<PAGE>
As filed with the Securities and Exchange Commission on May 14, 1999.
Registration No. 333-73435
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CENTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
(Exact Name of Registrant as Specified in Its Charter)
Delaware 4841 06-1158179
Delaware 4841 13-4035089
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
---------------
1305 Campus Parkway
Neptune, New Jersey 07753
(732) 919-1000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrants' Principal Executive Offices)
---------------
Michael J. Small
Chief Executive Officer
Centennial Cellular Corp.
1305 Campus Parkway
Neptune, New Jersey 07753
(732) 919-1000
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
---------------
with a copy to:
Karen C. Wiedemann, Esq.
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
(212) 841-5700
---------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
---------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<CAPTION>
Title Of Each Proposed Maximum Proposed Maximum
Class Of Securities To Amount To Be Offering Aggregate Amount Of
Be Registered Registered Price Per Note(1) Offering Price(1) Registration Fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/4% Senior
Subordinated Notes due
2008, Series B....... $370,000,000 100% $370,000,000 $102,860*
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
* Fee previously paid.
The registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+This information in this prospectus is not complete and may be changed. We +
+may not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 14, 1999
PROSPECTUS
Centennial Cellular Corp. and
Centennial Cellular Operating Co. LLC,
Exchange Offer for $370,000,000
10 3/4% Senior Subordinated Notes due 2008
-----------
Material terms of the Exchange Offer:
. We are offering to exchange all of the notes we sold in a private
offering for new registered notes,
. The exchange offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended,
. The terms of the new notes are substantially identical to the outstanding
notes, except for the fact that they will not have transfer restrictions
and registration rights,
. Tenders of the outstanding notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the expiration date of the exchange
offer,
. The exchange offer is subject to customary conditions, which we may
waive,
. We will exchange all outstanding notes that are properly tendered and not
validly withdrawn, and
. The new notes will not be listed on any exchange or quoted on NASDAQ.
Consider carefully the "Risk Factors" beginning on page 17 of this
Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
This prospectus is dated , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information........................................ 2
Documents Incorporated by Reference........................................ 3
Forward-Looking Statements................................................. 3
Summary of the Prospectus.................................................. 6
Risk Factors............................................................... 17
The Merger................................................................. 32
Use of Proceeds............................................................ 34
The Exchange Offer......................................................... 36
Capitalization............................................................. 41
Selected Financial and Operating Information............................... 42
Unaudited Pro Forma Financial Statements................................... 45
Business................................................................... 51
Management................................................................. 54
Principal Stockholders..................................................... 59
Certain Relationships and Related Transactions............................. 61
Description of Certain Indebtedness........................................ 64
Description of the New Notes............................................... 68
Certain Federal Income Tax Considerations.................................. 114
Plan of Distribution....................................................... 114
Legal Matters.............................................................. 115
Experts.................................................................... 115
Uncertainties Associated With Forward-Looking Statements................... 115
</TABLE>
----------------
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-4 under the
Securities Act concerning the new notes being offered. The SEC's rules and
regulations allow us to omit from this prospectus some of the information
contained in the registration statement. For further information concerning
Centennial Cellular Corp. and the notes being offered, we refer you to the
registration statement and the documents filed as exhibits to the registration
statement.
Centennial Cellular Corp. also files annual, quarterly and special
reports, proxy and information statements and other information with the SEC.
You may read and copy any document we file with the Commission, including the
Registration Statement, at the SEC's public reference room at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's web site
(http://www.sec.gov). You may also request copies of such documents, upon
payment of a duplicating fee, by writing to the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Centennial's common stock is listed on the Nasdaq
National Market. You may read reports and other information filed by Centennial
with the Nasdaq National Market at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Centennial Cellular Operating Co. LLC is a wholly-owned subsidiary of
Centennial. Because of this relationship and because the new notes are co-
issued by Centennial and Centennial Cellular Operating, we expect to receive
advice from the SEC's staff that Centennial Cellular Operating will not have to
comply as a separate registrant with the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934.
This prospectus incorporates important business and financial information
about Centennial and Centennial Cellular Operating that is not included in, or
delivered with, the prospectus. This information
2
<PAGE>
is available without charge to you by making a written or oral request to
Centennial at 1305 Campus Parkway, Neptune, New Jersey 07753, Attention: Chief
Financial Officer (telephone: (732) 919-1000). To obtain timely delivery of
such information, you should request the information no later than five
business days prior to the expiration date of the exchange offer.
----------------
DOCUMENTS INCORPORATED BY REFERENCE
The following documents and other materials, which we have filed with the
SEC, are incorporated into this prospectus by reference and are made a part of
this prospectus by reference:
. Annual Report on Form 10-K for the fiscal year ended May 31, 1998,
. Quarterly Reports on Form 10-Q for the quarters ended August 31, 1998,
November 30, 1998, and February 28, 1999,
. Proxy Statement for the Annual Meeting of Stockholders filed on
November 28, 1998,
. Information Statement filed on December 8, 1998, and
. Current Reports on Form 8-K filed on July 16, 1998, October 19, 1998,
December 7, 1998 and January 22, 1999.
In addition, all documents that we may file with the SEC pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of the offering will be deemed to be
incorporated by reference into this prospectus and to be a part of this
prospectus from the date of filing with the SEC. Any statement in this
prospectus or in a document incorporated or deemed to be incorporated by
reference into this prospectus will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement in this prospectus
or other document filed with the SEC after the date of this prospectus modifies
or supersedes the statement. Any modified or superseded statement will not be
deemed to be a part of this prospectus, except as modified or superseded.
Statements in this prospectus or in any document incorporated by
reference into this prospectus with respect to the contents of any contract or
document referred to in this prospectus or other document are not necessarily
complete, and in each case, reference is made to the copy of the contract or
other document filed as an exhibit to the registration statement of which this
prospectus is a part or to the documents incorporated by reference, each
statement to those documents is qualified in all respects by the reference to
the document.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
. Our high degree of leverage and the requirement for significant and
sustained growth in our cash flow to meet our debt service
requirements,
. That we are a holding company and the notes are structurally
subordinated to all indebtedness of our subsidiaries, including
guarantees by our subsidiaries of all indebtedness under our $1.05
3
<PAGE>
billion credit facility (approximately $936 million of which was drawn
at closing of the merger and a portion of which was borrowed directly
by our Puerto Rico subsidiary),
. Our history of net losses and the expectation of future losses,
. That the telecommunications industry is highly competitive,
. That new technologies or new business opportunities will require
additional investments in network capacity or additional capital
spending,
. That the success of any acquisitions will depend on our ability to
integrate acquired businesses,
. That the telecommunications industry is subject to rapid and
significant changes in technology,
. That there is potential for adverse regulatory change and the need for
regulatory approvals in the operation of our business and renewal of
our cellular licenses,
. Fluctuations in market value of our licenses,
. Risks associated with the regional economic conditions in the areas we
operate our business,
. Operating costs due to fraud,
. That a decline in roaming rates may materially adversely affect us,
. That a dispute regarding reverse billing may materially adversely
affect us,
. That the indenture governing the notes will require us to offer to
purchase all of the notes issued and outstanding upon any change of
control and that the credit facility contains similar provisions,
which purchases, in each case, we may not have sufficient funds to
consummate,
. That the indenture and the credit facility impose significant
operating and financial restrictions on Centennial Cellular Operating,
. That Centennial Cellular Operating has pledged the capital stock of
all its direct and indirect subsidiaries to the lenders under the
credit facility and that all of the assets of such subsidiaries are
pledged to such lenders,
. That Centennial has unconditionally guaranteed the obligations of the
borrowers under the credit facility,
. That Centennial, as co-obligor, has no assets other than the stock of
Centennial Cellular Operating and Centennial is not subject to the
covenants contained in the indenture governing the notes,
. That the right of the trustee under the indenture and a pledge and
escrow agreement to obtain payment on the notes upon the occurrence of
an event of default may be significantly impaired by applicable
bankruptcy law,
. The lack of certainty with respect to how a court might decide a suit
by an unpaid creditor on the basis of fraudulent conveyance,
4
<PAGE>
. The potential effect of Year 2000 computer issues,
. Risks associated with new management and any future changes in
management,
. That certain equity investors control Centennial and its subsidiaries
and have the power to elect directors and take other corporate
actions,
. That we have limited ability to direct the operations of the systems
in which we hold minority cellular investment interests as a limited
partner and that our interests in such systems may be diluted if we do
not meet a capital call,
. The potential effect of equipment failure or natural disaster on our
business,
. Concerns about radio frequency emissions from cellular handsets, and
. The absence of a public market for the new notes.
We are not obligated to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events
discussed in this prospectus might not occur.
CERTAIN TERMS
Interests in cellular markets that are licensed by the Federal
Communications Commission are commonly measured on the basis of the population
of the market served, with each person in the market area referred to as a
"Pop." The number of Pops or Net Pops owned is not necessarily indicative of
the number of subscribers or potential subscribers. As used in this prospectus,
unless otherwise indicated, the term "Pops" means the estimate of the 1996
population of a metropolitan statistical area or rural service area, as derived
from the 1997 Paul Kagan Associates population estimates. The term "Net Pops"
means the estimated population with respect to a given service area multiplied
by the percentage interest that a company owns in the entity licensed in such
service area. Metropolitan statistical areas and rural service areas are also
referred to as "markets." The term "wireline" license refers to the license for
any market initially awarded to a company or group that was affiliated with a
local landline telephone carrier in the market. The term "non-wireline" license
refers to the license for any market that was initially awarded to a company,
individual or group not affiliated with any landline carrier.
5
<PAGE>
SUMMARY OF THE PROSPECTUS
The following summary contains a general discussion of our businesses,
the offering and summary financial information. We encourage you to read this
entire prospectus for a more complete understanding of Centennial, Centennial
Cellular Operating and the exchange offer. Centennial Cellular Operating became
a wholly-owned subsidiary of Centennial on January 7, 1999. In this prospectus,
we refer to the business operations of our domestic rural cellular systems as
"Centennial Rural Cellular." Likewise, "Centennial de Puerto Rico" refers to
our Puerto Rico business operations. See "Certain Terms" for definitions of
industry terms used and "Selected Financial and Operating Information" for
operating and financial definitions. Investors should carefully consider the
information set forth under the heading "Risk Factors." In addition, certain
statements include forward-looking statements which involve risks and
uncertainties. See "Forward-Looking Statements."
Centennial Cellular Corp.
Our company is one of the largest independent wireless telecommunications
service providers in the United States and Puerto Rico with approximately 10.8
million Net Pops and 426,700 subscribers as of February 28, 1999. Centennial
Rural Cellular serves 5.8 million Net Pops and its service area covers
approximately 81,645 square miles. Our subsidiary, Centennial de Puerto Rico,
is a fully integrated provider of communications services in Puerto Rico. These
operations utilize a personal communications services license that covers 3.8
million Pops in Puerto Rico and the U.S. Virgin Islands and a competitive local
exchange carrier license to operate in Puerto Rico. In addition, we own
minority shares, representing approximately 1.2 million Net Pops, in certain
other cellular operations controlled and managed by other cellular operators.
The table below shows certain data for each of our two principal business
segments.
<TABLE>
<CAPTION>
Centennial de Puerto Rico
(Personal communications services
Centennial Rural Cellular wireless and competitive local
(Cellular services) exchange carrier wireline services)
------------------------------ -------------------------------------------
Year ended Nine months ended Year ended Nine months ended
May 31, 1998 February 28, 1999 May 31, 1998 February 28, 1999
------------ ----------------- ----------------- --------------------
(in millions, except as noted)
<S> <C> <C> <C> <C>
Net Pops................ 5.8 5.8 3.8 3.8
Subscribers (in
thousands)............. 252.7 309.3 69.5 117.4
Penetration............. 4.4% 5.3% 1.8% 3.1%
Revenue................. $182.9 $175.0 $54.6 $ 87.6
EBITDA.................. $ 86.7 $ 91.5 $12.5 $ 38.8
Annualized EBITDA....... $ 86.7 $122.0 $12.5 $ 51.8
</TABLE>
For the year ended May 31, 1998, our company earned revenue of $237.5
million, representing a compound annual growth rate of 45% over the previous
two fiscal years. EBITDA (as defined) for the year ended May 31, 1998 was $99.2
million, representing a compound annual growth rate of 44% over the previous
two fiscal years.
Our Principal Executive Offices
The address of our principal executive offices is 1305 Campus Parkway,
Neptune, New Jersey 07753. Our telephone number is (732) 919-1000. Centennial
is the sole member of Centennial Cellular Operating and holds all of its
material assets through Centennial Cellular Operating.
6
<PAGE>
Risk Factors
You should consider all of the information in this prospectus before
tendering your outstanding notes in the exchange offer. The risks of an
investment in Centennial and Centennial Cellular Operating include our
substantial indebtedness, our history of net losses, competitive conditions and
the potential for adverse regulatory impact. See the "Risk Factors" section of
this prospectus for a discussion of these and other risks involved in an
investment in Centennial and Centennial Cellular Operating.
Summary of the Terms of the Exchange Offer
On December 14, 1998, we completed the private offering of $370.0 million
principal amount of our 10 3/4% Senior Subordinated Notes due 2008. In
connection with that offering, we agreed, among other things, to deliver to you
this prospectus and to use our best efforts to complete the exchange offer by
July 6, 1999.
The Exchange Offer
We are offering to exchange an equal principal amount of our 10 3/4%
Senior Subordinated Notes due 2008, which have been registered under the
Securities Act for the tendered principal amount of our outstanding 10 3/4%
Senior Subordinated Notes due 2008. In order to be exchanged, an outstanding
note must be properly tendered and accepted. You may tender outstanding notes
only in integral multiples of $1,000.
As of this date, there is $370.0 million principal amount of notes
outstanding. The exchange offer is not conditioned on any minimum aggregate
principal amount of outstanding notes being tendered for exchange.
Expiration Date
The exchange offer will expire at 5:00 p.m., New York City time, ,
1999, unless we decide to extend the expiration date.
Accrued Interest on the New Notes
If you exchange your outstanding notes for new notes in the exchange
offer, you will receive the same interest payment on the next interest payment
date following the expiration date that you would have received had you not
accepted the exchange offer. The next interest payment date following the
expiration date is expected to be June 15, 1999.
Procedures for Tendering Outstanding Notes
If you wish to tender your outstanding notes for exchange, you must
transmit on or prior to the expiration date a properly completed and duly
executed copy of the letter of transmittal delivered with this prospectus, or a
facsimile of the letter of transmittal, including all other documents required
by the letter of transmittal, to , as exchange agent for the exchange
offer; and either:
. a timely confirmation of book-entry transfer of your outstanding
notes in accordance with the procedure for book-entry transfers
described in this prospectus in "The Exchange Offer" section under
the heading "Procedures for Tendering," or
. certificates for your outstanding notes.
7
<PAGE>
Guaranteed Delivery Procedures
If you wish to tender your outstanding notes and, prior to the expiration
date of the exchange offer,
. your outstanding notes are not immediately available,
. you cannot deliver your outstanding notes, the letter of transmittal
or any other required documents to , as exchange agent, or
. you cannot complete the procedures for book-entry transfer,
you may tender your outstanding notes by following the guaranteed
delivery procedures described in "The Exchange Offer" section under the
heading "Guaranteed Delivery Procedures."
Special Procedures for Beneficial Owners
If you wish to tender outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee, you
should promptly instruct the registered holder to tender on your behalf. If
you wish to tender on your own behalf, you must, prior to completing the
procedures described above under the heading "Procedures for Tendering
Outstanding Notes," either register ownership of the outstanding notes in your
name or obtain a properly completed bond power from the registered holder.
Withdrawal Rights
You may withdraw the tender of your notes at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
Certain U.S. Federal Income Tax Consequences
The exchange of new notes for outstanding notes in the exchange offer
will generally not be a taxable event for United States federal income tax
purposes.
Conditions to the Exchange Offer
The exchange offer is not subject to any conditions other than that it
does not violate applicable law or any applicable interpretation of the SEC
staff.
Consequences of Failure to Exchange Outstanding Notes
If you do not exchange your outstanding notes for new notes, you will no
longer be able to require us to register the outstanding notes under the
Securities Act. In addition, you will not be able to offer or sell the
outstanding notes unless:
. they are registered under the Securities Act, or
. you offer or sell them under an exemption from the registration
requirements of the Securities Act.
Use of Proceeds
We will not receive any proceeds from the issuance of the new notes in
the exchange offer.
8
<PAGE>
Summary of Ability to Resell the New Notes
We believe that the new notes issued in the exchange offer may be offered
for resale, resold or otherwise transferred by you without compliance with the
registration and prospectus delivery provisions of the Securities Act, but only
if:
. you acquire the new notes in the ordinary course of business,
. you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in a
distribution of the new notes, and
. you are not an affiliate of ours, as the term affiliate is defined
in Rule 405 under the Securities Act and which may include our
executive officers and directors, another person having control over
our operations or management or an entity we control.
By executing and delivering the letter of transmittal, you will represent
to us that the above statements by you are true.
Each broker-dealer that is issued new notes in the exchange offer for its
own account in exchange for outstanding notes which were acquired by the
broker-dealer as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of the new notes. A broker-dealer
may use this prospectus, as it may be amended or supplemented from time to
time, for an offer to resell, resale or similar transfer of the new notes
issued to it in the exchange offer.
Summary Description of the New Notes
Notes Offered
We are offering $370.0 million aggregate principal amount of 10 3/4%
Senior Subordinated Notes due 2008. The form and terms of the new notes will be
the same as the form and terms of the outstanding notes except that:
. the new notes will bear a different CUSP number from the outstanding
notes,
. the new notes will have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer,
and
. you will not be entitled to any exchange or registration rights with
respect to the new notes.
The new notes will evidence the same debt as the outstanding notes, will
be entitled to the benefits of the indenture governing the outstanding notes
and will be treated under the indenture as a single class with the outstanding
notes.
Issuers
Centennial Cellular and its wholly owned subsidiary, Centennial Cellular
Operating.
Maturity
December 15, 2008.
9
<PAGE>
Interest Payment Dates
We will pay interest on the notes on June 15 and December 15 of each year,
beginning June 15, 1999.
Ranking
The notes are subordinated to all our senior debt, including all our debt
under a credit facility with Merrill Lynch Capital Corporation, Nations Bank
N.A., The Chase Manhattan Bank, The Bank of Nova Scotia, Morgan Stanley Senior
Funding, Inc. and other financial institutions party to the credit facility.
The notes rank equally with any senior subordinated debt, and rank senior to
all our subordinated debt. The notes effectively rank junior to all liabilities
of the subsidiaries of Centennial Cellular Operating including debt under the
credit facility.
On February 28, 1999, the notes:
. were subordinated to $933.9 million of senior debt under the credit
facility, and
. were effectively ranked junior to the guarantees of $933.9 million of
this debt by the subsidiaries of Centennial Cellular Operating, other
than a portion of such debt that was borrowed directly by Centennial
de Puerto Rico, which has not initially guaranteed this debt.
The notes were senior to $180 million (face amount) of subordinated notes
issued to WCAS Capital Partners III, L.P. The only debt of Centennial (without
its subsidiaries) as of February 28, 1999 were these subordinated notes,
Centennial's guarantee under the credit facility and the notes for which the
exchange offer is being made.
Security
At the time the outstanding notes were issued, we used a portion of the
proceeds to purchase a portfolio of government securities in an amount
sufficient to pay the first three interest payments on the notes. We pledged
this portfolio of securities for your benefit and the benefit of other holders
of the notes. The notes are otherwise unsecured. You should also read the
section captioned "Description of the New Notes" under the heading "Security."
Optional Redemption
We may redeem any of the notes on or after December 15, 2003 at the
redemption prices set forth in the "Description of the New Notes" section under
the heading "Optional Redemption."
Prior to December 15, 2001, we may redeem up to 35% of the aggregate
principal amount of the then outstanding notes with the net proceeds of one or
more public equity offerings or strategic equity offerings at 110.75% of their
principal amount, plus accrued interest.
Change of Control
If we experience specific kinds of changes in control, we must offer to
repurchase any then-outstanding notes at 101% of their principal amount, plus
accrued interest, if any, to the date of repurchase.
10
<PAGE>
Covenants
The indenture governing the notes contains covenants that, among other
things, limit our ability and the ability of our restricted subsidiaries to:
. incur additional indebtedness,
. pay dividends on, redeem or repurchase our capital stock,
. make investments,
. restrict dividend or other payments to us,
. engage in transactions with related persons,
. guarantee indebtedness,
. sell assets,
. create certain liens,
. consolidate, merge or transfer all or substantially all of our
assets and the assets of our subsidiaries on a consolidated basis,
and
. enter new lines of business.
These covenants are subject to important exceptions and qualifications,
which are described under the heading "Description of the New Notes--Certain
Covenants" in this Prospectus.
The Merger
Merger Agreement. On January 7, 1999, Centennial merged with CCW
Acquisition Corp., a new Delaware corporation organized by Welsh, Carson,
Anderson & Stowe VIII, L.P., pursuant to a merger agreement dated as of July 2,
1998. At the effective time of the merger, by virtue of the merger,
. each outstanding share of Class A Common Stock of Centennial was
converted into the right to receive, pursuant to each holder's
election and subject to proration, either (a) one common share of
the surviving corporation or (b) $41.50 in cash;
. each outstanding share of Class B Common Stock of Centennial was
converted into the right to receive $41.50 in cash; and
. all shares of Convertible Preferred Stock and Second Series
Convertible Preferred Stock of Centennial were converted into the
right to receive an amount of cash as if such shares had been
converted in common shares of Centennial.
The surviving corporation in the merger continues to operate under the
name "Centennial Cellular Corp." The merger was accounted for as a
recapitalization in which the historical basis of our company's assets and
liabilities was not affected and no new goodwill related to the merger was
created.
11
<PAGE>
Equity Investors. Welsh, Carson, Anderson & Stowe VIII, L.P., certain of
its affiliates, including WCAS Capital Partners III, L.P., certain affiliates
of Blackstone Capital Partners, L.P. and certain other investors provided $580
million in capital contributions. These equity investors purchased $400 million
in common shares of CCW Acquisition Corp. In addition, WCAS Capital Partners
III, L.P. provided mezzanine financing by acquiring $180 million (face amount)
of subordinated notes and a number of common shares for an aggregate purchase
price of $180 million.
Welsh Carson VIII is a private investment partnership with over $3.0
billion in committed capital that is managed by the investment firm of Welsh,
Carson, Anderson & Stowe. As of December 31, 1998, Welsh Carson had organized
and managed eleven limited partnerships with total capital of approximately
$7.6 billion. Since 1979, Welsh Carson has completed over eighty management
buyouts concentrated in the health care and information services industries,
including investments in Alliance Data Systems Corporation, Amdocs Limited, and
Bridge Information Systems, Inc.
Blackstone is one of the leading firms engaged in institutional private
equity investing. The firm's current primary corporate private equity
investment vehicle is Blackstone Capital Partners III Merchant Banking Fund
L.P., with approximately $3.8 billion in committed capital. Blackstone has
significant experience in the media and telecommunications sector, with
investments in companies such as CommNet Cellular, Intermedia Cable and
TW/Fanch Communications.
Post-Merger Organization of Centennial
The chart below shows our organizational structure following the
consummation of the merger and related transactions.
[CHART APPEARS HERE]
12
<PAGE>
Sources and Uses of Funds
The equity investors in CCW Acquisition Corp. financed the merger of CCW
Acquisition Corp. into Centennial from a variety of sources, including a credit
facility, an offering of subordinated notes, equity contributions and the
outstanding notes for which we are making an exchange offer. The funds were
used to pay cash merger consideration to stockholders of Centennial, to
refinance its existing debt and to pay the fees and expenses of the merger and
related transactions. For a more complete description of the sources and uses
of funds in connection with the merger, you should read the section captioned
"The Merger" under the heading "Financing of the Merger" as well as the section
captioned "Use of Proceeds."
13
<PAGE>
Summary Historical Financial Information
The following table sets forth summary historical consolidated financial
information for Centennial as of February 28, 1999 and 1998 and for the nine
months ended February 28, 1999 and 1998. Such data were derived from our
unaudited condensed consolidated financial statements and notes, but, in the
opinion of our management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for such periods. Operating results for the
nine months ended February 28, 1999 and 1998 do not necessarily show what the
results for a full year may be. The table also sets forth summary historical
consolidated financial information for Centennial for the five years ended May
31, 1998. Such data were derived from our audited consolidated financial
statements and notes. Since the information in this table is only a summary,
you should read our historical financial statements and the related notes, "--
Sources and Uses of Funds," and "Unaudited Pro Forma Financial Information"
found elsewhere in this prospectus.
<TABLE>
<CAPTION>
Nine months ended
February 28, Years ended May 31,
------------------------ -------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Domestic operating
revenue............... $ 174,980 $ 133,953 $ 182,944 $ 145,120 $ 112,197 $ 85,419 $ 56,373
Puerto Rico operating
revenue............... 87,611 35,752 54,557 5,903 -- -- --
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total operating
revenue................ 262,591 169,705 237,501 151,023 112,197 85,419 56,373
Cost of services and
equipment sold......... 50,783 42,248 54,818 38,228 26,129 22,152 13,424
----------- ----------- ----------- ----------- ----------- ---------- ----------
Gross profit............ 211,808 127,457 182,683 112,795 86,068 63,267 42,949
Selling, general and
administrative......... 81,460 62,142 81,790 55,132 34,188 26,055 17,787
Depreciation and
amortization........... 97,702 82,637 114,194 83,720 70,989 65,642 47,652
Recapitalization costs.. 58,852 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ---------- ----------
Operating loss.......... (26,206) (17,322) (13,301) (26,057) (19,109) (28,430) (22,490)
Interest expense--net... 48,553 31,801 45,155 33,379 27,886 23,357 21,040
Gain on sale of assets.. 8,414 8 5 3,819 8,310 -- --
Income from minority
cellular investment
interests(1)........... 9,352 9,843 13,069 15,180 10,473 4,670 3,645
----------- ----------- ----------- ----------- ----------- ---------- ----------
Loss before income tax
benefit and minority
interest............... (56,993) (39,272) (45,382) (40,437) (28,212) (47,117) (39,885)
Income tax benefit...... (10,114) (13,527) (13,597) (7,295) (11,596) (14,456) (11,780)
Minority interest in
income (loss) of
subsidiaries(2)........ 142 (337) 162 153 15 69 (321)
----------- ----------- ----------- ----------- ----------- ---------- ----------
Loss from continuing
operations............. (46,737) (26,082) (31,947) (33,295) (16,631) (32,730) (27,784)
Extraordinary loss on
early extinguishment of
debt, net of tax....... (40,526) 0 0 0 0 0 0
----------- ----------- ----------- ----------- ----------- ---------- ----------
Net loss................ $ (87,263) $ (26,082) $ (31,947) $ (33,295) $ (16,631) $ (32,730) $ (27,784)
=========== =========== =========== =========== =========== ========== ==========
Other Consolidated Data:
EBITDA(3)............... $ 130,348 $ 65,315 $ 99,208 $ 55,852 $ 47,793 $ 34,444 $ 24,080
EBITDA margin........... 49.6% 38.5% 42.1% 37.4% 44.2% 41.7% 43.6%
Cash flows provided by
(used in):
Operating activities... $ 98,654 $ 46,196 $ 54,771 $ 26,956 $ 24,282 $ 10,390 $ (3,558)
Investing activities... (51,262) (99,290) (126,111) (118,094) (78,765) (79,834) (64,749)
Financing activities... (28,098) 24,274 42,545 67,256 152 182,722 65,702
Capital expenditures.... 69,819 103,187 129,300 88,990 38,082 17,538 8,947
Net Pops(4)(5).......... 10,846,000 10,846,000 10,846,000 10,846,000 10,661,000 6,491,500 5,020,400
Subscribers(4).......... 426,700 298,500 322,200 203,900 135,000 85,900 49,000
</TABLE>
14
<PAGE>
(Table continued from preceding page)
<TABLE>
<CAPTION>
Nine months ended
February 28, Years ended May 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except as noted)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Rural Cellular
Data:
EBITDA(3)............... $ 91,520 $ 60,249 $ 86,669 $ 64,278 $ 48,208 $ 34,511 $ 24,080
EBITDA margin........... 52.3% 45.0% 47.8% 44.9% 44.6% 41.8% 43.6%
Capital expenditures.... $ 25,130 $ 31,363 $ 38,996 $ 38,921 $ 22,604 $ 17,319 $ 8,947
Net Pops (excluding
Minority Cellular
Investment
Interests)(4)(5)....... 5,831,000 5,777,000 5,777,000 5,777,000 5,592,000 5,412,100 3,941,000
Subscribers............. 309,300 237,900 252,700 187,000 135,000 85,900 49,000
Penetration(4)(6)....... 5.3% 4.1% 4.4% 3.2% 2.4% 1.6% 1.2%
Churn rate.............. 1.9% 1.8% 1.8% 2.3% 2.5% 2.5% 3.0%
Average monthly revenue
per unit (actual
dollars)(7)............ $ 69 $ 70 $ 68 $ 73 $ 74 $ 68 $ 69
Acquisition cost per
cellular customer
(actual dollars)(8).... $ 316 $ 307 $ 308 $ 343 $ 351 $ 431 $ --
Cell sites(4)........... 400 329 363 212 185 -- --
Retail and service
centers(4)............. 69 58 59 41 25 -- --
Other Centennial de
Puerto Rico Data:
EBITDA(3)............... $ 38,828 $ 5,066 $ 12,539 $ (8,426) $ (415) $ (67) --
EBITDA margin........... 44.3% 14.2% 23.1% n.a. n.a. n.a. --
Capital expenditures.... $ 44,689 $ 71,824 $ 90,304 $ 50,069 $ 15,478 $ 219 --
Net Pops(4)............. 3,839,000 3,839,000 3,839,000 3,839,000 3,839,000 -- --
Subscribers(4).......... 117,400 60,600 69,500 16,900 -- -- --
Penetration(4)(6)....... 3.1% 1.6% 1.8% 0.4% -- -- --
Churn rate.............. 3.5% 4.0% 4.6% 2.6% -- -- --
Average monthly revenue
per unit (actual
dollars)(7)............ $ 91 $ 94 $ 92 $ 113 -- -- --
Acquisition cost per
cellular customer
(actual dollars)(8).... $ 203 $ 166 $ 164 $ 310 -- -- --
Cell sites(4)........... 125 109 113 74 -- -- --
Retail and service
centers(4)............. 51 35 44 25 -- -- --
</TABLE>
<TABLE>
<CAPTION>
As of February 28, As of May 31,
-------------------- --------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets............ $ 956,672 $837,056 $847,417 $844,850 $785,812 $844,384 $502,384
Long-term Debt.......... 1,458,857 490,000 510,000 429,000 350,000 350,000 250,000
Redeemable preferred
stock.................. 0 193,539 193,539 193,539 189,930 176,340 163,706
Common stockholders'
equity (deficit)....... (605,800) 51,205 40,409 112,882 160,006 188,831 24,143
</TABLE>
- --------
(1) Represents our proportionate share of profits and losses based on our
interest in earnings of limited partnerships controlled and managed by
other cellular operators accounted for on the equity method.
(2) Represents the percentage share of earnings of our consolidated
subsidiaries that is allocable to unaffiliated holders of minority
interests.
(3) EBITDA is defined, for any period, as earnings before income from our
minority cellular investment interests that are controlled and managed by
third parties, allocations to minority interests in consolidated
subsidiaries, interest expense, interest income, income taxes,
depreciation and amortization,
15
<PAGE>
recapitalization costs, extraordinary loss on early extinguishment of debt
and gain on sale of assets. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness. EBITDA should not be considered an alternative to net income
as a measure of our operating results or to cash flow as a measure of
liquidity. In addition, although the EBITDA measure of performance is not
recognized under generally accepted accounting principles, it is widely
used by various companies as a general measure of a company's performance
because it assists in comparing performance on a relatively consistent
basis across companies without regard to depreciation and amortization,
which can vary significantly depending on accounting methods (particularly
where acquisitions are involved) or non-operating factors such as
historical cost bases. Because EBITDA is not calculated identically by all
companies, the presentation herein may not be strictly comparable to other
similarly titled measures of other companies.
(4) As of period-end.
(5) For the years ended May 31, 1995 and May 31, 1994, the number of Net Pops
is based on 1990 population figures of a metropolitan service area or
rural service area, as derived from the 1990 U.S. Census data.
(6) The penetration rate equals the percentage of total population in our
service areas who are subscribers to our cellular service as of period-
end.
(7) ARPU is defined as total monthly revenue per average subscriber.
(8) For the year ended as of the date shown. Determined for each period as
total marketing cost plus cost of equipment sales (net of associated
revenue), divided by the total subscriber activations during the fiscal
year.
16
<PAGE>
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to exchange outstanding notes for new notes.
Any of the following risks could have a material adverse impact on our
business, financial condition or results of operations or on the value of the
notes.
Significant Indebtedness--Our debt service consumes a substantial portion of
the cash we generate and reduces the cash available to invest in our
operations.
We have a significant amount of indebtedness after the merger. Our large
amount of debt could significantly affect our business and you because, among
other things, it:
. limits our ability to obtain additional financing for future
acquisitions (if any), working capital, capital expenditures or
other purposes;
. limits our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these
funds to make principal payments and fund debt service;
. increases our vulnerability to adverse economic and industry
conditions;
. increases our vulnerability to interest rate increases because
borrowings under our credit facility are at variable interest rates;
and
. increases our vulnerability to competitive pressures, as many of our
competitors will be less leveraged than we are.
As of February 28, 1999:
. We had outstanding total long-term indebtedness of approximately
$1.46 billion, and
. Centennial (without its subsidiaries) had $180 million (face amount)
of long-term indebtedness (other than its guarantee under the credit
facility and its co-obligation under the outstanding notes).
Following the financings related to the merger, our total long-term
indebtedness was substantially greater than our long-term indebtedness before
the merger. In addition, the indenture governing the outstanding notes and our
other debt instruments allows us to incur additional indebtedness, including
secured indebtedness. As of February 28, 1999 Centennial Cellular Operating had
an aggregate of $116.1 million available for borrowing under the credit
facility.
Ability to Service Debt--In order to service our debt, we require a significant
amount of cash. However, our ability to generate cash depends on many factors
that are beyond our control.
Prevailing economic conditions and financial, business and other factors,
many of which are beyond our control, will affect our ability to pay interest
on the notes and satisfy our other debt obligations. Upon the issuance of the
notes, our consolidated interest expense has increased compared to prior years.
We currently believe that our cash flow, together with available borrowings
under the credit facility, will permit us to pay our operating expenses and
service our debts for the foreseeable future. Our belief is based on
significant assumptions, including, among other things, that we will succeed in
implementing our business strategy and that there will be no material adverse
developments in our business, liquidity or capital requirements. If, in the
future, we cannot generate sufficient cash from operations to make scheduled
payments on the notes or to meet our other obligations, we will need to
refinance, obtain additional financing or sell assets. We cannot assure you
that our business will generate cash flow, or that we will be able to obtain
funding sufficient to satisfy our debt service requirements. On a pro forma
basis, earnings were insufficient to cover fixed charges for Centennial and
17
<PAGE>
Centennial Cellular Operating by $161.8 million and $138.9 million for the year
ended May 31, 1998, and by $64.7 million and $48.2 million for the nine months
ended February 28, 1999.
Restrictions Imposed on Us by Our Debt Instruments--Our existing debt
instruments contain restrictions and limitations which could significantly
affect our ability to operate our business and repay the notes.
We and our subsidiaries are subject to significant operating and
financial restrictions contained in the instruments governing the notes and our
credit facility. Such restrictions affect, and in many respects significantly
limit or prohibit, among other things, our ability to:
. borrow more funds,
. pay dividends,
. repay indebtedness prior to stated maturities,
. sell assets,
. make investments,
. engage in transactions with stockholders and affiliates,
. create liens, or
. engage in mergers or acquisitions.
In addition, the credit facility requires us to maintain certain
financial ratios. These restrictions could also limit our ability to obtain
financing in the future, make needed capital expenditures, withstand a future
downturn in our business or the economy in general or in our specific areas of
coverage, or otherwise conduct necessary corporate activities. If we or our
subsidiaries fail to comply with these restrictions, we may be in default under
the terms of such indebtedness, even if we are otherwise able to meet our debt
service obligations. In the event of a default, the holders of such
indebtedness could elect to declare all such indebtedness, together with
accrued interest, to be due and payable and a significant portion of our other
indebtedness (including the notes) and that of our subsidiaries may become
immediately due and payable. We cannot assure you that we or our subsidiaries
would be able to make such payments or borrow sufficient funds from alternative
sources to make any such payment. Even if we were to obtain additional
financing, such financing may be on terms unfavorable to us.
Subordination of the Notes--Because the notes rank below our senior debt and
below all debt of our subsidiaries, you may not receive full payment on your
notes.
The notes are subordinated to all our senior indebtedness. In addition,
the notes effectively rank junior to all liabilities of our subsidiaries. As of
February 28, 1999 Centennial Cellular Operating had outstanding $933.9 million
of senior indebtedness and $370 million of senior subordinated indebtedness. As
of February 28, 1999,
. Centennial Cellular Corp. (without its subsidiaries) had no
indebtedness outstanding other than $180 million (face amount) of
subordinated notes issued to WCAS Capital Partners III, L.P., and
its guarantee of $933.9 million of Centennial Cellular Operating's
indebtedness under the Credit Facility and its co-obligation on the
notes and
. our subsidiaries had no indebtedness outstanding other than their
guarantees of $933.9 million of funded indebtedness under the Credit
Facility (a portion of which was borrowed directly by Centennial de
Puerto Rico, which indebtedness is effectively senior to the notes).
18
<PAGE>
We also may incur additional senior indebtedness and our subsidiaries may incur
additional indebtedness consistent with the terms of our debt agreements. For
example, upon consummation of the offering of the notes and our use of the net
proceeds received from that offering, as of February 28, 1999, we had $116.1
million available under our credit facility which, if borrowed, would be senior
indebtedness and would be guaranteed by our subsidiaries other than Centennial
de Puerto Rico and its subsidiaries. In the event of our bankruptcy,
liquidation or dissolution, our assets would be available to pay obligations on
the notes only after all payments had been made on our senior indebtedness. We
cannot assure you that sufficient assets will remain to make any payments on
the notes. In addition, certain events of default under our senior indebtedness
would prohibit us from making any payments on the notes. The term "senior
indebtedness" is defined in the "Description of the New Notes--Subordination"
section of this prospectus.
Restrictions on Subsidiary Dividends--Because our subsidiaries may not be
permitted to pay dividends to us, we may not be able to repay the notes.
Our company depends on the cash flow from our subsidiaries to meet our
obligations, including all payments on the notes. Accordingly, our ability to
make payments to holders of the notes depends on the receipt of sufficient
funds from our subsidiaries. Because of the terms of existing and future
indebtedness of our subsidiaries, including the credit facility, which is
initially secured by the assets of our domestic subsidiaries, we may be
restricted in receiving funds from our subsidiaries. The indenture for the
notes permits our subsidiaries to enter into agreements which restrict
dividends and distributions to us. See "Description of the New Notes--Certain
Covenants--Limitation on Restrictions on Subsidiary Dividends."
Lack of Security--Because the notes are unsecured, other lenders will have
prior claims to our assets in the event we became insolvent or are liquidated.
In addition to being subordinate to all of our senior indebtedness, the
notes are not secured by any of our assets, other than the funds pledged to pay
the first three interest payments. Our obligations under our credit facility
are secured by substantially all of our assets, including assets held by our
subsidiaries. Under the indenture for the notes, we and our subsidiaries are
permitted to incur additional secured indebtedness. If we became insolvent or
are liquidated, or if payment under our credit facility is accelerated, the
lenders under our credit facility would be entitled to exercise the remedies
available to a secured lender under applicable law. Therefore, our bank lenders
will have a claim on such assets before the holders of the notes. Because the
notes are unsecured, there may be no assets remaining for the holders of notes
or any assets may be insufficient to pay off the notes. See "Description of
Certain Indebtedness."
Net Losses--We have a history of net losses which we expect to continue through
the foreseeable future.
Since our formation, we have concentrated on the acquisition, exchange,
construction, initial operation and development of cellular telephone systems
in our domestic markets and the provision of facilities-based integrated
communications in Puerto Rico. Our business operations have incurred net losses
for each of the past five fiscal years and, after giving pro forma effect to
the offering of the outstanding notes and borrowings under the credit facility,
Centennial Cellular Operating would have incurred a net loss of $120.5 million
for the fiscal year ended May 31, 1998. We expect to report net losses for the
foreseeable future due to increased interest payments and non-cash charges such
as depreciation and amortization. We cannot assure you that in future periods
our operations will generate sufficient earnings to pay our obligations,
including the notes.
Competition in Rural Cellular Markets--Because the wireless telephone service
industry is highly competitive, we may be adversely affected by competitors
with superior financial resources and/or technology.
Our principal business, wireless telephone service, is highly
competitive. Competition for wireless telephone service in each of our markets
is based primarily on the quality of service, price, system coverage,
19
<PAGE>
enhancements offered, capacity and customer service. We compete with one
cellular licensee in each geographic area and most of these competitors are
larger, have greater financial resources than we do and may be less leveraged
than we are. We also face competition from paging companies, landline telephone
companies and resellers. The FCC requires cellular and personal communication
services licensees to offer service to resellers on a nondiscriminatory basis.
A reseller buys blocks of telephone numbers from cellular and personal
communication services providers, usually at a discounted rate, and resells the
service to the public for a profit. Many telecommunications companies resell
wireless telephone service as a complement to other services, such as long
distance or local telephone services.
As a result of recent regulatory and legislative initiatives, we also
face increased competition from entities using or proposing to use other
comparable communications technologies. The FCC currently is licensing
commercial personal communication services. The FCC identified two categories
of personal communication services: broadband and narrowband. Personal
communication services is not a specific technology, but a variety of potential
technologies that could compete with cellular telephone systems. For example,
the broadband personal communication services systems licensed to operate in
the 2 GHz band may provide wireless two-way telecommunications services for
voice, data, graphic and other transmissions. Equipment used for broadband
personal communication services includes small, lightweight and wireless
telephone handsets, computers that can communicate over the airwaves wherever
they are located, and portable facsimile machines and other graphic devices.
Many personal communication services systems have commenced operations in the
last few years. When a personal communication services system employs microcell
technology, as is common, it uses a network of small, low-powered transceivers
placed throughout a neighborhood, business complex, community or metropolitan
area to provide customers with mobile and portable voice and data
communications. Many personal communication services licensees who will compete
with us have access to substantial capital resources. In addition, many of
these companies, or their affiliates, already operate large cellular telephone
systems and thus bring significant wireless experience to this new marketplace.
To date, we have experienced little impact from personal communication services
competition in our domestic markets. However, there can be no assurance of the
long-term effect these new personal communication services licensees may have
on us.
ESMR is a two-way wireless communications service that incorporates
characteristics of cellular technology, including many low-power transmitters
and connection with the landline telephone network. ESMR service may compete
with cellular service by providing digital communication technology, lower
rates, enhanced privacy and additional features such as electronic mail and
built-in paging. Nextel Communications, Inc. is the primary provider of such
services today.
We may also face competition from satellite-based services. The FCC has
issued a number of licenses to provide such services which would enable
subscribers to access mobile communications systems throughout the world.
Additional proposals for the provision of satellite services remain pending
with the FCC and foreign regulatory bodies must approve certain aspects of some
satellite systems. Although we may experience increased competition from such
services in the future, such systems have not affected our operations to date.
The FCC has made available other frequency bands that may be used for the
provision of cellular-like services. The general wireless communications
service and the wireless communications service are two such services that are
in their infancy. Although the FCC has proposed technical rules for wireless
communications service that will make commercial mobile services like cellular
and personal communication services infeasible, there can be no assurance that
the FCC will not adopt more flexible wireless communications service technical
rules that will enable wireless communications service licensees to provide
service comparable to cellular and personal communication services.
We are unable to predict whether such competing technologies or any new
technologies will be successful and, if successful, whether any will provide
significant competition for us. We cannot assure you that one or more of the
technologies that we currently use in our business will not become inferior or
obsolete at some time in the future.
20
<PAGE>
Competition in Puerto Rico Market--We may be adversely affected by competition
from other wireless and wireline telephone service providers in Puerto Rico.
Competition from Cellular Systems
The market for wireless services is highly competitive in Puerto Rico.
Our two main competitors for wireless services in the Puerto Rico market are
Cellular Communications of Puerto Rico, Inc., a publicly traded U.S. company
which has agreed to be acquired by SBC Communications, Inc., a U.S.
telecommunications company, and Telephonos de Mexico, S.A., a Mexican
telecommunications company, and the Puerto Rico Telephone Company, of which a
majority is owned by GTE Corporation, a U.S. telecommunications company, and a
minority is owned by the Commonwealth of Puerto Rico. The parties' public
statements indicate that they expect the transaction to close during the first
quarter of 1999. In July 1998, GTE agreed to merge with Bell Atlantic
Corporation. Both CoreComm and the Puerto Rico Telephone Company were earlier
entrants into the Puerto Rico wireless market, have greater resources than we
do and currently hold subscriber market shares of approximately 47% and 40%,
respectively. CoreComm and the Puerto Rico Telephone Company offer both analog
and digital cellular service to their subscribers and offer more capability of
cellular service than us to their customers traveling outside Puerto Rico. We
currently offer customers in Puerto Rico the capability of cellular service in
the U.S. pursuant to an agreement with Sprint.
Competition From Other Broadband Personal Communication Services Systems
The FCC has issued a 30 MHz broadband personal communication services
license for the Puerto Rico-U.S. Virgin Islands metropolitan trading area to
TeleCorp. The FCC has also issued four broadband personal communication
services licenses for the San Juan, Puerto Rico basic trading area, the
Mayaguez-Aguadilla-Ponce, Puerto Rico basic trading area and the U.S. Virgin
Islands basic trading area to other entities, including a 10 MHz license to the
Puerto Rico Telephone Company. If these licenses become operational, these
broadband personal communication services systems will present additional
competition to our personal communication services operations in Puerto Rico.
We believe that TeleCorp, which is in the process of constructing its personal
communication services system as part of a franchise relationship with AT&T
Wireless Services, will likely begin service within the next twelve months.
New personal communication services competitors will face a number of
significant hurdles in building out their systems in Puerto Rico, including the
development of a network connecting its cell sites. A competitor may:
. use the Puerto Rico Telephone Company's network,
. construct its own network,
. use our fiber optic network, or
. choose a combination of these methods. We believe that few
competitors will choose to build their own networks because of the
significant cost and time constraints, nor will they choose to
contract with the Puerto Rico Telephone Company's because of its
poor reliability and the long wait times required for these new
services to be added. Thus, we believe that some of our competitors
in Puerto Rico may seek to contract with us for these services.
Competition From Resellers
The FCC requires all cellular and personal communication system operators
to provide service on a nondiscriminatory basis to resellers, who provide
service to customers but do not hold an FCC license or own facilities to
provide such services. Instead, a reseller buys blocks of cellular telephone
numbers from a licensed carrier, usually at a discounted rate, and resells
service to the public. Thus, a reseller may be both a customer of a cellular or
personal communications services provider and also a competitor. Ameritel,
acting as a reseller,
21
<PAGE>
is currently offering cellular services at Radio Shack stores throughout Puerto
Rico. We do not know of any other significant cellular resellers currently
operating in competition with our personal communication services system.
Wireline Competition
Our primary competitor for wireline service is the incumbent provider,
the Puerto Rico Telephone Company, which has considerably greater resources
than we do. GTE has bought a majority stake in the Puerto Rico Telephone
Company and controls the Puerto Rico Telephone Company's board of directors.
GTE also has significantly greater resources than we do and may make changes to
improve service which in turn may strengthen the Puerto Rico Telephone
Company's competitive position. The growth of our market presence will depend
upon our ability to obtain customers that are underserved by the PRTC (or its
successor) or looking for an alternative. Because of our ability to provide
more timely installation and service to date, we have primarily attracted
customers on the basis of quality and service rather than price. KMS, a U.S.
corporation based in New Jersey, has announced plans to set up a fiber optic
network in Puerto Rico to offer internet access and data transmission, although
it has not yet commenced construction.
Risks Associated With Acquisitions--Our strategy to expand our business through
acquisitions may fail due to a number of risks involved in implementing this
strategy.
Since August 1988, we have acquired 29 cellular systems in the United
States that we own and manage. We intend to expand our current clusters through
the acquisition of properties and target for purchase other small to mid-sized
metropolitan service areas and strategic rural service areas that we believe
are undervalued or underdeveloped or that possess traits that indicate high
potential cellular use and superior financial performance. There can be no
assurance, however, that we will seek to acquire or be successful in acquiring
any of these systems. Increased competition for acquisition candidates could
result in fewer acquisition opportunities for us and higher acquisition prices.
The magnitude, timing and nature of future acquisitions will depend upon
various factors, including the availability of suitable acquisition candidates,
competition with other telecommunications companies for suitable acquisitions,
the negotiation of acceptable terms, our financial capabilities, the
availability of skilled employees to manage the acquired companies and general
economic and business conditions.
We face risks that the systems we own and those we acquire in the future
will not perform as expected and that such systems will not generate the
returns necessary to repay the indebtedness incurred to acquire, or fund the
capital expenditures needed to develop, the systems. In addition, expansion of
our operations may place a significant strain on our management, financial and
other resources. Our ability to manage future growth will depend upon our
ability to monitor operations, control costs, maintain effective quality
controls and significantly expand our internal management, technical and
accounting systems, all of which will result in higher operating expenses. A
failure to expand these areas or to implement and improve our systems,
procedures and controls in an efficient manner and at a pace consistent with
the growth of our business could have a material adverse effect on our
business, prospects, operating results and ability to service our indebtedness,
including the notes.
In addition, we will incur considerable expenses to integrate systems we
acquire with existing operations before we earn any anticipated revenue from
these new systems, which may cause our operating results to fluctuate
substantially. We will, among other things, have to integrate switching,
transmission, technical, sales, marketing, billing, accounting, quality
control, management, personnel, payroll, regulatory compliance and other
systems and operating hardware and software, some of which may be incompatible
with our existing systems. In addition, telecommunications providers generally
experience higher customer and employee turnover rates during and after an
acquisition. We cannot assure you that we will be able to successfully
integrate the systems we own or may acquire or any other businesses we may
acquire or that any acquired business will not experience high employee or
customer turnover rates after an acquisition.
22
<PAGE>
We may fail or be unable to discover certain liabilities, including
liabilities arising from non-compliance with certain federal, state or local
environmental laws by prior owners, when we perform due diligence
investigations on each company or business we seek to acquire. We may be
responsible for these liabilities as a successor owner. We generally seek to
minimize our exposure to such liabilities by obtaining indemnification from
each seller of the acquired companies and, in some cases, by deferring payment
of a portion of the purchase price to support these indemnification
obligations. However, we cannot assure you that we could enforce or collect
such indemnifications, even if obtainable, or that the indemnifications would
be sufficient in amount, scope or duration to fully offset the possible
liabilities arising from the acquisitions.
We expect to finance acquisitions with cash on hand, through issuances of
debt or equity securities and through borrowings under credit arrangements,
including pursuant to the credit facility. We cannot assure you that we will be
able to obtain additional financing in order to finance our acquisition
strategy. The ability to obtain debt or equity financing is subject to market
conditions and our current debt instruments limit our ability to incur
additional indebtedness.
Rapid Technological Changes--Rapid and significant technological changes in the
telecommunications industry may adversely affect us.
Telecommunications providers face rapid and significant changes in
technology. New technologies may be protected by patents or other intellectual
property laws and therefore may not be available. In particular, the wireless
telecommunications industry is experiencing significant technological change,
including:
. the increasing pace of digital upgrades in existing analog wireless
systems,
. evolving industry standards,
. the allocation of new radio frequency spectrum in which to license
and operate wireless services,
. ongoing improvements in the capacity and quality of digital
technology,
. shorter development cycles for new products and enhancements, and
. changes in end-user requirements and preferences.
Like others in the industry, we are uncertain about the extent of
customer demand as well as the extent to which airtime and monthly access rates
may continue to decline. We cannot predict the effect of technological changes
on our business, and it is possible that technological developments will have a
material adverse effect on us.
Extensive Regulation of our Industry--Extensive governmental regulation of the
telecommunications industry requires us to obtain regulatory approvals and
creates the possibility for adverse regulatory change.
Wireless
The FCC regulates the licensing, construction, operation, acquisition and
sale of commercial wireless communications systems, as well as the number of
wireless licensees permitted in each market. Certain aspects of cellular
operations may also be subject to public utility regulation in the state in
which the service is provided. Changes in the regulation of commercial wireless
services (such as cellular, personal communication services, or paging),
wireless carriers, the licensing of additional connecting carriers in our
service areas, the deregulation of interconnection arrangements or the loss of
any license or licensed area previously awarded to us could have a material
adverse effect on our operations. See "Business--Regulation."
The FCC continues to license additional spectrum for wireless
communications. In addition, all cellular and personal communication services
licenses in the United States are subject to renewal upon the
23
<PAGE>
expiration of their initial ten-year term. Our company's initial cellular
licenses have expired and will continue to expire in the near future. To date,
however, we have successfully renewed each of our cellular licenses. We will
continue to apply for renewal of our licenses in a timely fashion. Although we
cannot assure you that these licenses will be renewed, we believe that each
license will be renewed based upon FCC rules establishing a presumption in
favor of licensees that have complied with their regulatory obligations during
the prior license term. Any failure to renew our licenses would have a material
adverse effect on our business, financial condition and results of operations.
We must obtain a number of other approvals, licenses and permits in the
operation of our business, including determinations of no hazard to navigation
from the Federal Aviation Administration in connection with the construction of
cellular and personal communication services towers. Additionally, the wireless
communications industry is subject to certain state and local government
regulation. Operating costs are also affected by other governmental actions
that are beyond our control. We cannot assure you that the various federal,
state and local agencies responsible for granting licenses, approvals and
permits will do so or that, once granted, will not revoke or fail to renew
them. The absence of such licenses, approvals and permits would adversely
affect our existing operations and could delay commencement of or prohibit
business operations that we propose.
In addition, the Communications Act of 1934, as amended, generally
prohibits foreign persons or entities from controlling FCC licenses or holding
interests of more than 25% in an FCC licensee. An FCC licensee may, however,
request that the FCC allow a foreign entity to hold more than a 25% interest.
These restrictions could adversely affect our ability to attract additional
equity financing.
The wireless communications industry is subject to continually evolving
regulation. As new regulations are made, we may be required to modify our
business plans or operations in order to comply with any new regulations. There
can be no assurance that we can do so in a cost-effective manner, if at all.
In Puerto Rico, we are also subject to regulation by the Puerto Rico
Planning Board, the Administration of Regulation and Permits and the Puerto
Rico Telecommunications Regulatory Board. The powers of these authorities
include a number of matters, such as cost-based rate-making that could have a
material adverse effect on our business, financial condition and results of
operations.
Wireline
Lambda CLEC, our wholly-owned subsidiary, is subject to the Puerto Rico
Telecommunications Act of 1996, which grants jurisdiction over
telecommunications services and providers to the Puerto Rico Telecommunications
Regulatory Board and purports to open the Puerto Rico telecommunications market
to competition.
In addition, Lambda CLEC is subject to the Communications Act. Pursuant
to the Communications Act, the FCC requires all telecommunications carriers,
including Lambda CLEC, to contribute to the federal universal service fund. The
Communications Act also requires state public utilities commissions and/or the
FCC to implement policies that mandate reciprocal compensation between local
exchange carriers. On August 1, 1996, the FCC adopted rules implementing these
policies, but various aspects of the order have been overturned by a federal
court and the decision remains subject to further judicial review.
General
From time to time, federal, state or commonwealth legislators propose
legislation that potentially could materially affect us either beneficially or
adversely. We cannot assure you that federal, state or commonwealth governments
will not enact legislation or that the FCC, state or commonwealth regulatory
authorities will not promulgate regulation or take other actions that might
have a material adverse affect on our business. If the
24
<PAGE>
FCC allocates radio spectrum for services that compete with our business, these
changes could materially and adversely affect our business, prospects,
operating results or ability to service our indebtedness, including the notes.
Fluctuations in Market Value of Our Licenses--The value of our cellular
licenses may decrease due to market conditions and the success of our business.
A substantial portion of our assets consists of our interests in cellular
licenses held by subsidiaries. While there currently exists a market for the
purchase and sale of cellular licenses, including those in our markets, that
market may not exist in the future or the values of our licenses in that market
may fall. The future value of our interests in our cellular licenses will
depend significantly upon the success of our business. The transfer of
interests in such licenses is subject to prior FCC approval, which may have the
effect of reducing the value of the license. As a consequence, if the market
value of our cellular licenses decreases significantly, we may realize a
material loss upon the sale of any of our licenses.
Importance of Certain Markets--Our business will be hurt if business and
economic conditions generally worsen in our principal markets.
Our success depends upon various factors related to business and economic
conditions and consumer spending in the regions where our principal operations
are located. If existing economic conditions were to deteriorate in any of our
regions, the market for cellular services to business and consumer subscribers
may grow more slowly or may decline, thereby materially and adversely affecting
our business and results of operations. The fact that we have clustered our
operations geographically may increase this risk.
Risks Associated with Conditions in Puerto Rico--Business and economic factors,
severe weather and political conditions in Puerto Rico may significantly affect
our operations in Puerto Rico and hurt our overall performance.
Our business in Puerto Rico is dependent on the business and economic
conditions and consumer spending generally in Puerto Rico. If existing economic
conditions in Puerto Rico were to deteriorate, the market for wireless or
wireline services in Puerto Rico may grow more slowly or decline. This would
have an adverse impact on our business in Puerto Rico and, because our Puerto
Rico operations currently generate approximately 30% of our company's EBITDA,
on our financial condition and results of operations generally.
In particular, our business in Puerto Rico may be materially adversely
affected by events such as hurricanes, labor strikes and the like which affect
Puerto Rico generally. Puerto Rico was hit by Hurricane Georges in September
1998. The island suffered significant damage as a result of the storm. Less
than 10% of our personal communication services towers and microwave
transmitters were damaged during the hurricane, which interrupted service to
approximately 25% of our customers in Puerto Rico. After consideration of
expected insurance recoveries, we believe it will not incur significant losses
as a result of the effects of the damage caused by Hurricane Georges. During
the nine months ended February 28, 1999, we recorded approximately $1.7 million
of insurance recoveries related to subscriber refunds within revenue. Other
hurricanes or adverse weather conditions that may hit the island from time to
time may have a material adverse effect on our business in Puerto Rico.
Any change in Puerto Rico's political status with the U.S., or the
ongoing debate on such status, could also affect the economy of Puerto Rico.
The ultimate effect of possible changes in Puerto Rico's governmental and
political status is uncertain and, accordingly, we cannot assure you that such
changes will not materially adversely affect our business and results of
operations.
25
<PAGE>
Operating Costs Due to Fraud--A substantial increase in fraudulent and/or
unbilled use of our network or costs incurred to prevent such use would affect
our business operations.
Like most companies in the cellular industry, we incur costs associated
with unauthorized use of our network. Fraud increases interconnection costs,
capacity costs, administrative costs, costs incurred for fraud prevention and
payments to other carriers for unbillable fraudulent roaming. We currently
employ anti-fraud measures in our rural cellular clusters and intend to
continue to develop and invest in measures to prevent cellular fraud. Even so,
we cannot assure you that we will not incur substantial costs due to fraud. In
addition, while we have not experienced significant costs in the past due to
our anti-fraud measures and the costs associated with unauthorized use of our
cellular network, we cannot assure you that these costs will not become
substantial in the future.
We have not yet experienced any fraud problems in connection with our
wireless service in Puerto Rico because of its use of CDMA technology. We
cannot assure you, however, that a fraud problem will not develop or that we
will not incur substantial costs due to fraud in the future.
Risk Related to Strategy to Reduce Roaming Rates--Because we both receive
revenue when cellular and personal communications services customers roam in
our service area and remit payment to other wireless service providers when our
customers roam outside our service area, a general decline in roaming rates and
our strategy of aggressively pricing roaming rates may lead to lower roaming
revenues that are not fully offset by lower payments to other providers, and
thus a decrease in results of operations.
We earn much of our revenue from customers of other cellular providers
who are roaming in our markets. Roaming rates per minute pursuant to reciprocal
roaming arrangements have declined over the last several years and we expect
that such declines will continue for the foreseeable future. We have
implemented a strategy of aggressively pricing roaming rates to encourage other
cellular and personal communications services providers to include portions of
our service areas within their home calling regions and to discourage wireless
providers from expanding their footprints into our service areas. While we
benefit from lower roaming rates when we remit to other cellular providers
roaming charges incurred by our subscribers in other cellular providers'
calling regions, we receive less revenue per minute of use from customers
roaming in our markets. We cannot assure you that the decline in roaming rates
will be offset by the benefits of increased roaming minutes of use by other
cellular and personal communication services providers or that such decline
will not materially adversely affect our results of operations.
Possible Inability to Purchase Notes upon a Change of Control--We may not be
able to fulfill our obligations under our credit facility or the notes
following a change of control.
Upon certain change of control events, each holder of notes may require
us to repurchase all or a portion of its notes at a purchase price equal to
101% of the principal amount thereof, plus accrued interest. Our ability to
repurchase the notes upon a change of control event will be limited by the
terms of our debt agreements. Upon a change of control event, we may be
required immediately to repay the outstanding principal, any accrued interest
on and any other amounts owed by us under our credit facility or the
subordinated notes financing provided by WCAS Capital Partners III, L.P. There
can be no assurance that we would be able to repay amounts outstanding under
our credit facility or obtain necessary consents under such facility to
repurchase these notes. Any requirement to offer to purchase any outstanding
notes may result in us having to refinance our outstanding indebtedness, which
we may not be able to do. In addition, even if we were able to refinance such
indebtedness, such financing may be on terms unfavorable to us. The term
"change of control" is defined in the section "Description of the New Notes--
Certain Definitions."
26
<PAGE>
Pledge of Stock by Centennial Cellular Operating--Because we have pledged the
capital stock of many of our subsidiaries to the lenders under the credit
facility, we may encounter difficulties obtaining future financing on favorable
terms.
Centennial Cellular Operating has pledged as security the shares of all
its direct and indirect subsidiaries (other than foreign subsidiaries) to the
lenders under its credit facility. The pledge of such shares could impair our
ability to obtain future financing on favorable terms, if at all. Further, in
the event Centennial Cellular Operating were to default on its obligations
under the credit facility and the lenders were to foreclose upon such pledged
capital stock, Centennial Cellular Operating, as the holding company for such
subsidiary, would likely be unable to service or repay its indebtedness,
including the notes. See "Description of Certain Indebtedness."
Risks Related to Co-Obligor; Guarantee by Centennial Under Credit Facility--
Centennial is not restricted by the indenture governing the outstanding notes;
in addition, we conduct our operations through a holding company structure,
which leaves the parent entity unlikely to be able to service its debt
obligations if our subsidiary defaults on its obligations.
Centennial, which is a co-obligor of the notes, has no assets other than
the stock of Centennial Cellular Operating. Therefore, Centennial would be
unlikely to be able to make payments on the notes if Centennial Cellular
Operating fails to make such payments. In addition, Centennial is not be
subject to the covenants of the indenture governing the notes.
Centennial has unconditionally guaranteed all obligations of its
subsidiary, Centennial Cellular Operating, which is the borrower under the
credit facility. In the event that Centennial Cellular Operating were to
default on its obligations under the credit facility and the lenders were to
seek to enforce such guarantee, Centennial would likely be unable to service or
repay its indebtedness, including the notes. See "Description of Certain
Indebtedness."
Changes in Tax Law--Our operations in Puerto Rico, which depends in part on
business customers using our networks, may be adversely affected if changes in
tax incentives and tax benefits available to businesses in Puerto Rico cause
companies to reduce their business activities in Puerto Rico.
Section 936 of the Internal Revenue Code of 1986 was amended in 1996.
This section had historically provided tax incentives for U.S. companies to
operate in Puerto Rico and to reinvest the earnings from their Puerto Rico
operations in Puerto Rico. One result of this tax preference was to encourage
the development of business and manufacturing operations in Puerto Rico and to
make available to certain Puerto Rico businesses financing at rates below those
generally offered by commercial banks. As a result of the 1996 amendment to
Section 936, such favorable financing rates are no longer available.
The tax benefits available to corporations, such as pharmaceutical
companies, doing business in Puerto Rico phase out in annual increments through
2005. Consequently, such corporations may reduce or close their Puerto Rico
operations and may reduce their re-investments in Puerto Rico. The changes may
also reduce the incentives for new investments in Puerto Rico. We do not yet
know the full extent to which our business in Puerto Rico will be affected by
such changes in the tax law. However, if the change diminishes the overall
level of business activity in Puerto Rico, it could cause our business
customers and other cellular subscribers roaming within our coverage area to
reduce their use of telecommunications. A significant reduction in such use
would have a material adverse effect on our business and results of operations.
27
<PAGE>
Bankruptcy Risks Related to Escrow and Pledge Account--If we entered
bankruptcy, you would not be able to foreclose on the escrow funds securing the
interest payments without approval from a bankruptcy court.
If we or any of our subsidiaries commence a bankruptcy or reorganization
case, or one is commenced against us, the bankruptcy law may prevent the
trustee under the indenture governing the notes from foreclosing on and selling
the escrow funds if an event of default on the notes occurs. Under applicable
bankruptcy law, secured creditors such as the holders of the notes are
prohibited from foreclosing upon or disposing of a debtor's property without
prior bankruptcy court approval. See "Description of the New Notes--Security."
Fraudulent Conveyance--A court may conclude that we issued the outstanding
notes for inadequate consideration and at a time when we were insolvent or that
we issued the notes with intent to defraud our creditors.
We believe that we incurred the indebtedness represented by the notes for
proper purposes and in good faith. Based on current asset valuations and other
financial information, we also believe that we were solvent after issuing the
notes, consummating the merger and completing the other financings required for
the merger. We expect that we will have sufficient capital to carry on our
business and to pay our debts as they mature. See "--Significant Indebtedness
and Interest Payment Obligations." Notwithstanding this belief, however, if an
unpaid creditor or a representative of a creditor (such as a trustee in
bankruptcy or a debtor-in-possession) were to sue us in an appropriate court,
the court might find that, when we issued the notes,
(1) we incurred the indebtedness with intent to hinder, delay or defraud
any present or future creditor or we contemplated insolvency with a
design to prefer one or more creditors to the exclusion in whole or
in part of others; or
(2) we incurred the indebtedness for less than reasonably equivalent
value and, at the time, we
. were insolvent,
. were rendered insolvent by reason of such incurrence,
. were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital,
. intended to incur, or believed that we would incur, debts beyond
our ability to pay such debts as they matured or
. were a defendant in an action for money damages or had a judgment
for money damages docketed against us (in either case, if after
final judgment, the judgment remained unsatisfied).
In such event, the court could, among other things, (x) void all or a
portion of our obligations to you, the effect of which would be that you may
not be repaid in full and/or (y) subordinate our obligations to you to our
other existing and future indebtedness to a greater extent than would otherwise
be the case, the effect of which would entitle other creditors to be paid in
full before any payment could be made on the notes. We cannot assure you that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of holders of the notes.
Courts applying the laws of different jurisdictions will use different
standards to determine whether we are insolvent for purposes of the foregoing.
Generally, however, a company would be considered insolvent if the sum of the
company's debts is greater than all of the company's property at a fair
valuation, or if the present fair saleable value of the company's assets is
less than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and mature. We cannot predict what
standards a court would apply to determine whether we were solvent at the
relevant time.
28
<PAGE>
Potential Failure of Computer Systems to Recognize Year 2000--The potential
failure of our computer systems and those of third parties with whom we deal to
recognize the year 2000 could significantly disrupt our operations, causing a
decline in cash flow and revenue and other difficulties.
During fiscal 1998, we began a review of our computer systems and related
software to identify systems and software that might malfunction due to a
misidentification of the Year 2000. Most of our customer-related computer
systems and databases, including our billing systems, are managed by third
parties under contractual arrangements. We have requested those third parties
to advise us as to whether they anticipate difficulties in addressing Year 2000
problems and, if so, the nature of such difficulties. Our management has not
finally determined the cost associated with its Year 2000 readiness efforts and
the related potential impact on our results of operations. Amounts expended to
date have not been material. We cannot assure you that the systems of other
companies on which we rely, including third party billers, will be converted in
time or that any such failure to convert by another company will not have a
material adverse effect on our business, financial condition or results of
operations.
Risks Associated With Certain Changes in Senior Management--We have new senior
managers who have not operated our company in the past and other key
individuals may not stay with us when their contracts expire.
Michael J. Small, who is the President and Chief Executive Officer of
Centennial, became the Chief Executive Officer of Centennial upon the
consummation of the merger with CCW Acquisition Corp. Mr. Small has 17 years of
experience in the telecommunications industry but had no experience managing
our operations. We have employment contracts with seventeen members of senior
management, including Mr. Small, whose contract expires on September 30, 2002;
Rudy J. Graf, who is the President and Chief Executive Officer of Centennial de
Puerto Rico and Peter Chehayl, who became Senior Vice President and Chief
Financial Officer following the Merger. To the extent that these key
individuals do not remain with Centennial at the end of their respective
employment terms, such change in management could have a material adverse
effect on our company unless we can obtain a suitable replacement in a timely
manner. Our management will also be required to devote additional time and
resources toward recruitment, hiring and training to fill such positions,
which, if substantial, could result in a material adverse effect on our
business, prospects, operations or results of operations. If the senior
management team is not put into place, or if our executive officers do not
achieve their management objectives in a timely manner, our business,
prospects, operating results and ability to service our indebtedness, including
the notes, may be materially adversely affected.
Control by the Equity Investors--A group of affiliated stockholders controls
the voting power of Centennial.
Following the Merger, 92.9% of Centennial's outstanding shares of common
stock are held by Welsh Carson VIII, certain of its affiliates and certain
other equity investors. Accordingly, these equity investors will, directly or
indirectly, control our company and have the power to elect all of our
directors, appoint new management and approve or reject any action requiring
the approval of stockholders, including adopting amendments to our charter and
approving mergers and sales of all or substantially all of our assets. In
addition, the existence of a controlling stockholder may have the effect of
making it difficult for a third party to acquire, or of discouraging a third
party from seeking to acquire, a majority of the outstanding Centennial common
stock. See "Principal Stockholders" and "Certain Relationships and Related
Transactions--Equity Investor Agreements."
29
<PAGE>
Investment Interests; Capital Calls--If we do not continue to fund certain
investment partnerships in which we hold interests, our ownership in these
partnerships may be diluted.
We have a limited ability to direct the operation of any system in which
we now or in the future hold a minority investment as a limited partner. In
addition, these investment partnerships are entitled to make certain demands
for capital contributions, including to complete acquisitions by the limited
partnerships. If we do not meet such a capital call, our ownership interest in
such system may be diluted. Capital calls with respect to such investment
interests for the fiscal years ended May 31, 1998, 1997 and 1996 were
approximately $0.8 million, $2.9 million and $1.5 million, respectively. We
have, to date, paid all capital calls that we have received. Although we
anticipate that such capital calls will decrease over time, we cannot assure
you that such capital calls will, in fact, decrease. We cannot assure you that
we will be able to pay such capital calls when due. In addition, under the
indenture relating to the notes, Centennial Cellular Operating will be
permitted to dividend to Centennial all cash received from Centennial Cellular
Operating's non-subsidiary investment interests.
Equipment Failure; Natural Disaster
A major equipment failure or a natural disaster affecting any one of our
central switching offices or certain of our cell sites or microwave links could
have a material adverse effect on our business, prospects, operating results or
ability to service our indebtedness, including the notes. In particular, our
business in Puerto Rico may be materially adversely affected by events such as
hurricanes, labor strikes and the like which affect Puerto Rico generally.
Puerto Rico was hit by Hurricane Georges in September 1998 and the island
suffered significant damage as a result of the storm. After giving effect to
insurance proceeds that we expect to receive, there will be no material adverse
impact on our operating results. Other hurricanes or adverse weather conditions
that may hit the island from time to time may have a material adverse effect on
our business in Puerto Rico. Although we currently carry "business
interruption" insurance, our insurance policies may not entirely cover all
damages we may suffer.
Radio Frequency Emission Concerns
Media reports have suggested that certain radio frequency emissions from
portable cellular telephones may be linked to cancer and interfere with heart
pacemakers and other medical devices. Concerns over radio frequency emissions
and interference may have the effect of discouraging the use of cellular
telephones, which could have an adverse effect upon our business. During the
past two years, the FCC has updated its guidelines and methods for evaluating
the environmental effects of radio frequency emissions. The updated guidelines
generally are more stringent than the previous rules, based on recommendations
of federal health and safety agencies, including the Environmental Protection
Agency and the Food and Drug Administration. However, we do not believe these
guidelines will have a material impact on our operations. Among the guidelines
are limits for specific absorption rate for evaluation of certain hand-held
devices such as cellular telephones, as well as guidelines for the evaluation
of cellular transmitting facilities. We believe that the cellular telephones
currently marketed and generally used, as well as our transmission facilities,
comply with the new standards. Moreover, the FCC preempted state and local
government regulation of cellular and other personal wireless services
facilities based on radio frequency environmental effects to the extent that
such facilities comply with the FCC's rules concerning such radio frequency
emissions. Potential interference to medical devices involves primarily digital
transmissions rather than analog. Industry, government and medical experts have
been conducting tests and developing methods for reducing or eliminating such
interference.
30
<PAGE>
Absence of Public Market for the New Notes--If an active trading market does
not develop, you may have difficulties reselling the notes.
The notes are being offered to the holders of the outstanding notes. The
outstanding notes were sold to the initial purchasers on December 14, 1998 and
then resold to "qualified institutional buyers" (as defined in Rule 144A under
the Securities Act) and pursuant to offers and sales outside the United States
within the meaning of Regulation S under the Securities Act and are eligible
for trading in the Private Offerings, Resale and Trading through Automated
Linkages (PORTAL) market. The new notes are securities for which there
currently is no market. If the new notes are traded, they may trade at a
discount from their face value, depending upon prevailing interest rates, the
market for similar securities and other factors. We do not intend to apply for
listing of the notes on any securities exchange or the Nasdaq National Market.
Accordingly, we cannot assure you that a liquid trading market for the notes
will develop.
Historically, there has been substantial volatility in the market for
non-investment grade debt, such as the notes, due to market disruptions. This
volatility has increased in recent months and the liquidity of non-investment
grade securities has declined significantly. We cannot assure you that the
market, if any, for the notes will not be subject to similar disruptions. Any
such disruptions may have a material adverse effect on the holders of the
notes.
Consequences of the Exchange Offer to Non-Tendering Holders of the Outstanding
Notes--If you do not exchange your notes for new notes, your outstanding notes
may trade at discount because you may not be able to transfer such notes.
In the event the exchange offer is consummated, we will not be required
to register the old notes under the Securities Act. In such event, the notes
would rank pari passu with the outstanding notes, and the holders of
outstanding notes seeking liquidity in their investment would have to rely on
exemptions from registration requirements under the securities laws, including
the Securities Act. A reduction of the aggregate principal amount of the
currently outstanding notes as a result of the consummation of the exchange
offer may have an adverse effect on the ability of holders of the outstanding
notes to transfer such notes.
31
<PAGE>
THE MERGER
The following is a summary of the structure of the merger that was
consummated on January 7, 1999. This summary does not purport to be complete
and is qualified in its entirety by reference to the merger agreement, a copy
of which has been filed with the SEC.
Structure of the Merger
Pursuant to the merger agreement and subject to the terms and conditions
set forth in the merger agreement, CCW Acquisition Corp. merged with and into
Centennial and Centennial was the surviving corporation in the merger. At the
effective time of the merger, by virtue of the merger,
. each issued and outstanding share of Class A Common Stock, par value
$.01 per share, of Centennial was converted into the right to
receive, subject to proration so that the total number of common
shares of the surviving corporation received by the holders of
Centennial common shares immediately before the merger was equal to
7.1% of the common shares of the surviving corporation outstanding
immediately after the effective time of the merger, either (a) one
common share of the surviving corporation or (b) $41.50 in cash;
. all outstanding shares of Class B Common Stock, par value $.01 per
share, were converted into the right to receive; $41.50 in cash; and
. all outstanding shares of Convertible Preferred Stock and Second
Series Convertible Preferred Stock of Centennial were converted into
the right to receive $41.50 in cash as if such shares had been
converted into shares of Centennial.
The surviving corporation in the merger continues to operate under the
name "Centennial Cellular Corp."
Financing of the Merger
A total of approximately $1.87 billion was required to pay the cash
consideration to Centennial stockholders in the merger, repay our indebtedness
(including the purchase of tendered notes in debt tender offers), pay the
related fees and expenses and purchase pledged securities. See "Summary--The
Merger--Sources and Uses of Funds." The sources of funding for the merger and
the related transactions were the credit facility, the financing from WCAS
Capital Partners III, L.P., the common equity contribution and the offering of
the old notes (collectively, the "Merger Financing").
In connection with the merger, Centennial Cellular Operating and its
Puerto Rico subsidiary borrowed approximately $936.0 million under the $1,050
million credit facility. A group of lenders provided Centennial Cellular
Operating with the credit facility, consisting of an $900 million term loan
facility and a $150 million revolving credit facility. See "Description of
Certain Indebtedness."
WCAS Capital Partners III, L.P., an investment partnership affiliated
with Welsh Carson VIII, purchased, at the time of the consummation of the
merger, unsecured subordinated notes due 2009 of Centennial and common shares
of Centennial at an aggregate price of $180 million. In addition, the other
equity investors made a common equity contribution of $400 million to purchase
common shares at the time of the consummation of the merger. In total, the
equity investors owned 9,638,554 common shares immediately following the
consummation of the Merger (prior to giving effect to a three-for-one stock
split effected on January 8, 1999).
32
<PAGE>
Debt Tender Offers and Solicitations
In connection with the merger, Centennial consummated debt tender offers
to acquire approximately 99% of its outstanding notes due 2001 and 2005 and to
eliminate the interest expense associated with the old notes. Pursuant to
consent solicitations which were made in order to enhance our operating and
financial flexibility of, Centennial entered into supplemental indentures,
approved by the required number of holders of the tendered notes, to eliminate
most of the restrictive covenants contained in the indentures governing the
tendered notes and to amend certain other provisions contained in such
indentures. As of the expiration date of the debt tender offers, valid
irrevocable tenders and consents had been received from 99.4% of holders of
notes due 2001 and 99.8% of holders of the notes due 2005. From time to time in
the future, we may seek to acquire any notes due 2001 and 2005 that remain
outstanding following the consummation the debt tender offers, through open
market purchases, privately negotiated transactions, tender offers, exchange
offers or otherwise, upon such terms and at such prices as it may determine,
which may be more or less than the price to be paid in the related debt tender
offer and could be for cash or other consideration. In addition, we may elect
to redeem or defease any notes due 2001 or 2005 that remain outstanding in
accordance with the terms of the applicable note indenture.
33
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the issuance of new notes pursuant
to the exchange offer. The offering of notes resulted in net proceeds to us, as
the successor to Centennial Finance Corp., and Centennial Cellular Operating of
approximately $357.1 million (after payment of underwriting discounts and other
issuance costs totaling approximately $12.9 million). The net proceeds from the
offering, the mezzanine financing and the common equity contribution, together
with borrowings under the credit facility, were used to (i) fund payment of the
cash consideration in the merger, (ii) repay or repurchase certain indebtedness
of Centennial (including the purchase of notes tendered in the debt tender
offers), (iii) pay the fees and expenses incurred in connection with the
merger, the Merger Financings and the other transactions contemplated by the
merger agreement, and (iv) purchase the pledged securities.
The following table sets forth the sources and uses of funds in
connection with the financing of the merger as of the merger's consummation on
January 7, 1999:
<TABLE>
<CAPTION>
Amount
---------------------
(Dollars in millions)
<S> <C>
Sources of Funds
Credit facility(1)...................................... $ 936.0
Old notes(2)............................................ 370.0
Mezzanine financing of parent (Centennial)(3)........... 180.0
Common equity contribution.............................. 400.0
--------
Total Sources of Funds................................ $1,886.0
========
Uses of Funds
Cash merger consideration(4)............................ $1,210.7
Repayment of net existing indebtedness and preferred
dividends accrued(5)................................... 535.4
Restricted interest escrow investment(2)................ 57.5
Premiums on debt tender offers for tendered notes(6).... 39.8
Fees and expenses(7).................................... 42.6
--------
Total Uses of Funds................................... $1,886.0
========
</TABLE>
- --------
(1) The credit facility consists of three term loans in aggregate principal
amount of $900 million and a revolving credit facility in an aggregate
principal amount of up to $150 million. The borrowers under these
facilities are Centennial Cellular Operating and, for a portion thereof,
Centennial de Puerto Rico. Centennial, together with the direct and
indirect subsidiaries of Centennial Cellular Operating (excluding initially
Centennial de Puerto Rico and its subsidiaries, which subsidiaries have
guaranteed the obligations of Centennial de Puerto Rico under the credit
facility), have unconditionally guaranteed, jointly and severally, the
obligations of the borrowers under such facilities. See "Description of
Certain Indebtedness."
(2) Upon consummation of the merger, approximately $57.5 million of the
proceeds from the old notes was deposited with the trustee to purchase
pledged securities to pay the first three scheduled interest payments on
the notes at the stated interest rate. See "Description of the New Notes--
Security."
(3) WCAS Capital Partners III, L.P., an investment partnership affiliated with
Welsh Carson VIII, purchased, at the time of the consummation of the
merger, unsecured subordinated notes due 2009 and common shares of
Centennial at an aggregate price of $180 million. The issuance of $180
million principal amount of Mezzanine Financing has been allocated as
$157.5 million debt and $22.5 million equity.
(4) Includes $1,033.1 million in consideration for the Centennial common
shares, $128.2 million in consideration for the Centennial common shares
issued upon conversion of Centennial's preferred stock
34
<PAGE>
and $49.4 million in consideration for the settlement of outstanding options
to purchase Centennial common shares.
(5) Represents the amount of debt tender offer payments and funds required to
repay total existing indebtedness of Centennial. In connection with the
merger, Centennial consummated the debt tender offers to acquire its
outstanding 8 7/8% Senior Notes due 2001 and 10 1/8% Senior Notes due 2005.
At the expiration of the debt tender offers, Centennial paid consent
solicitation fees and tender offer payments to 99.4% of holders of the
notes due 2001 and 99.8% of holders of the notes due 2005. The amount
required to repay existing indebtedness and preferred dividends accrued
includes accrued interest of $6.9 million and preferred dividends of $18.1
million.
(6) The amount required to pay the debt tender premiums associated with the
debt tender offers for the outstanding notes due 2001 and 2005. The amount
shown above includes the consent solicitation fees associated with the debt
tender offers.
(7) Assumed for simplicity to be paid by Centennial and includes all fees and
expenses related to the merger, the offering of old notes and related
transactions.
35
<PAGE>
THE EXCHANGE OFFER
Terms of the Exchange Offer
The holders of the notes currently are entitled to certain registration
rights under a registration rights agreement. Pursuant to the registration
rights agreement, we became obligated to file with the SEC a registration
statement covering the offer by us to the holders of the notes to exchange all
of the notes for the new notes. This exchange offer, if consummated, will
satisfy our obligations under the registration rights agreement.
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept all properly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. We will issue $1,000 principal amount of new notes in exchange
for each $1,000 principal amount of outstanding notes accepted in the exchange
offer. Holders may tender some or all of their notes pursuant to the exchange
offer.
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that the new notes issued pursuant
to the exchange offer in exchange for notes may be offered for resale, resold
and otherwise transferred by the holders thereof (other than any such holder
that is our "affiliate" within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such new notes are acquired in
the ordinary course of such holders' business, and such holders have no
arrangement with any person to participate in the distribution of such new
notes. See Morgan Stanley & Co., Inc., SEC No-Action Letter (available June 5,
1991), Exxon Capital Holdings Corporation, SEC No-Action Letter (available May
13, 1988), and Shearman & Sterling, SEC No-Action Letter (available July 2,
1993).
If you were to be participating in the exchange offer for the purposes of
distributing securities in a manner not permitted by the SEC's interpretation,
you (i) could not rely on the position of the staff of the SEC enunciated in
Exxon Capital Holdings Corporation or similar interpretive letters and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. The letter of transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of new notes
received in exchange for notes where such notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities. See
"Plan of Distribution."
As of the date of this prospectus, there was $370,000,000 aggregate
principal amount of the notes outstanding. This prospectus, together with the
letter of transmittal, is being sent to all such registered holders as of the
date of this prospectus.
We shall be deemed to have accepted validly tendered notes when, as and
if we have given written notice of acceptance to the exchange agent. The
Exchange Agent will act as agent for the tendering holders of notes for the
purposes of receiving the new notes from us and delivering new notes to the
tendering holders.
If any tendered notes are not accepted for exchange because of an invalid
tender, certificates for any such unaccepted notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
expiration date.
36
<PAGE>
If notes are not tendered, they will remain outstanding and will continue
to accrue interest from their date of issue, December 14, 1998, at a rate of 10
3/4% per annum.
In the event the exchange offer is consummated, we will not be required
to register the notes that are not tendered. In such event, holders of notes
seeking liquidity in their investment would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act. See "Risk Factors--Consequences of the Exchange Offer to Non-Tendering
Holders of the notes."
The term "expiration date" means the expiration date set forth on the
cover page of this prospectus, unless we, in our discretion, extend the
exchange offer, in which case the term "expiration date" means the latest date
to which the exchange offer is extended.
In order to extend the expiration date, we will notify the exchange agent
of any extension by written notice and will mail to the record holders of notes
an announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date. Such
announcement may state that we are extending the exchange offer for a specified
period of time.
In addition, we will issue notice of each such extension by press release
or other public announcement as contemplated by the provisions of Rule 14e-1
promulgated under the exchange act.
Interest on the New Notes
The notes will bear interest from December 14, 1998, payable semiannually
on June 15 and December 15 of each year, commencing June 15, 1999, at a rate of
10 3/4% per annum.
Procedures for Tendering
The tender to us of notes by you pursuant to one of the procedures set
forth below will constitute an agreement between you and us in accordance with
the terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
You may tender your notes by
. properly completing and signing the letter of transmittal or a
facsimile of the letter of transmittal (all references in this
prospectus to the letter of transmittal will be deemed to include a
facsimile) and delivering the letter of transmittal, together with
the certificate or certificates representing the notes being
tendered and any required signature guarantees, to the exchange
agent at its address set forth on the back cover of this prospectus
on or prior to the expiration date (or complying with the procedure
for book-entry transfer described below), or
. complying with the guaranteed delivery procedures described below.
If your tendered notes are registered in the name of the signer of the
letter of transmittal and the notes to be issued in exchange for your notes are
to be issued (and any untendered notes are to be reissued) in the name of the
registered holder (which term, for the purposes described in this prospectus,
shall include any participant in The Depository Trust Company (also referred to
as a book-entry transfer facility) whose name appears on a security listing as
the owner of notes), the signature of such signer need not be guaranteed. In
any other case, your tendered notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to us and duly executed by the
registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a commercial bank or trust company located or
having an office or correspondent in the United States, or by a member firm of
a national securities exchange or of the National Association of Securities
Dealers, Inc., which firm must also be a member of or participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock
37
<PAGE>
Exchanges Medallion Program (any of these banks, trust company or member firms
are referred to as an "eligible institution"). If the notes and/or notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the notes, the signature in the
letter of transmittal must be guaranteed by an eligible institution.
The method of delivery of notes and all other documents is at your
election and risk. If you send your certificates, letters of transmittal and
related documents by mail, it is recommended that you use registered mail,
return receipt requested, and the mailing be made sufficiently far in advance
of the expiration date to permit delivery to the exchange agent on or before
the expiration date.
The exchange agent will make a request promptly after the date of this
prospectus to establish accounts with respect to the notes at the book-entry
transfer facility for the purpose of aiding the exchange offer, and subject to
the establishment of these accounts, any financial institution, that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of notes by causing such book-entry transfer facility to transfer
notes into the exchange agent's account with respect to the notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of notes may be effected through book-entry transfer into the exchange
agent's accounts at the book-entry transfer facility, an appropriate letter of
transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
exchange agent at its address set forth on the back cover page of this
prospectus on or prior to the expiration date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures.
If you desire to accept the exchange offer, and
. time will not permit a letter of transmittal or notes to reach the
exchange agent before the expiration date, or
. the procedure for book-entry transfer cannot be completed on a
timely basis,
a tender may be effected if the Exchange Agent has received at its office
listed on the back cover of this prospectus on or prior to the expiration date
a letter, telegram or facsimile transmission from an eligible institution
setting forth your name and address, the names in which the notes are
registered and, if possible, the certificate numbers of your notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange trading days after the date of
execution of such letter, telegram or facsimile transmission by the eligible
institution, the notes, in proper form for transfer (or a confirmation of book-
entry transfer of such notes into the Exchange Agent's account at the book-
entry transfer facility), will be delivered by such eligible institution
together with a properly completed and duly executed letter of transmittal (and
any other required documents). Unless notes being tendered by the above-
described method are deposited with the exchange agent within the time period
set forth above (accompanied or preceded by a properly completed letter of
transmittal and any other required documents), we may, at our option, reject
the tender. Copies of a notice of guaranteed delivery which may be used by
eligible institutions for the purposes described in this paragraph are
available from the exchange agent.
Your tender will be deemed to have been received as of the date when
. your properly completed and duly signed letter of transmittal
accompanied by the notes (or a confirmation of book-entry transfer
of such notes into the exchange agent's account at the book-entry
transfer facility) is received by the exchange agent, or (ii) a
notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an eligible
institution is received by the exchange agent. Issuances of new
notes in exchange for notes tendered pursuant to a notice of
guaranteed delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an eligible institution will
be made only against deposit of the Letter of Transmittal (and any
other required documents) and the tendered notes.
38
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of notes will be determined
by us, which determination will be final and binding. We reserve the absolute
right to reject any or all tenders not in proper form or the acceptance for
exchange of which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any of the conditions of the exchange offer
or any defect or irregularity in the tender of any notes. None of us, the
exchange agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give such notification.
By tendering, you will represent to us that, among other things, (i) the
notes acquired pursuant to the exchange offer are being obtained in the
ordinary course of your business, (ii) you have no arrangement with any person
to participate in the distribution of such new notes, (iii) you are not an
"affiliate," as defined under Rule 405 of the Securities Act, of us, and (iv)
if you are a broker or a dealer (as defined in the Exchange Act), that you
acquired the notes for your own account as a result of market-making activities
on other trading activities and that you have not entered into any arrangement
or understanding with us or any of our "affiliates" to distribute the new notes
received in the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the expiration date.
To withdraw a tender of notes in the exchange offer, a written
transmission notice of withdrawal via telegram, telex, facsimile transmission
or letter must be received by the exchange agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the expiration date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the notes to be withdrawn (the "Depositor"), (ii) identify the notes to be
withdrawn (including the certificate number or numbers and principal amount of
such notes), (iii) be signed by the Depositor in the same manner as the
original signature on the Letter of Transmittal by which such notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee with respect to the notes
register the transfer of such notes into the name of the depositor withdrawing
the tender, and (iv) specify the name in which any such notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by us, which determination shall be final and
binding on all parties. Any notes you withdrew will be deemed not to have been
validly tendered for purposes of the exchange offer, and no new notes will be
issued to you with respect thereto unless the notes so withdrawn are validly
retendered. Any notes that have been tendered but that are not accepted for
exchange will be returned to them as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
notes may be retendered by following one of the procedures described above
under "Procedures for Tendering" at any time prior to the expiration date.
Conditions
The exchange offer is not subject to any conditions other than that the
exchange offer does not violate applicable law or any applicable interpretation
of the staff of the SEC.
39
<PAGE>
Exchange Agent
[ ] has been appointed as exchange agent for the exchange offer.
Questions and requests for assistance and requests for additional copies of
this prospectus or of the letter of transmittal and deliveries of completed
letters of transmittal with tendered notes should be directed to the exchange
agent addressed as follows:
By Hand/Overnight Express:
By Mail:
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
Fees and Expenses
The expenses of soliciting tenders pursuant to the exchange offer will be
borne by us. The principal solicitation for tenders pursuant to the exchange
offer is being made by mail. Additional solicitations may be made by our
officers and regular employees and their affiliates in person, by telegraph or
telephone.
We will not make any payments to brokers, dealers, or other persons
soliciting acceptances of the exchange offer. We will, however, pay the
exchange agent reasonable and customary fees for its services and will
reimburse the exchange agent for its reasonable out-of-pocket expenses in
connection with the exchange offer. We may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, letters of
transmittal and related documents to you in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and accounting
and legal fees, but not including transfer taxes, if any, relating to the sale
or disposition of the notes by you, will be paid by us, and are estimated in
the aggregate to be $ .
40
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
Centennial and Centennial Cellular Operating as of February 28, 1999. You
should read this table with "The Merger," the unaudited consolidated financial
statements of Centennial, including the notes to the unaudited consolidated
financial statements for the nine months ended February 28, 1999, incorporated
by reference into this prospectus and the unaudited pro forma financial
statements included in this prospectus. See "Unaudited Pro Forma Financial
Information."
<TABLE>
<CAPTION>
As of February 28, 1999
------------------------------
Centennial
Centennial Cellular Operating
---------- ------------------
(Dollars in thousands)
<S> <C> <C>
Cash........................................... $ 33,914 $ 33,914
========== ==========
Restricted investments(1)...................... $ 57,501 $ 57,501
========== ==========
Debt (including current portion):
Credit facility(2)............................. $ 933,875 $ 933,875
Notes issued in the offering(1)................ 370,000 370,000
Notes issued in WCAS Capital Partners
financing(3).................................. 157,875 --
Senior notes due 2001 and 2005................. 1,607 1,607
---------- ----------
Total debt..................................... 1,463,357 1,305,482
Stockholders' deficit.......................... (605,800) (447,925)
---------- ----------
Total capitalization........................... $ 857,557 $ 857,557
========== ==========
</TABLE>
- --------
(1) Upon consummation of the merger, approximately $57,501 of the proceeds from
the notes were used to purchase securities pledged to pay the first three
scheduled interest payments on the notes. See "Description of the New
Notes--Security."
(2) Centennial has the ability to borrow an additional $116,125 for general
corporate purposes pursuant to a revolving credit facility under the credit
facility.
(3) Represents the debt portion of $180,000 principal amount of subordinated
notes and Centennial common shares issued in the financing provided by WCAS
Capital Partners III, L.P.
41
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
The following table sets forth certain selected unaudited historical
consolidated financial information for Centennial and its subsidiaries (i) as
of February 28, 1999 and 1998 and for the nine months ended February 28, 1999
and 1998 and (ii) for the five years ended May 31, 1998. You should read this
table with "Use of Proceeds," "Unaudited Pro Forma Financial Information" and
the consolidated financial statements, including in each case the notes to
those financial statements, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Nine months ended
February 28, Years ended May 31,
---------------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Domestic operating
revenue................ $ 174,980 $ 133,953 $ 182,944 $ 145,120 $ 112,197 $ 85,419 $ 56,373
Puerto Rico operating
revenue................ 87,611 35,752 54,557 5,903 -- -- --
---------- ---------- ---------- ---------- ---------- --------- ---------
Total operating
revenue................ 262,591 169,705 237,501 151,023 112,197 85,419 56,373
Cost of services and
equipment sold......... 50,783 42,248 54,818 38,228 26,129 22,152 13,424
---------- ---------- ---------- ---------- ---------- --------- ---------
Gross profit............ 211,808 127,457 182,683 112,795 86,068 63,267 42,949
Selling, general and
administrative......... 81,460 62,142 81,790 55,132 34,188 26,055 17,787
Depreciation and
amortization........... 97,702 82,637 114,194 83,720 70,989 65,642 47,652
Recapitalization costs.. 58,852 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- --------- ---------
Operating loss.......... (26,206) (17,322) (13,301) (26,057) (19,109) (28,430) (22,490)
Interest expense--net... 48,553 31,801 45,155 33,379 27,886 23,357 21,040
Gain on sale of assets.. 8,414 8 5 3,819 8,310 -- --
Income from Minority
Cellular Investment
Interests(1)........... 9,352 9,843 13,069 15,180 10,473 4,670 3,645
---------- ---------- ---------- ---------- ---------- --------- ---------
Loss before income tax
benefit and minority
interest............... (56,993) (39,272) (45,382) (40,437) (28,212) (47,117) (39,885)
Income tax benefit...... (10,114) (13,527) (13,597) (7,295) (11,596) (14,456) (11,780)
Minority interest in
income (loss) of
subsidiaries(2)........ 142 (337) 162 153 15 69 (321)
---------- ---------- ---------- ---------- ---------- --------- ---------
Loss from continuing
operations............. (46,737) (26,082) (31,947) (33,295) (16,631) (32,730) (27,784)
Extraordinary loss on
early extinguishment of
debt, net of tax....... (40,526) 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- --------- ---------
Net loss................ $ (87,263) $ (26,082) $ (31,947) $ (33,295) $ (16,631) $ (32,730) $ (27,784)
========== ========== ========== ========== ========== ========= =========
Other Consolidated Data:
EBITDA(3)............... $ 130,348 $ 65,315 $ 99,208 $ 55,852 $ 47,793 $ 34,444 $ 24,080
EBITDA margin........... 49.6% 38.5% 42.1% 37.4% 44.2% 41.7% 43.6%
Cash flows provided by
(used in):
Operating activities... $ 98,654 $ 46,196 $ 54,771 $ 26,956 $ 24,282 $ 10,390 $ (3,558)
Investing activities... (51,262) (99,290) (126,111) (118,094) (78,765) (79,834) (64,749)
Financing activities... (28,098) 24,274 42,545 67,256 152 182,722 65,702
Capital expenditures.... 69,819 103,187 129,300 88,990 38,082 17,538 8,947
Net Pops(4)(5).......... 10,846,000 10,846,000 10,846,000 10,846,000 10,661,000 6,491,500 5,020,400
Subscribers(4).......... 426,700 298,500 322,200 203,900 135,000 85,900 49,000
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Nine months ended
February 28, Years ended May 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except as noted)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Rural Cellular
Data:
EBITDA(3)............... $ 91,520 $ 60,249 $ 86,669 $ 64,278 $ 48,208 $ 34,511 $ 24,080
EBITDA margin........... 52.3% 45.0% 47.8% 44.9% 44.6% 41.8% 43.6%
Capital expenditures.... $ 25,130 $ 31,363 $ 38,996 $ 38,921 $ 22,604 $ 17,319 $ 8,947
Net Pops (excluding
Minority Cellular
Investment
Interests)(4)(5)....... 5,831,000 5,777,000 5,777,000 5,777,000 5,592,000 5,412,100 3,941,000
Subscribers............. 309,300 237,900 252,700 187,000 135,000 85,900 49,000
Penetration(4)(6)....... 5.3% 4.1% 4.4% 3.2% 2.4% 1.6% 1.2%
Churn rate.............. 1.9% 1.8% 1.8% 2.3% 2.5% 2.5% 3.0%
Average monthly revenue
per unit (actual
dollars)(7)............ $ 69 $ 70 $ 68 $ 73 $ 74 $ 68 $ 69
Acquisition cost per
cellular customer
(actual dollars)(8).... $ 316 $ 307 $ 308 $ 343 $ 351 $ 431 $ --
Cell sites(4)........... 400 329 363 212 185 -- --
Retail and service
centers(4)............. 69 58 59 41 25 -- --
Other Centennial de
Puerto Rico Data:
EBITDA(3)............... $ 38,828 $ 5,066 $ 12,539 $ (8,426) $ (415) $ (67) --
EBITDA margin........... 44.3% 14.2% 23.1% n.a. n.a. n.a. --
Capital expenditures.... $ 44,689 $ 71,824 $ 90,304 $ 50,069 $ 15,478 $ 219 --
Net Pops(4)............. 3,839,000 3,839,000 3,839,000 3,839,000 3,839,000 -- --
Subscribers(4).......... 117,400 60,600 69,500 16,900 -- -- --
Penetration(4)(6)....... 3.1% 1.6% 1.8% 0.4% -- -- --
Churn rate.............. 3.5% 4.0% 4.6% 2.6% -- -- --
Average monthly revenue
per unit (actual
dollars)(7)............ $ 91 $ 94 $ 92 $ 113 -- -- --
Acquisition cost per
cellular customer
(actual dollars)(8).... $ 203 $ 166 $ 164 $ 310 -- -- --
Cell sites(4)........... 125 109 113 74 -- -- --
Retail and service
centers(4)............. 51 35 44 25 -- -- --
</TABLE>
<TABLE>
<CAPTION>
As of February 28, As of May 31,
-------------------- --------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total Assets............ $ 956,672 $837,056 $847,417 $844,850 $785,812 $844,384 $502,384
Long-term Debt.......... 1,458,857 490,000 510,000 429,000 350,000 350,000 250,000
Redeemable preferred
stock.................. 0 193,539 193,539 193,539 189,930 176,340 163,706
Common stockholders'
equity (deficit)....... (605,800) 51,205 40,409 112,882 160,006 188,831 24,143
</TABLE>
- --------
(1) Represents our proportionate share of profits and losses based on our
interest in earnings of limited partnerships controlled and managed by
other cellular operators which we account for on the equity method.
(2) Represents the percentage share of earnings of our consolidated
subsidiaries that is allocable to unaffiliated holders of minority
interests.
(3) EBITDA is defined, for any period, as earnings before income from minority
cellular investment interests that are controlled and managed by third
parties, allocations to minority interests in consolidated subsidiaries,
interest expense, interest income, income taxes, depreciation and
amortization, recapitalization costs, extraordinary loss on early
extinguishment of debt and gain on sale of assets. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness. EBITDA should not be considered an
alternative to net income as a measure of our operating results or to cash
flow as a measure of liquidity. In addition, although the EBITDA measure of
performance is not recognized under generally accepted accounting
principles, it is widely used by
43
<PAGE>
various companies as a general measure of a company's performance because it
assists in comparing performance on a relatively consistent basis across
companies without regard to depreciation and amortization, which can vary
significantly depending on accounting methods (particularly where
acquisitions are involved) or non-operating factors such as historical cost
bases. Because EBITDA is not calculated identically by all companies, the
presentation herein may not be strictly comparable to other similarly titled
measures of other companies.
(4) As of period-end.
(5) For the years ended May 31, 1995 and May 31, 1994, the number of Net Pops
is based on 1990 population figures of a metropolitan service area or a
rural service area, as derived from the 1990 U.S. Census data.
(6) The penetration rate equals the percentage of total population in our
service areas who are subscribers to our cellular service as of period-end.
(7) ARPU is defined as total monthly revenue per average subscriber.
(8) For the year ended as of the date shown. Determined for each period as
total marketing cost plus cost of equipment sales (net of associated
revenue), divided by the total subscriber activations during the fiscal
year.
44
<PAGE>
CENTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following pro forma consolidated financial statements have been
derived by the application of pro forma adjustments to Centennial's historical
consolidated financial statements incorporated by reference into this
prospectus. The unaudited pro forma statements of operations and other
unaudited pro forma supplemental financial information gives effect to (i) the
Merger Financings and (ii) the debt tender offers and the repayment or
conversion of other existing indebtedness of Centennial. The pro forma
statements of operations information for the fiscal year ended May 31, 1998 and
the nine months ended February 28, 1999 have been prepared as if such
transactions had occurred at June 1, 1997. The adjustments are described in the
accompanying notes. You should not consider the pro forma consolidated
financial statements to be indicative of actual results that would have been
achieved had the merger and related transactions been consummated on the date
or for the periods indicated and do not purport to indicate results of
operations as of any future date or for any future period. You should read the
pro forma consolidated financial statements with Centennial's historical
financial statements and the notes to the historical financial statements
incorporated by reference in this prospectus.
A pro forma balance sheet as of February 28, 1999 is not presented
because the merger occurred on January 7, 1999. Accordingly, the February 28,
1999 historical consolidated balance sheets include the events described above.
The pro forma adjustments were applied to the respective historical
consolidated financial statements to reflect and account for the merger as a
recapitalization. Accordingly, the historical basis of the Centennial's assets
and liabilities have not been affected by the transaction.
45
<PAGE>
CENTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
Unaudited Pro Forma Statement of Operations
For the Year Ended May 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
------------------------
Centennial
Pro Forma Cellular
Historical Adjustments Centennial Operating(a)
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Service revenue......... $ 231,097 $ -- $ 231,097 $ 231,097
Equipment sales......... 4,719 -- 4,719 4,719
Interest income......... 1,685 (1,685)(b) -- --
--------- --------- --------- ---------
237,501 (1,685) 235,816 235,816
--------- --------- --------- ---------
Cost and expenses:
Cost of cellular
service................ 38,389 -- 38,389 38,389
Cost of equipment sold.. 16,429 -- 16,429 16,429
Selling, general and
administrative......... 81,790 750 (c) 82,540 82,540
Depreciation and
amortization........... 114,194 -- 114,194 114,194
--------- --------- --------- ---------
250,802 750 251,552 251,552
--------- --------- --------- ---------
Operating loss............ (13,301) (2,435) (15,736) (15,736)
Interest expense.......... 45,155 109,029 (e) 154,184 131,273
Gain on sale of assets.... 5 -- 5 5
Income from equity
investments.............. 13,069 -- 13,069 13,069
--------- --------- --------- ---------
Loss before income tax
benefit and minority
interests................ (45,382) (111,464) (156,846) (133,935)
Income tax benefit........ (13,597) -- (f) (13,597) (13,597)
--------- --------- --------- ---------
Loss before minority
interest................. (31,785) (111,464) (143,249) (120,338)
Minority income in income
of subsidiaries.......... (162) -- (162) (162)
--------- --------- --------- ---------
Net loss.................. $ (31,947) $(111,464) $(143,411) $(120,500)
========= ========= ========= =========
Dividend on preferred
stock.................... $ 16,451 $ (16,451)(g) -- --
========= ========= ========= =========
Net loss applicable to
common stock............. $ (48,398) $ (95,013) $(143,411) $(120,500)
========= ========= ========= =========
Other Data:
EBITDA(h)............... $ 99,208 $ (750) $ 98,458 $ 98,458
Depreciation and
amortization........... 114,194 -- 114,194 114,194
Cash flows provided by
(used in):
Operating activities.... 54,771 (91,469) (36,698) (27,499)
Investing activities.... (126,111) -- (126,111) (126,111)
Financing activities.... 42,545 -- 42,545 42,545
Pro forma ratio of
earnings to fixed
charges(i)............... -- -- -- --
</TABLE>
See Notes to Pro Forma Statements of Operations.
46
<PAGE>
CENTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended February 28, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
-----------------------
Centennial
Pro Forma Cellular
Historical Adjustments Centennial Operating(a)
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Service revenue........... $257,209 $ -- $257,209 $257,209
Equipment sales........... 5,382 -- 5,382 5,382
-------- -------- -------- --------
Revenue..................... 262,591 -- 262,591 262,591
-------- -------- -------- --------
Cost and expenses:
Cost of cellular service.. 35,347 -- 35,347 35,347
Cost of equipment sold.... 15,436 -- 15,436 15,436
Selling, general and
administrative........... 81,460 563 (c) 82,023 82,023
Depreciation and
amortization............. 97,702 -- 97,702 97,702
Recapitalization expenses... 58,852 (58,852)(d) -- --
-------- -------- -------- --------
288,797 58,289 230,508 230,508
-------- -------- -------- --------
Operating income (loss)..... (26,206) 58,289 32,083 32,083
Interest expense, net....... 48,553 66,483 (e) 115,036 98,456
Gain on sale of assets...... 8,414 -- 8,414 8,414
Income from equity
investments................ 9,352 -- 9,352 9,352
-------- -------- -------- --------
Loss before income tax
benefit and minority
interests.................. (56,993) (8,194) (65,187) (48,607)
Income tax benefit.......... (10,114) -- (f) (10,114) (10,114)
-------- -------- -------- --------
Income (loss) before
minority interest.......... (46,879) (8,194) (55,073) (38,493)
Minority interest in income
of subsidiaries............ 142 -- 142 142
-------- -------- -------- --------
Loss from continuing
operations................. $(46,737) $ (8,194) $(54,931) $(38,351)
======== ======== ======== ========
Dividend on preferred
stock...................... $ 9,906 $ (9,906)(g) -- --
======== ======== ======== ========
Loss from continuing
operations applicable to
common stock............... $(56,643) $ -- $(54,931) $(38,351)
======== ======== ======== ========
Other Data:
EBITDA(h)................. $130,348 $ (563) $129,785 $129,785
Depreciation and
amortization............. 97,702 -- 97,702 97,702
Cash flows provided by (used
in):
Operating activities...... 98,654 (54,058) 44,596 53,506
Investing activities...... (51,262) -- (51,262) (51,262)
Financing activities...... (28,098) -- (28,098) (28,098)
</TABLE>
See Notes to Pro Forma Statements of Operations.
47
<PAGE>
CENTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
(Dollars in thousands)
The pro forma financial data have been derived by the application of pro
forma adjustments to Centennial's historical financial statements for the
periods noted. The merger has been accounted for as a recapitalization.
Accordingly, the historical basis of Centennial's assets and liabilities have
not been affected by the transaction. The pro forma financial data assume that
there were no dissenting stockholders to the merger.
(a) The pro forma statement of operations of Centennial Cellular
Operating includes all of the same adjustments made for Centennial noted below
except interest expense related to the subordinated notes described in the
table under note (e).
(b) To eliminate interest income on overnight deposits.
(c) Represents estimated monitoring fee to be paid to affiliates of Welsh
Carson VIII and Blackstone.
(d) The pro forma statements of operations for the year ended May 31,
1998 do not include any adjustments for one-time non-recurring expenses
incurred at the closing of the recapitalization by Centennial and Centennial
Cellular Operating. Such amounts are recorded in the Statement of Operations
for the nine months ended February 28, 1999 and are deducted as an adjustment
in determining pro forma loss for the period.
(e) The pro forma adjustments to interest expense reflect the following:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
May 31, 1998 February 28, 1999
--------------------------------- ---------------------------------
Consolidated Centennial Consolidated Centennial
(including Parent) Rural Cellular (including Parent) Rural Cellular
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Credit Facility
Revolving credit
facility(1).......... $ 3,128 $ 3,128 $ 2,346 $ 2,346
Tranche A term
loans(2)............. 43,450 43,450 32,588 32,588
Tranche B term
loans(3)............. 18,380 18,380 13,785 13,785
Tranche C term
loans(4)............. 18,880 18,880 14,160 14,160
Notes issued in the
offering(5)............ 39,775 39,775 29,831 29,831
Notes issued in the WCAS
Capital Partners
financing(6)........... 9,199 -- 8,910 --
Commitment fee(7)....... 570 570 428 428
-------- -------- -------- --------
Cash Interest Expense... 133,382 124,183 102,048 93,138
Notes issued in the WCAS
Capital Partners
Financing(8)........... 11,441 -- 5,967 --
Amortization of discount
on subordinated
notes(9)............... 2,271 -- 1,703 --
Amortization of debt
issuance costs(10)..... 7,090 7,090 5,318 5,318
-------- -------- -------- --------
Pro forma interest
expense................ 154,184 131,273 115,036 98,456
Less: historical
interest expense on
debt repaid(11)........ (45,155) (45,155) (48,553) (48,553)
-------- -------- -------- --------
Total adjustment.... $109,029 $ 86,118 $ 66,483 $ 49,903
======== ======== ======== ========
</TABLE>
- -------
(1) Represents interest on the revolving credit facility using an assumed
interest rate of 8.69%, assuming $36.0 million drawdown at the closing of
the merger.
48
<PAGE>
(2) Represents interest on an assumed $500 million of the Tranche A term loans
using an assumed interest rate of 8.69%.
(3) Represents interest on an assumed $200 million of the Tranche B term loans
using an assumed interest rate of 9.19%.
(4) Represents interest on an assumed $200 million of the Tranche C term loans
using an assumed interest rate of 9.44%.
(5) Represents interest on $370 million of the Notes using an interest rate of
10.75%.
(6) Represents cash interest portion of the $180 million (face amount) of the
subordinated notes issued in the WCAS Capital Partners financing.
(7) Represents a 0.5% commitment fee on the unused portion of the revolving
credit facility.
(8) Represents Paid in Kind portion of the $180 million of subordinated notes
issued in the WCAS Capital Partners financing.
(9) Represents the amortization of the discount ($22.5 million) on the shares
issued to the holder of notes issued in the WCAS Capital Partners
financing.
(10) Represents amortization of deferred financing costs of $60.9 million over
the term of the related debt.
(11) Represents the elimination of historical interest expense.
A 0.125% increase or decrease in the assumed weighted average interest
rate applicable to the credit facility and the notes issued in the offering
would change the pro forma interest expense and income before taxes as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
May 31, 1998 February 28, 1999
------------ -----------------
<S> <C> <C>
Credit facility
Revolving credit facility................. $ 45 $ 34
Tranche A term loans...................... 625 469
Tranche B term loans...................... 250 187
Tranche C term loans...................... 250 187
------ ----
Total................................... $1,170 $877
====== ====
</TABLE>
(f) No net tax benefit is provided for the pro forma adjustments to
earnings before taxes on the assumption that an offsetting increase to the
valuation allowance would be recorded with respect to the resultant tax loss
carryforward asset.
(g) To eliminate dividends on preferred stock redeemed as part of the
merger.
(h) EBITDA is defined, for any period, as earnings before income from
minority cellular investment interests that are controlled by third parties,
allocations to minority interests in consolidated subsidiaries, interest
expense, interest income, income taxes, depreciation and amortization,
recapitalization costs, extraordinary loss on early extinguishment of debt and
gain on sale of assets. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service and/or incur
indebtedness. EBITDA should not be considered an alternative to net income as a
measure of Centennial's operating results or to cash flow as a measure of
liquidity. In addition, although the EBITDA measure of performance is not
recognized under generally accepted accounting principles, it is widely used by
various companies as a general measure of a company's performance because it
assists in comparing performance on a relatively consistent basis across
companies without regard to depreciation and amortization, which can vary
significantly depending on accounting methods (particularly where acquisitions
are involved) or non-operating factors such as historical
49
<PAGE>
cost bases. Because EBITDA is not calculated identically by all companies, the
presentation herein may not be strictly comparable to other similarly titled
measures of other companies.
Pro forma EBITDA is calculated as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
May 31, 1998 February 28, 1999
--------------------------------- ---------------------------------
Consolidated Centennial Consolidated Centennial
(including Parent) Rural Cellular (including Parent) Rural Cellular
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Pro forma income (loss)
before minority
interest............... $(143,249) $(120,338) $(55,073) $(38,493)
Adjustments:
Interest expense...... 154,184 131,273 115,036 98,456
Income tax benefit.... (13,597) (13,597) (10,114) (10,114)
Depreciation and
amortization......... 114,194 114,194 97,702 97,702
Gain on sale of fixed
assets............... (5) (5) (8,414) (8,414)
Income from equity
investments.......... (13,069) (13,069) (9,352) (9,352)
--------- --------- -------- --------
Pro forma EBITDA........ $ 98,458 $ 98,458 $129,785 $129,785
========= ========= ======== ========
</TABLE>
50
<PAGE>
BUSINESS
Centennial Cellular Corp.
Our company is one of the largest independent wireless telecommunications
service providers in the United States and Puerto Rico with approximately 10.8
million Net Pops and 426,700 subscribers as of February 28, 1999. Centennial
Rural Cellular serves 5.8 million Net Pops and its service area covers
approximately 81,645 square miles. Our subsidiary, Centennial de Puerto Rico,
is a fully integrated provider of communications services in Puerto Rico. These
operations utilize a personal communications services license that covers 3.8
million Pops in Puerto Rico and the U.S. Virgin Islands and a competitive local
exchange carrier license to operate in Puerto Rico. In addition, we own
minority shares, representing approximately 1.2 million Net Pops, in certain
other cellular operations controlled and managed by other cellular operators
(referred to as "minority cellular investment interests").
The table below shows certain data for each of our two principal business
segments.
<TABLE>
<CAPTION>
Centennial de Puerto Rico
(Personal communication services
Centennial Rural Cellular wireless and Competitive local
(Cellular services) exchange carrier wireline services)
------------------------------ -------------------------------------------
Year ended Nine months ended Year ended Nine months ended
May 31, 1998 February 28, 1999 May 31, 1998 February 28, 1999
------------ ----------------- ----------------- --------------------
(in millions, except as noted)
<S> <C> <C> <C> <C>
Net Pops................ 5.8 5.8 3.8 3.8
Subscribers (in
thousands)............. 252.7 309.3 69.5 117.4
Penetration............. 4.4% 5.3% 1.8% 3.1%
Revenue................. $182.9 $175.0 $ 54.6 $ 87.6
EBITDA.................. $ 86.7 $ 91.5 $ 12.5 $ 38.8
Annualized EBITDA....... $ 86.7 $122.0 $ 12.5 $ 51.8
</TABLE>
For the year ended May 31, 1998, our company earned revenue of $237.5
million, representing a compound annual growth rate of 45% over the previous
two fiscal years. EBITDA for the year ended May 31, 1998 was $99.2 million,
representing a compound annual growth rate of 44% over the previous two fiscal
years.
The success of our company's operating and financial performance has been
driven by the quality and experience of its management and employees. We expect
to continue to benefit from the experienced members of operating management who
are expected to remain at Centennial Rural Cellular following the merger. This
management team built us through internal growth and acquisitions from
approximately 1.7 million Net Pops in 1988 to approximately 10.8 million Net
Pops (including those in Puerto Rico and minority cellular investment
interests) as of February 28, 1999. The addition of Michael Small, formerly the
Chief Financial Officer of 360(degrees) Communications Company (now a
subsidiary of ALLTEL Corporation), as our Chief Executive Officer following the
merger complements the existing management team. Rudy J. Graf, who has been the
Chief Operating Officer of Centennial since 1991, will continue to manage our
day-to-day operations.
Rural Cellular Systems
Our domestic consolidated systems are among the leading independent
providers of rural non-wireline cellular telecommunications services. We
believe our rural and small-city cellular systems provide strong growth
opportunities due to lower penetration rates and higher subscriber growth
rates. We focus on underdeveloped rural and small-city cellular areas that have
a significant number of potential customers for wireless communications because
we believe these areas offer:
51
<PAGE>
. Potential Penetration Growth. We believe these areas are in the
early stages of their growth cycles and offer significant
opportunities for increases in penetration and cellular usage;
. Insulation from Potential Competition. These regions are currently
subject to less competition from other wireless providers (such as
personal communications services) as compared to larger metropolitan
service areas, and the population density of these regions suggests
that the build-out of a personal communications services network may
not be economically attractive to competitors at present; and
. Above-Average Revenue per Subscriber. Our domestic markets, which
are strategically located between larger metropolitan areas, tend to
exhibit long commute times and well-traveled roadways that have the
potential to generate high levels of cellular minutes of use and
roaming revenues.
Our domestic cellular interests consist primarily of three operating
clusters:
. Michiana Cluster contains approximately 3.4 million Net Pops in
Michigan, Ohio and Indiana, covering portions of three major
interstate highways that connect Chicago, Detroit and Indianapolis.
. East Texas/Louisiana Cluster contains approximately 2.1 million Net
Pops, covering portions of interstate highway I-10, as well as
sections of Texas, Louisiana and Mississippi adjacent to Houston,
New Orleans, Shreveport and Baton Rouge.
. Southwestern Cluster contains approximately 296,000 Net Pops,
covering the Yuma, Arizona and El Centro, California markets and is
bordered by Los Angeles to the northwest, San Diego to the west,
Phoenix to the east and Mexicali, Mexico to the south.
Our domestic operations have achieved significant increases in revenue,
EBITDA and number of subscribers since 1988. For the year ended May 31, 1998,
our domestic operations earned revenue of $182.9 million, representing a
compound annual growth rate of 28% over the previous two fiscal years. EBITDA
from domestic operations for the year ended May 31, 1998 was $86.7 million,
representing a compound annual growth rate of 34% over the previous two fiscal
years. As of May 31, 1998, our domestic operations had approximately 252,700
subscribers, representing a compound annual growth rate of 37% over the number
of subscribers in the previous two fiscal years.
Puerto Rico Systems
Our Puerto Rico business, which is conducted through Centennial de Puerto
Rico, is a facilities-based independent cellular provider of a broad range of
wireless and wireline services in the Commonwealth of Puerto Rico (an area
covering approximately 3.8 million Pops). It is (i) the only provider of
personal communications services in the Puerto Rico market, (ii) a provider of
facilities-based wireless local loop services to both business and residential
customers, and (iii) a provider of local, long distance and enhanced data
services through its subsidiary, Lambda CLEC, which competes with the incumbent
Puerto Rico Telephone Company. We believe that Puerto Rico represents an
attractive market for communications services due to unmet demand for wireless
and local phone service, high population density in the island's metropolitan
areas, a growing economy and a stable business environment.
Centennial de Puerto Rico offers wireless and wireline services using a
shared Lucent Technologies 5 ESS switch and its sophisticated fiber optic
network, which contains over 314 route miles of fiber throughout the island of
Puerto Rico. The digital personal communications services network allows for
coverage in most areas of Puerto Rico using its established base of 120 cell
sites and CDMA technology to transmit its calls.
. Wireless Services. Centennial de Puerto Rico offers both personal
communications services and wireless local loop service to its
customers. Our personal communications services business
52
<PAGE>
currently covers approximately 85% of the total Pops on the island
of Puerto Rico and targets high volume users. We began offering
personal communication services, in December 1996 and as of February
28, 1999 had approximately 99,600 subscribers, an increase of 83%
over our approximately 54,500 subscribers at February 28, 1998. Our
total average revenue per personal communications services customer
was approximately $89 during the nine months ended February 28,
1999, compared to approximately $46 for the average U.S. wireless
customer for the nine months ended September 30, 1998, according to
data from the CTIA. Centennial de Puerto Rico began offering
wireless local loop service to business and residential customers in
August 1997. Our total average revenue per wireless local loop
customer was $94 during the nine months ended February 28, 1999.
This service uses our fully digital CDMA network in Puerto Rico and
had over 17,800 subscribers as of February 28, 1999.
. Wireline Services. Lambda CLEC provides local, long distance and
enhanced data services (including internet-related services) to
business and government customers over our high bandwidth, fiber
optic network. We believe that our targeted competitive local
exchange carrier customers have sophisticated communications service
requirements, including the need for a reliable network providing
data access and private line services and high quality customer
service. Lambda CLEC has grown rapidly since its inception in
September 1997, primarily due to its ability to offer a broad range
of products as well as responsive and reliable service in an
underserved market. Lambda CLEC provided approximately 56.9 million
MOUs to its customers in February 1999, an increase of 90% over the
minutes of use provided in May 1998.
Since operations commenced in December 1996, Centennial de Puerto Rico
has achieved significant growth in subscribers, revenue and EBITDA, which we
attribute to our premium service capabilities, experienced local management
team and limited competition in the region. Revenue for the fiscal year ended
May 31, 1998 was $54.6 million, compared to $5.9 million for the year ended
May 31, 1997. EBITDA for the fiscal year ended May 31, 1998 was $12.5 million,
compared to an EBITDA deficit of $(8.4) million for the prior period. Revenue
for the nine months ended February 28, 1999 was $87.6 million. EBITDA for the
nine months ended February 28, 1999 was $38.8 million or $51.8 million on an
annualized basis.
Additional Information
You can find more information about our business, competition,
regulation, employees, properties and legal proceedings in our
. Annual Report on Form 10-K for the fiscal year ended May 31, 1998,
. Quarterly Reports on Form 10-Q for the quarters ended August 31,
1998, November 30, 1998 and February 28, 1999, and
. Current Reports on Form 8-K filed on July 16, 1998, October 19,
1998, December 7, 1998 and January 22, 1999.
Each of these documents is incorporated by reference into this prospectus. You
can get copies of these documents by contacting us as indicated under "Where
You Can Find More Information" on page 2 of this prospectus.
53
<PAGE>
MANAGEMENT
Directors and Executive Officers
Centennial Cellular Operating
Centennial Cellular Operating is a member-managed limited liability
company organized under Delaware law. The sole member of Centennial Cellular
Operating is Centennial. The executive officers of Centennial Cellular
Operating are identical to and hold identical positions as the persons
identified below as directors and executive officers of Centennial.
Centennial
Executive officers of Centennial are elected annually by the Board of
Directors and serve until their successors are duly elected and qualified. On
January 7, 1998, upon the consummation of the merger, the directors identified
below were designated by Welsh Carson VIII and Blackstone and elected to the
Board of Directors. There are no arrangements or understandings between any
officer and any other person pursuant to which the officer was selected, and
there are no family relationships between any executive officers or any
directors of Centennial. The names, ages and positions of the executive
officers and directors of Centennial are listed below along with their business
experience during at least the past five years.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael J. Small................. 41 President and Chief Executive Officer
(Centennial) and Director
Rudy J. Graf..................... 50 President and Chief Executive Officer
(Centennial de Puerto Rico) and Director
Peter W. Chehayl................. 51 Senior Vice President, Treasurer and Chief
Financial Officer
Phillip H. Mayberry.............. 46 President--Domestic Operations
Kari L. Jordan................... 45 President--Caribbean Operations
Thomas R. Cogar, Jr. ............ 42 Senior Vice President--Engineering
Michael Marrero.................. 37 Senior Vice President--Engineering (Puerto
Rico)
Thomas E. Bucks.................. 42 Senior Vice President--Controller
John H. Casey, III............... 42 Senior Vice President--Administration
Thomas E. McInerney.............. 57 Director
Anthony J. de Nicola............. 34 Director
Rudolph E. Rupert................ 33 Director
Mark T. Gallogly................. 42 Director
Lawrence H. Guffey............... 30 Director
</TABLE>
In addition to the persons named above, the stockholders of Centennial
will elect two outside directors, who have not yet been designated.
Michael J. Small is President and Chief Executive Officer of Centennial.
Upon the consummation of the merger he became Chief Executive Officer and a
director of Centennial. Prior to joining Centennial, Mr. Small served as
Executive Vice President and Chief Financial Officer of 360(degrees)
Communications Company (now a subsidiary of ALLTEL Corporation) since 1995.
Prior to 1995, he served as President of Lynch Corporation, a diversified
acquisition-oriented company with operations in telecommunications,
manufacturing and transportation services.
Rudy J. Graf is President and Chief Executive Officer of Centennial de
Puerto Rico and a director of Centennial. He had been Chief Operating Officer
of Centennial since August 1991, and was Vice President, Operations of
Centennial from November 1990 to August 1991.
54
<PAGE>
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.
Peter W. Chehayl became Senior Vice President, Treasurer and Chief
Financial Officer of Centennial upon the consummation of the Merger. Prior to
joining Centennial, Mr. Chehayl was the Vice President and Treasurer of
360(degrees) Communications Company (now a subsidiary of ALLTEL Corporation)
since 1996. From 1991 to 1996, he served as Vice President--Capital Markets at
Sprint Corporation.
Phillip H. Mayberry has been President--Domestic Operations of Centennial
since January 1999 and was Senior Vice President--Operations since December
1994. He served as 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.
Kari L. Jordan has been President--Caribbean Operations of Centennial
since January 1999. She joined Centennial in January 1998 as Senior Vice
President of International Operations from PrimeCo where she was responsible
for the operations of the North Texas MTA. From 1990 to January 1997, Ms.
Jordan worked at US Cellular as Vice President of Business Development. During
her tenure at US Cellular, Ms. Jordan also served as Vice President of National
Operations and Regional General Manager.
Thomas R. Cogar, Jr. joined Centennial in September 1990 as Director of
Engineering and has been Senior 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.
Michael Marrero has been Senior Vice President--Engineering (Puerto Rico)
of Centennial since April 1997, and was Director of Technical Operations from
April 1995 to April 1997. Prior to joining Centennial, Mr. Marrero served as
the Manager of Strategic Planning for the PRTC from May 1988 to April 1995.
Prior to 1987, Mr. Marrero served in various capacities at Bell Corp.
Thomas E. Bucks has been Senior 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.
John H. Casey, III has been Senior Vice President--Administration of
Centennial since July 1997 and served as Vice President--Operations from
January 1995 to June 1997. He was a regional manager of Centennial from January
1991 until December 1994. From August 1989 to December 1990, Mr. Casey was
employed by McCaw Cellular One as a district general manager.
Thomas E. McInerney is a director and President of Centennial Cellular
Operating and will become a director of Centennial upon consummation of the
Merger. He has served as a managing member or general partner of the respective
sole general partners of Welsh Carson VIII and other associated investment
partnerships since 1986. He is a director of The Cerplex Group, Inc., The BISYS
Group, Inc., MedE America Corporation and several private companies.
Anthony J. de Nicola is a director and Vice President of Centennial
Cellular Operating and will become a director of Centennial upon consummation
of the Merger. He has served as a managing member or general partner of the
respective sole general partners of Welsh Carson VIII and other associated
investment partnerships since 1994. Previously he worked for William Blair &
Co. for four years financing middle market buyouts. He is a director of SEER
Technologies, Inc., MedE America Corporation and several private companies.
55
<PAGE>
Rudolph E. Rupert is a director and Secretary of Centennial Cellular
Operating and will become a director of Centennial upon consummation of the
Merger. He is a Vice President of the investment adviser to Welsh Carson VIII
and other associated investment partnerships. Prior to 1997, he worked for
three years at General Atlantic Partners where he was involved in the
information technology industry. From 1987 to 1992, he worked for Lazard Freres
and Company, initially in the Mergers and Acquisitions Department and then with
Lazard's European leveraged buyout fund. Mr. Rupert is a director of several
private companies.
Mark T. Gallogly is a member of the limited liability company that acts
as the general partner of Blackstone Capital Partners, L.P. and its affiliates.
He is a Senior Managing Director of The Blackstone Group L.P. and has been with
Blackstone since 1989. Mr. Gallogly is a member of the boards of directors of
InterMedia Partners VI, L.P., CommNet Cellular Inc. and TWFanch-One Co.
Lawrence H. Guffey is a Vice President of The Blackstone Group, L.P.,
with which he has been associated since 1991. He is a member of the board of
directors of CommNet Cellular Inc. and TWFanch-One Co.
Committees of the Board
The Compensation Committee of Centennial, whose current members are
Thomas E. McInerney, Anthony J. de Nicola and Mark T. Gallogly, makes
recommendations to the Board of Directors concerning the salary and cash bonus
compensation for Centennial's Chief Executive Officer and determines the salary
and cash bonus compensation for Centennial's other executive officers and
senior management. The Compensation Committee also administers Centennial's
1991 Employee Stock Purchase Plan, Incentive Award Plan and 1991 Stock
Equivalent Plan. The 1993 Management Equity Investment Plan is administered by
a separate committee whose membership is the same as the Stock Option
Committee, which makes recommendations to the Board of Directors, which
determines the recipients of awards under this plan, including the number of
shares awarded and, subject to the terms of the plan, the duration of
restrictions. The Compensation Committee determines the participants and
selects the recipients of awards or units under the 1991 Employee Stock
Purchase Plan and the 1991 Stock Equivalent Plan and the amount and terms of
compensation granted under each plan. The Compensation Committee met once
during the fiscal year ended May 31, 1998.
The Board of Directors determines the recipients of options under
Centennial's 1991 Employee Stock Option Plan and the provisions of options
granted under such plan, including the option price, term and number of shares
subject to option. The Employee Stock Option Committee, whose members are noted
above, administers the 1991 Employee Stock Option Plan subject to the authority
and responsibility of the Board of Directors as set forth in such plan. The
Employee Stock Option Committee met twice during the fiscal year ended May 31,
1998.
The Executive Committee, whose current members have not been elected
following the merger, is empowered, except as limited by the laws of the State
of Delaware, to function with the full power of the Board of Directors when the
Board is not meeting. The Executive Committee did not meet during the fiscal
year ended May 31, 1998.
The Audit Committee, whose members are Anthony J. de Nicola, Rudolph E.
Rupert and Lawrence H. Guffey, recommends to the Board of Directors the
independent auditors to be selected for Centennial and reviews the following
matters with the independent auditors: scope and results of the independent
audits; corporate accounting; internal accounting control procedures; adequacy
and appropriateness of financial reporting to shareholders; and such other
related matters as the Audit Committee considers to be appropriate. The Audit
Committee met once during the fiscal year ended May 31, 1998.
56
<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During the fiscal year ended May 31, 1998, the members of the
Compensation Committee were William M. Kraus and David Z. Rosensweig. Mr.
Rosensweig also served as Secretary of Centennial and Century Communications.
Mr. Rosensweig is a member of Leavy Rosensweig & Hyman, which provides legal
services to Centennial. During fiscal 1998, Centennial paid a total of
approximately $426,000 for legal services and disbursements to Leavy Rosensweig
& Hyman.
Employment Agreements
After the merger, Michael Small has been employed by Centennial as its
President and Chief Executive Officer pursuant to an employment agreement. Mr.
Small's base salary is $250,000 per annum, plus an annual bonus of up to
$225,000 subject to achievement of certain performance targets for fiscal 1999.
The initial term of the employment agreement expires on September 30, 2002, but
will automatically renew for subsequent one-year terms unless either party
gives notice of non-renewal at least 90 days prior to the expiration of the
renewal term. If Centennial terminates Mr. Small's employment for other than
"cause" (as defined in the employment agreement), or if Mr. Small terminates
his employment with Centennial for "Good Reason" (as defined in the employment
agreement), he is entitled to continue to receive his base salary and any bonus
payable with respect to the one-year period following such termination, as well
as certain other benefits. Mr. Small also received incentive stock options and
non-qualified stock options to purchase an aggregate 135,000 Centennial common
shares (prior to adjustment to account for a three-for-one stock split),
vesting over four years beginning with the fiscal year ended May 31, 1999 if
Centennial attains certain EBITDA targets; if such targets are not met, the
stock options will vest over four years commencing with the seventh anniversary
of the consummation of the merger. These stock options are subject to
accelerated vesting if Mr. Small's employment is terminated other than for
cause or for Good Reason following a change of control of Centennial. During
the employment term and for a period of one year following the termination of
his employment (except termination by Mr. Small for Good Reason), Mr. Small is
subject to certain non-competition and non-solicitation provisions.
After the merger, Rudy J. Graf has been employed by Centennial de Puerto
Rico as its President and Chief Executive Officer pursuant to an employment
agreement. Mr. Graf's base salary is $226,800 per annum, plus an annual bonus
of up to $200,000 subject to achievement of certain performance targets for
fiscal 1999. The term of the employment agreement expires on May 31, 1999. If
Centennial terminates Mr. Graf's employment for other than "cause" (as defined
in the employment agreement), he is entitled to receive his base salary for the
remainder of the employment term, any bonus payable for the 1999 fiscal year
and certain other payments. At the effective time of the merger, Mr. Graf
received 17,242 Centennial common shares (prior to adjustment to account for a
three-for-one stock split) subject to the terms of a restricted stock purchase
agreement. Mr. Graf also received incentive stock options and non-qualified
stock options to purchase an aggregate 130,000 Centennial common shares (prior
to adjustment to account for a three-for-one stock split), vesting over four
years beginning with the fiscal year ended May 31, 1999 if Centennial attains
certain EBITDA targets; if such targets are not met, the stock options will
vest over four years commencing with the seventh anniversary of the
consummation of the merger. During the employment term and for a period of two
years following the termination of his employment, Mr. Graf is subject to
certain non-competition and non-solicitation provisions.
After the merger, Peter Chehayl has been employed by Centennial as its
Senior Vice President and Chief Financial Officer. Mr. Chehayl's base salary
will be $165,000 per annum, plus an annual bonus of up to $90,000. He is also
eligible for options to purchase 25,000 Centennial common shares.
Director Compensation
Centennial Cellular Operating. None of the directors of Centennial
Cellular Operating will receive any remuneration from Centennial Cellular
Operating for their attendance at Board and committee meetings during 1999.
57
<PAGE>
Centennial. During the fiscal year ended May 31, 1998, each director who
was not also an employee of Centennial received quarterly retainers of $3,000
plus a uniform fee of $750 for each Board and committee meeting attended. In
addition, options for 1,000 shares of Centennial common shares were
automatically granted under the 1993 Non-Employee/Officer Directors' Stock
Option Plan to each person who was a non-employee/officer director on the date
of each annual meeting of shareholders of Centennial. During such period,
directors who were also employees of Centennial received no remuneration for
attendance at Board and committee meetings.
After the merger, each director who is not also an employee of
Centennial will receive compensation in accordance with the Welsh Carson
VIII's and Blackstone's customary practices. Centennial expects that such
compensation will be consistent with compensation paid to directors in
comparable public companies.
Additional Information
You can find more information about our executive compensation and
various benefit plans in our
. Annual Report on Form 10-K for the fiscal year ended May 31, 1998,
. Quarterly Reports on Form 10-Q for the quarters ended August 31,
1998, November 30, 1998 and February 28, 1999,
. Proxy Statement for the Annual Meeting of Stockholders filed on
November 28, 1998,
. Information Statement filed on December 8, 1998, and
. Current Reports on Form 8-K filed on July 16, 1998, October 19,
1998, December 7, 1998 and January 22, 1999.
Each of these documents is incorporated by reference into this prospectus. You
can get copies of these documents by contacting us as indicated under "Where
You Can Find More Information" on page 2 of this prospectus.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
After the merger and related transactions, all of the issued and
outstanding capital stock of Centennial Cellular Operating is owned by
Centennial. The table below contains information regarding the beneficial
ownership of Centennial's common shares immediately following the consummation
of the merger and related transactions by (i) each stockholder who owns
beneficially five percent or more of Centennial's common shares, (ii) each
director of the Centennial, (iii) each executive officer and (iv) all directors
and officers as a group.
The number of shares beneficially owned by each stockholder, director or
officer is determined according to the rules of the SEC, and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the individual
or entity has sole or shared voting power or investment power. As a
consequence, several persons may be deemed to be the "beneficial owners" of the
same shares. Unless otherwise noted in the footnotes to this table, each of the
stockholders named in this table has sole voting and investment power with
respect to the Centennial common shares shown as beneficially owned. The
percentage ownership of each stockholder is calculated based on 31,125,579
common shares outstanding (after giving effect to a three-for-one stock split
effected on January 8, 1999).
<TABLE>
<CAPTION>
Beneficial Ownership
Immediately After Merger
------------------------------
Name and Address Amount Percentage
---------------- --------------- --------------
<S> <C> <C>
Welsh, Carson, Anderson & Stowe VIII,
L.P.(1)..................................... 17,249,026 55.4%
WCAS Capital Partners III, L.P.(1)........... 1,626,507 5.2
Blackstone Investors(2)...................... 9,390,681 30.2
Thomas E. McInerney(1)....................... -- *
Anthony J. de Nicola(1)...................... -- *
Rudolph E. Rupert(1)......................... -- *
Michael J. Small............................. 30,000 *
Rudy J. Graf................................. 16,842 *
Peter Chehayl................................ 7,500 *
Phillip Mayberry............................. 8,718 *
Thomas Cogar................................. 5,676 *
Thomas E. Bucks.............................. 1,860 *
John Casey................................... -- --
Mark T. Gallogly(2).......................... -- *
Lawrence H. Guffey(2)........................ -- --
All directors and executive officers as a
group (12 individuals)...................... 70,596 *
</TABLE>
- --------
* Less than one percent.
(1) The address for Welsh, Carson, Anderson & Stowe VIII, L.P. and WCAS Capital
Partners III, L.P. is 320 Park Avenue, Suite 2500, New York, New York
10022. Certain of the shares reflected as owned by Welsh, Carson, Anderson
& Stowe VIII, L.P. are owned beneficially and of record by limited
partnerships affiliated with Welsh, Carson, Anderson & Stowe VIII, L.P. Up
to an aggregate 862,452 shares included as beneficially owned by Welsh,
Carson, Anderson & Stowe VIII, L.P. are owned beneficially and of record by
individuals who are members of the limited liability company that serves as
its sole general partner, including Messrs. McInerney and de Nicola, and
individuals employed by its investment advisor, including Mr. Rupert.
Messrs. McInerney, de Nicola and Rupert may be deemed to share beneficial
ownership of the shares owned by Welsh, Carson, Anderson & Stowe VIII,
L.P., and disclaim beneficial ownership of such shares except to the extent
owned of record by them.
59
<PAGE>
(2) The total number of shares beneficially owned by Blackstone Investors are
owned by Blackstone CCC Capital Partners L.P. (7,471,074), Blackstone CCC
Offshore Capital Partners L.P. (1,356,165) and Blackstone Family Investment
Partnership III L.P. (563,442). Blackstone Management Association III
L.L.C. ("BMA") is the general partner of each of these partnerships, and
Messrs. Peter G. Peterson and Stephen A. Schwarzman, as the founding
members of BMA, may be deemed to share, together with BMA, beneficial
ownership of such shares. The address of the Blackstone Investors, BMA and
Messrs. Peterson and Schwarzman is c/o The Blackstone Group, 345 Park
Avenue, New York, New York 10154. Mr. Gallogly, who is a member of BMA, and
Mr. Guffey, who is an employee of certain affiliates of BMA, disclaim
beneficial ownership of such shares.
60
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Equity Investor Agreements
In connection with their initial investment in CCW Acquisition Corp. and
the common equity contribution and simultaneously with the consummation of the
merger, the equity investors and CCW Acquisition Corp. entered into a
securities purchase agreement, a registration rights agreement and a
stockholders agreement.
Pursuant to the securities purchase agreement, the equity investors
purchased an aggregate of 9,638,554 shares of common stock of CCW Acquisition
Corp. at the time of the merger. The securities purchase agreement contains
customary conditions, representations and warranties, and will terminate upon
the termination of the merger agreement.
At the same time, the equity investors and Centennial entered into a
stockholders' agreement pursuant to which they agreed to establish a board of
directors of Centennial consisting of nine members. Welsh Carson and certain of
its affiliates will designate three of such directors, who initially are Thomas
E. McInerney, Anthony J. de Nicola and Rudolph E. Rupert, so long as Welsh
Carson and those affiliates own in the aggregate at least 25% of the shares of
Centennial owned by them as of the date of the merger. Blackstone and its
affiliates will designate two directors, who initially are Mark T. Gallogly and
Lawrence H. Guffey, so long as Blackstone and those affiliates own in the
aggregate at least 25% of the shares of the surviving corporation owned by them
as of the date of the merger. The Chief Executive Officer and the Chief
Operating Officer of Centennial, who initially are Michael J. Small and Rudy
Graf, respectively, will also be directors. The remaining two directors will be
outside directors nominated by the board of directors and elected by
stockholders of Centennial, including the equity investors. Pursuant to the
stockholders' agreement, the equity investors (other than Welsh Carson and its
affiliates) also have "tag-along" rights to participate in certain proposed
dispositions of the Centennial's shares by the Welsh Carson and its affiliates.
In addition, in the event that Welsh Carson and its affiliates or Centennial
receives a third party offer to purchase at least 80% of the outstanding
capital stock of Centennial, a majority of Welsh Carson and its affiliates may
require the other equity investors to accept such offer and to sell their
shares of Centennial to the third party. Centennial has also granted the equity
investors pre-emptive rights with respect to participating, on a pro rata basis
according to their stock ownership, in certain eligible offerings (excluding
registered public offerings of Centennial common shares and offerings of
Centennial common shares or options to purchase Centennial common shares in
connection with certain stock option plans or stock purchase plans). While the
stockholders' agreement is in effect, Centennial may not amend, alter or repeal
its organizational documents without obtaining the consent of a majority in
interest of Welsh Carson and its affiliates and Blackstone and its affiliates,
as well as a majority of the other equity investors adversely affected by such
amendment or alteration. Further, the stockholders' agreement contains certain
restrictions on transactions with related persons. Upon the consummation of the
merger and related transactions, an affiliate of each of Welsh Carson and
Blackstone received a deal consummation fee of $10.6 million and $3.4 million,
respectively. An equity investor unaffiliated with Blackstone and Welsh Carson
and its affiliates received a fee of $4.0 million upon the consummation of the
merger. During the term of the stockholders' agreement, an affiliate of each of
Welsh Carson and Blackstone will receive an annual monitoring fee of $450,000
and $300,000, respectively.
Pursuant to the registration rights agreement entered into among
Centennial and the equity investors, the Welsh Carson and its affiliates and
Blackstone and its affiliates have certain rights to require Centennial to
register their shares of Centennial under the Securities Act and to include,
upon request, their shares in any registration of shares effected by
Centennial.
Former Indebtedness of Certain Executive Officers
During fiscal 1998, Thomas R. Cogar, Vice President of Engineering of
Centennial received a relocation loan from Centennial of approximately $65,000
and John H. Casey, Vice President--Administration
61
<PAGE>
of Centennial received a relocation and temporary house loan of approximately
$200,000. There are no amounts outstanding under these loans.
Arrangements with Former Controlling Stockholder
Pursuant to the stockholder's agreement, on the effective date of the
merger, Century executed and delivered a non-compete agreement with Centennial,
in which Century agreed that, for a period of three years from the effective
date of the merger, it will not engage in, or acquire a controlling interest
in, any business that competes with any of the businesses of Centennial's
current operations in Puerto Rico; provided, however, that such non-compete
shall not extend to or restrict in any manner the activities of Century's
existing joint venture in Puerto Rico, Century-ML.
Centennial and Century, which owned a controlling interest in Centennial
prior to the merger, previously maintained combined workers compensation and
general insurance policies. The premiums were allocated between Centennial and
Century based upon the actual cost of each respective company's coverage.
Centennial believes that the amounts payable by Centennial under such
arrangement were more favorable than the premiums Centennial would have paid if
it had obtained coverage under a separate policy. Centennial's cost of such
insurance was approximately $0.6 million, $0.7 million and $1.7 million for the
fiscal years ended May 31, 1998, 1997 and 1996, respectively, all of which was
paid in full during the current fiscal year. In fiscal 1996, Centennial and
Century also maintained combined group health, life and casualty coverage.
Pursuant to the merger agreement, Centennial has covenanted to maintain for a
period of at least two years employee benefits and incentive compensation that
are no less favorable to its employees.
Centennial and Century entered into a services agreement, effective
August 30, 1996, 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
Centennial. Such services also include providing all the services necessary for
the monitoring, to the extent possible, of the activities of the partnerships
in which Centennial has minority equity interests, in such manner as to protect
the interests of Centennial. Such services have historically been provided to
Centennial by Century. As consideration for the services rendered under the
services agreement, Centennial paid Century the annual sum of $1.0 million and
reimbursed Century for all costs incurred by Century or its affiliates
(excluding Centennial and its subsidiaries) that were directly attributable to
the design, construction, management, operation and maintenance of the wireless
telephone, paging and related systems of Centennial or to the performance by
Century of its other duties under the services agreement. For the years ended
May 31, 1998 and 1997, Centennial recorded expenses of $1.0 million and $0.8
million, respectively, under the services agreement. At May 31, 1998 and 1997,
$0.3 million and $0.8 million, respectively, of such amounts were recorded
within Payable to Affiliate on Centennial's consolidated balance sheet. As of
the effective time of the merger, Century and Centennial terminated the
services agreement.
Centennial leases space for the mobile telephone switching office 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, Centennial
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.
Centennial leases and shares capacity on the fiber optic cable television
facility and network of Century-ML fiber network for the purposes of operating
as a competitive access provider. Centennial shares 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 Centennial.
During fiscal 1997, Centennial recorded a deferred asset and related
payable to an affiliate in its consolidated balance sheet in the amount of $6.0
million to reflect certain costs incurred by Centennial to secure the use of
the fiber optic network as required by the facilities agreement. This amount,
which was paid
62
<PAGE>
by Centennial during fiscal 1998, represents Centennial's share of the costs of
constructing Century-ML's fiber optic network.
Leavy Rosensweig & Hyman, of which David Z. Rosensweig, a director and
Secretary of Centennial prior to the merger, is a member, provides legal
services to Centennial.
63
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The Credit Facility
In connection with the Merger, Centennial and some of its subsidiaries
entered into the credit facility with Merrill Lynch Capital Corporation,
NationsBank, N.A., The Chase Manhattan Bank, The Bank of Nova Scotia and Morgan
Stanley Senior Funding, Inc. (collectively with Merrill Lynch Capital,
NationsBank, Chase and Scotia, the "Agents") and certain other financial
institutions (collectively, with the Agents, the "Lenders"), pursuant to which
the Lenders provided credit facilities to certain of Centennial's subsidiaries.
The following is a summary of the proposed terms and conditions of each credit
facility.
The Borrowers. The borrowers under the credit facility are Centennial
Cellular Operating, a wholly owned direct subsidiary of Centennial, and
Centennial de Puerto Rico, a wholly owned direct subsidiary of Centennial
Cellular Operating.
The Facility. The credit facility provides for a senior secured revolving
credit facility, which provides revolving loans in an aggregate principal
amount of up to the Lenders' revolving credit commitment, which will initially
be $150 million (of which a sublimit thereof will be available to be borrowed
by Centennial de Puerto Rico), and senior secured term loan facilities in four
tranches, which provide term loans in an aggregate principal amount of up to
$900 million (of which one tranche thereof is available to be drawn by
Centennial de Puerto Rico).
Use of Credit Facility Proceeds. The proceeds of the credit facility were
used, together with other proceeds of the Merger Financings, to fund payment of
cash consideration in the merger, repay Centennial's indebtedness (including
the purchase of the tendered notes in the debt tender offers), pay the related
fees and expenses and purchase the pledged securities. In addition, the
revolving credit facility is available after the closing of the revolving
credit facility subject to the conditions set forth in the credit facility
documentation to finance future working capital needs, capital expenditures,
permitted acquisitions, and for general corporate purposes.
Under certain circumstances, the credit facility may be increased by up
to $150 million in aggregate principal amount, upon terms and conditions no
more onerous than those contained in the credit facility.
Availability of Loans. The term loans were available on the date of
closing of the merger. The revolving credit loans were available on the date of
closing of the merger in a principal amount not to exceed $65 million and
thereafter on a revolving basis until 30 days prior to the maturity thereof. Up
to $25 million of the revolving credit facility is available for the issuance
of letters of credit and up to $30 million of the Revolving Credit Facility
will be available for swing loans.
Maturity of Loans. The revolving credit commitments will be reduced
quarterly beginning in the fourth year after the closing of the credit facility
and the revolving credit facility will mature eight years after the closing of
the credit facility. The term loans will consist of four tranches and will
amortize over eight years for tranche A term loans, eight years for tranche A-
PR term loans, eight and one-half years for tranche B term loans and nine years
for tranche C term loans.
Prepayments. Borrowings and commitments under the credit facility are
subject to mandatory prepayment and reduction in an amount equal to (a) 100% of
the net proceeds of asset dispositions (including insurance proceeds resulting
from casualty to assets), subject to the borrower's ability to reinvest such
proceeds under certain circumstances, (b) 75% of excess cash flow (reduced to
50% with respect to any fiscal year if the Total Leverage Ratio (defined as the
ratio of total debt to operating cash flow) is less than 6.0:1.0), (c) 100% of
the net proceeds of the issuance or incurrence of debt or of any sale and
lease-back, and (d) 50% of the net proceeds of any issuance of equity
securities. Voluntary prepayment of the loans will be permitted in whole or
64
<PAGE>
in part with prior notice. The revolving credit loans and the tranche A and
tranche A-PR loans are subject to prepayment without premium or penalty (other
than funding losses), subject to limitations as to minimum amounts. The tranche
B and tranche C loans are subject to prepayment (x) on or prior to the first
anniversary of the closing of the credit facility, with a premium of 2% of the
aggregate principal amount of loans prepaid, (y) after the first anniversary of
the closing of the credit facility and on or prior to the second anniversary of
the closing of the credit facility, with a premium of 1% of the aggregate
principal amount of loans prepaid and (z) thereafter, without premium or
penalty (other than funding losses), subject to limitations as to minimum
amounts.
Interest Rates. Borrowings under the credit facility bear interest at a
rate per annum of, at the borrowers' option, either (a) a base rate (defined as
the higher of (i) the announced prime rate of NationsBank, and (ii) the federal
funds rate, plus 0.50%) plus the Applicable Margin (as defined) or (b) a LIBOR
rate plus the Applicable Margin. The maximum Applicable Margin for the tranche
A loans, tranche A-PR loans and the revolving credit loans is 2.00% for base
rate loans and 3.00% for LIBOR loans, for the tranche B loans will be 2.50% for
base rate loans and 3.50% for LIBOR loans, and for the tranche C loans will be
2.75% for base rate loans and 3.75% for LIBOR loans. Based upon Centennial
Cellular Operating's leverage ratio after the delivery of certain financial
statements after the closing of the credit facility, the Applicable Margin for
tranche A loans, tranche A-PR loans and revolving credit loans may be reduced
by up to 1.250% for base rate loans and LIBOR loans. The default rate under the
credit facility is 2.00% above the otherwise applicable rate.
Fees and Expenses. The credit facility requires the borrower to pay (a)
commitment fees to the Lenders in an amount equal to 0.50% or 0.375% per annum
on the unused commitment under the revolving credit facility, depending on
Centennial Cellular Operating's leverage ratio, and (b) an annual
administrative agent's fee. Additionally, the borrowers paid various fees and
costs in connection with the credit facility, including commitment fees and
underwriting fees to Merrill Lynch Capital, NationsBank, Chase, Nova Scotia,
and Morgan Stanley.
Guarantees. Centennial and each of Centennial Cellular Operating's direct
and indirect existing and future subsidiaries (other than foreign subsidiaries)
will be required to guarantee Centennial Cellular Operating's obligations under
the credit facility, and Centennial Cellular Operating and Centennial de Puerto
Rico's direct and indirect existing and future subsidiaries were required to
guarantee Centennial de Puerto Rico's obligations under the credit facility.
Security. The obligations of Centennial Cellular Operating under the
credit facility are secured by substantially all of the assets of Centennial
and each of its direct and indirect existing and future subsidiaries (other
than foreign subsidiaries), including the capital stock of such subsidiaries,
and the obligations of Centennial de Puerto Rico under the credit facility are
secured by substantially all of the assets of Centennial de Puerto Rico and
each of its direct and indirect existing and future subsidiaries, including the
capital stock of such subsidiaries.
In addition, Centennial guaranteed the credit facility and pledged as
security for Centennial Cellular Operating's obligations the capital stock of
Centennial Cellular Operating to the Lenders under the credit facility. The
pledge of such capital stock of Centennial Cellular Operating could impair
Centennial Cellular Operating's ability to obtain future financing on favorable
terms, if at all. Further, in the event Centennial Cellular Operating were to
default on its obligations under the credit facility and the Lenders were to
foreclose upon such pledged capital stock of Centennial Cellular Operating,
Centennial, as the holding company of Centennial Cellular Operating, would
likely be unable to service or repay its indebtedness, including the notes.
Conditions. Various conditions precedent to borrowings under the credit
facility on the date of closing of the merger were satisfied.
65
<PAGE>
Representations and Warranties. The credit facility contains
representations and warranties customarily found in loan agreements for similar
financings.
Affirmative Covenants. The credit facility contains affirmative
covenants customarily found in loan agreements for similar financings.
Centennial Cellular Operating is required to enter into interest rate hedging
agreements with respect to 50% of the indebtedness under the credit facility
for a period of time satisfactory to the Lenders.
Negative Covenants. The credit facility contains customary restrictive
covenants, including covenants that limit (subject to certain exceptions) the
ability of the Centennial Cellular Operating and its subsidiaries to:
. incur indebtedness or contingent obligations, issue guarantees or
enter into operating leases,
. grant liens or negative pledges,
. make investments or enter into joint ventures,
. make certain restricted payments,
. make fundamental changes in their business, corporate structure or
capital structure,
. sell assets or receivables,
. make capital expenditures,
. enter into transactions with affiliates,
. amend documents relating to other existing indebtedness and other
material documents, or
. prepay other indebtedness.
Financial Covenants. The credit facility contains financial covenants
relating to:
. minimum interest coverage ratio,
. minimum fixed charge coverage ratio,
. maximum ratio of total debt to operating cash flow,
. maximum ratio of senior debt to operating cash flow,
. minimum pro forma debt service coverage ratio, and
. limitation on capital expenditures.
Events of Default. The credit facility includes standard events of
default, including, subject to certain exceptions, those related to:
. default in the payment of principal and interest,
. cross-default in payment of other indebtedness of more than $10.0
million,
. materially incorrect representations and warranties,
. default in the observance or performance of any of the affirmative
or negative covenants included in the credit facility documentation
or in the related security and pledge documents,
. the failure to or admission in writing of an inability to pay debts
when such debts become due,
. certain events of bankruptcy,
66
<PAGE>
. certain judgments or decrees involving more than $10.0 million,
. certain ERISA events,
. a Change of Control (as defined in the credit facility),
. the failure of the applicable credit facility documents or any
material provision thereof, the guarantees, security documents or
any related documents to be in full force and effect,
. certain non-monetary judgments or decrees which might have a
material effect,
. the termination, revocation or nonrenewal of one or more cellular
licenses if such termination, revocation or nonrenewal will have a
material effect, and
. the failure of the merger to be consummated substantially concurrent
with the extension of credit under the credit facilities.
Subordinated Debt
As part of the mezzanine financing, WCAS Capital Partners III, L.P., an
investment partnership affiliated with Welsh Carson VII, purchased at the time
of the consummation of the merger, a Senior Subordinated Note of Centennial due
2009 (the "Senior Subordinated Note") in the original principal amount of $180
million, as well as an agreed upon number of Centennial common shares, for an
aggregate cash purchase price of $180 million. The Senior Subordinated Note
bears cash interest at a rate of 10% or pay-in-kind interest at a rate of 13%
per annum. Centennial Cellular Operating is restricted from making cash
payments to Centennial to service the debt under certain circumstances under
the notes and the credit facility. See "Description of the New Notes--Certain
Covenants--Limitation on Restricted Payments."
The Senior Subordinated Note is prepayable at Centennial's option and
must (subject to the terms of the indenture for the notes and the credit
facility) be prepaid in the event of a "Change in Control," defined as:
. the acquisition by a person or group acting together (other than the
equity investors and their affiliates) of either at least 50% of the
voting stock of Centennial or sufficient voting power to elect a
majority of the Board of Directors,
. a merger or consolidation of Centennial as a result of which the
stockholders of Centennial do not continue to hold a majority of the
voting capital stock of the resulting entity, or
. the sale by Centennial of substantially all of its assets.
The Senior Subordinated Note contains certain affirmative and negative
covenants typically found in subordinated notes. The Senior Subordinated Note
may not be transferred without the consent of the Lenders under the credit
facility or, during the period ending 180 days after the closing of the
offering of the notes, without the consent of Merrill Lynch on behalf of the
initial purchasers of the notes.
The Senior Subordinated Note is subordinate in right of payment to the
notes to the extent set forth in the Senior Subordinated Note. Under the Senior
Subordinated Note, Centennial may not make any payments thereon if there is a
default under any "Senior Indebtedness" which is defined to include the notes.
If an "Event of Default" occurs under the Senior Subordinated Note (except in
connection with certain bankruptcy events), the holder of the Senior
Subordinated Note may not accelerate such debt unless the indebtedness under
the notes and the credit facility have been accelerated for at least 90 days.
The Senior Subordinated Note is also subordinate to the credit facility to the
same extent.
67
<PAGE>
DESCRIPTION OF THE NEW NOTES
Introduction to the Indenture
The outstanding notes were, and the new notes will be, issued under an
Indenture dated as of December 14, 1998 among Centennial Cellular Operating Co.
LLC, as the Issuer, Centennial Cellular Corp., as successor to Centennial
Finance Corp., as a co-obligor, and Norwest Bank Minnesota, N.A., as trustee, a
copy of which is available from Centennial. Upon the effectiveness of the
registration statement, of which this prospectus is a part, the indenture will
be subject to and governed by the Trust Indenture Act of 1939, as this Act may
have been amended. The summary of the material provisions of the indenture in
this "Description of the New Notes" section includes all material information
with regard to those provisions. For definitions of certain capitalized terms
used in this "Description of the New Notes" section, see the discussion under
the "Certain Definitions" heading below. For purposes of this section, the term
"Issuer" means Centennial Cellular Operating Co. LLC without its subsidiaries
and the term "Centennial" means Centennial Cellular Corp. without its
subsidiaries. For purposes of this section, the term "Co-Obligors" means the
Issuer and Centennial, in each case without their respective subsidiaries.
General Terms of the Notes
The new notes:
. will be senior subordinated obligations of the Co-Obligors limited
to $370 million aggregate principal amount,
. will be issued at par,
. will mature on December 15, 2008,
. will bear interest at the rate per annum stated on the cover page
hereof from December 14, 1998 or from the most recent Interest
Payment Date to which interest has been paid or provided for,
payable semi-annually in arrears on June 15 and December 15 of each
year (each, an "Interest Payment Date"), commencing June 15, 1999 to
the Persons in whose names such new notes are registered at the
close of business on June 1 or December 1 preceding such Interest
Payment Date,
. will accrue interest from the most recent Interest Payment Date to
which interest has been paid or duly provided for on the old note
surrendered in exchange for such new note, or, if no interest has
been paid or duly provided for on such old note, from December 14,
1998, and
. will be issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
The Indenture does not contain provisions which would afford holders of
the new notes protection in the event of a decline in the Co-Obligors' credit
quality resulting from highly leveraged or other similar transactions involving
the Co-Obligors.
Principal of, premium, if any, and interest on the new notes will be
payable, and, subject to the following provisions, the new notes may be
presented for registration of transfer or exchange, at the office or agency of
the Co-Obligors maintained for such purpose, which office or agency shall be
maintained in the Borough of Manhattan of The City of New York. At the option
of the Co-Obligors, payment of interest may be made by check mailed to the
holders of the new notes at the addresses set forth upon the registry books of
the Co-Obligors. No service charge will be made for any registration of
transfer or exchange of new notes, but the Co-Obligors may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
68
<PAGE>
connection therewith. Until otherwise designated by the Co-Obligors, the Co-
Obligors' office or agency will be the corporate trust office of the Trustee
presently located in New York, New York.
Settlement for the new notes will be made in same day funds. All payments
of principal and interest will be made by the Co-Obligors in same day funds.
The new notes will trade in the Same-Day Funds Settlement System of The
Depository Trust Company (the "Depositary" or "DTC") until maturity, and
secondary market trading activity for the new notes will therefore settle in
same day funds.
When issued, the new notes will be a new issue of securities with no
established trading market. We cannot assure you that there will be a liquid
trading market for the notes. See "Risk Factors--Absence of Public Trading
Market for the New Notes."
Ranking
The payment of the principal of, premium, if any, and interest on, the
new notes will be subordinated, as set forth in the indenture, in right of
payment, to the prior payment in full of all Senior Indebtedness. The new notes
will be senior subordinated indebtedness of the Issuer ranking pari passu with
all other existing and future senior subordinated indebtedness of the Issuer
and senior to all existing and future Subordinated Indebtedness of the Issuer.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relating to the Issuer or to its assets, or any
liquidation, dissolution or other winding-up of the Issuer, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
assignment for the benefit of creditors or their marshalling of assets or
liabilities of the Issuer (except in connection with the consolidation or
merger of the Issuer or its liquidation or dissolution following the
conveyance, transfer or lease of its properties and assets substantially as an
entirety upon the terms and conditions described under "Certain Covenants--
Limitation on Merger, Sale or Consolidation" below), the holders of Senior
Indebtedness will be entitled to receive payment in full in cash or cash
equivalents of all Senior Indebtedness, or provision will be made for such
payment in full, before the holders of new notes will be entitled to receive
any payment or distribution of any kind or character (other than any payment or
distribution in the form of equity securities or subordinated securities of the
Issuer or any successor obligor that, in the case of any such subordinated
securities, are subordinated in right of payment to all Senior Indebtedness
that may at the time be outstanding to at least the same extent as the new
notes are so subordinated (such equity securities or subordinated securities
hereinafter being "Permitted Junior Securities") and any payment made pursuant
to the provisions described under "--Legal Defeasance and Covenant Defeasance"
from monies or U.S. Government Obligations (as defined in the Indenture)
previously deposited with the Trustee on account of principal of, or premium,
if any, or interest on the new notes); and any payment or distribution of
assets of the Issuer of any kind or character, whether in cash, property or
securities (other than a payment or distribution in the form of Permitted
Junior Securities and payments made pursuant to the provision described under
"--Legal Defeasance and Covenant Defeasance" from monies or U.S. Government
Obligations previously deposited with the Trustee), by set-off or otherwise, to
which the holders of the new notes or the Trustee would be entitled but for the
provisions of the Indenture shall be paid by the liquidating trustee or agent
or other person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
holders of Senior Indebtedness or their representative or representatives
ratably according to the aggregate amounts remaining unpaid on account of the
Senior Indebtedness to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
No payment or distribution of any assets of the Issuer of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities and payments made pursuant to the provisions described under "--
Legal Defeasance and Covenant Defeasance" from monies or U.S. Government
Obligations previously deposited with the Trustee), may be made by or on behalf
of the Issuer on account of
69
<PAGE>
principal of, premium, if any, or interest on the new notes or on account of
the purchase, redemption or other acquisition of new notes:
. upon the occurrence of any default in payment (whether at stated
maturity, upon scheduled installment, by acceleration or otherwise)
of principal of, premium, if any, or interest on Designated Senior
Indebtedness (as defined below) (a "Payment Default") until such
Payment Default shall have been cured or waived in writing or shall
have ceased to exist or such Designated Senior Indebtedness shall
have been discharged or paid in full in cash or cash equivalents,
. for the period specified below (a "Payment Blockage Period") upon
the occurrence of any default or event of default with respect to
any Designated Senior Indebtedness other than any Payment Default
pursuant to which the maturity thereof may be accelerated (a "Non-
Payment Default") and receipt by the Trustee of written notice
thereof from the agent bank under the Credit Facility (the "Agent
Bank") or other representative of holders of Designated Senior
Indebtedness.
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from the Agent Bank or such other representative of
the holders of the Designated Senior Indebtedness in respect of which the Non-
Payment Default exists and shall end on the earliest of:
(1) 179 days thereafter (provided that any Designated Senior
Indebtedness as to which notice was given shall not theretofore
have been accelerated),
(2) the date on which such Non-Payment Default is cured, waived or
ceases to exist or such Designated Senior Indebtedness is
discharged or paid in full in cash or cash equivalents, or
(3) the date on which such Payment Blockage Period shall have been
terminated by written notice to the Trustee or the Issuer from the
Agent Bank or such other representative initiating such Payment
Blockage Period, after which the Issuer will resume making any and
all required payments in respect of the notes, including any missed
payments.
In any event, not more than one Payment Blockage Period may be commenced during
any period of 365 consecutive days, and there must be at least 186 consecutive
days in every 365 day period during which there is no Payment Blockage Period.
No event of default that existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be made, the basis
for the commencement of a subsequent Payment Blockage Period, unless such
default has been cured or waived for a period of not less than 90 consecutive
days subsequent to the commencement of such initial Payment Blockage Period.
In the event that, notwithstanding the provisions of the preceding four
paragraphs, any payment shall be made to the Trustee which is prohibited by
such provisions, then and in such event such payment shall be paid over and
delivered by such Trustee to the Agent Bank and any other representative of
holders of Designated Senior Indebtedness, as their interests may appear, for
application to Designated Senior Indebtedness. After all Senior Indebtedness is
paid in full and until the new notes are paid in full, holders of the new notes
shall be subrogated (equally and ratably with all other Indebtedness pari passu
with the new notes, including the old notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the new notes
have been applied to the payment of Senior Indebtedness.
Failure by the Issuer to make any required payment in respect of the new
notes when due and within any applicable grace period, whether or not occurring
during a Payment Blockage Period, will result in an Event of Default under the
Indenture and, therefore, holders of the new notes will have the right to
accelerate the maturity thereof. See "--Events of Default."
70
<PAGE>
By reason of such subordination, in the event of liquidation,
receivership, reorganization or insolvency of the Issuer, creditors of the
Issuer who are holders of Senior Indebtedness may recover more, ratably, than
the holders of the new notes, and assets which would otherwise be available to
pay obligations in respect of the new notes will be available only after all
Senior Indebtedness has been paid in full in cash or cash equivalents, and
there may not be sufficient assets remaining to pay amounts due on any or all
of the new notes.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including interest, to the extent allowable, accruing after the
filing of a petition initiating any proceeding under any state, federal or
foreign bankruptcy law) on any Indebtedness of the Issuer (other than as
otherwise provided in this definition), whether outstanding on the date of the
Indenture or thereafter created, incurred or assumed, and whether at any time
owing, actually or contingent, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the new notes. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include:
(1) Indebtedness evidenced by the new notes,
(2) Indebtedness that is subordinate or junior in right of payment to
any Indebtedness of the Issuer,
(3) Indebtedness which when incurred and without respect to any election
under Section 1111(b) of Title 11 United States Code, is without
recourse to the Issuer,
(4) Indebtedness which is represented by Disqualified Capital Stock,
(5) any liability for foreign, federal, state, local or other taxes owed
or owing by the Issuer to the extent such liability constitutes
Indebtedness,
(6) Indebtedness of the Issuer to a Subsidiary or any other Affiliate of
the Issuer or any of such Affiliate's Subsidiaries,
(7) to the extent it might constitute Indebtedness, amounts owing for
goods, materials or services purchased in the ordinary course of
business or consisting of trade accounts payable owed or owing by
the Issuer, and amounts owed by the Issuer for compensation to
employees or services rendered to the Issuer,
(8) that portion of any Indebtedness which at the time of issuance is
issued in violation of the Indenture, and
(9) Indebtedness evidenced by any guarantee of any Subordinated
Indebtedness or Pari Passu Indebtedness.
"Designated Senior Indebtedness" means:
(1) all Senior Indebtedness under the Credit Facility, and
(2) any other Senior Indebtedness which at the time of determination has
an aggregate principal amount outstanding of at least $25 million
and which is specifically designated in the instrument evidencing
such Senior Indebtedness or the agreement under which such Senior
Indebtedness arises as "Designated Senior Indebtedness" by the
Issuer.
The indenture will limit, but not prohibit, the incurrence by the Issuer
and its Subsidiaries of additional Indebtedness, and the indenture will
prohibit the incurrence by the Issuer of Indebtedness that is subordinated in
right of payment to any Senior Indebtedness of the Issuer and senior in right
of payment to the new notes.
The new notes will rank junior to all Senior Indebtedness of the Issuer,
equal in right of payment to all future senior subordinated indebtedness of the
Issuer and senior to all Subordinated Indebtedness of the Issuer. As of
February 28, 1999, the Issuer had:
71
<PAGE>
. $933.9 million in aggregate principal amount of Senior Indebtedness
outstanding, and
. $370 million in aggregate principal amount of senior Subordinated
Indebtedness representing the notes. See "Unaudited Pro Forma
Financial Information."
The Issuer conducts its operations through its Subsidiaries. Accordingly,
the Issuer's ability to meet its cash obligations is dependent upon the ability
of its Subsidiaries to make cash distributions to the Issuer. Dividends from
the Issuer's Subsidiaries are expected to be the only source for payment of
interest on the new notes after the first three interest payments (which will
be satisfied from the Pledged Securities). Furthermore, any right of the Issuer
to receive the assets of any of its Subsidiaries upon any such Subsidiary's
liquidation (and the consequent right of the Holders of the new notes to
participate in the distribution of the proceeds of those assets) effectively
will be subordinated by operation of law to the claims of such Subsidiary's
creditors (including trade creditors) and holders of its preferred stock, if
any, except to the extent that the Issuer is itself recognized as a creditor or
preferred stockholder of such Subsidiary, in which case the claims of the
Issuer would still be subordinate to any Indebtedness or preferred stock of
such Subsidiary senior in right of payment to that held by the Issuer. In the
event of the liquidation, bankruptcy, reorganization, insolvency, receivership
or similar proceeding or any assignment for the benefit of the creditors of the
Issuer or a marshaling of assets or liabilities of the Issuer, holders of the
new notes may receive ratably less than other such creditors or interest
holders. As of February 28, 1999, the Issuer's Subsidiaries would have had no
long-term Indebtedness outstanding other than their guarantees of the
Indebtedness of the Issuer under the Credit Facility (which was not initially
guaranteed by Centennial de Puerto Rico and its subsidiaries) and the portion
of the Indebtedness borrowed by Centennial de Puerto Rico under the Credit
Facility (which was guaranteed by Centennial Cellular Operating and Centennial
de Puerto Rico's subsidiaries), all of which effectively would have ranked
senior to the new notes.
Upon consummation of the Merger, Centennial Finance Corp., which was
initially an obligor on the old notes, merged with and into Centennial and
Centennial became a joint and several obligor on the notes under the Indenture
pursuant to an Assumption Agreement and Supplemental Indenture to the
Indenture. The Indenture provides that the new notes are senior subordinated
obligations of any co-obligor to the same extent as the obligations are senior
subordinated obligations of the Issuer. As of February 28, 1999, Centennial
(without its subsidiaries) had $933.9 million in aggregate principal amount of
Senior Indebtedness outstanding (representing its guarantee under the Credit
Facility).
Optional Redemption by the Co-Obligors
General. The new notes will be subject to redemption at any time on or
after December 15, 2003, at the option of the Co-Obligors, in whole or in part,
on not less than 30 nor more than 60 days' prior notice in amounts of $1,000 or
an integral multiple thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-month period
beginning December 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003................................... 105.375%
2004................................... 103.583
2005................................... 101.792
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
72
<PAGE>
Upon Certain Equity Offerings. In addition, at any time after
consummation of the merger and prior to December 15, 2001, the Co-Obligors, at
their option, may use the net cash proceeds of one or more Public Equity
Offerings or Strategic Equity Offerings in a single transaction or a series of
related transactions to redeem up to an aggregate of 35% of the aggregate
principal amount of notes originally issued under the Indenture at a redemption
price equal to 110.750% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date); provided that:
. at least 65% of the initial aggregate principal amount of Notes
remains outstanding immediately after the occurrence of such
redemption,
. any such redemption with respect to a Strategic Equity Offering may
not occur in connection with or after the occurrence of a Change of
Control, and
. any such net proceeds received by Centennial or any other direct or
indirect parent of the Issuer are first contributed to the Issuer as
a capital contribution prior to any such redemption.
In order to effect the foregoing redemption, the Co-Obligors must mail a
notice of redemption no later than 30 days after the closing of the related
Public Equity Offering or Strategic Equity Offering and must consummate such
redemption within 60 days of the closing of the Public Equity Offering or
Strategic Equity Offering.
Upon a Change of Control. In addition, the new notes may be redeemed upon
a Change of Control at any time prior to December 15, 2003, at the option of
the Co-Obligors, in whole and not in part, within 60 days of such Change of
Control at a redemption price equal to:
(1) 100% of the principal amount of the notes, plus
(2) accrued interest to the redemption date (subject to the rights of
holders of record on relevant record dates to receive interest due
on an interest payment date), plus
(3) the Applicable Premium, if any.
In no event will the redemption price of the new notes be less than 105.375%
(the redemption price for the new notes on December 15, 2003) of the principal
amount of the new notes, plus accrued interest to the applicable redemption
date.
Procedures. Subject to the following, notice of any redemption will be
sent, by first-class mail, at least 30 days and not more than 60 days prior to
the date fixed for redemption to the new holder of each note to be redeemed to
such holder's last address as then shown upon the books of the Registrar. Any
notice which relates to a note to be redeemed in part only must state the
portion of the principal amount to be redeemed and must state that on and after
the date fixed for redemption, upon surrender of such note, a new note or notes
in a principal amount equal to the unredeemed portion thereof will be issued.
On and after the date fixed for redemption, interest will cease to accrue on
the portions of the notes called for redemption.
In the case of a partial redemption, the Trustee shall select the Notes
or portions thereof for redemption as follows:
. in compliance with the requirements of the principal national
securities exchange, if any, on which the notes are listed, or
. if the notes are not so listed, on a pro rata basis, by lot or by
any other manner as it deems appropriate and fair;
provided, that any such redemption pursuant to the provisions relating to a
Public Equity Offering or a Strategic Equity Offering shall be made on a pro
rata basis or on as nearly a pro rata basis as practicable
73
<PAGE>
(subject to the procedures of DTC or any other depositary). The new notes may
be redeemed in part in multiples of $1,000 only.
Sinking Fund
The new notes will not have the benefit of a sinking fund.
Security
Pursuant to the Pledge and Escrow Agreement, upon the closing of the
Merger, the Trustee purchased and holds in pledge for the benefit of the
holders of the notes the Pledged Securities in such amount and with such
maturity as will be sufficient upon receipt of scheduled interest and principal
payments of such securities, based on the report of an internationally
recognized firm of independent public accountants or a nationally recognized
investment banking firm, in either case selected by the Co-Obligors, to provide
for payment in full of the first three scheduled interest payments (excluding
Additional Interest) due on the notes (unless already paid). The Pledged
Securities will consist of three groups of Government Securities, one for each
of the first three scheduled interest payments. Each such group will consist of
Government Securities maturing on, or as nearly as possible prior to, the date
of the corresponding scheduled interest payment in an aggregate amount
sufficient upon receipt of scheduled interest and principal payments of such
securities (determined as described in the preceding sentence) to provide for
payment in full of such scheduled interest payment. The Co-Obligors used
approximately $60 million of the net proceeds of the Offering retained in the
Initial Escrow and Pledge Account to acquire the Pledged Securities at the time
of the closing of the Merger. The Pledged Securities were pledged by the Co-
Obligors to the Trustee for the benefit of the holders of notes pursuant to the
Pledge and Escrow Agreement and are held by the Trustee in the Subsequent
Collateral Investments Account (or other accounts). Pursuant to the Pledge and
Escrow Agreement, immediately prior to an Interest Payment Date on the Notes,
the Co-Obligors may either deposit with the Trustee, from funds otherwise
available to the Co-Obligors, cash sufficient to pay the interest scheduled to
be paid on such date, or the Co-Obligors may direct the Trustee to release from
the Subsequent Collateral Investments Account (or other accounts) proceeds
sufficient to pay interest then due. In the event that the Co-Obligors exercise
the former option, the Co-Obligors may thereafter direct the Trustee to release
to the Co-Obligors proceeds or Pledged Securities from the Subsequent
Collateral Investments Account (or other accounts) in like amount. A failure by
the Co-Obligors to pay interest on the notes in a timely manner on or prior to
the first three scheduled interest payments will constitute an immediate Event
of Default under the Indenture, with no grace or cure period.
Interest earned on the Pledged Securities will be held in a cash
collateral account by the Trustee. In the event that collectively the funds
held in the cash collateral account and the Pledged Securities held in the
Subsequent Collateral Investments Account exceed the amount sufficient, based
on the report of an internationally recognized firm of independent public
accountants or a nationally recognized investment banking firm, in either case
selected by the Co-Obligors, to provide for payment in full of the first three
scheduled interest payments (excluding Additional Interest unless then due and
payable) due on the notes (or, in the event an interest payment or payments
have been made, an amount sufficient to provide for payment in full or any
interest payments remaining, up to and including the third scheduled interest
payment) the Trustee will be permitted to release to the Co-Obligors at the Co-
Obligors' request any such excess amount. The notes will be secured by a first
priority security interest in the Pledged Securities in the Subsequent
Collateral Investments Account and the cash collateral account and,
accordingly, the Pledged Securities in the Subsequent Collateral Investments
Account and the cash collateral account will also secure repayment of the
principal amount of the notes to the extent of such security. The Pledge and
Escrow Agreement allows the Co-Obligors to substitute Marketable U.S.
Securities for the Government Securities originally pledged as collateral;
provided, however, that the Marketable U.S. Securities so substituted must have
a value (measured at the date of substitution), in the opinion of a nationally
recognized firm of independent public accountants selected by the Co-Obligors,
at least equal to 125.0% of the amount of all of the first three scheduled
interest payments on the notes that are unpaid (or the pro rata portion of such
interest payments equal to the percentage of such
74
<PAGE>
interest payments to be secured by such Marketable U.S. Securities) as of the
date such Marketable U.S. Securities are proposed to be substituted as security
for the Co-Obligors's obligations under the Pledge and Escrow Agreement.
Under the Pledge and Escrow Agreement, assuming that the Co-Obligors make
the first three scheduled interest payments on the notes in a timely manner,
all of the Pledged Securities will have been released from the Subsequent
Collateral Investments Account and thereafter the notes will be unsecured.
Certain Covenants
Repurchase of Notes at the Option of the Holder Upon a Change of
Control. The Indenture provides that, in the event that a Change of Control has
occurred, each holder will have the right, at such holder's option, pursuant to
an irrevocable and unconditional offer by the Co-Obligors (the "Change of
Control Offer"), to require the Co-Obligors to repurchase all or any part
(equal to $1,000 principal amount or an integral multiple thereof) of such
holder's notes, on a date (the "Change of Control Purchase Date") that is no
later than 45 Business Days after the occurrence of such Change of Control at a
cash price (the "Change of Control Purchase Price") equal to 101% of the
aggregate principal amount thereof, together with any accrued and unpaid
interest to the Change of Control Purchase Date. The Change of Control Offer
shall be made within 30 Business Days following a Change of Control and shall
remain open for 20 Business Days following its commencement (the "Change of
Control Offer Period"). Upon expiration of the Change of Control Offer Period,
the Co-Obligors shall purchase all notes properly tendered in response to the
Change of Control Offer.
On or before the Change of Control Purchase Date, the Co-Obligors will
(1) accept for payment notes or portions thereof properly tendered
pursuant to the Change of Control Offer,
(2) deposit with the Paying Agent cash sufficient to pay the Change of
Control Purchase Price (together with accrued and unpaid interest)
of all notes so tendered, and
(3) deliver to the Trustee notes so accepted together with an Officers'
Certificate listing the notes or portions thereof being purchased by
the Co-Obligors.
The Paying Agent promptly will deliver to the holders of notes so accepted
payment in an amount equal to the Change of Control Purchase Price (together
with any accrued and unpaid interest), and the Trustee will promptly
authenticate and mail or deliver to such holders a new note equal in principal
amount to any unpurchased portion of the note surrendered. Any notes not so
accepted will be promptly mailed or delivered by the Co-Obligors to the Holder
thereof. The Co-Obligors will announce publicly the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date.
The Change of Control purchase feature of the notes may make more
difficult or discourage a takeover of the Co-Obligors, and, thus, the removal
of incumbent management. The Change of Control purchase feature resulted from
negotiations between the Co-Obligors and the Initial Purchasers and is not the
result of any intention on the part of the Co-Obligors or their management to
discourage the acquisition of the Co-Obligors.
The Credit Facility provides that certain change of control events with
respect to the Co-Obligors would constitute a default thereunder. Any future
credit agreements or other agreements to which any of the Co-Obligors or any of
their Subsidiaries becomes a party may contain similar restrictions and
provisions. In the event a Change of Control were to occur at a time when the
Co-Obligors are prohibited from purchasing Notes, the Co-Obligors could seek
the consent of their lenders to such purchase of notes, or any of such
companies could attempt to refinance the borrowings that contain such
prohibition. If the Co-Obligors did not obtain such consents or repay such
borrowings, the Co-Obligors would not be able to purchase the notes under a
Change of Control Offer. In such case, the Co-Obligors' failure to purchase
tendered notes would constitute an Event of Default under the Indenture.
75
<PAGE>
If a Change of Control Offer is made, there can be no assurance that the
Co-Obligors will have available funds sufficient to pay the Change of Control
Purchase Price for all of the notes that might be delivered by holders of the
notes seeking to accept the Change of Control Offer. See "--Ranking."
Centennial is a holding company with no material assets other than the stock of
the Issuer. The failure of the Co-Obligors to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due will give
the Trustee and the holders of the notes the rights described under "Events of
Default."
The term "all or substantially all" as used in the definition of "Change
of Control" has not been interpreted under New York law (which is the governing
law of the Indenture) to represent a specific quantitative test. As a
consequence, in the event the holders of the notes elected to exercise their
rights under the Indenture and the Co-Obligors elected to contest such
election, there could be no assurance as to how a court interpreting New York
law would interpret the phrase.
The provisions of the Indenture do not afford holders of the notes the
right to require the Co-Obligors to repurchase the notes in the event of a
highly leveraged transaction or certain transactions with the Co-Obligors'
management or Affiliates, including a reorganization, restructuring, merger or
similar transaction (including, in certain circumstances, an acquisition of the
Co-Obligors by management or its affiliates) involving the Co-Obligors that may
adversely affect holders of the notes, if such transaction is not a transaction
defined as a Change of Control. A transaction involving the Co-Obligors'
management or Affiliates, or a transaction involving a recapitalization of the
Co-Obligors, will result in a Change of Control if it is the type of
transaction specified by such definition.
Any Change of Control Offer will be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation
14E under the Exchange Act and the rules thereunder and all other applicable
Federal and state securities laws and the Co-Obligors may modify a Change of
Control Offer to the extent necessary to effect such compliance.
Limitation on Incurrence of Additional Indebtedness. The Issuer will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, issue, create, incur, assume, guarantee or otherwise directly or
indirectly become liable for, or otherwise become responsible for, contingently
or otherwise (individually or collectively, to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness (including any Acquired Indebtedness). Neither
the accrual of interest (including the issuance of "pay in kind" securities or
similar instruments in respect of such accrued interest) pursuant to the terms
of Indebtedness Incurred in compliance with this covenant, nor the accretion of
original issue discount, nor the mere extension of the maturity of any
Indebtedness shall be deemed to be an Incurrence of Indebtedness.
Notwithstanding the foregoing, the Issuer and any Guarantor may Incur
Indebtedness (including Acquired Indebtedness) and any Restricted Subsidiary
may Incur Acquired Indebtedness if the Issuer's Annual Operating Cash Flow
Ratio, after giving effect to the Incurrence of such Indebtedness and the
application of the proceeds therefrom, would have been less than 8.25 to 1.0 at
any time prior to December 31, 2000 and 7.5 to 1.0 thereafter.
In addition, the foregoing limitations will not apply to the Incurrence
of the following:
(1) Indebtedness of the Issuer, any Guarantor or Centennial de Puerto
Rico under the Credit Facility in an aggregate principal amount at
any one time outstanding not to exceed $1.05 billion, reduced by
permanent reductions in commitments in satisfaction of the Net Cash
Proceeds application requirement set forth in "--Limitation on
Asset Sales and Sales of Subsidiary Stock," provided, that the
aggregate principal amount of Indebtedness of Centennial de Puerto
Rico pursuant to this clause (1) shall not exceed 25% of the
principal amount which may be borrowed pursuant to this clause (1),
76
<PAGE>
(2) Indebtedness of the Issuer (a) pursuant to the notes or (b)
existing on the Issue Date (other than under the credit facility),
(3) Indebtedness between the Issuer and any Restricted Subsidiary of
the Issuer or between Restricted Subsidiaries of the Issuer,
provided that, in the case of Indebtedness of the Issuer, such
obligations shall be unsecured and subordinated in all respects to
the Holders' rights pursuant to the Notes; provided, further, that
with respect to any Indebtedness in excess of $250,000, any such
Indebtedness is made pursuant to an intercompany note in the form
attached to the Indenture; provided, further, that (a) any
disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to the Issuer
or a Restricted Subsidiary) shall be deemed to be an Incurrence of
such Indebtedness by the obligor not permitted by this clause
(iii), and (b) any transaction pursuant to which any Restricted
Subsidiary, which has Indebtedness owing to the Issuer or any other
Restricted Subsidiary, ceases to be a Restricted Subsidiary shall
be deemed to be the Incurrence of Indebtedness by such Restricted
Subsidiary that is not permitted by this clause (3),
(4) Capitalized Lease Obligations and Purchase Money Indebtedness of
the Issuer and any Restricted Subsidiary in an aggregate amount or
aggregate principal amount, as the case may be, outstanding at any
time not to exceed in the aggregate the greater of (x) $25 million
and (y) 5% of the Issuer's Total Assets; provided that in the case
of Purchase Money Indebtedness, such Indebtedness shall not
constitute more than 100% of the cost (determined in accordance
with GAAP) to the Issuer or such Restricted Subsidiary of the
property purchased or leased with the proceeds thereof,
(5) Indebtedness of the Issuer or any Restricted Subsidiary arising
from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees or
letters of credit, surety bonds or performance bonds securing any
obligations of the Issuer or its Restricted Subsidiaries pursuant
to such agreements, in any case Incurred in connection with the
disposition of any business, assets or Restricted Subsidiary of the
Issuer to the extent none of the foregoing results in the
obligation to repay an obligation for money borrowed by any Person,
(6) any guarantee by any Restricted Subsidiary of the Credit Facility
or any other Indebtedness made in accordance with the provisions of
"--Limitation on Issuances of Guarantees,"
(7) Indebtedness incurred by the Issuer or any of its Restricted
Subsidiaries in connection with the acquisition of a new Restricted
Subsidiary, the majority of whose revenues for the most recent
twelve months for which audited or unaudited financial statements
are available are from a Related Business, or of property,
businesses or assets which, or Capital Stock of a Person all or
substantially all of whose assets, are of a type generally used in
a Related Business; provided, that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with
any other outstanding Indebtedness incurred pursuant to this clause
(7), does not exceed $40 million in the aggregate at any one time
outstanding; and provided, further, that the principal amount of
Indebtedness that may be incurred pursuant to this clause (7) and
clause (7) by any individual Restricted Subsidiary that is not a
Guarantor shall not exceed $25 million in the aggregate at any one
time outstanding,
(8) Indebtedness of the Issuer or any Restricted Subsidiary under
standby letters of credit or reimbursement obligations with respect
thereto issued in the ordinary course of business and consistent
with industry practices; provided that upon the drawing of such
letters of credit or the incurrence of such Indebtedness, such
obligations are reimbursed within 30 days following such drawing or
incurrence,
(9) Interest Rate Protection Obligations relating to (A) Indebtedness
of the Issuer or any Restricted Subsidiary (which Indebtedness is
otherwise permitted to be incurred under this covenant) or
(B) Indebtedness for which a lender has provided a commitment in an
amount reasonably
77
<PAGE>
anticipated to be incurred by the Issuer or any Restricted
Subsidiary in the 12 months after such Interest Rate Protection
Obligations has been incurred; provided, however, that the notional
principal amount of such Interest Rate Protection Obligations does
not exceed the principal amount of the Indebtedness (including
Indebtedness subject to commitments) to which such Interest Rate
Protection Obligations relate,
(10) Currency Hedging Agreements relating to (A) Indebtedness of the
Issuer or any Restricted Subsidiary and/or (B) obligations to
purchase or sell assets or properties, in each case, incurred in
the ordinary course of business of the Issuer or any Restricted
Subsidiary; provided, however, that such Currency Hedging
Agreements do not increase the Indebtedness or other obligations of
the Issuer or any Restricted Subsidiary outstanding other than as a
result of the fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder,
(11) Indebtedness of the Issuer or any Guarantor (other than as
otherwise permitted pursuant to this covenant) not to exceed $100
million in the aggregate at any one time outstanding; provided,
that the Issuer's Restricted Subsidiaries that are not Guarantors
may incur up to $50 million in the aggregate at any one time
outstanding of the $100 million of Indebtedness which may be
incurred pursuant to this clause (11); and provided, further, that
the principal amount of Indebtedness that may be incurred pursuant
to this clause (11) and clause (7) by any individual Restricted
Subsidiary that is not a Guarantor shall not exceed $25 million in
the aggregate at any one time outstanding,
(12) Refinancing Indebtedness incurred to extend, renew, replace or
refund Indebtedness permitted under the second paragraph of this
covenant or clause (2) of this paragraph (plus the lesser of (a)
the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms of
the Indebtedness being refinanced or (b) the amount of premium or
other payment actually paid at such time to refinance the
Indebtedness, plus, in either case, the amount of expenses of the
Issuer reasonably incurred in connection with such refinancing),
and
(13) other Indebtedness of the Issuer or a Guarantor in an amount not
greater than the aggregate amount of cash contributions made to the
capital of the Issuer (other than in exchange for Disqualified
Capital Stock); provided that the amount of such cash contributions
("Excluded Cash Contributions") are designated in an officer's
certificate as Excluded Cash Contributions and shall not be
included in the computation of the amount of Restricted Payments
which the Issuer can make pursuant to "--Limitation on Restricted
Payments."
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (1) through (8)
above or is entitled to be incurred pursuant to the second paragraph of this
covenant, the Issuer may, in its sole discretion, classify such item of
Indebtedness on the date of incurrence in any manner that complies with this
covenant and such item of Indebtedness will be treated as having been incurred
pursuant to only one of such clauses or pursuant to the second paragraph
hereof.
Limitation on Restricted Payments. The Indenture provides that the
Issuer will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, make any Restricted Payment, if, immediately prior or
after giving effect thereto (a) a Default or an Event of Default would exist,
(b) the Issuer would not be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Annual Operating Cash Flow Ratio provision set
forth in the second paragraph of "--Limitation on Incurrence of Additional
Indebtedness," or (c) the aggregate amount of all Restricted Payments made by
the Issuer and its Restricted Subsidiaries, including such proposed Restricted
Payment (if not made in cash, then the fair market value of any property used
therefor) from and after the Issue Date and on or prior to the date of such
Restricted Payment, shall exceed the sum of (i) the amount determined by
subtracting (x) 1.75 times the aggregate Consolidated Interest Expense of
78
<PAGE>
the Issuer for the period (taken as one accounting period) from the first day
of the first quarter commencing after the Issue Date to the last day of the
last full fiscal quarter prior to the date of the proposed Restricted Payment
(the "Computation Period") from (y) Operating Cash Flow of the Issuer for the
Computation Period, plus (ii) the aggregate Net Proceeds received by the Issuer
from the sale (other than to a Subsidiary of the Issuer) of its Qualified
Capital Stock after the Issue Date and on or prior to the date of such
Restricted Payment (other than any such Net Proceeds received by the Issuer in
connection with the financing of the Merger) and in any case other than
Excluded Contributions, Excluded Cash Contributions and Investment Equity),
plus (iii) 100% of the aggregate amount of non-recourse contributions to the
capital of the Issuer since the Issue Date (in any case other than Excluded
Contributions, Excluded Cash Contributions and Investment Equity), plus (iv) to
the extent not otherwise included in clauses (i)-(ii), above, an amount equal
to the net reduction in Investments in Unrestricted Subsidiaries resulting from
payments of dividends, repayment of loans or advances, or other transfers of
assets, in each case to the Issuer or any Restricted Subsidiary of the Issuer
from Unrestricted Subsidiaries, or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments").
Notwithstanding the foregoing, the provisions set forth in clauses (b) or
(c) of the immediately preceding paragraph will not prohibit (and the provision
set forth in clause (a) of the immediately preceding paragraph will not
prohibit the payment described in clause (i)) the following:
(1) the payment of any dividend within 60 days after the date of its
declaration if such dividend could have been made on the date of
its declaration in compliance with the foregoing provisions,
(2) the redemption, defeasance, repurchase or other acquisition or
retirement of any Indebtedness or Capital Stock of the Issuer or
its Restricted Subsidiaries either in exchange for or out of the
Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Issuer) of Qualified Capital Stock (in the case
of any redemption, defeasance, repurchase or other acquisition or
retirement of any Subordinated Indebtedness or Capital Stock of the
Issuer or its Restricted Subsidiaries) or Subordinated Indebtedness
(in the case of any redemption, defeasance, repurchase or other
acquisition or retirement of any Indebtedness of the Issuer or its
Restricted Subsidiaries) of the Issuer,
(3) loans, advances, dividends or distributions by the Issuer to
Centennial in order to fund the payment of the management or other
similar fees to equity investors (or their Affiliates) in
Centennial permitted by the covenant "--Limitation on Transactions
with Related Persons,"
(4) the purchase, redemption or other acquisition or retirement for
value of Capital Stock of Centennial (or loans, advances,
dividends, or distributions by the Issuer to Centennial to fund the
foregoing) from employees, former employees, directors, former
directors, consultants and former consultants of Centennial or any
of its Subsidiaries pursuant to the terms of the agreements
pursuant to which such Capital Stock was acquired in an amount not
to exceed $2.5 million in the aggregate in any calendar year (with
unused amounts in any calendar year being carreeding calendar
years; provided, further, that such amount in any calendar year may
be increased by an amount not to exceed (a) the cash proceeds from
the sale of Capital Stock to members of management, directors or
consultants that occurs after the Issue Date plus (b) the cash
proceeds of key man life insurance policies received by the Issuer
and its Restricted Subsidiaries after the Issue Date,
(5) repurchases of Capital Stock of the Issuer deemed to occur upon
exercise of stock options if such Capital Stock represents a
portion of the exercise price of such options,
(6) loans, advances, dividends or distributions by the Issuer to
Centennial to fund the acquisition, repurchase or other repayment
in respect of Centennial's common shares, Class B Shares,
Convertible Preferred Stock, par value $.01 per share, Second
Series Convertible Preferred Stock, par value $.01 per share, or
options or warrants to purchase any of the foregoing, in each case
pursuant to the Merger Agreement,
79
<PAGE>
(7) loans, advances, dividends or distributions by the Issuer to
Centennial not to exceed an amount necessary to permit Centennial
to pay (a) its costs (including all professional fees and expenses)
incurred to comply with its reporting obligations under federal or
state laws or under the Indenture, (b) its other operational
expenses (other than taxes) incurred in the ordinary course of
business and not exceeding $1 million in any fiscal year (with
unused amounts in any fiscal year being carried over to the next
two succeeding fiscal years) and (c) its then currently due taxes
attributable solely on account of the Issuer and its subsidiaries
(as a consolidated, combined or unitary filing group) or on account
of the income of Centennial related to its investment in the Issuer
and its subsidiaries payable pursuant to a tax sharing agreement
between Centennial and the Issuer and its subsidiaries and the
reasonable expenses of preparing returns reflecting such taxes (not
to exceed in any event the amount of tax that the Issuer and the
Restricted Subsidiaries would otherwise pay if not part of such
filing group), provided that Centennial agrees to be obligated to
contribute to the Issuer any refund Centennial receives relating to
any such taxes,
(8) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness (other than Disqualified Capital Stock) (a
"refinancing") through the substantially concurrent issuance of new
Subordinated Indebtedness of the Issuer, provided that any such new
Subordinated Indebtedness (1) shall be in a principal amount that
does not exceed the principal amount so refinanced (or, if such
Subordinated Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration
of acceleration thereof, then such lesser amount as of the date of
determination), plus the lesser of (I) the stated amount of any
premium or other payment required to be paid in connection with
such a refinancing pursuant to the terms of the Indebtedness being
refinanced or (II) the amount of premium or other payment actually
paid at such time to refinance the Indebtedness, plus, in either
case, the amount of expenses of the Issuer incurred in connection
with such refinancing; (2) has a final maturity date later than the
final maturity date of, and has a Weighted Average Life equal to or
greater than the Weighted Average Life of, the Indebtedness to be
refinanced; and (3) is expressly subordinated in right of payment
to the Notes at least to the same extent as the Subordinated
Indebtedness to be refinanced,
(9) loans, advances, dividends or distributions by the Issuer to
Centennial in an amount no greater than the current quarterly
interest payments then due on the Mezzanine Financing as in effect
on the Issue Date; provided that in no event shall such amount
exceed the aggregate amount of Cash from Minority Cellular
Investment Interests received by the Issuer net of all taxes (on a
consolidated basis required to be paid in respect thereof; and
provided further that with respect to any loans, advances,
dividends or distributions after the first anniversary of the Issue
Date and after giving effect thereto, the Issuer would be permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
Annual Operating Cash Flow Ratio test contained in the second
paragraph of "--Limitation on Incurrence of Additional
Indebtedness,"
(10) the declaration and payment of dividends or distributions to
holders of any class or series of Disqualified Capital Stock of the
Issuer or any Preferred Stock of its Restricted Subsidiaries issued
or incurred in accordance with the covenant "--Limitation on
Incurrence of Additional Indebtedness,"
(11) the payment of dividends on the Issuer's common stock following the
first initial public offering of Centennial's or the Issuer's
common stock after the Issue Date, of up to 6% per annum of the net
cash proceeds received by the Issuer in such public offering or
contributed by Centennial to the Issuer from the net cash proceeds
of an equity offering by Centennial,
(12) loans, advances, dividends or distribution by the Issuer to
Centennial to fund the repurchase, retirement or other acquisition
for value of Capital Stock of Centennial in existence on the Issue
80
<PAGE>
Date after the Merger (which shall not exceed 7.1% of the
outstanding Capital Stock of Centennial prior to the Merger) and
which are not held by Welsh Carson, Blackstone or their respective
Affiliates or any members of management of Centennial or the Issuer
or any of their Subsidiaries (including any Capital Stock issued in
respect of such Capital Stock as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise)
provided that (A) the amount per share paid under this clause (xii)
shall not exceed $41.50 per share (as such amount shall be adjusted
as determined in good faith by the Board of Directors of the Issuer
for stock splits, stock dividends, recapitalizations, stock
recombinations, mergers, reverse stock splits, consolidations or
similar transactions) and (B) after giving effect thereto, the
Issuer would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Annual Operating Cash Flow Ratio test
contained in the second paragraph of "--Limitation on Incurrence of
Additional Indebtedness",
(13) Investments made with Excluded Contributions, and
(14) other Restricted Payments in an aggregate amount not to exceed $2
million.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this description of the
"--Limitation on Restricted Payments" covenant, 100% of the amounts expended
under clauses (1), (2) to the extent the Net Proceeds from the concurrent sale
of Qualified Capital Stock has been added to the aggregate Net Proceeds
calculation pursuant to clause (ii) of the first paragraph of this covenant),
(4), (5), (10), (11) and (12) of the immediately preceding paragraph shall be
deducted.
Notwithstanding anything contained in this Section, prior to the Merger,
the Issuer, Finance Corp. and their Subsidiaries shall not make any Restricted
Payments (other than pursuant to clause (6) of the second preceding paragraph).
Limitation on Restricting Subsidiary Dividends. The Issuer will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, assume or suffer to exist any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Issuer to pay dividends or make
other distributions on the Capital Stock of any Restricted Subsidiary of the
Issuer or pay or satisfy any obligation to the Issuer or any of its Restricted
Subsidiaries or otherwise transfer assets or make or pay loans or advances to
the Issuer or any of its Restricted Subsidiaries, except encumbrances and
restrictions existing under
(1) any applicable law or any governmental or administrative regulation
or order,
(2) Refinancing Indebtedness permitted under the Indenture, provided
that the restrictions contained in the instruments governing such
Refinancing Indebtedness are no more restrictive in the aggregate
than those contained in the instruments governing the Indebtedness
being refinanced immediately prior to such refinancing,
(3) restrictions with respect solely to a Restricted Subsidiary of the
Issuer imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary,
provided that such restrictions apply solely to the Capital Stock
or assets being sold of such Restricted Subsidiary,
(4) restrictions contained in any agreement relating to a Person or
real or tangible personal property acquired after the Issue Date
which are not applicable to any Person or property, other than the
Person or property so acquired and which were not put in place in
connection with, or in contemplation of, such acquisition,
(5) any agreement (other than those referred to in clause (4)) of a
Person acquired by the Issuer or a Restricted Subsidiary of the
Issuer, which restrictions existed at the time of acquisition,
81
<PAGE>
(6) contractual encumbrances or restrictions in effect on the Issue
Date and customary encumbrances and restrictions contained in the
security agreements related to the Credit Facility and encumbrances
and restrictions which will be contained in the Credit Facility on
the Merger Date as such encumbrances or restrictions may be
amended, provided that such encumbrances or restrictions as amended
are no more restrictive in the aggregate than those contained in
the security agreements and the Credit Facility in effect on the
Merger Date,
(7) the Indenture and the Notes,
(8) Purchase Money Indebtedness for property acquired in the ordinary
course of business to the extent such encumbrance or restriction
relates to the property underlying the Purchase Money Indebtedness,
(9) Indebtedness of Restricted Subsidiaries otherwise permitted to be
incurred pursuant to the covenants "--Limitation on Incurrence of
Additional Indebtedness" and "--Limitation on Liens," which
encumbrances or restrictions in the aggregate with all such
previous encumbrances or restrictions do not restrict greater than
10% of the Issuer's Annual Operating Cash Flow on the date of
incurrence of the Indebtedness,
(10) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business,
(11) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business to the
extent such encumbrance and restriction relates to the activities
and assets of such joint venture or similar entity and provided
that the Annual Operating Cash Flow determined as of the date of
execution of any such joint venture or similar agreement in all
such joint ventures or similar entities which are subject to such
encumbrances or restrictions do not exceed 10% of the Issuer's
Annual Operating Cash Flow on the date of execution of such joint
venture or similar agreement, or
(12) customary provisions restricting subletting or assignment of any
lease entered into the ordinary course of business.
Limitation on Transactions with Related Persons. The Issuer will not, and
will not permit any of its Restricted Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction") involving in one or a series of related transactions
an aggregate consideration in excess of $5.0 million, unless (a) such Affiliate
Transaction is on terms that are not materially less favorable to the Issuer or
the relevant Restricted Subsidiary than those that would have been obtained in
a comparable transaction by the Issuer or such Restricted Subsidiary with an
unrelated Person and the Issuer delivers an officer's certificate to the
Trustee certifying that such Affiliate Transaction complies with this clause
(a) and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $10.0
million, the Issuer delivers to the Trustee a resolution adopted by the
majority of the Disinterested Directors approving such Affiliate Transaction
and set forth in an officer's certificate certifying that such Affiliate
Transaction complies with clause (a) above.
The foregoing provisions will not apply to the following:
(1) transactions between or among the Issuer and/or any of its
Restricted Subsidiaries,
(2) Restricted Payments permitted by the provisions of the Indenture
described above under the covenant "--Limitation on Restricted
Payments,"
(3) the payment of annual management, consulting, monitoring and
advisory fees and related expenses to Welsh Carson, Blackstone and
their respective Affiliates in an amount in any
82
<PAGE>
calendar year not to exceed the greater of (a) $1 million or (b) 1%
of Annual Operating Cash Flow,
(4) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors, employees or
consultants of the Issuer or any Restricted Subsidiary,
(5) payments by the Issuer or any of its Restricted Subsidiaries to
Welsh Carson, Blackstone and their respective Affiliates made for
any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or
divestitures which payments are approved by a majority of the Board
of Directors of the Issuer in good faith,
(6) transactions with respect to which the Issuer or any of its
Restricted Subsidiaries, as the case may be, delivers to the
Trustee a letter from an investment banking firm of national
standing stating that such transaction is fair to the Issuer or
such Restricted Subsidiary from a financial point of view,
(7) payments or loans to employees or consultants which are approved by
a majority of the Board of Directors of the Issuer in good faith,
(8) any agreement as in effect on the Issue Date or any amendment
thereto (so long as any such amendment is not disadvantageous to
the holders of the notes in any material respect) or any
transaction contemplated thereby,
(9) the existence of, or the performance by the Issuer or any of its
Restricted Subsidiaries of its obligations under the terms of, the
Recapitalizatioers agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a
party on the Issue Date and any similar agreements which it may
enter into thereafter; provided, however, that the existence of, or
the performance by the Issuer or any of its Restricted Subsidiaries
of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the
Issue Date shall only be permitted by this clause,
(10) to the extent that the terms of any such amendment or new agreement
are not otherwise disadvantageous to the Holders of the Notes in
any material respect,
(11) the payment of all fees, expenses, bonuses and awards related to
the Recapitalization including fees to Welsh Carson and Blackstone,
and
(12) any payment pursuant to a tax sharing agreement between the Issuer
and any other Person with which the Issuer is required or permitted
to file a consolidated tax return or with which the Issuer is or
could be part of a consolidated, combined or unitary group for tax
purposes, which payments are not in excess of the tax liabilities
attributable solely to the Issuer and its Restricted Subsidiaries
(as a consolidated, combined or unitary group).
Limitation on Issuances of Guarantees. (a) The Issuer will not cause or
permit any Restricted Subsidiary (which is not a Guarantor), directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of the Issuer or any Restricted Subsidiary (other
than under the Credit Facility, except for any Indebtedness under the Credit
Facility constituting Pari Passu Indebtedness or Subordinated Indebtedness)
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for a Guarantee of the notes
on the same terms as the guarantee of such Indebtedness except that
(A) such guarantee need not be secured unless required pursuant to "--
Limitation on Liens,"
(B) if such Indebtedness is by its terms Senior Indebtedness, any such
assumption, guarantee or other liability of such Restricted
Subsidiary with respect to such Indebtedness shall be senior to such
Restricted Subsidiary's Guarantee of the notes to the same extent as
such Senior Indebtedness is senior to the notes, and
83
<PAGE>
(C) if such Indebtedness is by its terms expressly subordinated to the
notes, any such assumption, guarantee or other liability of such
Restricted Subsidiary with respect to such Indebtedness shall be
subordinated to such Restricted Subsidiary's Guarantee of the notes
at least to the same extent as such Indebtedness is subordinated to
the notes.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the notes will provide by its terms that it (and all Liens
securing the same) shall be automatically and unconditionally released and
discharged upon
(1) any sale, exchange or transfer, to any Person not an Affiliate of
the Issuer, of all of the Issuer's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary, which
transaction is in compliance with the terms of the Indenture and
such Restricted Subsidiary is released from all guarantees, if any,
by it or other Indebtedness of the Issuer or any Restricted
Subsidiaries, or
(2) the release by the holders of the Indebtedness of the Issuer
described in clause (a) above or their guarantee by such Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness), which resulted in the notes
being guaranteed by such Restricted Subsidiary, at such time as
. no other Indebtedness of the Issuer has been guaranteed by such
Restricted Subsidiary or
. the holders of all such other Indebtedness which is guaranteed by
such Restricted Subsidiary also release their guarantee by such
Restricted Subsidiary (including any deemed release upon payment
in full of all obligations under such Indebtedness).
Limitation on Asset Sales and Sales of Subsidiary Stock. The Indenture
provides that the Issuer will not, and will not permit any of its Restricted
Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, businesses or assets, including by merger or consolidation or sale
and leaseback transaction, and including any sale or other transfer or issuance
of any Capital Stock of any Restricted Subsidiary of the Issuer, whether by the
Issuer or a Restricted Subsidiary (an "Asset Sale"), unless
(1)
. within one year after the date of such Asset Sale, an amount equal
to the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount")
are applied to the optional redemption of the notes in accordance
with the terms of the Indenture and other Indebtedness of the
Issuer ranking on a parity with the notes from time to time
outstanding with similar provisions requiring the Issuer to make
an offer to purchase or to redeem such Indebtedness with the
proceeds from asset sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) of the notes
and such other Indebtedness then outstanding or to the repurchase
of the notes and such other Indebtedness pursuant to an
irrevocable, unconditional offer (the "Asset Sale Offer") to
repurchase such Indebtedness at a purchase price (the "Asset Sale
Offer Price") of 100% of the principal amount thereof in the case
of the notes or 100% of the principal amount (or accreted value in
the case of Indebtedness issued with an original issue discount)
of such Indebtedness, plus, in each case, accrued interest to the
date of payment, made within one year of such Asset Sale, or
. within one year of such Asset Sale, the Asset Sale Offer Amount is
(i) invested (or committed, pursuant to a binding commitment
subject only to reasonable, customary closing conditions, to be
invested, and in fact is so invested, within an additional 90
days) in tangible assets and property (other than notes,
obligations or securities), which in the good faith reasonable
judgment of the Issuer are of a type used in a Related Business,
or Capital Stock
84
<PAGE>
of a Person (which, if such Person becomes a Subsidiary of the
Issuer by virtue of such Asset Sale, shall initially be designated
a Restricted Subsidiary) all or substantially all of whose assets
and property (in the good faith reasonable judgment of the Issuer)
are of a type used in a Related Business (provided that, with
respect to such Capital Stock, all of the requirements of the last
proviso of clause (5) of the following paragraph shall have been
satisfied) or (ii) used to permanently retire Senior Indebtedness
of the Issuer or any Guarantor or Indebtedness of any Restricted
Subsidiary (which is not a Guarantor),
(2) with respect to any transaction or related series of transactions of
securities, property or assets with an aggregate fair market value
in excess of $2,500,000, at least 75% of the value of consideration
for the assets disposed of in such Asset Sale, excluding
. Senior Indebtedness under a bank credit facility (and any
Refinancing Indebtedness issued to refinance any such
Indebtedness) or any Indebtedness of a Restricted Subsidiary in
each case that is assumed by a transferee which assumption
permanently reduces the amount of Indebtedness outstanding on the
Issue Date and permitted to have been Incurred pursuant to the
covenant "--Limitation on Incurrence of Additional Indebtedness"
(including that in the case of a revolver or similar arrangement
that makes credit available, such commitment is permanently
reduced by such amount),
. Purchase Money Indebtedness secured exclusively by the assets
subject to such Asset Sale which is assumed by a transferee, and
. marketable securities that are promptly converted into cash or
Cash Equivalents) consists of cash or Cash Equivalents, provided
that any cash or Cash Equivalents received within 12 months
following any such Asset Sale upon conversion of any property or
assets (other than in the form of cash or Cash Equivalents)
received in consideration of such Asset Sale shall be applied
promptly in the manner required of Net Cash Proceeds of any such
Asset Sale as set forth above (provided further that the Issuer
and its Restricted Subsidiaries shall not be required to receive
any cash in connection with the transfer or contribution of assets
to a joint venture), and
(3) the Board of Directors of the Issuer determines in good faith that
the Issuer or such Restricted Subsidiary, as applicable, would
receive fair market value in consideration of such Asset Sale. The
Indenture provides that an Asset Sale Offer may be deferred until
the accumulated Net Cash Proceeds from Asset Sales not applied to
the uses set forth in
. above exceeds $15,000,000 and that each Asset Sale Offer shall
remain open for 20 Business Days following its commencement and no
longer, except as otherwise required by applicable law (the "Asset
Sale Offer Period"). Upon expiration of the Asset Sale Offer
Period, the Issuer shall apply the Asset Sale Offer Amount, plus
an amount equal to accrued interest to the purchase of all
Indebtedness properly tendered (on a pro rata basis as described
above if the Asset Sale Offer Amount is insufficient to purchase
all Indebtedness so tendered) at the Asset Sale Offer Price
(together with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(1) the Issuer and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or
otherwise dispose of assets acquired and held for resale in the
ordinary course of business,
(2) the Issuer and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the "--Limitation on Mergers, Sales or
Consolidations" covenant,
85
<PAGE>
(3) the Issuer and its Restricted Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course
of business so long as such property is no longer necessary for the
proper conduct of the business of the Issuer or such Restricted
Subsidiary, as applicable,
(4) the Issuer and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets to the Issuer or any
of its Restricted Subsidiaries in accordance with the terms of the
Indenture, and
(5) the Issuer and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, in the case of exchanges in excess of $15 million upon
receipt of a favorable written opinion by an independent financial
advisor of national reputation as to the fairness from a financial
point of view to the Issuer or such Restricted Subsidiary of the
proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or
Capital Stock of a Person all or substantially all of whose assets,
are of a type used in the business of the Issuer on the date of the
Indenture or a Related Business (provided that such Person shall
initially be designated a Restricted Subsidiary if such Person
becomes a Subsidiary of the Issuer by virtue of such Asset Sale), or
a combination of any such property, businesses or assets, or Capital
Stock of such a Person and cash or Cash Equivalents, provided that
. a majority of the Disinterested Directors of the Board of
Directors of the Issuer shall have approved a resolution of the
Board of Directors that such exchange is fair to the Issuer or
such Restricted Subsidiary, as the case may be,
. any cash or Cash Equivalents received pursuant to any such
exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the
provisions of the immediately preceding paragraph of this
covenant, and
. any Capital Stock of a Person received in an Asset Sale pursuant
to this clause (5) shall be owned directly by the Issuer or a
Restricted Subsidiary and, when combined with the Capital Stock of
such Person already owned by the Issuer and its Restricted
Subsidiaries, shall constitute a majority of the voting power and
Capital Stock of such Person.
Restricted Payments that are made in compliance with "--Limitation on
Restricted Payments" shall not be deemed to be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
Limitation on Liens. The Issuer will not, and will not cause or permit
any Restricted Subsidiary to, directly or indirectly, create, incur or affirm
any Lien of any kind securing any Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee or other liability with
respect thereto by any Restricted Subsidiary) upon any property or assets
(including any intercompany notes) of the Issuer or any Restricted Subsidiary
owned on the date of the Indenture or acquired after the date of the Indenture,
or any income or profits therefrom, unless the Notes are directly secured
equally and ratably with (or, in the case of Subordinated Indebtedness, prior
or senior thereto, with the same relative priority as the Notes shall have with
respect to such Subordinated Indebtedness) the obligation or liability secured
by such Lien except for Liens
(A) securing any Indebtedness which became Indebtedness pursuant to a
transaction permitted under "--Limitation on Merger, Sale or
Consolidation" or securing Acquired Indebtedness which was created
prior to (and not created in connection with, or in contemplation
of) the incurrence of such Pari Passu Indebtedness or Subordinated
Indebtedness (including any assumption, guarantee
86
<PAGE>
or other liability with respect thereto by any Restricted Subsidiary)
and which Indebtedness is permitted under the provisions of "--
Limitation on Incurrence of Additional Indebtedness," or
(B) securing any Indebtedness incurred in connection with any
refinancing, renewal, substitutions or replacements of any such
Indebtedness described in clause (A), so long as the aggregate
principal amount of Indebtedness represented thereby (or if such
Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness
plus any accreted value attributable thereto since the original
issuance of such Indebtedness) is not increased by such refinancing
by an amount greater than the lesser of
. the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms
of the Indebtedness being refinanced, or
. the amount of premium or other payment actually paid at such time
to refinance the Indebtedness, plus, in either case, the amount of
expenses of the Issuer incurred in connection with such
refinancing; provided, however, that in the case of clauses (A)
and (B), any such Lien only extends to the assets that were
subject to such Lien securing such Indebtedness prior to the
related acquisition by the Issuer or its Restricted Subsidiaries.
Notwithstanding the foregoing, any Lien securing the notes granted
pursuant to this covenant shall be automatically and unconditionally released
and discharged upon the release by the holders of the Pari Passu Indebtedness
or Subordinated Indebtedness described above of their Lien on the property or
assets of the Issuer or any Restricted Subsidiary (including any deemed
release upon payment in full of all obligations under such Indebtedness), at
such time as the holders of all such Pari Passu Indebtedness or Subordinated
Indebtedness also release their Lien on the property or assets of the Issuer
or such Restricted Subsidiary, or upon any sale, exchange or transfer to any
Person not an Affiliate of the Issuer of the property or assets secured by
such Lien, or of all of the Capital Stock held by the Issuer or any Restricted
Subsidiary in, or all or substantially all the assets of, any Restricted
Subsidiary creating such Lien.
Limitation on Merger, Sale or Consolidation. The Issuer will not
consolidate with or merge with or into another Person, or sell, lease, convey,
transfer or otherwise dispose of all or substantially all of its properties
and assets (computed on a consolidated basis), whether in a single transaction
or a series of related transactions, to another Person or group of affiliated
Persons, and the Issuer will not permit any Restricted Subsidiary to enter
into any such transaction or series of transactions which would result in a
sale, lease, conveyance, transfer or other disposition of all or substantially
all of the properties and assets of the Issuer on a consolidated basis, unless
(1) either (a) the Issuer is the continuing entity or (b) the resulting,
surviving or transferee entity is an entity organized under the laws
of the United States, any state thereof or the District of Columbia
and expressly assumes by supplemental indenture all of the
obligations of the Issuer in connection with the Notes, the
Indenture and the Registration Rights Agreement, as the case may be,
and the Notes, the Indenture and the Registration Rights Agreement
will remain in full force and effect as so supplemented (and any
Guarantee shall be confirmed as applied to the surviving entity's
obligations),
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis (and treating
any Indebtedness not previously an obligation of the Issuer or any
of its Restricted Subsidiaries which becomes the obligation of the
Issuer or any of its Restricted Subsidiaries as a result of such
transaction as having been incurred at the time of such transaction)
to such transaction,
(3) immediately before and immediately after giving effect to such
transaction on a pro forma basis (on the assumption that the
transaction occurred on the first day of the four-quarter period for
which financial statements are available ending immediately prior to
the consummation of such
87
<PAGE>
transaction with the appropriate adjustments with respect to the
transaction being included in such pro forma calculation), either the
Issuer or resulting surviving or transferee entity would immediately
thereafter be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Annual Operating Cash Flow Ratio
provision set forth in the second paragraph of the "--Limitation on
Incurrence of Additional Indebtedness" covenant or such Annual
Operating Cash Flow Ratio would be lower than such ratio immediately
prior to such transaction,
(4) at the time of the transaction any co-obligor, unless it is the
other party to the transaction described above, will have by
supplemental indenture confirmed that it remains a co-obligor under
the Indenture and the Notes,
(5) at the time of the transaction each Guarantor, if any, unless it is
the other party to the transaction described above, will have by
supplemental indenture confirmed that its Guarantee shall apply to
such Person's obligations under the Indenture and the Notes, and
(6) at the time of the transaction the Issuer or the resulting surviving
or transferee entity will have delivered, or caused to be delivered,
to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each to
the effect that such consolidation, merger, transfer, sale,
assignment, conveyance, transfer, lease or other transaction and the
supplemental indenture in respect thereof comply with the Indenture
and that all conditions precedent therein provided for relating to
such transaction have been complied with.
Notwithstanding the foregoing, any Restricted Subsidiary may merge with
and into any other Restricted Subsidiary or the Issuer.
Immediately upon consummation of the Merger, Finance Corp. shall merge
with and into Centennial and Centennial shall assume all of Finance Corp.'s
obligations under the Indenture and the Notes pursuant to an assumption
agreement in the form attached to the Indenture.
Centennial will not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person
(other than (i) the Issuer or any Guarantor, (ii) CCW Acquisition Corp. in
connection with the Merger or (iii) Finance Corp. upon consummation of the
Merger) or sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of its properties and assets to any Person or group of
Persons (other than the Issuer or any Guarantor) unless at the time and after
giving effect thereto
(1) either (a) Centennial will be the continuing corporation or (b) the
Person (if other than Centennial) formed by such consolidation or
into which Centennial is merged or the Person which acquires by
sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of Centennial on a
Consolidated basis will be a corporation duly organized and validly
existing under the laws of the United States of America, any state
thereof or the District of Columbia and such Person expressly
assumes, by a supplemental indenture, in a form reasonably
satisfactory to the Trustee, all the obligations of Centennial under
the notes and the Indenture and the Registration Rights Agreement
and such Note, Indenture and Registration Rights Agreement will
remain in full force and effect,
(2) immediately before and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default
will have occurred and be continuing, and
(3) at the time of the transaction Centennial or the surviving entity
will have delivered, or caused to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each to the effect
that such consolidation, merger, transfer, sale, assignment,
conveyance, lease or other transaction and the supplemental
indenture in respect thereof comply with the Indenture and that all
conditions precedent therein provided for relating to such
transaction have been complied with.
88
<PAGE>
In the event that Centennial shall merge or consolidate with or into the
Issuer, the provisions of the first paragraph of this Section are also required
to be satisfied.
Upon any consolidation or merger or any transfer (other than a lease) of
all or substantially all of the assets of the Issuer or Centennial, as the case
may be in accordance with the foregoing, the successor corporation formed by
such consolidation or into which the Issuer or Centennial, as the case may be,
is merged or to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer or
Centennial, as the case may be, under the Indenture with the same effect as if
such successor entity had been named therein as the Issuer or Centennial, as
the case may be, and the Issuer or Centennial, as the case may be (except in
connection with a transfer that results in the transfer of assets constituting
or accounting for less than 95% of the consolidated assets (as of the last
balance sheet available), revenues, or Annual Operating Cash Flow of the Issuer
or Centennial, as the case may be (as of the last twelve month period for which
financial statements are available), shall be released from the obligations
under the notes and the Indenture.
Limitation on Lines of Business. Neither the Issuer nor any of its
Restricted Subsidiaries shall directly or indirectly engage in any line or
lines of business activity other than that which, in the reasonable, good faith
judgment of the Board of Directors of the Issuer, is a Related Business.
Limitation on Activities Prior to the Merger. Prior to consummation of
the Merger, the Co-Obligors may not, and must cause their Subsidiaries not to,
incur any Indebtedness or engage in any activities other than in connection
with the Merger and the Credit Facility.
Transfer of Stock to the Issuer. Immediately following consummation of
the Merger, Centennial shall cause the Capital Stock of all of its existing
Subsidiaries and Minority Cellular Investment Interests to be contributed to
the Issuer and Centennial shall immediately thereafter have no material assets
other than its Investment in the Capital Stock of the Issuer.
Limitation on Senior Subordinated Indebtedness. Each Issuer will not, and
will not permit or cause any Guarantor to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise in any manner become directly or
indirectly liable for or with respect to or otherwise permit to exist any
Indebtedness that is subordinate in right of payment to any Indebtedness of
such Co-Obligors or such Guarantor, as the case may be, unless such
Indebtedness is also pari passu with the Notes or the Guarantee of such
Guarantor or subordinated in right of payment to the notes or such Guarantee at
least to the same extent as the notes or such Guarantee are subordinated in
right of payment to Senior Indebtedness or Senior Indebtedness of such
Guarantor, as the case may be, as set forth in the Indenture.
Limitation on Unrestricted Subsidiaries. The Indenture provides that the
Issuer may designate any Subsidiary (other than a Guarantor) as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation,
(b) the Issuer would be permitted to make an Investment at the time of
Designation (assuming the effectiveness of such Designation)
pursuant to "--Limitation on Restricted Payments" above in an amount
(the "Designation Amount") equal to the greater of (1) the net book
value of the Issuer's interest in such Subsidiary calculated in
accordance with GAAP or (2) the fair market value of the Issuer's
interest in such Subsidiary as determined in good faith by the
Issuer's board of directors,
(c) such Unrestricted Subsidiary does not own any Capital Stock in any
Restricted Subsidiary of the Issuer which is not simultaneously
being designated an Unrestricted Subsidiary,
89
<PAGE>
(d) such Unrestricted Subsidiary is not liable, directly or indirectly,
with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness, provided that an Unrestricted Subsidiary may provide a
Guarantee for the notes, and
(e) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with the Issuer
or any Restricted Subsidiary unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the
Issuer or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the
Issuer or, in the event such condition is not satisfied, the value
of such agreement, contract, arrangement or understanding to such
Unrestricted Subsidiary shall be deemed a Restricted Payment.
In the event of any such Designation, the Issuer shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"--Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
The Indenture will also provide that the Issuer shall not and shall not
cause or permit any Restricted Subsidiary to at any time
. provide credit support for (provided that operational contracts in
the ordinary course of business shall not be deemed credit support),
or subject any of its property or assets (other than the Capital
Stock of any Unrestricted Subsidiary) to the satisfaction of, any
Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument constituting such Indebtedness)
(other than Permitted Investments in Unrestricted Subsidiaries), or
. be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary.
For purposes of the foregoing, the Designation of a Subsidiary of the
Issuer as an Unrestricted Subsidiary shall be deemed to be the Designation of
all of the Subsidiaries of such Subsidiary as Unrestricted Subsidiaries.
The Issuer may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation,
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred
at such time, have been permitted to be incurred for all purposes of
the Indenture, and
(c) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed
Revocation, and after giving pro forma effect to the incurrence of
any such Indebtedness of such redesignated Subsidiary as if such
Indebtedness was incurred on the date of the Revocation, the Issuer
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "--Limitation
on Incurrence of Additional Indebtedness."
All Designations and Revocations must be evidenced by a resolution of the
board of directors of the Issuer delivered to the Trustee certifying compliance
with the foregoing provisions.
Provision of Financial Statements. Whether or not the Issuer is subject
to Section 13(a) or 15(d) of the Exchange Act, so long as any notes are
outstanding, the Issuer will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the
90
<PAGE>
Issuer would have been required to file with the SEC pursuant to Section 13(a)
or 15(d) if it were so subject, such documents to be filed with the SEC on or
prior to the date (the "Required Filing Date") by which the Issuer would have
been required so to file such documents if it were so subject. The Issuer will
also in any event
. within 15 days of each Required Filing Date (whether or not prior to
the 120th calendar day following the Merger Date) (i) transmit by
mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with
the Trustee copies of the annual reports, quarterly reports and other
documents which the Issuer would have been required to file with the
SEC pursuant to Section 13(a) or 15(d) of the Exchange Act if the
Issuer were subject to either of such Sections, and
. if filing such documents by the Issuer with the SEC is not permitted
under the Exchange Act, promptly upon written request and payment of
the reasonable cost of duplication and delivery, supply copies of
such documents to any prospective purchaser of notes at the Issuer's
cost.
The Indenture also provides that, so long as any of the notes remain
outstanding, the Issuer will make available to any prospective purchaser of
notes or beneficial owner of notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act, until such
time as the Issuer has either exchanged the notes for securities identical in
all material respects which have been registered under the Securities Act or
until such time as the holders thereof have disposed of such notes pursuant to
an effective registration statement under the Securities Act. The Issuer will
be deemed to have satisfied the requirements set forth above if (a) Centennial
prepares, files, mails and supplies reports and other documents prepared on a
consolidated basis of the types required above, in each case within the
applicable time periods, (b) the Issuer is not required to file such reports
and other documents separately under the applicable rules and regulations of
the SEC (after giving effect to any exemptive relief) because of the filings
made by Centennial, (c) Centennial does not own assets in excess of $10 million
other than the Capital Stock of the Issuer, and (d) Centennial does not have
outstanding Indebtedness in excess of $10 million (other than indebtedness
under the Mezzanine Financing and Indebtedness as to which the Issuer is also
liable).
Amendments to Mezzanine Financing. The Indenture provides that the
Mezzanine Financing shall be in substantially the form attached to the
Indenture and Centennial shall not amend the terms of the Mezzanine Financing
in a manner adverse to the Holders.
Additional Covenants. The Indenture also contains covenants with respect
to the following matters:
. payment of principal, premium and interest,
. maintenance of an office or agency in The City of New York,
. arrangements regarding the handling of money held in trust,
. maintenance of corporate existence,
. payment of taxes and other claims,
. maintenance of properties, and
. maintenance of insurance.
Events of Default and Remedies
The Indenture defines an Event of Default as
(1) the failure by Finance Corp. or the Issuer to pay any installment of
interest on the notes as and when the same becomes due and payable
and, with respect to any installment of interest after the
91
<PAGE>
first three Interest Payment Dates, the continuance of such failure
for 30 days (whether or not prohibited by the subordination
provisions of the Indenture),
(2) the failure by Finance Corp. or the Issuer to pay all or any part of
the principal, or premium, if any, on the notes when and as the same
becomes due and payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, payment of the Change of
Control Purchase Price or the Asset Sale Offer Price (whether or not
prohibited by the subordination provisions of the Indenture),
(3) the failure by Finance Corp. or the Issuer to observe or perform any
other covenant or agreement contained in the Notes or the Indenture
and, subject to certain exceptions, the continuance of such failure
for a period of 30 days after written notice is given to the Issuer
by the Trustee or to the Issuer and the Trustee by the Holders of at
least 25% in aggregate principal amount of the notes outstanding,
(4) there shall have been the entry by a court of competent jurisdiction
of (a) a decree or order for relief in respect of Centennial, the
Issuer or any Significant Restricted Subsidiary in an involuntary
case or proceeding under any applicable Bankruptcy Law or (b) a
decree or order adjudging Centennial, the Issuer, or any Significant
Restricted Subsidiary bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in
respect of Centennial, the Issuer, or any Significant Restricted
Subsidiary under any applicable federal or state law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of Centennial, the Issuer or any
Significant Restricted Subsidiary or of any substantial part of
their respective properties, or ordering the winding up or
liquidation of their affairs, and any such decree or order for
relief shall continue to be in effect, or any such other decree or
order shall be unstayed and in effect, for a period of 60
consecutive days,
(5) (a) Centennial, the Issuer, or any Significant Restricted Subsidiary
commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated
bankrupt or insolvent, (b) Centennial, the Issuer or any Significant
Restricted Subsidiary consents to the entry of a decree or order for
relief in respect of Centennial, the Issuer or such Significant
Restricted Subsidiary in an involuntary case or proceeding under any
applicable Bankruptcy Law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, (c) Centennial, the
Issuer or any Significant Restricted Subsidiary files a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state law, (d) Centennial, the Issuer or any
Significant Restricted Subsidiary (I) consents to the filing of such
petition or the appointment of, or taking possession by, a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of Centennial, the Issuer or such Significant
Restricted Subsidiary or of any substantial part of their respective
properties, (II) makes an assignment for the benefit of creditors or
(III) admits in writing its inability to pay its debts generally as
they become due or (e) Centennial, the Issuer or any Significant
Restricted Subsidiary takes any corporate action in furtherance of
any such actions in this paragraph (5),
(6) any Guarantee of a Significant Restricted Subsidiary shall for any
reason cease to be, or shall for any reason be asserted in writing
by any Guarantor or the Issuer not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent
contemplated by the Indenture and any such Guarantee, or Finance
Corp. shall for any reason cease to be, or shall for any reason be
asserted in writing not to be, a co-obligor pursuant to the notes,
except to the extent contemplated by the Indenture and the notes,
(7) one or more defaults in any Indebtedness for money borrowed by
Finance Corp., the Issuer or any of their Restricted Subsidiaries
(or the payment of which is guaranteed by Finance Corp., the Issuer
or any of their Restricted Subsidiaries), whether such Indebtedness
or guarantee now exists or is created after the Issue Date, which
default results from the failure to pay Indebtedness at its final
maturity date or results in the acceleration of such Indebtedness
prior to its express maturity
92
<PAGE>
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
which was not paid at its final maturity date or the maturity of
which has been so accelerated, aggregates $20,000,000 or more, and
(8) final unsatisfied judgments, orders or decrees (not subject to
appeal) of any court or regulatory or administrative agency
aggregating in excess of $20,000,000 (exclusive of any portion of
any such payment covered by insurance, if and to the extent the
insurer has acknowledged in writing its liability therefor), at any
one time rendered against Finance Corp., the Issuer or any of its
Restricted Subsidiaries and not stayed, bonded or discharged within
60 days. The Indenture provides that, if a Default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of
such Default, give to the Holders notice of such Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clauses (iv) and (v) above relating to Centennial, the
Issuer or any Significant Restricted Subsidiary), then in every such case,
unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Issuer (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal of the Notes (or the Change in Control Purchase Price if
the Event of Default includes failure to pay the Change in Control Purchase
Price) (or the Special Redemption Price in connection with any Special
Mandatory Redemption if the Event of Default relates to failure to make payment
in connection with the Special Mandatory Redemption), determined as set forth
below, including in each case accrued interest thereon to be due and payable
immediately; provided that so long as the Credit Facility shall be in full
force and effect, if an Event of Default shall have occurred and be continuing
(other than as specified in clauses (4) or (5) with respect to Centennial, the
Issuer or any Significant Restricted Subsidiary), any such acceleration shall
not be effective until the earlier to occur of (x) five business days following
delivery of a written notice of such acceleration of the Notes to the agent
under the Credit Facility and (y) the acceleration of any Indebtedness under
the Credit Facility. If an Event of Default specified in clauses (4) and (5)
above relating to Centennial, the Issuer or any Restricted Subsidiary occurs,
all principal and accrued interest thereon will be immediately due and payable
on all outstanding Notes without any declaration or other act on the part of
Trustee or the Holders. The Holders of a majority in aggregate principal amount
of notes generally are authorized to rescind such acceleration if all existing
Events of Default, other than the non-payment of the principal of, premium, if
any, and interest on the Notes which have become due solely by such
acceleration, have been cured or waived.
The Holders of a majority in aggregate principal amount of the notes at
the time outstanding may waive on behalf of all the Holders any Default, except
a Default in the payment of principal of or interest on any note not yet cured,
or a Default with respect to any covenant or provision which cannot be modified
or amended without the consent of the Holder of each outstanding note affected.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee.
No holder of any of the notes has any right to institute any proceedings
with respect to the Indenture or any remedy thereunder, unless
. the holders of at least 25% in aggregate principal amount of the
outstanding Notes have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee
under the notes and the Indenture, and
93
<PAGE>
. the Trustee has failed to institute such proceeding within 15 days
after receipt of such notice and the Trustee, within such 15-day
period, has not received directions inconsistent with such written
request by holders of a majority in aggregate principal amount of
the outstanding notes.
Such limitations do not, however, apply to a suit instituted by a holder
of a Note for the enforcement of the payment of the principal of, premium, if
any, or interest on such note on or after the respective due dates expressed in
such note.
The Co-Obligors are required to notify the Trustee within five business
days of the occurrence of any Default. The Co-Obligors are required to deliver
to the Trustee, not more than 120 days after the end of each fiscal year, a
written statement as to compliance with the Indenture, including whether or not
any Default has occurred.
The Trust Indenture Act contains limitations on the rights of the
Trustee, should it become a creditor of Centennial, the Issuer or any
Guarantor, if any, to obtain payment of claims in certain cases or to realize
on certain property received by it in respect of any such claims, as security
or otherwise. The Trustee is permitted to engage in other transactions,
provided that if it acquires any conflicting interest it must eliminate such
conflict upon the occurrence of an Event of Default or else resign.
Legal Defeasance and Covenant Defeasance
The Indenture provides that the Issuer may, at its option and at any
time, elect to have the obligations of Centennial, the Issuer, any Guarantor
and any other obligor upon the Notes discharged with respect to the outstanding
notes ("Legal Defeasance"). Such Legal Defeasance means that Centennial, the
Issuer, any such Guarantor and any other obligor under the Indenture shall be
deemed to have paid and discharged the entire indebtedness represented, and the
Indenture shall cease to be of further effect as to all outstanding notes,
except as to
(1) rights of Holders to receive payments in respect of the principal
of, premium, if any, and interest on such notes when such payments
are due from the trust funds,
(2) the Co-Obligors' obligations with respect to such notes concerning
issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes, and the maintenance of an office or
agency for payment and money for security payments held in trust,
(3) the rights, powers, trust, duties, and immunities of the Trustee,
and the Issuer's obligations in connection therewith, and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have
the obligations of Centennial, the Issuer and any Guarantor released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the notes. In the
event Covenant Defeasance occurs, certain events (not including events
described in clauses (1), (2), (4) (with respect to the Co-Obligors) and (5)
(with respect to the Co-Obligors) described under "--Events of Default") will
no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(1) the Issuer must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, U.S. Legal Tender, non-callable
government securities or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium,
if any, and interest on such notes on the stated date
94
<PAGE>
for payment thereof or on any redemption date of such principal or
installment of principal of, premium, if any, or interest on such
notes, and the holders of notes must have a valid, perfected,
exclusive security interest in such trust,
(2) in the case of Legal Defeasance, the Issuer shall have delivered to
the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that
. the Issuer has received from, or there has been published by the
Internal Revenue Service, a ruling, or
. since the date of the Indenture, there has been a change in the
applicable Federal income tax law, in each case to the effect
that, and based thereon such opinion of counsel shall confirm
that, the holders of such notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Legal
Defeasance, and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred,
(3) in the case of Covenant Defeasance, the Issuer shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the holders of such notes
will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant
Defeasance had not occurred,
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91 date of deposit (other than a Default which
results from the borrowing of amounts to finance the defeasance and
which borrowing does not result in a breach or violation of, or
constitute a default under, any other material agreement or
instrument to which Centennial, the Issuer or any Restricted
Subsidiary is a party or to which it is bound) (it being understood
that such condition will not be satisfied until the expiration of
such 91-day period),
(5) the Issuer shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee to the
effect that (assuming that no holder of any notes would be
considered an insider of the Issuer under any applicable bankruptcy
or insolvency law) after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors rights generally,
(6) such defeasance or covenant defeasance shall not cause the Trustee
for the notes to have a conflicting interest for purposes of the
Trust Indenture Act with respect to any securities of the Issuer or
any Guarantor,
(7) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture
or any other material agreement or instrument to which Centennial,
the Issuer or any of their Subsidiaries is a party or by which
Centennial, the Issuer or any of their Subsidiaries is bound,
(8) the Issuer shall have delivered to the Trustee an officers'
certificate stating that the deposit was not made by the Issuer with
the intent of preferring the Holders of such notes over any other
creditors of the Issuer or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Issuer or others,
and
(9) the Issuer shall have delivered to the Trustee an officers'
certificate and opinion of counsel each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with. References in this
section to "Centennial" refer to Finance Corp. before the Merger and
to Centennial Cellular Corp. after the Merger.
95
<PAGE>
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
notes as expressly provided for in the Indenture) as to all outstanding notes
under the Indenture when
(a) either
. all such notes theretofore authenticated and delivered (except
lost, stolen or destroyed notes which have been replaced or paid
or notes whose payment has been deposited in trust or segregated
and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust as provided for in the
Indenture) have been delivered to the Trustee for cancellation, or
. all notes not theretofore delivered to the Trustee for
cancellation (x) have become due and payable, (y) will become due
and payable at their Stated Maturity within one year, or (z) are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Issuer; and
Centennial, the Issuer or any Guarantor has irrevocably deposited
or caused to be deposited with the Trustee as trust funds in trust
an amount in United States dollars sufficient to pay and discharge
the entire indebtedness on the Notes not theretofore delivered to
the Trustee for cancellation, including principal of, premium, if
any, and accrued interest at Maturity, Stated Maturity or
redemption date,
(b) Centennial, the Issuer or any Guarantor has paid or caused to be
paid all other sums payable under the Indenture by Centennial, the
Issuer and any Guarantor, and
(c) the Issuer and Centennial have delivered to the Trustee an officers'
certificate and an opinion of independent counsel each stating that
(i) all conditions precedent under the Indenture relating to the
satisfaction and discharge of such Indenture have been complied with
and (ii) such satisfaction and discharge will not result in a breach
or violation of, or constitute a default under, the Indenture or any
other material agreement or instrument to which Centennial, the
Issuer, any Guarantor or any Subsidiary is a party or by which
Centennial, the Issuer, any Guarantor or any Subsidiary is bound.
References in this section to "Centennial" refer to Finance Corp.
before the Merger and to Centennial Cellular Corp. after the Merger.
Amendments and Supplements
The Indenture contains provisions permitting the Issuer, Centennial and
the Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. With the consent of the Holders of not less
than a majority in aggregate principal amount of the notes at the time
outstanding, Centennial, the Issuer, each Guarantor, if any, and the Trustee
are permitted to amend or supplement the Indenture or any supplemental
indenture or modify the rights of the Holders; provided that no such
modification may, without the consent of each Holder affected thereby:
(1) change the Stated Maturity of, or the Change of Control Purchase
Date or the Asset Sale Offer Period on, or change to an earlier date
any redemption date of, any note, or reduce the principal amount
thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or
change the place of payment where, or the coin or currency in which,
any note or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the redemption date), or reduce the Change
of Control Purchase Price or the Asset Sale Offer Price or alter the
redemption provisions or the provisions of the "--Repurchase of
Notes at the Option of the Holder Upon a Change of Control"
96
<PAGE>
covenant, including, in each case, amending, changing or modifying
any definitions related thereto, but only to the extent such
definitions relate thereto, in a manner adverse to the Holders,
(2) reduce the percentage in principal amount of the outstanding notes,
the consent of whose Holders is required for any such amendment,
supplemental indenture or waiver provided for in the Indenture,
(3) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the
Indenture cannot be modified or waived without the consent of the
Holder of each outstanding note affected thereby,
(4) except as otherwise permitted under "--Certain Covenants--Limitation
on Merger, Sale or Consolidation," consent to the assignment or
transfer by Centennial, the Issuer or any Guarantor of any of its
rights and obligations under the Indenture, or
(5) amend or modify any of the provisions of the Indenture relating to
the subordination of the notes or any Guarantee in any manner
adverse to the holders of the notes or any Guarantee.
Notwithstanding the foregoing, without the consent of any holders of the
notes, Centennial, the Issuer, any Guarantor, any other obligor under the notes
and the Trustee may modify or amend the Indenture:
(a) to evidence the succession of another Person to Centennial, the
Issuer or a Guarantor, and the assumption by any such successor of
the covenants of Centennial, the Issuer or such Guarantor in the
Indenture and in the notes and in any Guarantee in accordance with
"--Certain Covenants--Limitation on Merger, Sale or Consolidation"
(including to execute a supplemental indenture upon consummation of
the Merger in which Centennial Cellular Corp. assumes the
obligations under the Indenture of Finance Corp.),
(b) to add to the covenants of Centennial, the Issuer, any Guarantor or
any other obligor upon the notes for the benefit of the holders of
the notes or to surrender any right or power conferred upon
Centennial, the Issuer or any Guarantor or any other obligor upon
the Notes, as applicable, in the Indenture, in the notes or in any
Guarantee,
(c) to cure any ambiguity, or to correct or supplement any provision in
the Indenture, the notes or any Guarantee which may be defective or
inconsistent with any other provision in the Indenture, the notes or
any Guarantee or make any other provisions with respect to matters
or questions arising under the Indenture, the Notes or any
Guarantee; provided that, in each case, such provisions shall not
adversely affect the interest of the holders of the notes,
(d) to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust
Indenture Act,
(e) to add a Guarantor under the Indenture,
(f) to evidence and provide the acceptance of the appointment of a
successor Trustee under the Indenture, or
(g) to mortgage, pledge, hypothecate or grant a security interest in
favor of the Trustee for the benefit of the holders of the notes as
additional security for the payment and performance of Centennial's,
the Issuer's and any Guarantor's obligations under the Indenture, in
any property, or assets, including any of which are required to be
mortgaged, pledged or hypothecated, or in which a security interest
is required to be granted to the Trustee pursuant to the Indenture
or otherwise.
The holders of a majority in aggregate principal amount of the notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. References in this section to "Centennial" refer
to Finance Corp. before the Merger and to Centennial Cellular Corp. after the
Merger, unless otherwise indicated.
97
<PAGE>
No Personal Liability of Partners, Stockholders, Officers, Directors
The Indenture provides that no direct or indirect stockholder (or
partner, limited liability company member or employee of a stockholder),
employee, officer or director, as such, past, present or future of the Co-
Obligors or any successor entity or any Affiliate thereof shall have any
personal liability in respect of the obligations of the Co-Obligors under the
Indenture or the notes by reason of his or its status as such stockholder,
employee, officer or director.
Governing Law
The Indenture, the notes and any Guarantee will be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of Centennial or the Issuer, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue as Trustee with such conflict or resign as Trustee.
The holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
occurs (which has not been cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any holder of notes unless such holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Certain Definitions
Set forth below is a summary of certain defined terms contained in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at
the time such Person becomes a Restricted Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, as the case may
be. Acquired Indebtedness shall be deemed to be Incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
98
<PAGE>
"Annual Operating Cash Flow" on any date means, with respect to any
Person, the Operating Cash Flow for the Reference Period.
"Annual Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and its Restricted Subsidiaries, the ratio of
(i) consolidated Indebtedness of such Person and its Restricted Subsidiaries on
the Transaction Date (after giving pro forma effect to the Incurrence of such
Indebtedness) (and without duplication of any Indebtedness that may be the
obligation of such Person and/or one or more of its Subsidiaries) divided by
(ii) the aggregate amount of Annual Operating Cash Flow of such Person
(determined on a pro forma basis after giving effect to all Investments in and
acquisitions or dispositions of any company or any business or any assets out
of the ordinary course of business, whether by merger, stock purchase or sale
or asset purchase or sale, made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
Investment, acquisition or disposition had occurred at the beginning of such
Reference Period); provided that, for purposes of such computation, in
calculating Annual Operating Cash Flow and consolidated Indebtedness, (a) the
transaction giving rise to the need to calculate the Annual Operating Cash Flow
Ratio will be assumed to have occurred (on a pro forma basis) on the first day
of the Reference Period; (b) the incurrence of any Indebtedness during the
Reference Period or subsequent thereto and on or prior to the Transaction Date
(and the application of the proceeds therefrom to the extent used to retire
Indebtedness or to acquire businesses) will be assumed to have occurred (on a
pro forma basis) on the first day of such Reference Period; (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the Transaction Date had been the applicable rate for the entire
period; and (d) all members of the consolidated group of such Person on the
Transaction Date terence Period shall be deemed to be members of the
consolidated group of such Person for the entire Reference Period. When the
foregoing definition is used in connection with the Issuer and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Issuer and its Restricted
Subsidiaries. Any such pro forma calculation may include adjustments for the
pro forma effect of (a) any cost savings accounted for on an annualized basis
as a result of an acquisition by the Issuer or a Restricted Subsidiary which,
in the good faith judgment of the Issuer (as determined by a resolution of the
board of directors of the Issuer), will be eliminated or realized within one
year after the date of such transaction (provided that any such cost savings
are calculated in accordance with Regulation S-X under the Securities Act (or
any successor regulation)) or (b) any direct quantifiable savings from the
conversion of roaming expense which the Issuer will obtain within one year of
the transaction in the good faith judgment of the Board of Directors of the
Issuer from the acquisition of a third party which prior to such acquisition
had a contract with the Issuer or any Restricted Subsidiary for roaming
services.
"Applicable Premium" means, with respect to a note at any redemption
date, the excess of (A) the present value at such time of (1) the redemption
price of such note at December 15, 2003 (such redemption price being described
under "--Optional Redemption by the Co-Obligors"), plus (2) all required
interest payments (excluding accrued but unpaid interest) due on such note
through December 15, 2003, computed using a discount rate equal to the Treasury
Rate plus 50 basis points, over (B) the then outstanding principal amount of
such Note.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978,
as amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law.
"Blackstone" means Blackstone Capital Partners III Merchant Banking Fund
L.P. and affiliates of the foregoing that are directly or indirectly
controlling or controlled by Blackstone or under direct or indirect common
control with Blackstone.
"Board of Directors" means (i) with respect to a limited liability
company, the board of managers of such limited liability company or other body
fulfilling the function of a board of directors of a corporation, and
99
<PAGE>
(ii) with respect to a corporation, the board of directors or any duly
authorized committee of such board of directors.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation, each general
and limited partnership interest of such Person if such Person is a partnership
and all membership or other interests if such Person is a limited-liability
company, and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distribution of
assets of, the issuing Person.
"Cash from Minority Cellular Investment Interests" means any dividends,
distributions, interest payments or other periodic payments of cash
(collectively a "cash distribution") received directly or indirectly by the
Issuer from its Minority Cellular Investment Interests; provided, however, that
"Cash from Minority Cellular Investment Interests" shall not include any
proceeds received directly by the Issuer from the liquidation, sale, merger,
consolidation, transfer or other disposition (collectively, a "sale") of any
Minority Cellular Investment Interest, except that Cash from Minority Cellular
Investment Interests shall include in every fiscal year ending after the sale
of any Minority Cellular Investment Interest an amount equal to the cash
distributions received directly or indirectly by the Issuer from such Minority
Cellular Investment Interest during the twelve months prior to such sale if
either (a) the proceeds of such sale are used to permanently reduce the amount
of Indebtedness which may be borrowed under the Credit Facility in accordance
with clause (i) of the third paragraph of "--Limitation on Incurrence of
Additional Indebtedness" or (b) at the time of any Restricted Payment being
made pursuant to clause (ix) of the second paragraph of "--Limitation on
Restricted Payments," the Issuer would be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Annual Operating Cash Flow Ratio
provision set forth in the second paragraph of "--Limitation on Incurrence of
Additional Indebtedness" assuming that the Issuer was the obligor of additional
Indebtedness in a principal amount equal to the net after-tax proceeds received
from such sale.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Ratings Group or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (iii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) and (ii) above.
"Centennial" means Centennial Cellular Corp., a corporation organized
under the laws of Delaware, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter
"Centennial" shall mean such successor Person.
"Centennial de Puerto Rico" means a direct or indirect Restricted
Subsidiary of the Issuer which controls the Issuer's Puerto Rico operations.
"Change of Control" means the occurrence of any of the following events:
(i) Centennial or the Issuer consolidates with or merges with or into any
Person or sells, assigns, conveys, transfers, leases or
100
<PAGE>
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with or merges into or with Centennial or the Issuer,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of Centennial or the Issuer is converted into or exchanged for cash,
securities or other property, other than any such transaction where (A) the
outstanding Voting Stock of Centennial or the Issuer is changed into or
exchanged for (x) Voting Stock of the surviving corporation which is not
Disqualified Capital Stock or (y) cash, securities and other property (other
than Capital Stock of the surviving corporation) in an amount which could be
paid by Centennial or the Issuer as a Restricted Payment as described under "--
Certain Covenants--Limitation on Restricted Payments" (and such amount shall be
treated as a Restricted Payment subject to the provisions in the Indenture
described under "--Certain Covenants--Limitation on Restricted Payments") and
(B) immediately after such transaction, no "person" or "group," other than
Permitted Holders, is the beneficial owner (as such term is used in Rule 13d-3
and 13d-5 promulgated pursuant to the Exchange Act), directly or indirectly,
more than 50% of the total outstanding Voting Stock of the surviving
corporation, (ii) any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than Permitted Holders, is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 and 13d-5 promulgated pursuant to the Exchange Act),
directly or indirectly, of Voting Stock representing more than 50% of the
voting power of the Voting Stock of Centennial or the Issuer then outstanding
normally entitled to vote in elections of directors or (iii) during any period
of 12 consecutive months, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of Centennial or the Issuer (together
with any new directors whose election to such board or whose nomination for
election by the shareholders of Centennial or the Issuer was designated by the
Permitted Holders or approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute at least a majority of the Board of Directors of
Centennial or the Issuer then in office. Each of (i) through (iii) of this
definition shall also be deemed to apply to any Restricted Subsidiary of
Centennial which directly or indirectly controls the Issuer. The consummation
of the transactions contemplated by the Merger, and the merger of Finance Corp.
with and into Centennial, shall not be deemed a Change of Control.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such shares are not listed or admitted to trading
on any national securities exchange or quoted on Nasdaq National Market but the
Issuer is a Foreign Company (as defined in Rule 3b-4(b) under the Exchange Act)
and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares are
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq National Market and the Issuer and principal securities exchange
do not meet such requirements, the average of the closing bid and asked prices
in the over-the-counter market as furnished by any New York Stock Exchange
member firm is selected from time to time by the Issuer for that purpose and is
reasonably acceptable to the Trustee.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker, having a maturity comparable to
the first redemption date of the Notes, that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of a comparable maturity to the first
redemption date of such notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Trustee after consultation with the
Issuer.
101
<PAGE>
"Comparable Treasury Price" means, with respect to any Redemption Date,
(A) the average of the Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 3:30 p.m., New York time, on the third
business day preceding such Redemption Date.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to the Capitalized Lease Obligations) of such Person and
its consolidated Restricted Subsidiaries during such period, including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations,
(iii) all commissions, discounts and other fees and charges owed with respect
to bankers' acceptances and letters of credit financings and currency and
Interest Rate Protection Obligations and Currency Hedging Agreements and
excluding the amortization of deferred financing fees, in each case to the
extent attributable to such period and (b) the amount of cash dividends accrued
or payable by such Person or any of its consolidated Restricted Subsidiaries in
respect of preferred stock (other than by Restricted Subsidiaries of such
Person to such Person or such Person's Restricted Subsidiaries). For purposes
of this definition, (x) interest on a Capitalized Lease Obligation shall be
deemed to accrue at an interest rate reasonably determined by the Issuer to be
the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP and (y) interest expense attributable to any Indebtedness
represented by the guaranty by such Person or a Subsidiary of such Person of an
obligation of another Person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed to the extent not otherwise
included and whether or not paid by such Person or Subsidiary. When the
foregoing definition is used in connection with the Issuer and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Issuer and its Restricted
Subsidiaries.
"Consolidated Net Income" of any Person, for any period, means the net
income (or loss) of such Person and its consolidated Restricted Subsidiaries
for such period, determined (on a consolidated basis) in accordance with GAAP,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication) (i) all extraordinary gains or losses and
all gains and losses from the sales or other dispositions of assets out of the
ordinary course of business (net of taxes, fees and expenses relating to the
transaction giving rise thereto) for such period, (ii) the net income, if
positive, of any Person, that is not a Subsidiary, in which such Person or any
of its Subsidiaries has an interest (other than a Minority Cellular Investment
Interest), except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person, (iii) except as
provided in the definition of "Annual Operating Cash Flow Ratio," the net
income (or loss) of any Subsidiary acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, (iv) for
purposes of the "--Limitation on Restricted Payments" covenant, the net income,
if positive, of any Restricted Subsidiary of such Person that is not a
Guarantor to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or any agreement or instrument applicable to such Subsidiary except to
the extent of the amount of dividends or distributions actually paid to such
Person or a Subsidiary of such Person, (v) any gain or loss, net of taxes,
realized upon the termination of any employee benefit plan, (vi) any
restoration to net income of any contingency reserve, except to the extent
provision for such reserve was made out of income accrued at any time following
the date of the Indenture, (vii) any net gain or loss arising from the
acquisition of any securities such Person, (viii) the cumulative effect of a
change in accounting principles (ix) the amount of any nonrecurring charges or
income of the Issuer or any Restricted Subsidiary (including any one-time costs
incurred in connection with acquisitions after the Issue Date) certified as
non-recurring in an officer's certificate and deducted or included in such
period in computing Consolidated Net Income and (x) any net income, if
positive, resulting from the Issuer's Minority Cellular Investment Interests.
When the foregoing
102
<PAGE>
definition is used in connection with the Issuer and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Issuer and its Restricted
Subsidiaries.
"Credit Facility" means that certain Credit Facility to be entered into
among the Issuer, Centennial de Puerto Rico, the guarantors, Merrill Lynch
Capital Corporation and the other financial institutions party thereto, as such
agreement, may be, in one or more agreements with one or more lending groups,
amended, renewed, extended, substituted, refinanced, restructured, replaced,
supplemented or otherwise modified, in whole or in part, from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing, including those that increase the amount
available thereunder in accordance with the terms of the Indenture).
"Currency Hedging Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar
agreements or arrangements designed to protect against the fluctuations in
currency values.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the board of directors of the Issuer who
does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of any event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated
Maturity of the notes; provided that (a) Capital Stock will not be deemed to be
Disqualified Capital Stock if it may only be so redeemed or repurchased solely
in consideration of Qualified Capital Stock of the Issuer and (b) any Capital
Stock that would not constitute Disqualified Capital Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or "change
of control" occurring prior to the Stated Maturity of the Notes shall not
constitute Disqualified Capital Stock if the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions contained in "--
Limitation on Asset Sales and Sales of Subsidiary Stock" and "--Repurchase of
Notes at the Option of the Holder upon a Change of Control" covenants and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such Capital Stock pursuant to such provision prior to the Issuer's
repurchase of such notes as are required to be repurchased pursuant to "--
Limitation on Asset Sales and Sales of Subsidiary Stock" and "--Repurchase of
Notes at the Option of the Holder Upon a Change of Control."
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A" or higher (or the equivalent rating
or higher), according to Moody's Investors Service, Inc., Standard & Poor's
Ratings Group or Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) respectively, at the time as
of which any investment or rollover therein is made.
"Equity Contribution" means the equity contribution by Welsh, Carson,
Anderson & Stowe VIII, L.P., Blackstone Capital Partners, L.P., WCAS Capital
Partners III, L.P and certain other investors to Centennial in connection with
the financing of the Merger.
"Excluded Cash Contributions" has the meaning given to such item in the
covenant "--Limitation on Incurrence of Additional Indebtedness."
103
<PAGE>
"Excluded Contributions" means the net cash proceeds received by the
Issuer after the Issue Date from (a) contributions to its common equity capital
and (b) the sale (other than to a Subsidiary or to any Issuer or Subsidiary
management equity plan or stock option plan or any other management or employee
benefit plan or agreement) of Capital Stock (other than Disqualified Capital
Stock) of the Issuer, in each case designated as Excluded Contributions
pursuant to an officer's certificate executed by an officer of the Issuer, the
cash proceeds of which are excluded from the calculation set forth in the first
paragraph of the "--Limitation on Restricted Payments" covenant and which may
not also be designated Excluded Cash Contributions.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or, if FASB ceases to exist,
any successor thereto; provided, however, that for purposes of determining
compliance with covenants in the Indenture other than those relating to
financial statement delivery, "GAAP" means such generally accepted accounting
principles as in effect as of the Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted average life to maturity of not
more than one year from the date of Investment therein.
"Guarantee" means the guarantee by a Guarantor of Finance Corp.'s and the
Issuer's Indenture Obligations.
"Guarantor" means any Restricted Subsidiary of the Issuer which becomes a
guarantor of the Issuer's Indenture Obligations.
"Holder" means a Person in whose name a note is registered. The Holder of
a note will be treated as the owner of such note for all purposes.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services except (other than accounts payable or other obligations
to trade creditors which have remained unpaid for greater than 90 days past
their original due date or to financial institutions, which obligations are not
being contested in good faith and for which appropriate reserves have been
established) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
for the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (b) all obligations of such Person under
Interest Rate Protection Obligations or Currency Hedging Agreements; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such Person has guaranteed or that is otherwise its legal liability or
which are secured by any assets or property of such Person and all obligations
to purchase, redeem or acquire any Capital Stock; (d) all Disqualified Capital
Stock of such Person and all Preferred Stock of such Person's Restricted
Subsidiaries valued at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends; and (e) any and all
deferrals, renewals, extensions, refinancing and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a), (b), (c), (d) or this
clause (e), whether or not between or among the same parties; provided that the
outstanding principal amount at any date of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such date. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with
104
<PAGE>
the terms of such Disqualified Capital Stock as if such Disqualified Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
fair market value to be determined in good faith by the board of directors of
the issuer of such Disqualified Capital Stock.
"Initial Escrow and Pledge Account" means an account established with the
Trustee pursuant to the terms of the Pledge and Escrow Agreement for the
deposit of the net proceeds realized from the sale of the Notes, together with
the Additional Escrow Amount; and after the Merger such account will hold the
Pledged Securities purchased by the Issuer with a portion of the net proceeds
from the Offering.
"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates. For purposes of the Indenture, the amount of
such obligations shall be the amount determined in respect thereof as of the
end of the then most recently ended fiscal quarter of such Person, based on
the assumption that such obligation had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
obligation provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligations shall be the net amount so determined, plus any premium due upon
default by such Person.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation
or otherwise) by such Person (whether for cash, property, services, securities
or otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement
to make any such acquisition; (b) the making by such Person of any deposit
with, or advance, loan or other extension of credit to, such other Person
(including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property
to such other Person) or any commitment to make any such advance, loan or
extension; (c) the entering into by such Person of any guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of such
other Person; (d) the making of any capital contribution by such Person to
such other Person; and (e) the designation by the Board of Directors of the
Issuer of any Person to be an Unrestricted Subsidiary. For purposes of the "--
Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be equal to the fair market value of such Investment plus the
fair market value of all additional Investments by the Issuer or any of its
Restricted Subsidiaries at the time any such Investment is made; provided
that, for purposes of this sentence, the fair market value of net assets shall
be as determined in the reasonable judgment of the board of directors of the
Issuer.
"Investment Equity" has the meaning given to such term in the definition
of "Permitted Investment."
"Issue Date" means the time and date of the first issuance of the Notes
under the Indenture.
"Issuer" means Centennial Cellular Operating Co. LLC, a limited liability
company organized under the laws of Delaware, until a successor Person shall
have become such pursuant to the applicable provisions of the Indenture, and
thereafter "Issuer" shall mean such successor Person.
"Lien" means any mortgage or deed of trust, lien, pledge, charge,
privilege, security interest, assignment, deposit, arrangement, easement,
hypothecation, claim, preference, priority or other encumbrance of any kind,
whether or not filed, recorded or otherwise perfected under applicable law
with respect to property of
105
<PAGE>
any kind (including any conditional sale, capital lease or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest), real or personal,
movable or immovable, now owned or hereafter acquired.
"Marketable U.S. Securities" means: (i) Government Securities; (ii) any
time deposit account, money market deposit and certificate of deposit maturing
not more than 270 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 270
days after the date of acquisition issued by a corporation (other than an
Affiliate of the Issuer) with a rating, at the time as of which any investment
therein is made, of "P-1" or higher according to Moody's Investors Service,
Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or
higher according to Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)); (iv) any banker's
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; (v) repurchase obligations with a term of not more than 7 days for
Government Securities entered into with an Eligible Institution; and (vi) any
fund investing exclusively in investments of the types described in clauses (i)
through (v) above.
"Maturity Date" means, when used with respect to any note, the date
specified on such note as the fixed date on which the final installment of
principal of such note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer or Asset Sale Offer).
"Merger" means the merger of Centennial and CCW Acquisition Corp.
pursuant to the Merger Agreement.
"Merger Date" means the date the Merger is consummated.
"Merger Agreement" means the Merger Agreement, dated as of July 2, 1998,
between Centennial and CCW Acquisition Corp., as amended.
"Mezzanine Financing" means the $180 million in aggregate principal
amount of Senior Subordinated Notes due 2009 issued by Centennial to WCAS
Capital Partners III, L.P., dated the date of the closing of the Merger and in
substantially the form attached to the Indenture.
"Minority Cellular Investment Interests" means limited partnership or
other equity interests held directly or indirectly by the Issuer in cellular
telephony providers which are not Subsidiaries of or otherwise controlled
(directly or indirectly) by the Issuer in existence on the Merger Date.
"Net Cash Proceeds" means the aggregate amount of cash and Cash
Equivalents received by the Issuer and its Restricted Subsidiaries in respect
of an Asset Sale (including upon the conversion to cash and Cash Equivalents of
(A) any note or installment receivable at any time, or (B) any other property
as and when any cash and Cash Equivalents are received in respect of any
property received in an Asset Sale but only to the extent such cash and Cash
Equivalents are received within one year after such Asset Sale), less the sum
of (i) all out-of-pocket fees, commissions and other expenses incurred in
connection with such Asset Sale, including the amount (estimated in good faith
by the Board of Directors of the Issuer) of income, franchise, sales and other
applicable taxes required to be paid by the Issuer or any Restricted Subsidiary
of the Issuer in connection with such Asset Sale and (ii) the aggregate amount
of cash so received which is used to retire any existing Senior Indebtedness of
the Issuer or Indebtedness of its Restricted Subsidiaries, as the case may be,
which is required to be repaid in connection with such Asset Sale or is secured
by a Lien on the property or assets of the Issuer or any of its Restricted
Subsidiaries, as the case may be.
"Net Proceeds" means the aggregate net proceeds (including the fair
market value of non-cash proceeds constituting equipment or other assets of a
type generally used in a Related Business an amount
106
<PAGE>
reasonably determined by the Board of Directors of the Issuer for amounts under
$10,000,000 and by a financial advisor or appraiser of national reputation for
equal or greater amounts) received by a Person from the sale of Qualified
Capital Stock (other than to a Subsidiary of such Person) after payment of out-
of-pocket expenses, commissions and discounts incurred and net of taxes paid or
payable in connection therewith.
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Issuer in a
bankruptcy case under federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
pursuant to the terms of the documentation governing any Indebtedness.
"Operating Cash Flow" of any Person means (a), with respect to any
period, the Consolidated Net Income of such Person for such period, plus (b)
the sum, without duplication (and only to the extent such amounts are deducted
from net revenues in determining such Consolidated Net Income), of (i) the
provisions for income taxes for such period for such Person and its
consolidated Restricted Subsidiaries, (ii) depreciation, amortization and other
non-cash charges of such Person and its consolidated Restricted Subsidiaries
and (iii) Consolidated Interest Expense of such Person for such period,
determined, in each case, on a consolidated basis for such Person and its
consolidated Restricted Subsidiaries in accordance with GAAP, plus (c) any
fees, expenses or charges related to any equity offering, Permitted Investment,
acquisition or recapitalization or Indebtedness permitted to be incurred by the
Indenture (in each case, whether or not successful) and fees, expenses or
charges related to the Recapitalization and the financings thereof (including
fees to Welsh Carson and Blackstone), less (d) the amount of all cash payments
made during such period by such Person and its Restricted Subsidiaries to the
extent such payments relate to non-cash charges that were added back in
determining Operating Cash Flow for such period or for any prior period.
"Pari Passu Indebtedness" means (a) with respect to the Issuer, any
Indebtedness of the Issuer that is pari passu in right of payment to the Notes
(b) with respect to Finance Corp., any Indebtedness of Finance Corp. that is
pari passu in right of payment to the notes and (c) with respect to any
Guarantee, Indebtedness which ranks pari passu in right of payment to such
Guarantee.
"Permitted Holders" means Welsh Carson and Blackstone.
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Issuer or a Restricted Subsidiary; (iii) Investments in a
Person substantially all of whose assets are of a type generally used in a
Related Business (an "Acquired Person") if, as a result of such Investments,
(A) the Acquired Person immediately thereupon becomes a Restricted Subsidiary
or (B) the Acquired Person immediately thereupon either (1) is merged or
consolidated with or into the Issuer or any of its Restricted Subsidiaries and
the surviving Person is the Issuer or a Restricted Subsidiary or (2) transfers
or conveys all or substantially all of its assets to, or is liquidated into,
the Issuer or any of its Restricted Subsidiaries; (iv) Investments in accounts
and notes receivable acquired in the ordinary course of business; (v) any
securities received in connection with an Asset Sale and any Investment with
the Net Cash Proceeds from any Asset Sale in Capital Stock of a Person, all or
substantially all of whose assets are of a type used in a Related Business,
that complies with the "-- Limitation on Asset Sales and Sales of Subsidiary
Stock" covenant; (vi) any guarantee issued by a Restricted Subsidiary incurred
in compliance with the Indenture; (vii) advances and prepayments for asset
purchases in the ordinary course of business in a Related Business of the
Issuer or a Restricted Subsidiary; (viii) customary loans or advances made in
the ordinary course of business to officers, directors or employees of the
Issuer or any of its Restricted Subsidiaries for travel, entertainment, and
moving and other relocation expenses, (ix) advances to employees not in excess
of $1 million outstanding at any one time, in the aggregate; (x) any Investment
acquired by the Issuer or any of its Restricted Subsidiaries (a) in exchange
for any other Investment or accounts receivable held by the Issuer or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization of such other Investment or accounts receivable or (b)
as a result of a foreclosure by the Issuer or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of title
with respect to any secured Investment in default; (xi) Interest Rate
Protection
107
<PAGE>
Obligations or Currency Hedging Agreements permitted under clauses (ix) or (x)
of the "Limitation on Incurrence of Additional Indebtedness" covenant; (xii)
Investments the payment for which consists of Qualified Capital Stock of the
Issuer ("Investment Equity"); provided, however, that the issuance of such
Qualified Capital Stock equity interests will not increase the amount available
for Restricted Payments under the "Limitation on Restricted Payments" covenant;
(xiii) Investments in Permitted Joint Ventures which in the aggregate at any
one time outstanding do not exceed $10 million; and (xiv) any Investment in a
Related Business (including in an Unrestricted Subsidiary) having an aggregate
fair market value, taken together with all other Investments made pursuant to
this clause (xiv) that are at that time outstanding, which does not exceed the
greater of (x) $20 million or (y) 4% of Total Assets at the time of such
Investment (with the fair market value of each Investment being measured at the
time made and without giving effect to subsequent changes in value).
"Permitted Joint Venture" means, as applied to any Person, any other
Person engaged in a Related Business (a) over which such Person is responsible
(either directly or through a services agreement) for day-to-day operations or
otherwise has operational and managerial control of such other Person or (b) of
which more than forty percent (40%) of the outstanding Voting Stock (other than
directors' qualifying shares) of such other Person in the case of a
corporation, or more than forty percent (40%) of the outstanding ownership
interests of such other Person, in the case of an entity other than a
corporation, is at the time owned directly or indirectly by such Person.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Pledge and Escrow Agreement" means the Pledge and Escrow Agreement,
dated as of the date of the Indenture, among the Issuer, Finance Corp., the
Trustee and the collateral agents named therein.
"Pledged Securities" means the securities purchased by the Issuer with a
portion of the net proceeds from the Offering to be deposited in the Escrow and
Pledge Account.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Public Equity Offering" means an underwritten offer and sale of common
stock (which is Qualified Capital Stock) of the Issuer or Centennial with
aggregate proceeds of at least $50 million pursuant to a registration statement
that has been declared effective by the SEC pursuant to the Securities Act
(other than a registration statement on Form S-8 (or any successor form
covering substantially the same transactions), S-4 (or any successor form
covering substantially the same transactions), or otherwise relating to equity
securities issuable under any employee benefit plan of such corporate entity).
"Purchase Money Indebtedness" means any Indebtedness of the Issuer or its
Restricted Subsidiaries which is secured by a Lien on assets related to the
business of the Issuer or its Restricted Subsidiaries and any additions and
accessions thereto, which are purchased by the Issuer or its Restricted
Subsidiaries at any time after the Notes are issued; provided that (i) the
security agreement or conditional sales or other title retention contract
pursuant to which the Lien on such assets is created (collectively a "Purchase
Money Security Agreement") shall be entered into within 90 days after the
purchase or substantial completion of the construction of such assets and shall
at all times be confined solely to the assets so purchased without further
recourse to either the Issuer or any of its Restricted Subsidiaries or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (A) the
108
<PAGE>
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Purchase Money Security Agreement is entered into
exceed 100% of the purchase price to the Issuer or its Restricted Subsidiaries
of the assets subject thereto or (B) the Indebtedness secured thereby shall be
with recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Recapitalization" means the Merger and the transactions to be
consummated pursuant to the Recapitalization Documents.
"Recapitalization Documents" means the Merger Agreement, the Credit
Facility, the Indenture, the documentation governing the Mezzanine Financing,
and the ancillary documents related thereto.
"Reference Period" with regard to any Person means the last four full
fiscal quarters of such Person for which financial information (which the
Issuer shall use its best efforts to compile in a timely manner) in respect
thereof is available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the notes or the
Indenture.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated and three other primary U.S. Government securities dealers
in The City of New York to be selected by the Issuer, and their respective
successors.
"Refinancing Indebtedness" means any Indebtedness of the Issuer or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or such Restricted Subsidiary (other than
intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Refinancing Indebtedness does not
exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premium and reasonable
expenses incurred in connection therewith); (ii) such Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and has a
Weighted Average Life equal to or greater than the Weighted Average Life of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Refinancing Indebtedness is subordinated in right of payment to,
the notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Issuer or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Related Business" means any business related to, or complementary to,
the ownership, development, operation or acquisition of communications systems
as determined by the Board of Directors of the Issuer.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any
trust in which any Person described in clause (i) above, has a beneficial
interest.
"Restricted Payment" means, with respect to any Person, (i) any dividend
or other distribution on shares of Capital Stock of such Person or any
Restricted Subsidiary of such Person, (ii) any payment on account of the
purchase, redemption or other acquisition or retirement for value in whole or
in part, of any shares of Capital Stock of such Person, any entity which
controls such Person or any Restricted Subsidiary of such Person, which
Capital Stock is held by Persons other than such Person or any of its
Restricted Subsidiaries, or options, warrants or other rights to acquire such
Capital Stock, (iii) any defeasance,
109
<PAGE>
redemption, repurchase or other acquisition or retirement for value, in whole
or in part, of any Indebtedness of such Person (other than the scheduled
repayment thereof at maturity and any mandatory redemption or mandatory
repurchase thereof pursuant to the terms thereof) by such Person or a
Subsidiary of such Person that is subordinate in right of payment to the Notes
(other than in exchange for Refinancing Indebtedness permitted to be Incurred
under the Indenture and except for any such defeasance, redemption, repurchase,
other acquisition or payment in respect of Indebtedness held by any Restricted
Subsidiary) and (iv) any Investment (other than a Permitted Investment);
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on shares of Capital Stock of the
Issuer or any Restricted Subsidiary solely in shares of Qualified Capital Stock
or in options, warrants or other rights to acquire such Qualified Capital
Stock), (ii) any dividend, distribution or other payment to the Issuer, or any
dividend to any of its Restricted Subsidiaries, by any of its Subsidiaries,
(iii) any dividend, distribution or other payment by any Restricted Subsidiary
on shares of its Capital Stock that is paid pro rata to all holders of such
Capital Stock and (iv) the purchase, redemption or other acquisition or
retirement for value of shares of Capital Stock of any Restricted Subsidiary
held by Persons other than the Issuer or any of its Restricted Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of the Issuer that has not
been designated by the board of directors of the Issuer by board resolution
delivered to the Trustee as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "Certain Covenants--Limitation on
Unrestricted Subsidiaries."
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated by the Commission
thereunder.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of
the net book value of the assets of the Issuer and its Restricted Subsidiaries
on a consolidated basis.
"Stated Maturity" means the date fixed for the payment of any principal
or premium pursuant to the Indenture and the notes, including the Maturity
Date, upon redemption, acceleration, Asset Sale Offer, Change of Control Offer
or otherwise.
"Strategic Equity Investor" means any Person which is (or a controlled
Affiliate of any Person which is) engaged in the ownership, development,
operation or acquisition of communications systems and which, as of the last
available annual or quarterly financial statements, has Total Common Equity of
at least $1.0 billion.
"Strategic Equity Offering" means an offer or sale of Common Stock or
Preferred Stock (other than Disqualified Capital Stock) of the Issuer, with
aggregate proceeds of at least $50.0 million to a Strategic Equity Investor
other than in connection with or after the occurrence of a Change of Control.
The consummation of the transactions contemplated by the Merger shall not be
deemed a Strategic Equity Offering.
"Subordinated Indebtedness" means Indebtedness of the Issuer or a
Guarantor subordinated in right of payment to the notes or a Guarantee, as the
case may be.
"Subsequent Collateral Investments Account" means an account established
in the United States with the Trustee pursuant to the terms of the Pledge and
Escrow Agreement for the deposit of the Pledged Securities purchased by the
Issuer with a portion of the net proceeds from the offering.
"Subsidiary" with respect to any Person, means (i) a corporation at least
50% of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such Person,
by such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, or (ii) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person,
110
<PAGE>
or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof has (x) at least a fifty
percent ownership interest or (y) the power to elect or direct the election of
the directors or other governing body of such Person.
"Total Assets" means the total assets of the Issuer and its Restricted
Subsidiaries shown on the Consolidated balance sheet of the Issuer and its
Restricted Subsidiaries prepared in accordance with GAAP as of the last day of
the immediately preceding fiscal quarter for which financial statements are
available.
"Total Common Equity" of any Person means, as of any date of
determination, the product of (i) the aggregate number of outstanding primary
shares of Common Stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of Common Stock of such Person) and (ii) the average Closing Price of such
Common Stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (ii) of the preceding sentence
shall be determined by the Board of Directors of Centennial or the Issuer in
good faith and evidenced by a resolution of the Board of Directors filed with
the Trustee.
"Trading Day," with respect to a securities exchange or automated
quotation system, means a day on which such exchange or system is open for a
full day of trading.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Unrestricted Subsidiary" means any Subsidiary of the Issuer (other than
a Guarantor) designated as such pursuant to and in compliance with the covenant
described under "--Certain Covenants--Limitation on Unrestricted Subsidiaries."
"Voting Stock" means, with respect to a Person, Capital Stock of such
Person having generally the right to vote in the election of a majority of the
directors of such Person or having generally the right to vote with respect to
the organizational matters of such Person.
"Weighted Average Life" means, when applied to any Indebtedness at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Welsh Carson" means Welsh, Carson, Anderson & Stowe VIII, L.P. and
affiliates of the foregoing that are directly or indirectly controlling or
controlled by Welsh, Carson, Anderson & Stowe VIII, L.P. or under direct or
indirect common control with Welsh, Carson, Anderson & Stowe VIII, L.P.
Book-Entry Delivery And Form
The Global Note. The certificates representing the old notes were issued,
and the certificates representing the new notes will be issued, in fully
registered form, without coupons. The Old Notes are represented by one or more
permanent global certificates in definitive, fully registered form without
interest coupons in an aggregate amount of $370 million (the "Initial Global
Note"). Except as described in the next paragraph, the new notes initially will
be represented by one or more permanent global certificates in definitive,
fully registered form (the "Global Notes") and will be deposited with, or on
behalf of, the DTC (the
111
<PAGE>
"Depositary"), and registered in the name of Cede & Co., as the DTC's nominee
or will remain in the custody of the Trustee pursuant to a FAST Balance
Certificate Agreement between the DTC and the Trustee. If any holder of old
notes whose interest in such old notes is represented by the Initial Global
Note fails to tender in the exchange offer, we may issue and deliver to such
holder a separate certificate representing such holder's old notes in
registered form without interest coupons.
Certain Book-Entry Procedures for Global Notes. The descriptions of the
operations and procedures of DTC that follow are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
the respective settlement systems and are subject to change by them from time
to time. The Issuer takes no responsibility for these operations and procedures
and urges investors to contact DTC or its participants directly to discuss
these matters.
DTC has advised the Issuer as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Pursuant to procedures established by DTC, (i) upon the issuance of the
Initial Global Certificate, DTC credited, on its internal system, the
respective principal amount of the individual beneficial interests represented
by such Global Notes to the accounts with DTC of the participants through which
such interests are held and (ii) ownership of beneficial interest in the Global
Notes are shown on, and the transfer of that ownership is effected only
through, records maintained by DTC or its nominees (with respect to interest of
participants) and the records of participants and indirect participants (with
respect to interests of persons other than participants).
As long as DTC, or its nominee, is the registered Holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole
owner and Holder of the Notes represented by such Global Note for all purposes
under the Indenture and the notes. Except in the limited circumstances
described below, owners of beneficial interests in a Global Note will not be
entitled to have any portions of such Global Note registered in their names,
and will not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or Holders of the Global
Note (or any Notes represented thereby) under the Indenture or the notes.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such persons may
be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on Global
Notes will be made to DTC or its nominee as the registered owner thereof.
Neither the Issuer, the Trustee nor any of their respective agents will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
112
<PAGE>
The Issuer expects that DTC or its nominee, upon receipt of any payment
of principal of, premium, if any, or interest in respect of a Global Note
representing any notes held by it or its nominee, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note for such notes as shown
on the records of DTC or its nominee. The Issuer also expects that payments by
participants to owners of beneficial interests in such Global Note held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name." Such payments will be the responsibility
of such participants. None of the Issuer or the Trustee will be liable for any
delay by DTC or any of its participants in identifying the beneficial owners of
the notes, and the Issuer and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the notes for all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of notes only at the direction of one or more participants to
whose accounts with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default under the notes, DTC reserves the
right to exchange the Global Notes for Notes in certificated form, and to
distribute such Notes to its participants.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfer of beneficial ownership interests in the Global Notes among
participants of DTC, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Issuer, the Trustee nor any of their respective agents will have
any responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing its operations, including maintaining, supervising or reviewing the
records relating to or payments made on account of, beneficial ownership
interests in Global Notes.
113
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The summary below describes the material United States federal income tax
consequences of the exchange of old notes for new notes as of the date hereof.
The discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended, and regulations, rulings and judicial decisions thereunder
as of the date hereof, and such authorities may be repealed, revoked or
modified so as to result in federal income tax consequences different from
those discussed below. You should consult their own tax advisors concerning the
federal income tax consequences in light of their particular situations as well
as any consequences arising under the laws of any other taxing jurisdiction.
Exchange of Notes
The exchange of old notes for new notes pursuant to the exchange offer
should not be treated as an "exchange" for federal income tax purposes, because
the new notes should not be considered to differ materially in kind or extent
from the old notes. Rather, the new notes received by you should be treated as
a continuation of your old notes. As a result, there should be no federal
income tax consequences to you if you exchange notes for new notes pursuant to
the exchange offer.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
such old notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period of 90
days after the expiration date of the exchange offer, we will make this
prospectus available to any broker-dealer for use in connection with any such
resale. In addition, for a period of 90 days after the expiration date, all
dealers effecting transactions in the new notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of new notes by broker-
dealers. New notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such new notes. Any broker-dealer that resells new notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of new notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of new notes and any commissions or concessions received by
any such person may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act by acknowledging that it will deliver and by delivering a
prospectus. We have no arrangement or understanding with any broker or dealer
to distribute the New Notes received in the exchange offer.
For a period of 90 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal.
114
<PAGE>
LEGAL MATTERS
The validity of the New Notes will be passed upon for us by Reboul,
MacMurray, Hewitt, Maynard & Kristol, New York, New York.
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from Centennial's Annual Report on
Form 10-K for the year ended May 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports which are
incorporated by reference herein, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
UNCERTAINTIES ASSOCIATED WITH FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about us, including, among other things:
. Our high degree of leverage and the requirement for significant and
sustained growth in our cash flow to meet our debt service
requirements,
. That we are a holding company and the notes are structurally
subordinated to all indebtedness of our subsidiaries, including
guarantees by our subsidiaries of all indebtedness under our $1.05
billion credit facility (approximately $930 million of which was
drawn at closing of the merger and a portion of which was borrowed
directly by our Puerto Rico subsidiary),
. Our history of net losses and the expectation of future losses,
. That the telecommunications industry is highly competitive,
. That new technologies or new business opportunities will require
additional investments in network capacity or additional capital
spending,
. That the success of any acquisitions will depend on our ability to
integrate acquired businesses,
. That the telecommunications industry is subject to rapid and
significant changes in technology,
. That there is potential for adverse regulatory change and the need
for regulatory approvals in the operation of our business and
renewal of our cellular licenses,
. Fluctuations in market value of our licenses,
. Risks associated with the regional economic conditions in the areas
we operate our business,
. Operating costs due to fraud,
. That a decline in roaming rates may materially adversely affect us,
. That a dispute regarding reverse billing may materially adversely
affect us,
. That the indenture governing the notes will require us to offer to
purchase all of the notes issued and outstanding upon any change of
control and that the credit facility contains similar provisions,
which purchases, in each case, we may not have sufficient funds to
consummate,
. That the indenture and the credit facility impose significant
operating and financial restrictions on Centennial Cellular
Operating,
115
<PAGE>
. That Centennial Cellular Operating has pledged the capital stock of
all its direct and indirect subsidiaries to the lenders under the
credit facility and that all of the assets of such subsidiaries are
pledged to such lenders,
. That Centennial has unconditionally guaranteed the obligations of
the borrowers under the credit facility,
. That Centennial, as co-obligor, has no assets other than the stock
of Centennial Cellular Operating and Centennial is not subject to
the covenants contained in the indenture governing the notes,
. That the right of the trustee under the indenture and a pledge and
escrow agreement to obtain payment on the notes upon the occurrence
of an event of default may be significantly impaired by applicable
bankruptcy law,
. The lack of certainty with respect to how a court might decide a
suit by an unpaid creditor on the basis of fraudulent conveyance,
. The potential effect of Year 2000 computer issues,
. Risks associated with new management and any future changes in
management,
. That certain equity investors control Centennial and its
subsidiaries and have the power to elect directors and take other
corporate actions,
. That we have limited ability to direct the operations of the systems
in which we hold minority cellular investment interests as a limited
partner and that our interests in such systems may be diluted if we
do not meet a capital call,
. The potential effect of equipment failure or natural disaster on our
business,
. Concerns about radio frequency emissions from cellular handsets, and
. The absence of a public market for the new notes.
We are not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
116
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dealer Prospectus Delivery Obligation
Until , 1999, all dealers that effect transactions in these
securities, whether or not participating in this Exchange Offer, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus or the accompanying Letter of Transmittal, and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company or Centennial Cellular Operating. Neither this
Prospectus nor the accompanying Letter of Transmittal or both together
constitute an offer to sell or a solicitation of an offer to buy any security
other than the New Notes offered hereby, nor does it constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such offer or
solicitation to such person. Neither the delivery of this Prospectus or the
accompanying Letter of Transmittal or both together, nor any sale made
hereunder shall under any circumstances imply that the information contained
herein is correct as of any date subsequent to the date hereof.
[LOGO] Centennial Cellular Corp.
Centennial Cellular Corp.
Centennial Cellular Operating Co. LLC
Offer to Exchange Their
10 3/4% Senior Subordinated Notes due 2008, Series B,
for Any and All of Their Outstanding
10 3/4% Senior Subordinated Notes due 2008, Series A
----------------
PROSPECTUS
----------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
("DGCL") empowers a Delaware corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of such corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. A corporation may indemnify such person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation to procure a
judgment in its favor under the same conditions, except that no indemnification
is permitted without judicial approval if the officer or director is adjudged
to be liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses (including attorneys' fees)
which he actually and reasonably incurred in connection therewith. The
indemnification provided is not deemed to be exclusive of any other rights to
which an officer or director may be entitled under any corporation's by-law,
agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Centennial Cellular Corp.
("Centennial") has adopted a by-law that provides that, to the fullest extent
permitted by DGCL, Centennial shall indemnify any person serving as a director
or officer of Centennial and every such director or officer serving at the
request of Centennial as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for expenses
incurred in the defense of, or in connection with, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative. Under Section 145 of the DGCL and Centennial's by-laws, such
indemnification shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 18-108 of the Delaware Limited Liability Company Act (the "LLC
Act") empowers a Delaware limited liability company to indemnify and hold
harmless any member or manager or other person from and against any and all
claims and demands whatsoever. In accordance with such section, the limited
liability company agreement of Centennial Cellular Operating Co. LLC
("Centennial Cellular Operating") provides that, to the fullest extent
permitted by the LLC Act, Centennial Cellular Operating shall indemnify a
member, any affiliate of a member, any officers, directors, shareholders,
partners, employees, representatives or agents of a member, or their respective
affiliates, or any employee or agent of Centennial Cellular Operating or its
affiliates (each, a "Covered Person") for any loss, damage or claim incurred by
such Covered Person by reason of any act or omission performed or omitted by
such Covered Person in good faith on behalf of Centennial Cellular Operating
and in a manner reasonably believed to be within such Covered Person's scope of
authority.
Each of Centennial and Centennial Cellular Operating has purchased and
maintains insurance to protect persons entitled to indemnification pursuant to
its by-laws or limited liability company agreement (as the case may be), the
DGCL or the LLC Act against expenses, judgments, fines and amounts paid in
settlement, to the fullest extent permitted by the DGCL or the LLC Act (as the
case may be).
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of Centennial
Cellular Corp.*.................................................
3.2 Amended and Restated By-Laws of Centennial Cellular Corp.*......
3.3 Certificate of Formation of Centennial Cellular Operating Co.
LLC***..........................................................
3.4 Limited Liability Company Agreement of Centennial Cellular
Operating Co. LLC***............................................
4.1 Indenture dated as of December 14, 1998 between Centennial
Cellular Operating Co. LLC and Centennial Finance Corp. and The
Chase Manhattan Bank, as trustee, relating to the 10 3/4% Senior
Subordinated Notes due 2008*....................................
4.2 Assumption Agreement and Supplemental Indenture, dated as of
January 7, 1999, to the Indenture dated as of December 14,
1998*...........................................................
4.3 Form of 10 3/4% Senior Subordinated Note due 2008, Series B of
the registrant (included in Exhibit 4.1)........................
4.4 Registration Rights Agreement, dated as of December 14, 1998,
among Centennial Cellular Operating Co. LLC, Centennial Finance
Corp. and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
NationsBanc Montgomery Securities LLC, Morgan Stanley & Co.
Incorporated and Chase Securities Inc., as initial purchasers*..
4.5 Pledge and Escrow Agreement, dated as of December 14, 1998, from
Centennial Cellular Operating Co. LLC and Centennial Finance
Corp., as Pledgors, to The Chase Manhattan Bank, as Trustee*....
5.1 Opinion of Reboul, MacMurray, Hewitt, Maynard & Kristol as to
the legality of the securities being registered**...............
12.1 Statements re Computation of Ratios**...........................
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
23.1 Consent of Reboul, MacMurray, Hewitt, Maynard & Kristol (included
in their opinion filed as Exhibit 5.1)**.........................
23.2 Consent of Deloitte & Touche LLP.................................
24.1 Power of Attorney of the members of the Board of Directors of the
registrant (included in the signature pages of the Registration
Statement).......................................................
25.1 Statement on Form T-1 of Eligibility of Trustee..................
99.1 Form of Letter of Transmittal***.................................
99.2 Form of Notice of Guaranteed Delivery***.........................
</TABLE>
- --------
* Filed as an Exhibit to the Current Report on Form 8-K of Centennial
Cellular Corp. filed with the Commission on January 22, 1999.
** To be filed by amendment.
*** Previously filed.
Item 22. Undertakings
Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired therein, that was not the subject of and included in the
registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, each of the
registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Neptune,
state of New Jersey, on May 14, 1999.
Centennial Cellular Corp.
/s/ Michael J. Small
_____________________________________
Michael J. Small,
President, Chief Executive
Officer and Director
Centennial Cellular Operating Co.
LLC
By: Centennial Cellular Corp., its
sole member
/s/ Michael J. Small
_____________________________________
Michael J. Small,
Chief Executive Officer and
Director
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive May 14, 1999
______________________________________ Officer and Director
Michael J. Small (Principal Executive
Officer)
* Senior Vice President, May 14, 1999
______________________________________ Treasurer and Chief
Peter W. Chehayl Financial Officer
(Principal Financial and
Accounting Officer)
* President and Chief May 14, 1999
______________________________________ Executive Officer
Rudy J. Graf (Centennial de Puerto
Rico), Director
* Director May 14, 1999
______________________________________
Thomas E. McInerney
* Director May 14, 1999
______________________________________
Anthony J. de Nicola
* Director May 14, 1999
______________________________________
Rudolph E. Rupert
Director May 14, 1999
______________________________________
Mark T. Gallogly
* Director May 14, 1999
______________________________________
Lawrence H. Guffey
</TABLE>
- --------
* Pursuant to the Power of Attorney designated as Exhibit 24.1 hereto and
previously included in the S-4:
/s/ Michael J. Small
By: _________________________________
Michael J. Small
Attorney-in-Fact
II-5
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Centennial Cellular Corp. on Form S-4 of our reports dated July
17, 1998 appearing in the Annual Report on Form 10-K of Centennial Cellular
Corp. for the year ended May 31, 1998 and to the reference to us under the
heading "Experts" in such Prospectus.
Deloitte & Touche LLP
Stamford, Connecticut
May 13, 1999
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------------------------
__ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue 55479
Minneapolis, Minnesota (Zip code)
(Address of principal executive offices)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
----------------------------
CENNTENNIAL CELLULAR CORP.
CENTENNIAL CELLULAR OPERATING CO. LLC
(Exact name of obligor as specified in its charter)
Delaware 06-1158179
Delaware 13-4035089
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1305 Campus Parkway
Neptune, New Jersey 07753
(Address of principal executive offices) (Zip code)
----------------------------
10 3/4% Senior Subordinated Notes due 2008
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934, approving
the consolidation of The Northwestern National
Bank of Minneapolis and The Minnesota Loan and
Trust Company of Minneapolis, with the surviving
entity being titled Northwestern National Bank
and Trust Company of Minneapolis.*
c. A copy of the certificate of the Acting
<PAGE>
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988 from
the Administrator of National Banks for the
Comptroller of the Currency certifying approval
of consolidation and merger effective January 1,
1988 of Norwest Bank Minneapolis, National
Association with various other banks under the
title of "Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of
the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
<PAGE>
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-25233.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 25th day of March 1999.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
----------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE>
EXHIBIT 6
March 25, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of Trust Indenture Act of 1939, as amended,
the undersigned hereby consents that reports of examination of the undersigned
made by Federal, State, Territorial, or District authorities authorized to make
such examination may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
NORTHWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Curtis D. Schwegman
----------------------------
Curtis D. Schwegman
Assistant Vice President
