
<PAGE>
-8-
connection with the amendments to the Credit Agreement contemplated hereby and
shall have paid all commitment fees under the Credit Agreement that have accrued
and remain unpaid.
Section 5. Release of Certain Guaranties and Collateral of the
Puerto Rico Companies. Subject to the satisfaction of the conditions precedent
specified in Section 4 above, the Administrative Agent shall release the Puerto
Rico Companies from their obligations under the Subsidiary Guaranty and shall
release any and all capital stock issued by the Puerto Rico Companies pledged to
it to secure the obligations of the Borrower hereunder or to secure the
obligations of any Puerto Rico Company under the Subsidiary Guaranty. In
connection with the foregoing, the Administrative Agent hereby agrees, subject
to such conditions precedent, to (i) cause to be assigned, transferred or
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining share certificates evidencing such capital stock held
by the Administrative Agent to or on the order of the respective registered
owners thereof and (ii) execute and deliver to the Borrower such UCC-3
termination statements and other documents as shall be reasonably requested by
the Borrower, not resulting in any direct or contingent liability to the
Administrative Agent, necessary to terminate of record such pledges, provided
that, the Administrative Agent receives assurances satisfactory to it of its
reimbursement by the Borrwer of its costs and expenses incurred in connection
therewith.
Section 6. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
Amendment No. 1
---------------
<PAGE>
<PAGE>
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
CENTENNIAL CELLULAR CORP.
By /s/ SCOTT N. SCHNEIDER
-------------------------
Title: CFO
CENTENNIAL BENTON HARBOR CELLULAR CORP.
CENTENNIAL BENTON HARBOR HOLDING CORP.
CENTENNIAL CELLULAR TELEPHONE COMPANY OF
COCONINO
CENTENNIAL CELLULAR TELEPHONE COMPANY OF DEL
NORTE
CENTENNIAL CELLULAR TELEPHONE COMPANY OF
LAWRENCE
CENTENNIAL CELLULAR TELEPHONE COMPANY OF MODOC
CENTENNIAL CELLULAR TELEPHONE COMPANY OF
SACRAMENTO VALLEY
CENTENNIAL CELLULAR TELEPHONE COMPANY OF SAN
FRANCISCO
CENTENNIAL CLAIRBORNE CELLULAR CORP.
CENTENNIAL LAKE CHARLES CELLULAR CORP.
CENTENNIAL PUERTO RICO WIRELESS CORPORATION
CENTENNIAL WIRELESS PCS OPERATIONS CORP.
CENTENNIAL WIRELESS PCS LICENSE CORP.
LAMBDA COMMUNICATIONS, INCORPORATED
(INCORPORADO)
LAMBDA OPERATIONS CORP.
LAMBDA PCS CORP.
By /s/ SCOTT N. SCHNEIDER
-------------------------
Title: CFO
Amendment No. 1
---------------
<PAGE>
<PAGE>
-10-
CITIBANK, N.A., individually and as
Administrative Agent
By /s/ MARY S. THOMAS
-------------------------
Title: Attorney-in-Fact
Amendment No. 1
---------------
<PAGE>
<PAGE>
EXHIBIT 10.18
EXECUTION COPY
FACILITIES AGREEMENT
THIS FACILITIES AGREEMENT is made as of this 2nd day of January, 1995,
by and between Century ML Cable Venture, a New York joint venture (the
"Venture"), and Century-ML Cable Corporation, a Delaware corporation ("Century
ML Cable" and, collectively with the Venture, "Owners"), both having a place of
business at 50 Locust Avenue, New Canaan, CT 06840, and Centennial Puerto Rico
Wireless Corp., a Delaware corporation having a place of business at 1305 Campus
Parkway, Neptune, NJ 07753 ("Wireless").
RECITALS
WHEREAS:
A. Century Communications Corp., a Texas corporation ("Century"),
and ML Media Partners, L.P., a Delaware limited partnership ("ML" and,
collectively with Century, the "Joint Venturers"), each owns a fifty percent
(50%) interest in the Venture and the Venture is the record and beneficial owner
and holder of one hundred percent (100%) of the issued and outstanding shares of
Century ML Cable;
B. Century ML Cable owns and operates the cable television system
serving the San Juan, Puerto Rico community and the Venture owns and operates
the cable television system serving the Levittown, Puerto Rico community
<PAGE>
<PAGE>
(the systems being referred to as the "Cable Systems" and individually as a
"Cable System"), each pursuant to governmental authority, including, without
limitation, a cable television franchise;
C. Owners are in the process of constructing a fiber optic cable
television facility and network (the "Fiber Network") within the geographic area
described in Annex A hereto (the "Service Area") to enhance the capacity and
improve the signal quality of the Cable Systems;
D. Wireless through direct and indirect subsidiaries contemplates
developing a telecommunications and personal communications service ("PCS")
business and a competitive access provider business, and entering into the
business of providing local telephone exchange service (all such businesses
being referred to as the "Telecom Businesses" and individually a "Telecom
Business") and other "telecommunications services" as described in Annex C, in
the Service Area;
E. In connection with the operation of such Telecom Businesses
and each of them, Wireless desires to lease from and share capacity over the
Fiber Network of Owner, and in connection therewith (i) share in the costs of
constructing the Fiber Network based on the percentage of the number of fibers
of such Network used by or reserved for Wireless (which shall be deemed to
include fibers used by direct and indirect subsidiaries of Wireless) compared to
the percentage of fibers of such Network utilized by Owner and all third
parties; (ii) and pay the costs of operating the Telecom Businesses (including
but not limited to a proportional share of
-2-
<PAGE>
<PAGE>
certain of the Cable Systems' expenses) all under the terms and conditions set
forth in this Agreement, and Owner is willing to lease and share such facilities
to and with Wireless under such terms and conditions; and
F. Owners and Wireless believe that it is in their mutual best
interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained in this Agreement, the parties agree as
follows:
1. Arrangements.
Owner agrees to make space available to Wireless in Owner's Fiber
Network in the Service Area, in Owner's trenches, conduits and other facilities,
both aerial and underground, for the installation by Owner of fibers, cable and
associated equipment to be used by Wireless in connection with one or more of
the Telecom Businesses, and to permit Wireless to connect same to, and to
co-locate same at Owner's headend and/or other appropriate location of Owner,
and upon such installation to lease to Wireless such fibers, cable and
associated equipment for the Term, as hereafter defined. The number of fibers
and cable used by or provided for or to Wireless, compared to all cable and
fibers installed in Owners' aerial and underground trenches, conduits and
facilities in co-located areas shall be known as the "Use Percentage". From
time-to-time during the Term, Wireless may request that Owners' lease to and
grant Wireless
-3-
<PAGE>
<PAGE>
the use of and the right to install additional capacity, cable and fibers on
Owners' Fiber Network, and Owner shall not unreasonably withhold its consent to
such lease and use, it being agreed that if, in the exercise of their
discretion, Owners conclude that such additional capacity is necessary or
desirable in the operation of the Cable Systems it shall not be required to
grant such additional capacity requested by Wireless. As additional capacity and
fibers are leased and made available to Wireless the "Use Percentage" shall be
adjusted from time-to-time to reflect the number of fibers and cables used by or
provided for or to Wireless compared to the aggregate number of fibers and cable
installed in the Fiber Network, and the applicable "Use Percentage" shall be
such percentage, as so adjusted. The fibers and cables used by and provided to
Wireless are referred to as the "Wireless Fibers."
2. Construction and Maintenance Payments:
(a) Wireless shall make the following payments to Owners: (i) The Use
Percentage multiplied by the Costs of Construction of the Fiber Network, as such
term is defined in Annex B, to be paid, as the construction proceeds on the
twentieth day of each calendar month (the "Payment Month") during the course of
construction with each payment relating to and covering the costs of
construction incurred during the immediately preceding calendar month, provided
that on or before the fifth day of the particular Payment Month Owners have
provided Wireless with written documentation of such costs, including without
limitation appropriate invoices from vendors and contractors. In the event Owner
and Wireless disagree as to the amount of any of the Costs of Construction and
the appropriate elements to be included in its determination
-4-
<PAGE>
<PAGE>
and/or the charges presented by Owner, such disagreement(s) shall be resolved by
arbitration as provided for in Section 21(j);
(ii) Any additional franchise fees imposed upon or collected from
Owners by any franchising authority as a direct or indirect result of Wireless'
rights under this Agreement, without duplication of the payments required
pursuant to other portions of this subsection (a); and
(iii) The Use Percentage of pole attachment fees and rentals,
conduit fees and other out-of-pocket rights-of-way expenses (including but not
limited to franchise fees) incurred by Owners in connection with the Fiber
Network and in addition all surcharges or increases in pole attachment fees and
rentals, conduit fees and other out-of-pocket rights-of-way expenses
attributable or charged as a result of the installation of the Wireless Fibers.
Payment shall be made within ten days following submission of Owners' invoice
for the aforesaid charges, fees and expenses together with documentation of
same. Any disputes with reference to same shall be resolved by arbitration as
provided in Section 21(j).
(b) In addition to the payments set forth in subsection (a) above,
Wireless shall pay all direct and indirect costs of operating the Telecom
Businesses.
-5-
<PAGE>
<PAGE>
3. Term.
(a) This Agreement shall commence on the date hereof and terminate on
the earliest to occur of (i) the date this Agreement terminates pursuant to
Section 15, (ii) the date which is 25 years from the date of completion of
construction of the Fiber Network which, for the purposes of this Section, shall
be no later than January 31, 1997, and the availability of the Wireless Fibers
for use in any of the Telecom Businesses, and (iii) the date that the franchise
for either of the Cable Systems is terminated prior to its respective Expiration
Date or on the Expiration Date of such franchise, provided that if such
franchise is renewed or extended or replaced from time-to-time, the Expiration
Date of such renewed or extended period or replacement franchise shall be the
applicable date for this sub-section (iii).
(b) The sale or transfer from time to time, of one or both of the Cable
Systems, or the transfer of control thereof, or the transfer of the accompanying
cable franchise relating to one or both of the Cable Systems or the replacement
of such franchise with one in the name of the transferee of the ownership or
control of one or both of the Cable Systems, shall not work a termination of
this Agreement.
4. Use of Facilities.
(a) Wireless shall not use the Wireless Fibers in violation of
any law, rule, regulation or order of any governmental authority having
jurisdiction, or of any franchise, license, agreement or certificate relating to
the Cable Systems of which Wireless has been notified in writing, unless the
validity thereof is being contested in good faith and by appropriate proceedings
(but only so long as such proceedings and
-6-
<PAGE>
<PAGE>
Wireless' use of the Wireless Fibers do not, in Owners' reasonable judgment,
involve any risk of forfeiture of the Cable Systems, or either of them, or of
Owners' cable television franchises or any of them, or invalidate or conflict
with any insurance policies maintained by Owners covering the Fiber Network, the
material terms of which franchises and insurance policies, Owners have notified
Wireless in writing. Wireless shall not use or authorize another to use the
Wireless Fibers or any of Wireless' facilities to deliver, use, carry or
transmit video signals in competition with the Cable Systems or either of them.
Wireless may use the Wireless Fibers only for the Telecom Business and the
transmission and delivery of voice and data signals and telecommunications
services, as the term is defined in Annex C, and for no other purpose. Wireless
shall have exclusive control over its permitted voice and data and
telecommunications services, including, without limitation, customer premises,
sales and marketing, and billing and collection, and shall have reasonable
ingress and egress to and from the Cable Systems and Owners' facilities and
Fiber Network for the purposes of conducting its business operations and
transmission of voice and data and telecommunication services and maintaining
the Wireless Fibers.
5. Non-Exclusivity,. Nothing in this Agreement shall be construed (i) to
require Owners to be Wireless' exclusive provider of, or contractor with respect
to fiber optic facilities in the Service Area or to limit in any way Wireless'
right in its own name to apply for and obtain municipal franchises,
authorizations and permits, to construct, maintain and own fiber optic
facilities, and to apply for and obtain pole attachment agreements, conduit
licenses or other rights-of-way agreements from other rights-of-
-7-
<PAGE>
<PAGE>
way providers or (ii) to prohibit or limit Owners from granting to others the
right to use any of Owners' facilities in connection with the transmission of
voice and data and business as similar or dissimilar to the Telecom Businesses,
subject of course to Wireless' rights as expressly set forth in this Agreement.
6. Use of Wireless' Fibers and Capacity.
(a) In the event Owners desire to utilize Wireless Fibers in connection
with the transmissions by Owners, Owners and Wireless shall negotiate in good
faith the terms of such use, it being understood that there shall be no
obligation to reach agreement by either Wireless or Owners.
(b) If Wireless obtains operating authority, rights-of-way, building
entrance facilities, pole attachment agreements or conduit rights in areas
within the Service Area in which it currently does not have same, or constructs
and owns fiber optic facilities in the Service Area and determines, in its sole
discretion, that it has available capacity in such facilities, it will, upon
request of Owners, negotiate in good faith with Owners for the lease or use of
capacity to Owners for the provision of its services and the terms and
conditions of such lease or use, it being understood that neither party has an
obligation to conclude or enter into any such lease or agreement for such use.
Provided however, that provisions of such lease or use shall be as favorable to
Owners with respect to costs and other provisions, as any lease or other
agreement theretofore or thereafter entered into by Wireless with others with
respect to such facilities and any lease or use agreement with Owners shall be
modified from time-to-time to reflect any such favorable provisions.
-8-
<PAGE>
<PAGE>
7. Title.
All right, title and interest in all the Fiber Network constructed by
Owners including without limitation, the Wireless Fibers, shall at all times
remain exclusively with Owners. Except as expressly provided in Sections 4 and
17 and elsewhere in this Agreement, Owners shall retain full operating control
and shall continue to hold and be solely responsible for all operating authority
with regard to the Cable Systems and, subject to the rights of Wireless
hereunder, the Fiber Network. Subject to the foregoing, Wireless shall hold and
be responsible for all operating authority for its facilities and for the
provision of voice and data and telecommunications services by it, including,
without limitation, its use of the Wireless Fibers.
8. Liens and Encumbrances.
Neither party, directly or indirectly, shall create or impose any lien
on the property of the other, or on the rights or title relating thereto, or any
interest therein, or in this Agreement. Each party will promptly, at its own
expense, take such action as may be necessary to duly discharge any lien created
by it on the property of the other.
9. Representations and Covenants Regarding Authorizations.
(a) Owners and Wireless each represent(s), warrant(s) and covenant(s) to
the other that it (they) has (have) full authority and power to enter into and
carry out the provisions of this Agreement as same relate to it (or them) and
that there is no litigation or proceeding pending, or to its (or their)
knowledge, threatened, to which it
-9-
<PAGE>
<PAGE>
is (or they are) or will be named a party or to which any of its (or their)
property will be subject which could have a material adverse effect on its (or
their) ability to perform its obligations under this Agreement.
(b) Each party shall perform its or their respective rights and
obligations hereunder in accordance with the governmental authorizations
obtained by it or them and all applicable laws, rules and regulations imposed by
any governmental authority.
10. Relocation of the Facilities.
Owners may elect or be required to relocate the Fiber Network and the
Wireless Fibers. Wireless shall pay its share, based on the Use Percentage, of
the direct, out-of-pocket costs of such relocation to the extent such costs
cannot be recovered from third parties. Owners will use commercially reasonable
efforts to effect any relocation in a manner that will not cause any material
interruption to Wireless' use of the Wireless Fibers. Owners shall use
commercially reasonable efforts to give Wireless prior notice of any relocation
or of any governmental proceedings which might result in a relocation, subject
to notice that Owners receives from such governmental authority.
11. Condemnation and Casualty.
(a) Condemnation. If all or any material portion of the Wireless Fibers
are taken for any public or quasi-public purpose by any lawful power or
authority by the exercise of the right of condemnation or eminent domain as part
of condemnation of the Cable Systems, or either of them, and/or the Fiber
Network, either Owners or Wireless shall be entitled to terminate this Agreement
with respect to such Wireless
-10-
<PAGE>
<PAGE>
Fibers. In such event, Owners shall be entitled to 100% of all awards and
compensation, except that Wireless shall be entitled to the portion of the award
allocable to the Wireless Fibers which are taken. Any dispute with reference to
such allocable amount shall be resolved by arbitration as provided for in
Section 21(j).
(b) Casualty.
If all or any material portion of the Wireless Fibers are made
inoperable and beyond feasible repair due to a casualty or other force majeure
event (as that term is defined in Section 16), Wireless shall be entitled to
terminate this Agreement with respect to the Wireless Fibers affected by such
casualty or other force majeure event and the Use Percentage for prospective
purposes shall be adjusted appropriately.
12. Indemnification.
(a) Indemnification by Wireless. Wireless will indemnify and hold
harmless Owners, their respective affiliates (other than Wireless), and all
officers, directors, employees, stockholders, partners and agents of Owners and
their respective affiliates (other than Wireless) from and against any and all
claims, demands, costs, damages, losses, liabilities, joint and/or several,
expenses of any nature (including reasonable attorneys', accountants' and
experts' fees and disbursements), judgments, fines, settlements and other
amounts (collectively, "Damages") arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative
(collectively "Claims") relating to or arising out of:
-11-
<PAGE>
<PAGE>
(i) The installation, maintenance or operation of Wireless'
connections Wireless Fibers or the conduct or management of any of
the Telecom Businesses except to the extent such Damages are caused
by negligence of Owner or its agents; (ii) Any breach by Wireless of
any obligation under this Agreement; (iii) Any failure of any
representation or warranty made by Wireless herein to be true in any
material respect as of the date made or deemed made; (iv) Any claim
by any customer of Wireless relating to the provision by Wireless of
Telecom Business and other telecommunications services to such
customer over the Wireless Fibers; and (v) Any claim of any third
party resulting from the negligence or wilful misconduct (in each
instance, of omission or commission) of Wireless.
(b) Owners will similarly indemnify and hold harmless Wireless, its
affiliates (other than Owners), and all officers, directors, employees,
stockholders, partners and agents of Wireless and its affiliates (other than
Owners) from and against any and all Damages arising from any and all Claims
relating to or arising out of:
(i) The installation, maintenance or operation by Owners of the
Cable Systems and the Fiber Network and the conduct or management
Owners' business with regard to the Cable Systems and the Fiber Network,
except to the extent such Damages are caused by negligence of Wireless
or its agents; (ii) Any breach by Owners of any obligation or covenant
under this Agreement; (iii) Any failure of any representation or
warranty made by Owners herein to be true in any material respect as of
the date made or deemed made;
-12-
<PAGE>
<PAGE>
(iv) Any Claim by any customer of Owners relating to Owners' provision
of services (other than services provided by Wireless) over the Cable
Systems and the Fiber Network; and (v) Any Claim of any third party
resulting from the negligence or wilful misconduct (in each instance, of
omission or commission) of Owners.
(c) Procedure. No claims for indemnification shall be made by either
party against the other unless the aggregate amount of such Claims, together
with any other indemnifiable claims of such party, exceeds the amount of
$100,000, with the understanding that once said level of Claims is reached,
indemnification shall be available from the first dollar of Claims. Any
reasonable expenses incurred by any indemnified person pursuant to this Section
12 in defending any civil or criminal action, suit or proceeding (or the threat
thereof), other than a claim, action, suit or proceeding brought by the
indemnifying party, shall be borne and paid by the indemnifying party in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the indemnified person to repay to the
indemnifying party the amount of such expenses if it shall ultimately be
determined that such person is not entitled to the indemnification provided for
under this Section 12. Any person asserting a right to indemnification under
this Section 12 shall so notify the indemnifying party in writing. If the facts
giving rise to such indemnification involve any actual or threatened claim or
demand by or against a third party, the indemnifying party shall be entitled to
control the defense or prosecution of such claim or demand in the name of the
indemnified person, if the indemnifying party notifies the indemnified person in
writing of its intention to do so
-13-
<PAGE>
<PAGE>
within 20 days of the receipt of such notice by the indemnified person. The
indemnified person shall have the right, however, to participate in such
proceeding through counsel of its own choosing, which participation shall be at
its sole expense. Whether or not the indemnifying party chooses to defend or
prosecute such claim, each indemnified person, to the extent requested by the
indemnifying party, at the indemnifying party's expense, shall cooperate in the
prosecution or defense of such claim and shall furnish such records, information
and testimony and attend such conferences, discovery proceedings, hearings,
trials and appeals as may reasonably be requested in connection therewith.
(d) Survival.
The provisions of this Section 12 and of Section 9 shall survive
the termination of this Agreement.
13. Interruption of Service.
In the event of any interruption of use by Wireless of any portion of
the Wireless Fibers through no fault of Wireless, unless such interruption is
caused by Owners' wilful misconduct or gross negligence, Owners' sole obligation
shall be to restore the Cable Systems and the Fiber Network so that all of the
Wireless Fibers are available for use by Wireless. The remedy provided in this
Section shall be Wireless' sole and exclusive remedy for outages or
interruptions of service, other than those caused by Owners' wilful misconduct
or gross negligence, subject to the termination provisions in Sections 11 and
15. For purposes of this Agreement interruption of use shall be defined as any
interruption for more than one consecutive hour.
-14-
<PAGE>
<PAGE>
14. Events of Default.
Each of the following events shall constitute an event of default
(whether any such event shall be voluntary or involuntary or occur by operation
of law or pursuant to any judgment, decree, order, rule or regulation of any
court or administrative or governmental body):
(a) the failure of Wireless to make any payment pursuant to Section 2
hereof or any other payment due hereunder, in each case within ten days after
Wireless' receipt of notice from Owners of Wireless' failure to make such
payment when due, provided that in the event the right of Owners to all or a
portion of such payment is being contested in good faith by Wireless, Wireless'
failure to make payment within said ten-day period shall only obtain with
reference to the portion of such payment which is not being so contested and
there shall not be an event of default with respect to the portion of such
payment that is being contested until same remains unpaid more than ten days
following a final court order holding that such payment was proper;
(b) the failure of either party to perform or observe any material
agreement to be performed or observed by it hereunder, and such failure shall
continue unremedied for a period of 30 days after written notice is given to the
defaulting party provided such failure can be remedied within said 30-day
period, and if not so capable of being so remedied, that within said 30-day
period the applicable party commences to remedy such failure and thereafter
diligently pursues same;
(c) a court or governmental authority of competent jurisdiction shall
enter an order appointing, without consent by either party, a custodian,
receiver, trustee,
-15-
<PAGE>
<PAGE>
intervenor, or other officer with similar powers with respect to it or with
respect to any substantial part of its property, or shall enter any order
constituting an order for relief or approving a petition in bankruptcy or
insolvency under the law of any jurisdiction, or ordering the dissolution,
winding up, or liquidation of either party, or if any such petition shall be
filed against either party and shall not be dismissed within 60 days thereafter,
or an order shall have been issued granting either party any suspension of
payments under applicable law and any such order is not dismissed within 60 days
thereafter; or
(d) either party (or its permitted assignee) shall cease to have any of
the material franchises, licenses, agreements, certificates, concessions,
permits, rights or privileges required for the conduct of its business and
operations which loss is not remedied by the obtaining of a replacement
franchise, license, agreement, certificate, concession, permit, right or
privilege within 90 days of the loss thereof, if such loss would have a material
adverse effect upon the ability of the party suffering such loss to perform its
obligations hereunder.
15. Remedies.
Upon the occurrence and during the continuance of any event of default,
the non-defaulting party, at its option, may declare this Agreement to be in
default, and in addition to any other remedies provided herein or otherwise, may
terminate this Agreement.
-16-
<PAGE>
<PAGE>
16. Force Majeure Events.
Neither party shall be liable to the other for any failure of
performance under this Agreement due to causes beyond its control, including but
not limited to: acts of God, fire, flood or other catastrophes; any law, order,
regulation, direction, action or request of the United States Government, or of
any other government, including state and local and Commonwealth governments
having or claiming jurisdiction over such party, or of any department, agency,
commission, bureau, corporation or other instrumentality of any one or more of
these federal, state or local or commonwealth governments, or of any civil or
military authority; national emergencies; unavailability of materials or
rights-of-way; insurrections; riots; wars; or strikes, lock-outs, work stoppages
or other labor difficulties (collectively, "force majeure events").
17. Orderly Termination.
Upon termination of this Agreement in whole or with respect to the use
by Wireless of the Fiber Network or with respect to the Wireless Fibers, Owner
and Wireless each agrees to cooperate in good faith to effect an orderly
transition of any voice, data, or telecommunications services provided over the
Fiber Network by Wireless. Without limitation, Owner hereby agrees that,
notwithstanding such termination, to the extent permitted by applicable law and
regulation, it will continue to make available to Wireless any portions of the
Fiber Network which Wireless reasonably requires to fulfill its obligations
under existing customer agreements for a period up to three months after such
termination in the case of a termination by reason of Wireless' default, or 12
months after such termination in all other cases; provided,
-17-
<PAGE>
<PAGE>
however, if such termination is occasioned by the termination of the cable
television franchise applicable to either of the Cable Systems, Owner shall be
under no obligation to make any portion of the Fiber Network available to
Wireless beyond the time frame permitted by such terminated franchise.
Notwithstanding the foregoing, the agreement shall be terminable immediately if
Wireless is in default of payment under Section 2, subject to the provisions of
Section 14(a).
18. Obligations of Wireless.
In addition to the obligations of Wireless set forth elsewhere in this
Agreement and subject to limitations expressly set forth in this Agreement,
Wireless shall:
(a) have full and complete responsibility and liability for the signals
distributed over the Wireless Fibers;
(b) have full and complete responsibility and liability for the
purchase, installation, construction and maintenance of the terminals and
peripheral equipment connected to the fiber optic components of the Cable System
leased or used by Wireless;
(c) employ its own employees, agents and/or independent contractors in
the handling, storage, retrieval, processing, transmitting, and/or receiving of
any electronic signals distributed over the Wireless Fibers;
(d) provide all commercial or other power supplies for the operation of
the Wireless Fibers, terminals and peripheral equipment or facilities used with
or connected to the Cable Systems and located on Wireless' or its customer's,
premises;
-18-
<PAGE>
<PAGE>
(e) have full and complete control, responsibility and liability for
maintaining any operating authority from any federal, state or local
governmental body or agency that relates to the activities of Wireless under
this Agreement, including Wireless' lease or use of capacity on the Fiber
Network; and
(f) maintain all books and records relating to the Wireless Fibers.
19. Interest.
All payments due from either party to the other under the terms of this
Agreement which are not paid when due shall bear interest from the due date
until paid at an interest rate equal to the lesser of 1 1/2% per month or the
maximum lawful rate permitted by law.
20. Assignment. Neither party shall assign, transfer, delegate or in any
other manner dispose of, any of its rights, privileges or obligations under this
Agreement except (i) in the case of Owners, in connection with a transfer of one
or both of the Cable Systems or the control thereof, to Century or to a
subsidiary or Affiliate of Century, or to another Affiliate of Owners; or (ii)
in connection with transactions pursuant to which either the Venture or Century
ML Cable sells all or substantially all of its business or assets or control of
either of such entities is sold or transferred and in which the acquiror in any
of said transactions agrees in writing to be bound by the terms of this
Agreement; and (iii) in the case of Wireless, in connection with an assignment
of any of its rights, privileges or obligations or delegation of its obligations
in connection with a sale of all or substantially all of its business or assets
-19-
<PAGE>
<PAGE>
to an Affiliate and/or in connection with transactions pursuant to which
Wireless sells all or substantially all of its business or assets or control of
Wireless is sold or transferred and in which the acquiror in any of said
transactions agrees to be bound by the terms of this Agreement. "Affiliate" of a
person or entity shall mean any other person or entity directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person or entity. For the purpose of the definition of Affiliate, "control"
when used with respect to any person or entity, means the possession of the
power to direct or cause the direction of the management or policies of such
person or entity, directly or indirectly, whether through the ownership of
voting securities, by agreement or otherwise; and the terms "controlled by" and
"under common control with" have meanings correlative to the foregoing. The
Assignor shall remain liable hereunder despite its assignment.
21. Miscellaneous.
(a) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument, and in pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one complete set of
such counterparts.
(b) Captions; Gender. Article and section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. Whenever used herein the singular
number shall include the plural, the plural shall include the singular, and the
use of any gender shall include all genders.
-20-
<PAGE>
<PAGE>
(c) Governing Law and Binding Effect. This Agreement shall be governed
by and construed and enforced in accordance with the law and decisions of the
State of New York applicable to contracts made and to be performed entirely
therein, and without any reference to any rules of conflicts of laws. This
Agreement shall bind and inure to the benefit of each of the parties and their
successors and permitted assigns.
(d) Waivers and Amendments. This Agreement may not be amended nor shall
any waiver, change, modification, consent or discharge be effected, except by an
instrument in writing adopted, in the case of an amendment, by each party and,
in the case of a waiver, consent or discharge, by the party against whom
enforcement of such instrument is sought. Any consent by either party to, or
waiver of, a breach by the other party shall not constitute a waiver or consent
to any subsequent or different breach. If either party shall fail to enforce a
breach of this Agreement by the other party, such failure to enforce shall not
be considered a consent to or a waiver of said breach or any subsequent breach
for any purpose whatsoever.
(e) Relationship Not a Partnership or an Agency. The relationship
between Wireless and Owner shall not be that of partners or agents for one
another and nothing contained in this Agreement shall be deemed to constitute a
partnership, joint venture or agency agreement between them.
(f) Notices. All notices, requests, demands, statements, reports and
other communications under this Agreement shall be in writing and deemed to be
duly delivered, if delivered in person, by overnight courier or by certified or
registered mail
-21-
<PAGE>
<PAGE>
or by means of facsimile (telecopier) communications to the telecopier numbers
specified below:
(i) If to Wireless, to:
c/o Centennial Cellular Corp.
1305 Campus Parkway
Neptune, NJ 07753
Attention: President
Telecopier No.: 918-919-1022
with a copy to:
Centennial Cellular Corp.
50 Locust Ave
New Canaan, CT 06840
Attention: Legal Department
Telecopier No.: 203-972-2091
(ii) If to Owners or either of them to:
Cable TV of Greater San Juan
1 Calle Manuel Camunas
San Juan, PR 00918
Attention: General Manager
Telecopier No.:
and to
Century ML Cable Venture and
Century-ML Cable Corporation
c/o Century Communications Corp.
50 Locust Avenue
New Canaan, CT 08640
Attention: President
Telecopier No.: 203-972-2091
and to
ML Media Partners L.P.
350 Park Avenue
New York, NY 10022
Att: Managing Partner
Telecopier No. 212-980-8374
-22-
<PAGE>
<PAGE>
with a copy to:
Century Communications Corp.
50 Locust Avenue
New Canaan, CT 08640
Attention: Legal Department
Telecopier No.: 203-972-2091
and to:
Leavy Rosensweig & Hyman
11 East 44th Street
New York, NY 10017
Attention: David Z. Rosensweig, Esq.
Telecopier No.: 212-983-2537
Either party hereto may change its mailing address by giving notice to the other
pursuant to the provisions of this Section.
(g) Network Architecture and Diversity. Owner and Wireless shall consult
and cooperate with each other with regard to all technical matters relating to
network architecture, diversity and related matters.
(h) Entire Agreement. This Agreement, including the annexes hereto,
which are hereby incorporated by reference and made a part of this Agreement as
if they were set forth herein in their entirety, constitutes the entire
agreement between Owners and Wireless with respect to the subject matter hereof
and supersedes all prior agreements and understandings between them as to such
subject matter, and there are no restrictions, agreements, arrangements or
undertakings, oral or written, between Owners and Wireless relating to the
transactions contemplated hereby which are not fully expressed or referred to
herein.
-23-
<PAGE>
<PAGE>
(i) Severability. 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.
(j) Arbitration. In those instances where the Agreement provides for
resolution of differences or disputes by arbitration such resolution and
arbitration shall take place in New York, N.Y. before the American Arbitration
Association, in accordance with its rules then obtaining, and judgment may be
rendered upon the award of the arbitrators.
(k) Further Assurances. Each party agrees to execute all such further
instruments and documents and to take all such further actions as the other
party may reasonably request in order to effectuate the terms and purposes of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
OWNER:
-24-
<PAGE>
<PAGE>
CENTURY ML CABLE VENTURE
BY: CENTURY COMMUNICATIONS CORP.,
(A TEXAS CORPORATION) A VENTURER AND MANAGER
BY:______________ ________________________
DAVID Z. ROSENSWEIG,
SECRETARY
CENTURY-ML CABLE CORPORATION
BY CENTURY COMMUNICATIONS CORP.
(A TEXAS CORPORATION), MANAGER
BY: ____________________________
DAVID Z. ROSENSWEIG,
SECRETARY
WIRELESS:
CENTENNIAL PUERTO RICO WIRELESS CORP.
BY: __________________________________________
SCOTT N. SCHNEIDER,
SENIOR VICE-PRESIDENT
-25-
<PAGE>
<PAGE>
ANNEX A
GEOGRAPHIC AREA SERVED BY SYSTEM
Century-ML Cable Television Service Area in certain portions of San Juan,
Catano, Bayamon, Carolina, Toa Baja, Guaynabo, Trujillo Alto and Toa Alta,
Puerto Rico.
-26-
<PAGE>
<PAGE>
ANNEX B
COST OF CONSTRUCTION
Cost of Construction shall include all costs of completing the construction of
the Fiber Network, including but not limited to cost of materials and equipment,
direct and indirect labor, charges of persons furnishing or providing services
or labor, expediting fees, fees and charges for licenses, permits and
authorizations, transportation, insurance and a charge for corporate overhead
equal to 175% of the aggregate of all the foregoing.
-27-
<PAGE>
<PAGE>
ANNEX C
DEFINITION OF TELECOMMUNICATIONS SERVICES
The term "telecommunications service" means the offering of
telecommunications for a fee directly to the public, or to such classes of users
as to be effectively available directly to the public, regardless of the
facilities used. The term "telecommunications" means the transmission, between
or among points specified by the user, of information of the user's choosing,
without change in the form or content of the information as sent and received.
In no event shall the term "telecommunications services" include the
use, carriage, transmittal or delivery of video signals in competition with the
Cable Systems or either of them.
-28-
<PAGE>
<PAGE>
EXHIBIT 11
CENTENNIAL CELLULAR CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-K
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------------------------
1997 1996 1995
---------------- ------------ --------------
<S> <C> <C> <C>
Primary fully diluted:
Loss $ (33,295) $ (16,631) $ (32,730)
Preferred stock dividends (15,948) (13,590) (12,634)
------------ ------------ ------------
Loss applicable to common shares $ (49,243) $ (30,221) $ (45,364)
============ ============ ============
Average number of common shares and common
share equivalents outstanding
Average number of common shares
outstanding during the period 26,934,000 26,770,000 23,037,000
Add common share equivalents - Options
to purchase common shares - net 200,000 115,000 631,000
------------ ------------ ------------
Average number of common shares and common
share equivalents outstanding 27,134,000 (A) 26,885,000 (A) 23,668,000 (A)
============ ============ ============
Loss per common share $ (1.81)(A) $ (1.12)(A) $ (1.92)(A)
============ ============ ============
</TABLE>
(A) In accordance with Accounting Principles Board Opinion No. 15, the
inclusion of common share equivalents in the computation of earnings per
share need not be considered if the reduction of earnings per share is less
than 3% or the effect is antidilutive. Therefore, loss per common share and
common share equivalents as shown on the Consolidated Statements of
Operations for the periods presented do not include certain common share
equivalents as their effect is antidilutive. However, the consolidated
financial statements do include the effect, on a retroactive basis, of
approximately 0, 0, and 507,000 option shares, respectively, issued prior
to the Company's initial public offering for the years ended May 31, 1997,
1996 and 1995.
<PAGE>
<PAGE>
EXHIBIT 12
Computation of Ratio of Earnings to Fixed Charges (amounts in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------
Year Ended May 31,
1993 1994 1995 1996 1997
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss before income tax benefit & minority interest $(40,480) $(39,885) $(47,117) $(28,212) $(40,437)
======== ======== ======== ======== ========
Fixed Charges:
Interest, including amortization of debt issuance costs 16,483 21,397 23,996 27,886 33,379
Interest capitalized -- -- -- 5,200 2,752
Interest portion of rent expense 241 283 547 674 1,410
-------- -------- -------- -------- --------
Total fixed charges 16,724 21,680 24,543 33,760 37,541
======== ======== ======== ======== ========
Adjustments:
Capitalized interest -- -- -- (5,200) (2,752)
======== ======== ======== ======== ========
Total adjustments 0 0 0 (5,200) (2,752)
======== ======== ======== ======== ========
Earnings, as defined $(23,756) $(18,205) $(22,574) $ 348 $ (5,648)
======== ======== ======== ======== ========
Ratio of earnings to fixed charges(1) -- -- -- -- --
======== ======== ======== ======== ========
Amount by which earnings are less than fixed charges $(40,480) $(39,885) $(47,117) $(33,412) $(43,189)
======== ======== ======== ======== ========
</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>
EXHIBIT 21
SUBSIDIARIES OF CENTENNIAL CELLULAR CORP., A DELAWARE CORPORATION
NAME STATE OF ORGANIZATION
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 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 Cellular Corp. Delaware
Centennial Wireless PCS License Corp. Delaware
<PAGE>
<PAGE>
NAME STATE OF ORGANIZATION
Centennial Wireless PCS Operations Corp. Delaware
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
Centennial Tri-State Operating Partnership Delaware
<PAGE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
TO INCORPORATION BY REFERENCE IN REGISTRATION STATEMENTS
ON FORM S-3 AND FORM S-4
We consent to the incorporation by reference in Centennial Cellular Coporation's
Registration Statement No. 33-90954 on Form S-3 and Registration Statement No.
33-80716 on Form S-4 of our reports dated July 25, 1997, appearing in the Annual
Report on Form 10-K for the year ended May 31, 1997, and to the reference to us
under the heading "Experts" in the Prospectus, which is part of the Registration
Statements.
Deloitte & Touche LLP
Stamford, Connecticut
July 25, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 43,415
<SECURITIES> 0
<RECEIVABLES> 29,991
<ALLOWANCES> 2,130
<INVENTORY> 0
<CURRENT-ASSETS> 78,242
<PP&E> 177,292
<DEPRECIATION> 38,411
<TOTAL-ASSETS> 844,850
<CURRENT-LIABILITIES> 63,252
<BONDS> 350,000
<COMMON> 270
0
193,539
<OTHER-SE> 112,612
<TOTAL-LIABILITY-AND-EQUITY> 844,850
<SALES> 149,212
<TOTAL-REVENUES> 151,023
<CGS> 38,228
<TOTAL-COSTS> 177,080
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,379
<INCOME-PRETAX> (40,437)
<INCOME-TAX> (7,295)
<INCOME-CONTINUING> (33,142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,295)
<EPS-PRIMARY> (1.83)
<EPS-DILUTED> 0
</TABLE>
