As filed with the Securities and Exchange Commission on December 23, 1996
Registration No. 333-____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------------
D & E COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Commonwealth
of Pennsylvania 4813 23-2837108
- --------------- ---- ----------
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation
or organization)
--------------------------
Brossman Business Complex
124 East Main Street
Ephrata, Pennsylvania 17522
(717) 733-4101
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
--------------------------
Anne B. Sweigart, Chairman, President and Chief Executive Officer
D & E Communications, Inc.
Brossman Business Complex
124 East Main Street
Ephrata, Pennsylvania 17522
(717) 733-4101
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
With copies to:
Vincent C. Deluzio, Esquire
Buchanan Ingersoll Professional Corporation
301 Grant Street, One Oxford Centre, 21st Floor
Pittsburgh, Pennsylvania 15219
(412) 562-8800
--------------------------
Approximate date of commencement of proposed
sale of the securities to the public: As
soon as practicable after this
Registration Statement becomes
effective.
--------------------------
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: |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================
Proposed Proposed
Tile of each class maximum maximum Amount of
of securities to Amount to be offering price aggregate registration
be registered registered(1) per unit offering price fee(2)
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Common Stock,
$0.16 par value..... 341,304 Not Applicable Not Applicable $100.00
==============================================================================================
</TABLE>
(1) Estimated by dividing $7, 850,000 (the $8,000,000, less estimated expenses
of $150,000, of the Common Stock of D & E proposed to be issued in the
Merger) by $23.00 which is the lowest possible price per share of the D & E
Common Stock allowed by the terms of the Merger.
(2) Pursuant to Rule 457(f)(2), the registration fee is based on the book value
of $174,820 as of September 30, 1996, of the shares of the capital stock of
PCS One, Inc., which are to be converted in the Merger into shares of the
common stock, par value $0.16 per share, of the Registrant. Further,
pursuant to Section 6(b) of the Securities Act of 1933, as amended, the
minimum registration fee is $100.00.
--------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant 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>
D & E COMMUNICATIONS, INC.
CROSS REFERENCE SHEET PURSUANT TO RULE 404(a) AND REGULATION S-K, ITEM 501
SHOWING THE LOCATION IN THE PROXY STATEMENT AND PROSPECTUS OF THE INFORMATION
REQUIRED TO BE INCLUDED THEREIN IN ACCORDANCE WITH PART I OF FORM S-4.
Form S-4 Location or Heading in the Proxy
Item Number and Caption Statement and Prospectus
- ------------------------------------------- -----------------------------------
A. Information About the Transaction Forepart of the Registration
1. Forepart of Registration Statement; Facing Page;
Statement and Outside Front Cross-Reference Sheet; Outside
Cover Page of Prospectus .......... Front Cover Page of the Proxy
Statement and Prospectus
2. Inside Front and Outside Back Inside Front Cover Page of the
Cover Pages of Prospectus.......... Proxy Statement and Prospectus;
"Available Information"; "Table
of Contents"
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other Forepart of the Proxy Statement
Information ....................... and Prospectus; "Summary"
4. Terms of the Transaction............ "Merger"
5. Pro Forma Financial Information..... "Index to Financial Statements"
6. Material Contracts with D & E Being "PCS One--Material Contracts
Acquired........................... Between PCS One and D & E"
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters....................... *
8. Interests of Named Experts
and Counsel........................ *
9. Disclosure of Commission Position "Merger--Material Differences
on Indemnification for Between Rights of Holders of D &
Securities Act Liabilities ........ E Common Shares and of Holders
of PCS One Common
Shares--Indemnification"
B. Information About the Registrant
10. Information with Respect to
S-3 Registrants ................... *
11. Incorporation of Certain Information
by Reference....................... *
12. Information with Respect to S-2 or Cover Page of the Proxy Statement
S-3 Registrants ................... and Prospectus; "Incorporation,
Delivery and Disclosure of
Certain Information"
13. Incorporation of Certain Information "Incorporation, Delivery and of
by Reference ...................... Disclosure of Certain
Information"
<PAGE>
Form S-4 Location or Heading in the Proxy
Item Number and Caption Statement and Prospectus
- ------------------------------------------- -----------------------------------
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants ................... *
C. Information About the Company Being
Acquired
15. Information with Respect to S-3
Companie........................... *
16. Information with Respect to S-2
or S-3 Companies .................. *
17. Information with Respect to "PCS One"; "Summary--PCS One
Companies Other Than S-3 or S-2 Selected Financial Data"; "Index
Companies ......................... to Financial Statements"
D. Voting and Management Information
18. Information if Proxies, Consents "Summary--Date, Time and Place of
or Authorizations are to be Meeting"; "Summary--Principal
Solicited ......................... Executive Offices"; Outside
Front Cover Page of the Proxy
Statement and Prospectus; "1997
Shareholder Proposals";
"Outstanding Stock and Voting
Rights"; "Merger--Rights of
Dissenting Shareholders";
"Information About the Special
Meeting"; "Merger--Interests of
Certain Persons in the Merger";
"Summary--Vote Required";
"Summary--Record Date and
Eligible Voters"; "PCS
One--Market Price of and
Dividends on the PCS One Common
Shares and Related Shareholder
Matters"; "Incorporation,
Delivery and Disclosure of
Certain Information"; "PCS
One--Change of Control"
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange
Offer ............................. *
- ---------------
* Item is omitted because it is inapplicable or the answer is negative.
<PAGE>
PCS ONE, INC.
2500 English Creek Avenue
Building II
Egg Harbor Township, New Jersey 08234
___________, 1997
To Our Shareholders:
You are cordially invited to attend the Special Meeting (the "Special
Meeting") of the shareholders of PCS One, Inc. (the "PCS One Shareholders"), to
be held at 2500 English Creek Avenue, Building II, Egg Harbor Township, New
Jersey 08234, on February [15], 1997, at 10:00 a.m. local time. At the Special
Meeting, you will be asked to approve the following four proposals: (1) an
amendment to the Amended and Restated Certificate of Incorporation, as further
amended, of PCS One, Inc. (the "PCS One Certificate") to increase the number of
the Reserved Shares (as defined in Exhibit A to the PCS One Certificate) from
475,000 to 2,475,000 (the "Amendment"), such increase representing the number of
the Bonus Options (as defined below) proposed to be granted; (2) the grant of
options (the "Reserved Share Options") to certain officers, directors and
consultants of PCS One, Inc., a New Jersey corporation ("PCS One"), for an
aggregate of 475,000 Class II Common Shares, par value $.001 per share, of PCS
One ("Class II Common Shares"); (3) the grant of options (the "Bonus Options")
to certain executive officers of PCS One for an aggregate of 2,000,000 Class II
Common Shares; and (4) the merger (the "Merger") of PCS One with and into D & E
Communications, Inc. ("D & E"), pursuant to the terms of that certain Agreement
and Plan of Merger by and between them dated as of December 12, 1996, as
amended.
The purpose of the Amendment is to provide that the Bonus Options, if
approved and issued, shall be treated in the same manner as the Reserved Share
Options. Specifically, if the Amendment is approved, the grant and issuance of
the Bonus Options will not trigger the anti-dilution and rights of first refusal
provisions set forth in Exhibit A to the PCS One Certificate. The PCS One Board
of Directors believes that such shareholder protections are not appropriately
applied to the grant of the Bonus Options and, therefore, proposes the
Amendment. The issuance of the Bonus Options is specifically conditioned upon
PCS One Shareholder approval of the Amendment. FOR THIS REASON, THE PCS ONE
BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT.
The purpose of the proposed grant of the Reserved Share Options is to
recognize the extraordinary contributions of certain individuals integral to the
formation and viability of PCS One with respect to its participation in the
Auction (as defined below), contributions for which such individuals received no
salary from PCS One. FOR THIS REASON, THE PCS ONE BOARD OF DIRECTORS STRONGLY
RECOMMENDS THAT YOU VOTE FOR THE GRANT OF THE RESERVED SHARE OPTIONS.
The purpose of the proposed grant of the Bonus Options is to recognize the
extraordinary contributions of certain executive officers and directors in
connection with the successful negotiation of the Merger, contributions for
which such individuals received no salary form PCS One. FOR THIS REASON, THE PCS
ONE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU VOTE FOR THE GRANT OF THE
BONUS OPTIONS.
The purpose of the Merger is: (a) to allow the PCS One Shareholders to
realize certain financial benefits associated with the successful acquisition by
PCS One of a Frequency Block C broadband personal communication service ("PCS")
license from the Federal Communications Commission following its auction of PCS
licenses (the "Auction"), while removing accompanying risks associated with the
development and operation by PCS One of its PCS license, such as (i) obtaining
funding, (ii) repaying Auction debt and (iii) managing potential challenges
inherent to the establishment and provision of PCS services in a local community
foreign to PCS One;
<PAGE>
(b) to allow the PCS One Shareholders to benefit from D & E's significant
presence and familiarity with the various constituencies in the Lancaster,
Pennsylvania community covered by the PCS license of PCS One; and (c) for D & E
to have the opportunity to exploit the commercial potential of such license in
the geographic area in which D & E's business is primarily located. FOR THESE
REASONS, THE PCS ONE BOARD OF DIRECTORS CONSIDERS THE PROPOSED MERGER TO BE IN
THE BEST INTERESTS OF PCS ONE AND THE PCS ONE SHAREHOLDERS AND STRONGLY
RECOMMENDS THAT YOU VOTE FOR THE MERGER.
Detailed information as to the business to be transacted at the Special
Meeting is contained in the accompanying Notice of Special Meeting and combined
Proxy Statement and Prospectus. At your earliest convenience, please mark, sign
and date the enclosed Proxy Card and return it to us in the envelope provided.
Duly executed but unmarked proxies will be voted FOR the Amendement, FOR the
grant of the Reserved Share Options, FOR the grant of the Bonus Options and FOR
the Merger. If you attend the meeting, you may, of course, choose to revoke your
proxy by filing written notice with the Secretary of PCS One prior to the voting
of the proxy or by casting your vote by written ballot.
UNDER APPLICABLE NEW JERSEY LAW, PCS ONE SHAREHOLDERS ARE ENTITLED TO
DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER. AS A CONDITION TO CLOSING OF
THE MERGER, HOWEVER, NO PCS ONE SHAREHOLDER MAY TAKE STEPS TO PERFECT
DISSENTERS' RIGHTS. PCS ONE SHAREHOLDERS WHO WISH TO DISSENT MUST COMPLY WITH
CERTAIN REQUIREMENTS, INCLUDING FILING A WRITTEN NOTICE PRIOR TO THE SPECIAL
MEETING AND FOLLOWING CERTAIN VOTING PROCEDURES. FOR ADDITIONAL INFORMATION
ABOUT DISSENTERS' RIGHTS, SEE "MERGER--RIGHTS OF DISSENTING SHAREHOLDERS" IN THE
ACCOMPANYING PROXY STATEMENT AND PROSPECTUS.
Sincerely yours,
Michael B. Azeez
President
Enclosures
<PAGE>
PCS ONE, INC.
2500 English Creek Avenue
Building II
Egg Harbor Township, New Jersey 08234
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
A Special Meeting (the "Special Meeting") of the shareholders of PCS One,
Inc. (the "PCS One Shareholders"), will be held in accordance with the Amended
and Restated Certificate of Incorporation, as further amended, and By-Laws of
PCS One, Inc. ("PCS One"), at 10:00 a.m. local time on February [15], 1997, at
2500 English Creek Avenue, Building II, Egg Harbor Township, New Jersey 08234,
for the purposes stated below, which are more fully described in the
accompanying Proxy Statement and Prospectus:
1. To approve an amendment to the Amended and Restated Certificate of
Incorporation, as further amended, of PCS One (the "PCS One Certificate") to
increase the number of Reserved Shares (as defined in Exhibit A to the PCS One
Certificate) from 475,000 to 2,475,000, such increase representing the number of
the Bonus Options (as defined below) proposed to be granted;
2. To approve the grant of options to certain executive officers,
directors and consultants of PCS One for an aggregate of 475,000 Class II Common
Shares, par value $.001 per share, of PCS One ("Class II Common Shares");
3. To approve the grant of options to certain executive officers of PCS
One for an aggregate of 2,000,000 Class II Common Shares (the "Bonus Options");
and
4. To approve the merger of PCS One with and into D & E Communications,
Inc., a Pennsylvania corporation, pursuant to that certain Agreement and Plan of
Merger by and between them dated December 12, 1996, as amended; and
5. To act upon such other business as may properly come before the Special
Meeting.
Only holders of record of the common or preferred stock on the books of
PCS One at the close of business on January 20, 1997, will be entitled to vote
at the Special Meeting or any adjournment thereof. A copy of the Proxy Statement
and Prospectus is being sent to you, simultaneously with our mailing of a Proxy
Card, as of the date identified below.
UNDER APPLICABLE NEW JERSEY LAW, PCS ONE SHAREHOLDERS ARE ENTITLED TO
DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER. AS A CONDITION TO CLOSING OF
THE MERGER, HOWEVER, NO PCS ONE SHAREHOLDER MAY TAKE STEPS TO PERFECT
DISSENTERS' RIGHTS. PCS ONE SHAREHOLDERS WHO WISH TO DISSENT MUST COMPLY WITH
CERTAIN REQUIREMENTS, INCLUDING FILING A WRITTEN NOTICE PRIOR TO THE SPECIAL
MEETING AND FOLLOWING CERTAIN VOTING PROCEDURES. FOR ADDITIONAL INFORMATION
ABOUT DISSENTERS' RIGHTS, SEE "MERGER--RIGHTS OF DISSENTING SHAREHOLDERS" IN THE
ACCOMPANYING PROXY STATEMENT AND PROSPECTUS.
The enclosed proxy, which is being solicited on behalf of the PCS One
Board of Directors, can be returned in the enclosed envelope, which requires no
postage if mailed in the United States.
By Order of the Directors
_____________, 1997 Michael B. Azeez
President
Enclosures
<PAGE>
PROXY STATEMENT FOR PCS ONE, INC.
AND
PROSPECTUS FOR THE D & E COMMON SHARES
This Proxy Statement and Prospectus contains both a Proxy Statement for
the Special Meeting (the "Special Meeting") of the shareholders of PCS One,
Inc., a New Jersey corporation ("PCS One"), to be held on February [15], 1997,
and a Prospectus relating to the issuance by D & E Communications, Inc., a
Pennsylvania corporation ("D & E"), of that number of shares (the "Merger
Amount") of the common stock, par value $.16 per share, of D & E (the "D & E
Common Shares") equal to $8,000,000 (less certain expenses as more fully
described in the Plan of Merger (as defined below), see "Merger--Plan of
Merger--The Merger") divided by the weighted average closing price of the D & E
Common Shares on the National Association of Securities Dealers, Inc. Automated
Quotations National Market System ("NASDAQ/NMS") over the 20 trading days on
which the D & E Common Shares were traded immediately preceding the Closing Date
(as defined in the Plan of Merger, see "Merger--Plan of Merger--The Merger"),
but no less than $23.00, and no more than $27.00, per D & E Common Share. The
closing price per D & E Common Share as reported on NASDAQ/NMS on December 9,
1996, which was the latest practicable date prior to the date of this Proxy
Statement and Prospectus (the "Latest Practicable Date"), was $24.00.
At the Special Meeting, PCS One will propose: (i) to amend the Amended and
Restated Certificate of Incorporation, as further amended, of PCS One, a copy of
which is attached hereto as Exhibit A (the "PCS One Certificate"), in order to
increase the "Reserved Shares" (as defined in Exhibit A to the PCS One
Certificate) from 475,000 to 2,475,000 (the "Amendment"); (ii) to grant options
(the "Reserved Share Options") to certain of its executive officers, directors
and consultants for an aggregate of 475,000 shares of the Class II common stock,
par value $.001 per share (the "Class II Common Shares"); and (iii) to grant
options (the "Bonus Options") to certain of its executive officers and directors
for an aggregate of 2,000,000 Class II Common Shares. See "Amendment of the PCS
One Certificate," "Reserved Share Options" and "Bonus Options." The Amendment
requires approval of 66 2/3% of each of the combined voting power of the Class
II Common Shares and the Series A Convertible Preferred Stock, par value $.01
per share, of PCS One (the "PCS One Preferred Shares") and the PCS One Preferred
Shares voting together as a single class, and the grants of the Reserved Share
Options and the Bonus Options require the approval of 72% of the combined voting
power of the PCS One Shareholders. The approval of the grant of the Bonus
Options is specifically conditioned on the approval of the Amendment. See "Bonus
Options."
At the Special Meeting, PCS One will also propose to merge PCS One with
and into D & E (the "Merger") pursuant to that certain Agreement and Plan of
Merger by and between them dated as of December 12, 1996, a copy of which is
attached hereto as Exhibit B (the "Merger Agreement"), as amended by that
certain Amendment No. 1 to the Agreement and Plan of Merger by and between them
dated December 18, 1996, a copy of which is attached hereto as Exhibit C
(together with the Merger Agreement, the "Plan of Merger"). Under the terms of
the Plan of Merger, D & E will be the surviving corporation (the "Surviving
Corporation"), the articles of incorporation, by-laws, directors and officers of
D & E will be the articles of incorporation, by-laws, directors and officers of
the Surviving Corporation, each of the issued and outstanding shares of the PCS
One Class I common stock, par value $.001 per share (the "Class I Common
Shares"), and of the Class II Common Shares (together with the Class I Common
Shares, the "PCS One Common Shares") at the effective time of the Merger (the
"Effective Time") will be converted into a pro rata portion of the Merger
Amount, each of the PCS One Common Shares and the PCS One Preferred Shares
issued and held in the treasury of PCS One shall be canceled and retired, and
each of the D & E Common Shares issued and outstanding immediately prior to the
Effective Time shall not be converted or changed as a result of the Merger but
shall continue as identical shares of the Surviving Corporation. See
"Merger--Plan of Merger--The Merger." As a condition to the closing of the
Merger, all of the issued and outstanding PCS One Preferred Shares must have
been converted into Class II Common Shares. See "Merger--Plan of
Merger--Conditions to Merger." Approval of the Merger by the PCS One
Shareholders is not contingent, however, on approval by the PCS One Shareholders
of the Amendment, the grant of the Reserved Share Options or the grant of the
Bonus Options. See "Merger--Relationship of Merger to the Amendment and Grants
of Reserved Share Options and Bonus Options."
If the Merger is consummated, it will be necessary for holders of the PCS
One Common Shares and the PCS One Preferred Shares to surrender their existing
stock certificates for stock certificates
<PAGE>
representing D & E Common Shares. DO NOT DESTROY YOUR CERTIFICATES FOR PCS ONE
CLASS I COMMON, CLASS II COMMON SHARES OR PCS ONE PREFERRED SHARES (EACH A "PCS
ONE STOCK CERTIFICATE"). At the Effective Time, each PCS One Stock Certificate
will automatically represent a right to receive that number of the D & E Common
Shares to which such holder is entitled upon proper completion, due execution
and submission to the Surviving Corporation of a letter of transmittal and such
other documents as the Surviving Corporation may reasonably request. See
"Merger--Plan of Merger--The Merger."
This Prospectus and Proxy Statement is accompanied by a copy of the 1995
Annual Report to Shareholders of D & E's predecessor, the Denver and Ephrata
Telephone and Telegraph Company, a Pennsylvania corporation and now a
wholly-owned subsidiary of D & E, ("Predecessor"), and D & E's Form 10-Q for the
period ended September 30, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement and Prospectus, and the date on which it
is first being sent or given to the PCS One Shareholders, is ___________, 1997.
<PAGE>
AVAILABLE INFORMATION
D & E is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Predecessor was also subject to the informational requirements of the Exchange
Act through June 7, 1996, and in accordance therewith filed reports, proxy
statements and other information with the SEC. Such reports, proxy statements
and other information of D & E and Predecessor can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the SEC: Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the SEC at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, such reports, proxy
statements and other information can be inspected at the offices of D & E,
Brossman Business Complex, 124 East Main Street, Ephrata, Pennsylvania 17522.
Lastly, D & E is also listed on NASDAQ/NMS, and accordingly, such reports, proxy
statements and other information of D & E can be inspected at the offices of
NASDAQ/NMS.
D & E has filed with the SEC a Registration Statement on Form S-4 (this
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), registering the D & E Common Shares into which the PCS One
Common Shares will be converted pursuant to the terms of the Merger. As
permitted by the rules and regulations of the SEC, this Proxy Statement and
Prospectus does not contain all of the information set forth in the Registration
Statement, and thus for further information, reference is made to the
Registration Statement.
This Proxy Statement and Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. These documents are
available upon written or oral request to W. Garth Sprecher, Secretary, Brossman
Business Complex, 124 East Main Street, Ephrata, PA 17522, telephone (717)
733-4101. In order to ensure timely delivery of the documents, any request
should be made by [5 days before the Special Meeting]. D & E will provide a copy
of any and all such documents (excluding exhibits) without charge to each
person, including any beneficial owner, to whom a Proxy Statement and Prospectus
is delivered and who makes such a written or oral request.
--------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT
AND PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST BE
RELIED UPON AS HAVING BEEN UNAUTHORIZED. THIS PROXY STATEMENT AND PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT
AND PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF D & E
SINCE THE DATE OF THIS PROXY STATEMENT AND PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION................................. Inside Front Cover Page
SUMMARY .................................................................... 1
Date, Time and Place of Meeting.......................................... 1
Record Date and Eligible Voters.......................................... 1
Proposals at the Special Meeting......................................... 1
Vote Required............................................................ 1
Principal Executive Offices.............................................. 2
PCS One.................................................................. 2
D & E3
Amendment................................................................ 3
Reserved Shares Options.................................................. 3
Bonus Options............................................................ 4
The Merger............................................................... 4
Reasons for the Merger................................................... 4
Effective Time........................................................... 5
Regulatory Requirements.................................................. 5
Rights of Dissenting Shareholders........................................ 5
Accounting Treatment..................................................... 6
Certain Income Tax Consequences.......................................... 6
Exchange of Stock Certificates........................................... 6
D & E Summary Financial Data............................................. 7
PCS One Summary Financial Data........................................... 8
Pro Forma D & E Summary Financial Data................................... 9
Market Value............................................................. 9
INFORMATION ABOUT THE SPECIAL MEETING....................................... 10
OUTSTANDING STOCK AND VOTING RIGHTS......................................... 10
AMENDMENT OF THE PCS ONE CERTIFICATE........................................ 11
RESERVED SHARE OPTIONS...................................................... 11
BONUS OPTIONS............................................................... 12
MERGER ..................................................................... 12
Terms of the Merger...................................................... 12
Plan of Merger........................................................... 13
Reasons for the Merger................................................... 17
Recommendation of the PCS One Board of Directors......................... 17
Relationship of Merger to the Amendment and Grants of Reserved
Share Options and Bonus Options........................................ 18
Description of D & E Capital Stock....................................... 18
Description of PCS One Capital Stock..................................... 24
Material Differences Between Rights of Holders of D & E Common
Shares and of Holders of PCS One Common Shares......................... 28
Rights of Dissenting Shareholders........................................ 32
Accounting Treatment..................................................... 34
Certain Federal Income Tax Consequences.................................. 34
Exchange of Stock Certificates........................................... 35
i
<PAGE>
PCS ONE .................................................................... 35
Business................................................................. 35
Management's Discussion and Analysis of Financial Condition
and Results of Operations of PCS One........................ 36
Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.................................... 37
Market Price of and Dividends on the PCS One Common Shares and
Related Shareholder Matters.............................. 37
Change of Control........................................................ 38
Cash, Bonus and Deferred Compensation to Executives...................... 39
Material Contracts Between PCS One and D & E............................. 39
INCORPORATION, DELIVERY AND DISCLOSURE OF CERTAIN INFORMATION............... 40
1997 SHAREHOLDER PROPOSALS.................................................. 40
LEGAL OPINIONS.............................................................. 40
EXPERTS .................................................................... 41
FORWARD-LOOKING STATEMENTS.................................................. 41
Index to Financial Statements............................................... F-1
Glossary of Defined Terms................................................... G-1
Exhibit A: Amended and Restated Certificate of Incorporation, as
further amended............................................... A-1
Exhibit B: Agreement and Plan of Merger
(with certain Exhibits only and without Schedules).......................... B-1
Exhibit C: Amendment No. 1 to Agreement and Plan of Merger.................. C-1
Exhibit D: New Jersey Dissenters' Rights Statute............................ D-1
ii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in this Proxy Statement and Prospectus and the
Exhibits attached hereto. Reference is made to the "Glossary of Defined Terms"
in this Proxy Statement and Prospectus for the location of defined terms used
herein.
Date, Time and Place of Meeting..... The Special Meeting will be held at
10:00 a.m. on February [15], 1997, at
2500 English Creek Avenue, Building II,
Egg Harbor Township, New Jersey 08234.
See "Information About the Special
Meeting."
Record Date and Eligible Voters..... Holders of record of PCS One Common
Shares and PCS One Preferred Shares (the
"PCS One Shareholders") at the close of
business on January 20, 1997 (the
"Record Date"), are entitled to vote at
the Special Meeting.
Proposals at the Special Meeting.... At the Special Meeting, the PCS One
Shareholders will be asked to approve
the Amendment to the PCS One Certificate
(see "Amendment of PCS One
Certificate"), to approve the grant of
options to certain executive officers
and consultants of PCS One for an
aggregate of 475,000 Class II Common
Shares of PCS One (see "Reserved Share
Options"), to approve the grant of
options to certain executive officers of
PCS One for an aggregate of 2,000,000
Class II Common Shares (see "Bonus
Options"), to approve the Merger (see
"Merger") and to act upon such other
business as may properly come before the
Special Meeting.
Vote Required....................... Approval of the Amendment will require
the affirmative vote of 66 2/3% of the
combined voting power of the Class II
Common Shares and the PCS One Preferred
Shares and 66 2/3% of the vote of the
PCS One Preferred Shares voting together
as a single class. Approval of the grant
of the Reserved Share Options, the grant
of the Bonus Options and the Merger will
require the affirmative vote, in person
or by proxy, of 72% of the combined
voting power of the PCS One
Shareholders; provided, however, that
the grant of the Bonus Options is
completely contingent on approval by the
PCS One Shareholders of the Amendment.
See "Bonus Options." Pursuant to the
terms of the Amended and Restated
By-Laws of PCS One (the "PCS One
By-Laws"), the PCS One Certificate and
the applicable provisions of the New
Jersey Business Corporation Act, as
amended ("NJBCA"), each PCS One
Shareholder is entitled to one vote per
share, except that the vote of holders
of PCS One Class I Common Shares is
weighted so as to comprise a majority of
the votes held by all PCS One
Shareholders. In determining whether a
quorum is present, all duly executed
proxies (including those marked
"abstain") will be counted. See
"Outstanding Stock and Voting Rights."
A total of 4,800,000 Class I Common
Shares, 450,000 Class II Common Shares
and 22,000,000 PCS One Preferred Shares
were outstanding on the Record Date, of
which 100%, 100% and 71.37%,
respectively, are held by directors
(which includes shares held by certain
PCS One Shareholders who
<PAGE>
have the contractural right to appoint
representatives to the PCS One Board)
and executive officers of PCS One and
their affiliates and 0%, 0% and 11.36%,
respectively, are held or controlled
directly or indirectly by D & E. All of
the holders of the Class I Common Shares
are members of the PCS One Board of
Directors (the "PCS One Board") and, as
holders of Class I Common Shares and
pursuant to the PCS One Certificate,
represent 50.01% of the combined voting
power of all of the PCS One Common
Shares and the PCS One Preferred Shares
(the "Combined Voting Power"). The
holders of the Class I Common Shares
also represent 15.59% of the combined
voting power of the Class II Common
Shares and the PCS One Preferred Shares,
which represents 7.79% of the Combined
Voting Power. The remaining members of
the PCS One Board, either directly or
representing significant PCS One
Shareholders, represent 55.68% of the
combined voting power of the Class II
Common Shares and the PCS One Preferred
Shares, which represents 27.83% of the
Combined Voting Power. The members of
the PCS One Board collectively represent
85.72% of the Combined Voting Power and
71.27% of the combined voting power of
the Class II Common Shares and the PCS
One Preferred Shares. Such PCS One
Shareholders have indicated their
intention to vote in favor of the
Amendment, the grants of the Reserved
Share Options and the Bonus Options, and
the Merger at the Special Meeting. A
total of ______ D & E Common Shares were
outstanding on the Record Date, of which
_____% are held by directors and
executive officers of D & E and their
affiliates.
Principal Executive Offices......... The principal executive offices of D & E
are located at the Brossman Business
Complex, 124 East Main Street, Ephrata,
Pennsylvania 17522. The telephone number
of D & E is (717) 733-4101. The
principal executive offices of PCS One
are located at 2500 English Creek
Avenue, Building II, Egg Harbor
Township, New Jersey 08234. The
telephone number of PCS One is (609)
645-0900.
PCS One............................. PCS One is a development-stage company
which was incorporated in New Jersey on
October 11, 1994, and began conducting
business in 1995. PCS One was created to
provide personal communication services
("PCS") in selected basic trading areas
throughout the United States. PCS will
be offered pursuant to licenses
auctioned (the "PCS Licenses") by the
Federal Communications Commission
("FCC"). PCS One participated in the
FCC's Auction of the PCS Licenses (the
"Auction") for the Frequency Block C
broadband (the "C-Block") and was the
successful bidder for the PCS License to
operate in the Lancaster, Pennsylvania
market (the "Lancaster License") (having
submitted a bid of approximately
$17,600,000 ($13,200,000 net after the
25% entrepreneur's discount)). PCS One
made a 10% downpayment of the
$13,200,000 with the FCC, and the
remaining 90% of the net Auction price
for the Lancaster License is to be paid
to the FCC in installments (with
payments of interest only at 7.0% for
the first six years and payments of
interest at 7.0% and principal amortized
over the remaining four years of the
ten-year PCS License term). In lieu of
pursuing the development
-2-
<PAGE>
of the PCS system to which the Lancaster
License relates and/or the acquisition
of additional PCS Licenses on its own,
PCS One proposes to merge with and into
D & E, and D & E anticipates pursuing
such development and additional
acquisitions. See "PCS One."
D & E............................... D & E was incorporated in Pennsylvania
on February 14, 1996, and on June 7,
1996, became the holding company parent
of Predecessor and each of Predecessor's
then current subsidiaries, namely D & E
Marketing Corp., a Pennsylvania
corporation ("Marketing"), and Red Rose
Communications, Inc. f/k/a Red Rose
Systems, Inc., a Pennsylvania
corporation ("Red Rose"). Predecessor is
a regulated public utility incorporated
under the laws of the Commonwealth of
Pennsylvania which furnishes telephone
services through more than 50,000 access
lines to an estimated population of
100,000 in a contiguous area of
approximately 227 square miles in
Northern Lancaster County and parts of
Berks and Lebanon Counties in
Pennsylvania. Marketing and Red Rose
provide other telecommunications
services, conduct certain retail
operations and manage certain real
estate operations.
Amendment........................... The PCS One Board has voted unanimously
in favor of the Amendment. The purpose
of the Amendment is to provide for the
Bonus Options to be treated in the same
manner as the Reserved Share Options.
Specifically, if the Amendment is
approved, the grant of the Bonus Options
will not trigger the anti-dilution or
rights of first refusal provisions set
forth in the PCS One Certificate just as
the grant of the Reserved Share Options
does not and will not trigger such
provisions under the current PCS One
Certificate. The PCS One Board believes
that such shareholder protections are
not appropriately applied to the grant
of the Bonus Options and, therefore,
proposes the Amendment. See "Amendment
of the PCS One Certificate." For this
reason, the PCS One Board strongly
recommends that the PCS One Shareholders
vote for the Amendment.
Reserved Shares Options............. The PCS One Board has voted unanimously
in favor of the grant of the Reserved
Share Options to certain of its
executive officers, directors and
consultants. The purpose of the grant of
the Reserved Share Options is to
recognize the extraordinary
contributions of such individuals
integral to the formation and viability
of PCS One with respect to its
participation in the Auction,
contributions for which such individuals
received no salary from PCS One. If
approved by the PCS One Shareholders,
the Reserved Share Options will vest and
will be exercisable immediately for
475,000 Class II Common Shares at the
price of $.0132 per option. The approval
of the grant of the Reserved Share
Options will not trigger an
anti-dilutive adjustment to the PCS One
Preferred Shares or rights of first
refusal in the PCS One Preferred Shares
because the issuance of such options was
contemplated by the PCS One Certificate.
The exercise price for each Reserved
Share Option is equivalent to the
current pro rata cost basis of each PCS
One Shareholder in each PCS One
Preferred Share. Further, the approval
or disapproval by the PCS One
Shareholders of the grant of the
-3-
<PAGE>
Reserved Share Options is independent
of, and not a precondition to, approval
by the PCS One Shareholders of the
Merger. See "Reserved Share Options."
The PCS One Board strongly recommends
that the PCS One Shareholders vote for
the grant of the Reserved Share Options.
Bonus Options....................... The PCS One Board has voted unanimously
in favor of the grant of the Bonus
Options to certain of its executive
officers. The purpose of the grant of
the Bonus Options is to recognize the
extraordinary contributions of such
individuals in connection with the
successful negotiation of the Merger. If
approved by the PCS One Shareholders,
the Bonus Options will vest and will be
exercisable immediately for 2,000,000
Class II Common Shares at the price of
$.0132 per option. The exercise price
for each Bonus Option is equivalent to
the current pro rata cost basis of each
PCS One Shareholder in each PCS One
Preferred Share. In the absence of
approval of the Amendment, the approval
of the Bonus Options would cause an
anti-dilutive adjustment to the PCS One
Preferred Shares in accordance with the
PCS One Certificate, and the holders of
the PCS One Preferred Shares will be
entitled to exercise rights of first
refusal to purchase the Bonus Options.
Accordingly, the proposed grant of the
Bonus Options is completely contingent
on approval by the PCS One Shareholders
of the Amendment. Separately, the
approval or disapproval by the PCS One
Shareholders of the grant of the Bonus
Options is independent of, and not a
precondition to, approval by the PCS One
Shareholders of the Merger. See "Bonus
Options." The PCS One Board strongly
recommends that the PCS One Shareholders
vote for the grant of the Bonus Options.
The Merger.......................... Each of the PCS One Board and the Board
of Directors of D & E (the "D & E
Board") has unanimously approved the
Plan of Merger pursuant to which PCS One
is proposed to be merged with and into D
& E. Under the terms of the Plan of
Merger, D & E will be the Surviving
Corporation, the articles of
incorporation, by-laws, officers and
directors of D & E will be the articles
of incorporation, by-laws, officers and
directors of the Surviving Corporation,
each of the issued and outstanding PCS
One Common Shares at the Effective Time
will be converted into a pro rata
portion of the Merger Amount, each of
the PCS One Common Shares and the PCS
One Preferred Shares issued and held in
the treasury of PCS One will be canceled
and retired, and each of the D & E
Common Shares issued and outstanding
immediately prior to the Effective Time
will not be converted or changed as a
result of the Merger but shall continue
as identical shares of the Surviving
Corporation. See "Merger--Plan of
Merger--The Merger." As a condition to
the closing of the Merger, all of the
issued and outstanding PCS One Preferred
Shares must have been converted into
Class II Common Shares. See
"Merger--Plan of Merger--Conditions to
Merger."
Reasons for the Merger.............. The purpose of the Merger is: (a) to
allow the PCS One Shareholders to
realize certain financial benefits
associated with the successful
acquisition by PCS One of the Lancaster
-4-
<PAGE>
License following the FCC's Auction of
C-Block PCS Licenses, while removing
accompanying risks associated with the
development and operation by PCS One of
the PCS system to which the Lancaster
License relates, such as (i) obtaining
funding, (ii) repaying Auction debt and
(iii) managing potential challenges
inherent to the establishment and
provision of PCS in a local community
foreign to PCS One; (b) to allow the PCS
One Shareholders to benefit from D & E's
significant presence and familiarity
with the various constituencies in the
Lancaster, Pennsylvania community
covered by the Lancaster License of PCS
One; and (c) for D & E to have the
opportunity to exploit the commercial
potential of the Lancaster License in
the geographic area in which D & E's
business is primarily located. For these
reasons, the PCS One Board considers the
Merger to be in the best interests of
PCS One and the PCS One Shareholders and
strongly recommends that the PCS One
Shareholders vote for the Merger.
Effective Time...................... The Effective Time shall be the later of
the date upon and time at which articles
of merger in respect of the Merger (the
"Articles of Merger") are filed in the
Department of State of the Commonwealth
of Pennsylvania ("Pennsylvania
Department of State") and a certificate
of merger in respect of the Merger (the
"Certificate of Merger") is filed with
the Secretary of State of the State of
New Jersey ("New Jersey Secretary of
State"). It is expected that the closing
of the Merger and the transactions
contemplated by the Plan of Merger and
the filing of the Articles of Merger and
the Certificate of Merger in the
respective state offices will take place
upon the last to occur of the requisite
PCS One Shareholder approval, approval
by the FCC of the transfer of control of
the Lancaster License or other approvals
or conditions to closing are received
and/or satisfied, but in any case, no
later than June 10, 1997 (except in the
case of certain permitted extensions).
See "Merger--Plan of Merger--Conditions
to Merger."
Regulatory Requirements............. As a condition to the closing of the
Merger, the FCC must approve the
transfer of control of the Lancaster
License to D & E upon the consummation
of the Merger. D & E and PCS One have
begun the process to obtain such
approval. See "Merger--Plan of
Merger--Conditions to Merger."
Rights of Dissenting Shareholders... Under the NJBCA, each of the PCS One
Shareholders are entitled to the right
to dissent to the Merger ("Dissenters'
Rights"), whereby if he or she dissents,
he or she is entitled to obtain payment
of the "fair value" of his or her shares
by complying with the Dissenters' Rights
provisions of the NJBCA. See
"Merger--Rights of Dissenting
Shareholders." As a condition to the
closing of the Merger, however, no PCS
One Shareholder may take steps to
perfect his or her Dissenters' Rights.
See "Merger--Plan of Merger--Conditions
to Merger."
Accounting Treatment................ The Merger will be accounted for under
the purchase method of accounting.
-5-
<PAGE>
Certain Income Tax Consequences..... The Merger will constitute a
reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as
amended (the "Code"), in which case no
gain or loss should generally be
recognized by the PCS One Shareholders
on the conversion of their PCS One
Common Shares into D & E Common Shares.
The PCS One Shareholders should consult
their own tax advisors with respect to
the specific tax consequences of the
Merger, including the applicability and
effect of state, local and other tax
laws which may affect each PCS One
Shareholder. See "Merger--Certain Income
Tax Consequences."
Exchange of Stock Certificates...... If the Merger is consummated, it will be
necessary for holders of PCS One Common
Shares to surrender their existing stock
certificates for stock certificates
representing D & E Common Shares. DO NOT
DESTROY YOUR PCS ONE STOCK CERTIFICATES.
At the Effective Time, each PCS One
Common Share stock certificate will
automatically represent a right to
receive that number of the D & E Common
Shares to which such holder is entitled
upon proper completion, due execution
and submission to the Surviving
Corporation of a letter of transmittal
and such other documents as the
Surviving Corporation may reasonably
request. See "Merger--Plan of
Merger--The Merger."
-6-
<PAGE>
D & E Summary Financial Data........ The following table sets forth selected
consolidated summary financial
information for D & E as of the dates
indicated below. Certain amounts have
been reclassified for comparative
purposes.
D & E SELECTED FINANCIAL DATA
(dollars in thousands except per share data) (1)
<TABLE>
<CAPTION>
Period from
January 1,
1996
through Year Year Year Year Year
September Ended Ended Ended Ended Ended
30, 1996 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1995 1994 1993 1992 1991
--------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Operating Revenues..................... $ 33,378 $ 40,811 $ 36,736 $ 32,470 $ 29,358 $ 28,176
Net Income............................. $ 3,292 $ 3,343 $ 3,317 $ 3,446 $ 2,368 $ 3,116
September 30,
1996 December December December December December
(Unaudited) 31, 1995 31, 1994 31, 1993 31, 1992 31, 1991
--------- ------------ ------------ ------------ ------------ ------------
Balance Sheet Data
Total Assets........................... $ 89,518 $ 88,521 $ 85,175 $ 78,246 $ 66,337 $ 60,090
Long-Term Debt......................... $ 25,989 $ 26,137 $ 26,512 $ 26,269 $ 21,064 $ 14,640
Redeemable Preferred Stock (2)......... $ -- $ -- $ 129 $ -- $ -- $ --
Per-Share Information
Earnings Per Common
Share (3),(4),(6).................. $ .58 $ .59 $ .57 $ .59 $ .40 $ .54
Book Value Per Common Share (3),
(5),(6) ........................... $ 6.39 $ 6.06 $ 5.73 $ 5.43 $ 5.12 $ 5.34
Cash Dividends Declared
Per Common Share (3),(6)........... $ .29 $ .36 $ .35 $ .33 $ .30 $ .29
</TABLE>
- ----------
(1) The selected financial data for the fiscal years 1995 through 1991 are for
Predecessor, which is now a subsidiary of D & E.
(2) The 1,289 outstanding shares of Predecessor's Series B 5% Preferred Stock
were redeemed on February 1, 1995.
(3) The per-share data is based upon the weighted average shares outstanding
and reflects a ten-for-one stock split effective June 30, 1992.
(4) Earnings per share of D & E are calculated by deducting the Series A
Preferred Stock dividends of Predecessor to determine D & E net income.
Prior to D & E becoming the holding company of Predecessor, Series A
Preferred Stock dividends were deducted from the net income of Predecessor
to determine income available to common shareholders.
(5) The book value per-share data is based upon common shares outstanding at
the respective balance sheet dates and reflects a ten-for-one stock split
effective June 30, 1992.
(6) The amounts reflect the three-for-one exchange which occurred when D & E
became the holding company of Predecessor.
-7-
<PAGE>
PCS One Summary Financial Data...... The following table sets forth selected
summary financial information for PCS
One, a development stage company, as of
the dates indicated below.
PCS ONE SELECTED FINANCIAL DATA
(dollars in thousands except per share data)(1)
Period From Period From
1/1/96 Inception
Through Through
9/30/96 Year Ended 9/30/96
(Unaudited) 12/31/95 (Unaudited)
----------- ---------- -----------
Income Statement Data
Net Sales or Operating Revenues........... $ 0 $ 0 $ 0
(Loss) from Continuing
Operations............................. (166) (58) (224)
September 30,
1996 December 31,
(Unaudited) 1995
------------- ------------
Balance Sheet Data
Total Assets (2) ......................... $ 13,443 $ 22,064
Long-Term Debt (2) ....................... 11,879 0
Historical Per-Share Information (3)
Historical (Loss) per Common Share ....... $ (0.00) $ (0.00)
Historical Book Value per Common Share ... 0.01 0.81
Historical Cash Dividends Declared per
Common Share .... ...................... None None
- ----------
(1) PCS One has only been in existence since October 11, 1994, and conducted
no business until 1995.
(2) See Notes to PCS One September 30, 1996 Financial Statements.
(3) See Note 3 to PCS One December 31, 1995 Financial Statements. The Company
recognized extraordinary income of $104,000 in 1996. Also, in November
1996, the Company's board voted to issue 2,475,000 options to purchase
Class II Common Stock. See the notes to PCS One September 30, 1996
Financial Statements.
-8-
<PAGE>
Pro Forma D & E Summary
Financial Data..................... The following table sets forth selected
pro forma consolidated summary financial
information for D & E as of the dates
indicated below.
PRO FORMA D & E SELECTED FINANCIAL DATA
(dollars in thousands except per share data)
Period from
January 1,
1996 through Period Ended
September 30, December 31,
1996 1995
(Unaudited) (Unaudited)
------------- ------------
Income Statement Data
Operating Revenues........................ $ 33,378 $ 40,811
Net Income................................ $ 3,272 $ 3,349
September 30, December 31,
1996 1995
(Unaudited) (Unaudited)
------------- ------------
Balance Sheet Data
Total Assets.............................. $109,466
Long-Term Debt............................ $ 37,867
Per-Share Information (1)
Earnings per Common Share................. $ .54 $ .56
Book Value per Common Share............... $ 7.39
Dividends Declared per Common Share....... $ .29 $ .36
- ----------
(1) The amounts reflect the three-for-one exchange which occurred when D & E
became the holding company of Predecessor plus 320,000 net additional
shares issued in exchange for PCS One Common Share.
Market Value........................ The D & E Common Shares are quoted on
NASDAQ/NMS. The PCS One Common Shares
are not publicly traded, and thus, there
is no market for the PCS One Common
Shares. The following table sets forth
the last reported sales price per D & E
Common Share on December 9, 1996, the
last trading day preceding the date of
the Plan of Merger and on which the D &
E Shares were actively traded, and the
equivalent per share price (as defined
below) for PCS One Common Shares based
on such price for the D & E Common
Shares:
D & E Equivalent PCS One
Common Shares Common Shares(1)
------------- ----------------
December 19, 1996 $24.00 $0.264
- ----------
(1) Represents the equivalent of one PCS One Common Share calculated by
dividing $8 million (less an estimated $150,000 of expenses) by the total
number of the PCS One Common Shares which would be issued and outstanding
if all of the PCS One Preferred Shares were converted into PCS One Common
Shares as of such date and the Reserved Share Options and Bonus Options
were approved by the PCS One Shareholders and exercised as of such date.
-9-
<PAGE>
INFORMATION ABOUT THE SPECIAL MEETING
This Proxy Statement and Prospectus is being delivered, and proxies in the
accompanying form are being solicited, by the PCS One Board for use at the
Special Meeting of the PCS One Shareholders scheduled for 10:00 a.m. on February
[15], 1997 at 2500 English Creek Avenue, Building II, Egg Harbor Township, New
Jersey 08234. The PCS One Board is not aware that any matter other than those
listed in the notice of the Special Meeting is to be presented for action at the
Special Meeting.
In addition to the use of mails, proxies may be solicited by directors,
officers and other employees of PCS One, personally or by telephone. PCS One may
request persons holding stock in their names or names of nominees to send proxy
material to and obtain proxies from their principals and will reimburse such
persons for their expense in so doing.
D & E will pay one-half of its expenses in connection with printing,
assembling, and mailing the notice of Special Meeting, this Proxy Statement and
Prospectus and the accompanying form of Proxy, and each PCS One Shareholder will
bear a pro rata share of PCS One's expenses in connection with the Plan of
Merger and the Special Meeting and the remaining one-half of D & E's expenses
either by reimbursing D & E in cash therefor or by receiving a reduced number of
the D & E Common Shares pursuant to the terms of the Plan of Merger. See
"Merger--Terms of Merger."
The Proxy Statement and Prospectus and the form of proxy are being mailed
to the PCS One Shareholders commencing on or about ______________, 1996.
OUTSTANDING STOCK AND VOTING RIGHTS
Only PCS One Shareholders of record on the books of PCS One on the Record
Date, or their proxies, will be entitled to vote at the Special Meeting, and
each will be entitled to one vote per share thereat, except that the vote of
holders of Class I Common Shares is weighted so as to comprise a majority of the
votes held by all PCS One Shareholders. On the Record Date, there were 4,800,000
Class I Common Shares, 450,000 Class II Common Shares, and 22,000,000 PCS One
Preferred Shares issued and outstanding. In order to be approved, the Amendment
must receive 66 2/3% of the combined voting power of the Class II Common
Shares and the PCS One Preferred Shares and 66 2/3% of the votes of the PCS
One Preferred Shares voting together as a single class, and the grant of the
Reserved Share Options, the grant of the Bonus Options and the Merger must each
receive 72% of the Combined Voting Power, in person or by proxy, of the PCS One
Shareholders and, in the case of approval of the grant of the Bonus Options,
must be preceded by approval of the Amendment. See "Bonus Options."
Execution of a proxy will not affect a PCS One Shareholder's right to
attend the Special Meeting and vote in person. Any PCS One Shareholder giving a
proxy has the right to revoke it at any time before it is voted by filing with
the Secretary of PCS One either a notice in writing or a duly executed proxy
bearing a later date. Attendance at the Special Meeting will not in and of
itself constitute revocation of a proxy.
The PCS One Common Shares and the PCS One Preferred Shares represented by
a proxy will be voted in accordance with the instructions given. In the absence
of instructions to the contrary, a proxy solicited hereby will be voted FOR
approval of the Amendment, FOR approval of the grant of Reserved Share Options,
FOR approval of the grant of Bonus Options and FOR the approval of the Merger
pursuant to the terms of the Plan of Merger. Abstentions and broker non-votes
are not counted as either "yes" or "no" votes. Duly executed but unmarked
proxies will be voted FOR approval of the Amendment, FOR approval of the grant
of Reserved Share Options, FOR approval of the grant of Bonus Options and FOR
the approval of the Merger.
-10-
<PAGE>
Judges of Election may be appointed by the PCS One Board to conduct the
tabulation of votes with respect to approval of the Merger and any other matters
to come before the Special Meeting and to report the results thereof. If Judges
of Election at any meeting of PCS One Shareholders are not so appointed by the
PCS One Board, or should fail to qualify, the person presiding at the Special
Meeting may, and on the request of any PCS One Shareholder entitled to vote
thereat shall, make such appointment.
AMENDMENT OF THE PCS ONE CERTIFICATE
The PCS One Board has voted unanimously in favor of amending the PCS One
Certificate (a copy of which is attached hereto as Exhibit A) to increase the
number of "Reserved Shares" (as defined in Paragraph 10 of Exhibit A to the PCS
One Certificate (the "Series A Preferred Designations")), from 475,000 to
2,475,000. The PCS One Certificate currently provides that the term "Reserved
Shares" means not more than 475,000 Class II Common Shares which may be issued
upon the exercise of options granted to holders of the PCS One Preferred Shares,
directors, officers, employees or consultants of PCS One or any subsidiary or
affiliate thereof.
The purpose of the Amendment is to provide for the Bonus Options to be
treated in the same manner as the Reserved Share Options. Specifically, if the
Amendment is approved, the grant of the Bonus Options will not trigger the
anti-dilution provisions or the rights of first refusal provisions set forth in
the PCS One Certificate just as the grant of the Reserved Share Options does not
and will not trigger such provisions under the current PCS One Certificate.
Accordingly, the issuance of the Bonus Options is specifically conditioned upon
approval of the Amendment by the PCS One Shareholders. The PCS One Board
believes that such shareholder protections are not appropriately applied to the
grant of the Bonus Options and, therefore, proposes the Amendment.
THE PCS ONE BOARD STRONGLY RECOMMENDS THAT THE PCS ONE SHAREHOLDERS VOTE
FOR THE AMENDMENT.
RESERVED SHARE OPTIONS
The PCS One Board has voted unanimously in favor of the grant of the
Reserved Share Options to certain of its executive officers, directors and
consultants. The purpose of the grant of the Reserved Share Options is to
recognize the extraordinary contributions of such individuals integral to the
formation and viability of PCS One with respect to its participation in the
Auction, contributions for which such individuals received no salary from PCS
One. If approved by the PCS One Shareholders, the Reserved Share Options will
vest and will be exercisable immediately. The grant of the Reserved Share
Options unanimously approved by the PCS One Board and proposed for approval by
the PCS Shareholders consists of grants to the following individuals of the
following number of options to purchase Class II Common Shares at the following
exercise price:
Grantee Number of Options Granted Exercise Price
------- ------------------------- --------------
John Scarpa 190,000 $.0132
Michael Azeez 127,500 $.0132
James Yoh 95,000 $.0132
Sidney Azeez 47,500 $.0132
Richard Harris 15,000 $.0132
The exercise price for each Reserved Share Option is equal to the current
pro rata cost basis to each PCS One Shareholder in each PCS One Preferred Share.
The approval of the grant of the Reserved Share Options will not cause an
anti-dilutive adjustment to the PCS One Preferred Shares as the issuance of
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such options was contemplated by the PCS One Certificate. The approval or
disapproval by the PCS One Shareholders of the grant of the Reserved Share
Options is independent of, and not a precondition to, approval by the PCS One
Shareholders of the Merger. See "Merger--Relationship of Merger to the Amendment
and Grants of Reserved Share Options and Bonus Options."
THE PCS ONE BOARD STRONGLY RECOMMENDS THAT THE PCS ONE SHAREHOLDERS VOTE
FOR THE GRANT OF THE RESERVED SHARE OPTIONS.
BONUS OPTIONS
The PCS One Board has voted unanimously in favor of the grant of the Bonus
Options to certain of its executive officers. The purpose of the grant of the
Bonus Options is to recognize the extraordinary contributions of certain such
officers in connection with the successful negotiation of the Merger,
contributions for which such individuals received no salary from PCS One. If
approved by the PCS One Shareholders, the Bonus Options will vest and will be
exercisable immediately. The grant of the Bonus Options unanimously approved by
the PCS One Board and proposed for approval by the PCS Shareholders consists of
grants to the following individuals of the following number of options to
purchase Class II Common Shares at the following exercise price:
Grantee Number of Options Granted Exercise Price
------- ------------------------- --------------
John Scarpa 1,000,000 $.0132
Michael Azeez 1,000,000 $.0132
The exercise price for each Bonus Option is equal to the current pro rata
cost basis to each PCS One Shareholder in each PCS One Preferred Share. In the
absence of the Amendment to the PCS One Certificate, the approval of the Bonus
Options will cause an anti-dilutive adjustment to the PCS One Preferred Shares
in accordance with the PCS One Certificate, and the holders of the PCS One
Preferred Shares will be entitled to exercise a right of first refusal to
purchase the Bonus Options. Accordingly, the proposed grant of the Bonus Options
is completely contingent on approval by the PCS One Shareholders of the
Amendment. In other words, if the Amendment is not approved by the PCS One
Shareholders, the proposed grant of the Bonus Options will be deemed disapproved
notwithstanding any votes cast by PCS One Shareholders either for or against
such proposed grant of the Bonus Options. In addition, the approval or
disapproval by the PCS One Shareholders of the grant of the Bonus Options is
independent of, and not a precondition to, approval by the PCS One Shareholders
of the Merger. See "Merger--Relationship to the Amendment and Grants of Reserved
Share Options and Bonus Options."
THE PCS ONE BOARD STRONGLY RECOMMENDS THAT THE PCS ONE SHAREHOLDERS VOTE
FOR THE GRANT OF THE BONUS OPTIONS.
MERGER
Terms of the Merger
PCS One and D & E propose to merge pursuant to the Plan of Merger, a copy
of which is attached hereto as Exhibit B, as amended by Exhibit C, and
incorporated herein by reference. Under the terms of the Plan of Merger, each of
the issued and outstanding PCS One Common Shares (including the Class II Common
Shares upon the conversion of the PCS One Preferred Shares) will be converted
into a number of D & E Common Shares determined as described below. See
"Merger--Plan of Merger--The Merger." If the Merger is implemented, it will be
necessary for holders of the Class I Common Shares, the Class II Common Shares
and the PCS One Preferred Shares to surrender their existing PCS One Stock
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Certificates for stock certificates representing D & E Common Shares. DO NOT
DESTROY YOUR PCS ONE STOCK CERTIFICATES. Such certificates will automatically
represent a right to receive that number of D & E Common Shares to which you are
entitled. See "Merger--Exchange of Stock Certificates."
The PCS One Board believes that the Merger is in the best interests of the
PCS One Shareholders, as further detailed below under "Merger--Reasons for the
Merger." The Plan of Merger has been approved unanimously by the PCS One Board
and the D & E Board and has been executed by authorized officers of each
company. The Merger will become effective upon the filing of the Articles of
Merger with the Pennsylvania Department of State and the Certificate of Merger
with the New Jersey Secretary of State, whichever occurs later, which, if the
Merger is approved by the PCS One Shareholders, are intended to be filed upon
satisfaction of the conditions described below under "Merger--Plan of
Merger--Conditions to Merger" unless the Plan of Merger is earlier terminated as
described below under "Merger--Plan of Merger--Termination." PCS One Shareholder
approval of the Merger will constitute approval of the Plan of Merger and of the
other transactions contemplated by the Merger.
After the Effective Time, and subject to the limitations set forth in the
D & E Shareholders Agreement (defined in the Plan of Merger and detailed below
under "Merger--Plan of Merger--D & E Shareholders Agreement"), the holders of
PCS One Common Shares will have the right to vote on corporate actions
concerning D & E in accordance with the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL"), the Articles of Incorporation of D & E (the "D &
E Articles"), and the By-Laws of D & E (the "D & E By-Laws") then and thereafter
in effect.
Plan of Merger
The Plan of Merger has been unanimously approved by the PCS One Board and
the D & E Board and has been executed by authorized officers of each company. A
copy of the Plan of Merger is attached to this Proxy Statement and Prospectus as
Exhibit B, as amended by Exhibit C. The Plan of Merger is incorporated herein by
reference and the following discussion is qualified in its entirety by reference
thereto.
The Plan of Merger provides that upon PCS One Shareholder approval of the
Merger and the satisfaction of other conditions described below under
"Merger--Plan of Merger--Conditions to Merger," PCS One shall be merged with and
into D & E, with D & E being the Surviving Corporation. The Merger is intended
to be a reorganization tax-free to the holders of PCS One Common Shares and D &
E Common Shares. See "Merger--Certain Income Tax Consequences."
At the Effective Time, each PCS One Common Share shall be automatically
converted into the right to receive D & E Common Shares described above under
"Merger--Terms of the Merger" and the D & E Articles, the D & E By-Laws, the D &
E officers and the D & E directors shall be those of the Surviving Corporation.
After the Effective Time, D & E, as the Surviving Corporation, will mail to each
record-holder of PCS One Common Shares notice of the consummation of the Merger
and instructions for exchanging the stock certificates representing PCS One
Common Shares for D & E Common Shares. Automatically, at the Effective Time, by
operation of law, all of the assets of PCS One as well as all of the liabilities
and obligations of PCS One shall become D & E's (except PCS One's costs and
expenses in connection with the Merger as described below).
The Plan of Merger contains certain representations and warranties, and
other agreements and undertakings on the part of PCS One and D & E, all of which
must be true, correct and performed in material respects in order to consummate
the Merger in addition to the satisfaction of other conditions. See
"Merger--Plan of Merger--Conditions to Merger."
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The Plan of Merger also requires that the holders of PCS One Common Shares
be responsible for all of PCS One's costs and expenses incurred in connection
with the Merger and one-half of D & E's costs and expenses in connection with
the registration under the Securities Act of the D & E Common Shares issued to
the holders of PCS One Common Shares in connection with the Merger. All of these
costs and expenses, unless otherwise paid pro rata by each holder of PCS One
Common Shares, shall be deducted from and cause the adjustment of the D & E
Common Shares to be issued to such holder upon consummation of the Merger. See
"Merger--Plan of Merger--The Merger."
The Merger
The Plan of Merger provides that at the Effective Time, PCS One Common
Shares shall automatically convert into the Merger Amount; specifically, a
number of D & E Common Shares equal to $8,000,000 as adjusted by deducting from
such amount any and all of PCS One's costs and expenses incurred in connection
with the Merger, presently estimated to total $115,000, and one-half of all of D
& E's costs and expenses incurred in connection with the registration under the
Securities Act of the D & E Common Shares issued in exchange for the PCS One
Common Shares in connection with the Merger, presently estimated to total
$75,000. See "Merger--Plan of Merger." The number of D & E Common Shares issued
in exchange for the PCS One Common Shares shall equal the weighted average
closing price of the D & E Common Stock on NASDAQ/NMS over the 20 trading days
immediately preceding the Closing Date (as defined in the Plan of Merger) on
which D & E Common Shares were traded but no less than $23.00 nor more than
$27.00 per share of the D & E Common Shares (the "Stock Price"). As conditions
to the Merger, each of the PCS One Preferred Shares shall be converted into PCS
One Class II Common Shares (as provided in the PCS One Certificate) and held in
the treasury of PCS One prior to the Effective Time, and each option to acquire
PCS One Common Shares, including the Reserved Share Options and Bonus Options,
shall be exercised. After the Effective Time, each of the PCS One Preferred
Shares so converted and held in the treasury, along with any PCS One Common
Shares held in the treasury, shall be canceled and retired immediately prior to
the Merger without consideration being paid therefor. See "Merger--Plan of
Merger--Conditions to Merger."
No fractional D & E Common Shares will be issued in exchange for PCS One
Common Shares; in lieu thereof, the holders of PCS One Common Shares will
receive cash equal to the Stock Price multiplied by the fraction of D & E Common
Shares to which such holders would be entitled.
As soon as practical following the closing of the Merger, the Surviving
Corporation shall mail to each record holder of PCS One Common Shares a notice
that the Merger has been consummated and instructions for surrendering the
certificates representing PCS One Common Shares in exchange for certificates
representing D & E Common Shares along with a letter of transmittal to be
completed and executed by such holder. See "Merger--Exchange of Stock
Certificates." The letter of transmittal to accompany such surrendered
certificates shall explain that delivery of title and risk of loss shall pass
from the holder of PCS One Common Shares to D & E as the Surviving Corporation,
only upon delivery of the certificate representing PCS One Common Shares. Upon
the surrender of the certificates representing PCS One Common Shares accompanied
by the properly completed and duly executed letter of transmittal and any other
documents as D & E may request, the holder of the PCS One Common Shares shall
receive a stock certificate representing a whole number of D & E Common Shares.
Any holder of PCS One Common Shares who or which is not the record owner thereof
as indicated on the stock transfer records of PCS One shall be issued a
certificate representing D & E Common Shares upon delivery to D & E of the
certificate representing the PCS One Common Shares to such holder, the payment
of any applicable stock transfer taxes and any other documents D & E may
request.
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Termination
The Plan of Merger provides that notwithstanding PCS One Shareholder
approval of the Merger, the Plan of Merger may be terminated at any time prior
to the Effective Time either by (i) the mutual consent of PCS One and D & E,
(ii) PCS One or D & E if the other party fails to satisfy any of the conditions
required to be satisfied in order to consummate the Merger (see "Merger--Plan of
Merger--Conditions to Merger") or (iii) PCS One or D & E if the closing of the
Merger shall not have occurred on or before June 10, 1997, which is 180 days
after December 12, 1996, the date on which the parties signed the Merger
Agreement, unless extended for 30 days under specific circumstances. If the Plan
of Merger is so terminated, the Merger will be abandoned.
Amendment
The Plan of Merger further provides that it may be amended only by a
written agreement duly signed by authorized representatives of PCS One and D &
E. The PBCL provides that, after approval by the PCS One Shareholders, no such
amendments may be made which either change the amount or kind of shares to be
received pursuant to the Merger.
Conditions to Merger
As a condition to the consummation of the Merger, each of the
representations and warranties of PCS One and D & E must be true and correct in
all material respects on the date of the Merger, and PCS One and D & E must have
materially performed and complied with all of its respective agreements and
undertakings as set forth in the Plan of Merger. The Plan of Merger also
requires that PCS One perform or comply with certain agreements and
undertakings, including: (i) to call and hold such meetings of PCS One
Shareholders to vote upon the Merger (whose approval is a condition to the
closing of the Merger, as discussed below); (ii) to preserve and conduct in the
ordinary course its business and assets and consult and cooperate with D & E in
connection with the design, development and construction of its PCS system;
(iii) to not solicit any proposal or offer from any third parties to acquire any
material part of PCS One's capital stock or assets, or to enter into any
business combination with PCS One the effect of which would prevent the Merger,
or otherwise participate in any negotiations or agreements which would effect
any of the foregoing; (iv) to cooperate with D & E in connection with the filing
of all applications with the FCC and any other governmental authority necessary
to accomplish the Merger and the other transactions contemplated by the Plan of
Merger; and (v) to not: enter into any business combination with any party;
amend or authorize an amendment to the PCS One Certificate or the PCS One
By-Laws; make any change to or authorize the issuance of, PCS One's capital
stock or other securities; declare any dividend or distribution with respect to,
or purchase or redeem, or effect any reclassification of any shares of PCS One's
capital stock or recapitalization; enter into any material contracts or
commitments; sell, assign, transfer, mortgage, pledge or encumber any of PCS
One's assets except in the ordinary course of business or acquire any fixed
assets; incur any indebtedness or guaranty any indebtedness other than
indebtedness in the ordinary course of business, to the FCC in connection with
the Lancaster License, and to D & E and D & E's subsidiaries and affiliates; or
enter into any new business, abandon any existing business or incur or commit to
any capital expenditure.
In addition to the truth and correctness of the parties' representations
and warranties and the performance and compliance with the parties' other
agreements and undertakings, the Plan of Merger provides that the following
shall be conditions to the closing of the Merger:
(i) There shall be no material adverse change in the business,
properties or financial condition of PCS One whether caused by any insured
casualty or otherwise.
(ii) There shall be no institution or threat of any action,
proceeding or investigation to enjoin or prevent or set aside the Merger and the
other transactions contemplated by the Plan of Merger.
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(iii) The PCS One Shareholders shall have approved the Merger with
no fewer than 72% of the Combined Voting Power of the PCS One Shareholders, and
no PCS One Shareholders shall have taken any steps to perfect Dissenters'
Rights.
(iv) All of the PCS One Preferred Shares shall have been converted
into Class II Common Shares as provided in the PCS One Certificate and all PCS
One Preferred Shares and PCS One Common Shares held in the treasury of PCS One
shall have been canceled and retired.
(v) The FCC shall have issued its final and nonappealable order
approving the transfer of control of the Lancaster License and the consummation
of all other transactions contemplated by the Plan of Merger without any
material limitation, restriction or condition.
(vi) D & E and each of the holders of PCS One capital stock shall
have executed and delivered the D & E Shareholders Agreement (as defined in the
Plan of Merger and described below under "Merger--Plan of Merger--D & E
Shareholders Agreement").
(vii) This Registration Statement shall have become effective; and
there shall be no stop order suspending the effectiveness nor any event or
condition that shall make any statement herein materially untrue or misleading
nor any receipt of notification of suspension of qualification of the D & E
Common Shares for sale.
(viii) PCS One and D & E shall have each delivered to the other
party certain other documents, certificates, instruments and opinions.
D & E Shareholders Agreement
One of the conditions required to be satisfied prior to the closing of the
Merger is the execution and delivery of the D & E Shareholders Agreement by each
holder of PCS One capital stock issued and outstanding immediately prior to the
Effective Time (a "Signatory Shareholder"). See "Merger--Plan of
Merger--Conditions to Merger." It is strongly recommended that the PCS One
Shareholders read the D & E Shareholders Agreement in its entirety, the form of
which is attached as Exhibit D to the Plan of Merger (which is attached hereto
as Exhibit B), for a complete understanding of the terms thereof which are
summarized as follows.
Under the D & E Shareholders Agreement, each Signatory Shareholder
represents and warrants to D & E that, among other things (i) such Shareholder
has good title to such Shareholder's PCS One capital stock free of any
restrictions, claims, security interests or encumbrances; (ii) such Shareholder
has the power and authority to vote such Shares to approve the Merger and the
transactions contemplated by the Plan of Merger, enter into the D & E
Shareholders Agreement, and execute and deliver any other agreements or
instruments in connection with the D & E Shareholders Agreement; and (iii) the D
& E Shareholders Agreement and any other agreements or instruments executed by
such Shareholder are valid, binding and enforceable obligations of such
Shareholder.
The D & E Shareholders Agreement further provides that each Signatory
Shareholder agrees not to sue and releases from any prior claims against, or any
other obligations, debts and liabilities of PCS One, D & E and D & E's
affiliates and related parties that such Shareholder has on or before the
closing of the Merger. The provisions of the D & E Shareholder Agreement also
include each Signatory Shareholder's acknowledgment of receipt of this
Registration Statement and of D & E's exclusive rights to all Intellectual
Property (as defined in the Plan of Merger) of PCS One at the Effective Time,
and agreement with respect to all of such Shareholders' obligations to pay their
own costs and expenses and PCS One's costs and expenses in connection with the
Plan of Merger and the transactions contemplated thereby.
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Standstill. From the closing of the Merger until the fifth anniversary of
the closing of the Merger, the D & E Shareholder Agreement limits the ability of
each Signatory Shareholder and its transferees, and their respective Affiliates
and Associates (each as defined in the D & E Shareholder Agreement) otherwise
provided in the D & E Articles, the D & E By-Laws or by law, to vote or take
certain other action with respect to any capital stock of D & E, alone or
jointly with others; specifically, the following:
(i) acquiring or attempting to acquire any material portion of the
assets of D & E or voting securities of D & E except in
certain circumstances; namely, through public offerings or
from other Signatory Shareholders and not for the purposes of
controlling or influencing D & E management;
(ii) seeking to control or influence D & E management or policies;
(iii) forming, joining or participating in any group or syndicate
for the purposes of acquiring, holding, or disposing of any
voting securities of D & E;
(iv) seeking, or nominating any person for, nomination for election
on the D & E Board; soliciting any proxies or consents; or
seeking or calling any D & E shareholders' meeting; and
(v) opposing any nominees proposed by the D & E Board or seeking
any shareholder proposal for submission to the shareholders of
D & E.
Transfer Restrictions. The D & E Shareholders Agreement provides that
until such time as the D & E Common Shares issued in connection with the Merger
are the subject of an underwritten public offering or two years after the
closing of the Merger, such Shares may not be sold, transferred or disposed of,
in whole or in part, except to other Signatory Shareholders and in private sales
where the transferee agrees to be bound by the D & E Shareholders Agreement. In
every other case, any other transfer of such D & E Common Shares is prohibited
during the 180 days after the closing of the Merger and thereafter may be so
disposed of only in amounts not exceeding 50% of any such Shareholder's total
holdings of such Shares distributed equally over the succeeding six D & E
quarters.
Reasons for the Merger
The purpose of the Merger is: (a) to allow the PCS One Shareholders to
realize certain financial benefits associated with the successful acquisition by
PCS One of the Lancaster License for C-Block PCS following the Auction, while
removing accompanying risks associated with the development and operation by PCS
One of the PCS system to which the Lancaster License relates, such as (i)
obtaining funding, (ii) repaying Auction debt, (iii) managing potential
challenges inherent to the establishment and provision of PCS in a local
community foreign to PCS One; (b) to allow the PCS One Shareholders to benefit
from D & E's significant presence and familiarity with the various
constituencies in the Lancaster, Pennsylvania community covered by the Lancaster
License of PCS One; and (c) for D & E to have the opportunity to exploit the
commercial potential of the Lancaster License in the geographic area in which
its business is primarily located.
Recommendation of the PCS One Board of Directors
The PCS One Board strongly recommends that the PCS One Shareholders vote
for the Merger. In making its decision to recommend the Merger to the PCS One
Shareholders, the PCS One Board considered many factors, including the factors
set forth below.
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Since the formation of PCS One it was envisioned that PCS One would bid at
the Auction for several PCS Licenses serving various basic trading areas. PCS
One was ultimately the successful Auction bidder on the Lancaster License
serving a market which, while one of significant potential, would require
considerable investment in order to design, develop, construct and operate the
PCS system pursuant to the Lancaster License in addition to satisfying the
obligations owing to the FCC in connection with the acquisition of the Lancaster
License.
Against this backdrop, the PCS One Board concluded that, given (i) the
need to raise substantial financing to fund the acquisition of the Lancaster
License and the development and operation of the related PCS system, and (ii)
the other resources necessary and risks attendant to such undertaking as a
development stage company in an industry segment in its infancy, the safest and
most prudent course for the PCS One Shareholders to realize the greatest return
on their investment was a sale of the entire company.
The PCS One Board believes that the Plan of Merger is fair and in the best
interests of PCS One and the PCS One Shareholders providing as it does for the
PCS One Shareholders to realize the financial benefits of PCS One's successful
acquisition of the Lancaster License (without continuing to be directly subject
to the risks associated therewith) by becoming shareholders of D & E--a company
better positioned to exploit the commercial potential of such License which is
tied to the geographic area in which D & E's business is primarily located.
With respect to certain forward-looking statements in the foregoing
discussion of the Recommendation of the PCS One Board of Directors, see
"Forward-Looking Statements."
Relationship of Merger to the Amendment and Grants of Reserved Share Options and
Bonus Options
The approval by the PCS One Shareholders of the grant of the Reserved
Share Options, the Amendment and the grant of the Bonus Options is independent
of, and not a precondition to, approval by the PCS One Shareholders of the
Merger. In other words, if the PCS One Shareholders do not approve of any or all
of the grants of the Reserved Share Options, the Amendment or the grant of the
Bonus Options, they can still approve the Merger and its consummation pursuant
to the terms of the Plan of Merger. Separately, but related, the proposed grant
of the Bonus Options is completely contingent on approval by the PCS One
Shareholders of the Amendment, such that their disapproval of the Amendment will
be deemed disapproval of the proposed grant of the Bonus Options notwithstanding
any votes cast by PCS One Shareholders either for or against such proposed grant
of the Bonus Options.
Description of D & E Capital Stock
The following description of D & E's capital stock is qualified in its
entirety by reference to the D & E Articles, the D & E By-Laws and the D & E
Shareholders Agreement. See "Merger--Plan of Merger--D & E Shareholders
Agreement."
General
The D & E Articles provide for authorized capital stock consisting of: (i)
30,000,000 D & E Common Shares; and (ii) 20,000,000 shares of preferred stock,
without par value (the "D & E Preferred Shares"). As of the Record Date,
________ D & E Common Shares were issued and outstanding, and no D & E Preferred
Shares were issued or outstanding.
D & E Common Shares
The rights of holders of D & E Common Shares described below are subject
to any rights, designations, preferences, limitations, qualifications,
privileges, options, restrictions and special rights
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pertaining to any class or series of D & E Preferred Shares as determined solely
by an action or actions of the D & E Board to amend the D & E Articles in such
respect or respects as described further herein. See "Merger--Description of D &
E Capital Stock--D & E Preferred Shares."
Voting Rights. The holders of D & E Common Shares are entitled to one vote
per share with respect to matters other than the election of directors or the
approval of certain Business Combinations (as defined below). With respect to
the election of directors, the holders of D & E Common Shares have cumulative
voting rights--that is, each holder is entitled to a number of votes equal to
the number of D & E Common Shares held multiplied by the number of directors to
be elected in each class and to cast all such votes for a single nominee in the
class being elected or to distribute them among the nominees in such class as
such holder sees fit. Under cumulative voting, it is possible for representation
on the D & E Board to be obtained by an individual or group of individuals who
owns less than a majority of D & E Common Shares--that is, such holder or group
of holders could cast all of his, her or their votes for a single nominee while
the remainder of the holders could disperse their votes between several
nominees, the result being the election of the minority nominee. With respect to
the approval of Business Combinations, certain D & E Common Shares may have
limited voting rights. See "Merger--Description of D & E Capital Stock--Change
of Control Provisions." With respect to the PCS One Shareholders who will become
D & E Shareholders as a result of the Merger, the D & E Shareholders Agreement
will contain certain voting restrictions. See "Merger--Plan of Merger--D & E
Shareholders Agreement."
Supermajority Voting. In the exercise of the foregoing voting rights, the
D & E Articles impose certain supermajority voting requirements on the holders
of the capital stock of D & E. Specifically, in order to amend the D & E
By-Laws, the D & E Articles require that, in addition to any other shareholder
vote required by law, an affirmative class vote of both the holders of at least
80% of the voting power of all then outstanding shares of capital stock of D & E
entitled to vote in the election of directors (the "Voting Stock") and the
holders of at least a majority of such shares excluding shares held by any
Interested Shareholders (as defined below). See "Merger--Description of D & E
Capital Stock--Change of Control Provisions--Interested Shareholders." Further,
in order to amend those provisions of the D & E Articles which concern amendment
of the D & E By-Laws, the powers, number, classes, election, terms, removal,
filing of a vacancy in and nomination of directors, approval of Business
Combinations, opting out of certain anti-takeover provisions of the PBCL, and
the indemnification and limitation of liability of officers and directors, the D
& E Articles require, in addition to any other shareholder vote required by law,
an affirmative class vote of both the holders of at least 90% of the voting
power of all then outstanding shares of the Voting Stock and the holders of at
least a majority of such shares excluding shares held by any Interested
Shareholder; provided, however, that such votes are not required if the
amendment is recommended and submitted to the D & E Shareholders by the
affirmative vote of a majority of the Disinterested Directors (as defined below)
and such Disinterested Directors constitute at least a majority of the D & E
Board. See "Merger--Description of D & E Capital Stock--Change of Control
Provisions--Disinterested Directors." Also, the D & E Articles provide that the
removal of a director or directors requires both cause and the affirmative votes
of both the holders of at least 80% of the Voting Stock and the holders of at
least a majority of the Voting Stock excluding shares held by Interested
Shareholders. See "Merger--Description of D & E Capital Stock--Change of Control
Provisions--Interested Shareholders." Lastly, the D & E Articles provide that
certain supermajority votes of shareholders may be required in connection with
the approval of Business Combinations. See "Merger--Description of D & E Capital
Stock--Change of Control Provisions."
Board Classification. The D & E Board is divided into three classes, one
of which is elected each year for a three-year term. The classification of the D
& E Board helps to ensure continuity and stability of corporate leadership and
policy. It also has the effect, however, of increasing the number of shares
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required, pursuant to the exercise of cumulative voting, to elect a given number
of directors or to obtain minority representation on the D & E Board, and it
increases the period of time before each member of the D & E Board is re-elected
or can be replaced.
Dividend Rights. Dividends may be paid on D & E Common Shares if, when and
as determined by the D & E Board from time to time out of funds legally
available therefor. Under the PBCL, dividends may not be paid if D & E is at the
time insolvent or would be insolvent after payment of such dividend.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of D & E, the holders of D & E Common Shares are entitled to receive
pro rata the net assets of D & E available for distribution to common
shareholders after payment of all liabilities and obligations of D & E and all
distributions to the holders of D & E Preferred Shares. Because D & E is a legal
entity separate and distinct from its subsidiaries, the right of D & E and its
shareholders to participate in any distribution of the assets or earnings of any
subsidiary of D & E is necessarily subject to the prior claims of creditors of
such subsidiary, except to the extent that claims of D & E itself as a creditor
may be recognized.
Preemption and Other Rights. D & E Common Shares do not carry preemptive
rights. D & E may issue D & E Common Shares, option rights or securities having
conversion or option rights without first offering them to the holders of D & E
Common Shares. There are no conversion rights or sinking fund provisions
applicable to D & E Common Shares. D & E Common Shares are not subject to
redemption or to any further calls or assessments.
Amendment of the D & E Articles and By-Laws. Under the PBCL, the D & E
Articles may be amended by the affirmative vote of at least a majority of shares
cast by all shareholders entitled to vote on the proposed amendment.
Additionally, as discussed above, certain provisions of the D & E Articles
require an additional supermajority vote and a majority vote of the Voting Stock
not held by any Interested Shareholders. See "Merger--Description of D & E
Capital Stock--D & E Common Shares--Supermajority Voting."
The D & E By-Laws may be amended by a majority of the Disinterested
Directors, except with respect to those matters reserved exclusively to the
shareholders by the PBCL. Additionally, as discussed above, amendment of the D &
E By-Laws will require an additional supermajority vote and a majority vote of
the Voting Stock not held by any Interested Shareholders. See "Merger--
Description of D & E Capital Stock--D & E Common Shares--Supermajority Voting."
D & E Preferred Shares
The D & E Board is authorized, without further action by the D & E
Shareholders and with the full authority permitted by law, to issue D & E
Preferred Shares from time to time in one or more classes or series and to
determine the rights, designations, preferences, qualifications, privileges,
limitations, options, restrictions and other special rights, if any, including,
without limitation, the dividend rights, conversion rights, voting rights,
redemption rights and maturity dates thereof. D & E Preferred Shares are
available for possible future financing and acquisition transactions, stock
dividends or distributions, employee benefit plans and other general corporate
purposes. Under certain circumstances, D & E Preferred Shares could be used to
create voting impediments or to frustrate persons seeking to effect a takeover,
assume control of the D & E Board or otherwise gain control of D & E.
Change of Control Provisions
Certain provisions of the D & E Articles may have the effect of delaying,
deferring or preventing a change of control of D & E that would be operative
only with respect to an extraordinary corporate transaction involving D & E,
such as a merger, reorganization, tender offer, sale or transfer of
substantially all of its assets, or liquidation. These provisions might
discourage a potentially interested purchaser from attempting a unilateral
takeover bid for D & E on terms which some D & E Shareholders
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might favor. Although D & E does not believe that by discouraging potential
takeover bids these provisions will depress the stock price of D & E Common
Shares, these provisions might diminish the opportunity for the D & E
Shareholders to sell their D & E Common Shares at a premium over then prevailing
market prices.
Specifically, the D & E Articles provide that any Business Combination
must be approved by both (i) the holders of at least 80% of the voting power of
all then outstanding shares of Voting Stock, voting together as a single class,
and (ii) the holders of at least a majority of the voting power of the then
outstanding shares of the Voting Stock which are not beneficially owned by the
Interested Shareholder, voting together as a single class (a "Disinterested
Shareholder Vote"), unless (a) the transaction is approved by a majority of the
Disinterested Directors, or (b) certain minimum price, form of consideration and
other procedural requirements are met.
Interested Shareholders. For purposes of the D & E Articles, an
"Interested Shareholder" generally is any person, with certain exclusions as
discussed below, who: (a) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the Voting Stock; (b) controls, is
controlled by or is under common control with D & E and was within the prior two
years the beneficial owner, directly or indirectly, of more than 10% of the
voting power of the Voting Stock; or (c) has succeeded, other than through a
public offering of those shares, to the beneficial ownership of any shares of
the Voting Stock which were within the prior two years beneficially owned by any
Interested Shareholder. Expressly excluded from such definition, however, are:
(i) D & E, Predecessor, Red Rose and Marketing; (ii) an employee benefit plan of
D & E, Predecessor, Red Rose or Marketing; (iii) the Voting Trust of the Denver
and Ephrata Telephone and Telegraph Company ("Voting Trust") or a successor
trust to the Voting Trust; (iv) the William and Jemima Brossman Charitable
Foundation (the "Charitable Foundation") or a successor foundation to the
Charitable Foundation; (v) Anne B. Sweigart, Emily B. Sprecher, W. Garth
Sprecher or any heir of W. Garth Sprecher; (vi) a trustee or fiduciary of the
Voting Trust, the Charitable Foundation or any such plan when acting in such
capacity; or (vii) any other person deemed by a majority of the Disinterested
Directors not to be an Interested Shareholder. A person is deemed the
"beneficial owner" of any Voting Stock which such person or any of its
affiliates or associates owns, directly or indirectly, or has the right to
acquire or vote, or which is owned by any other person with whom such person or
an affiliate or associate of any Interested Shareholder has any understanding
with respect to acquiring, holding, voting or disposing of any shares of the
Voting Stock. At the present time, D & E is not aware of the existence of any
shareholder who is or would be an Interested Shareholder.
Business Combination. For purposes of the D & E Articles, a "Business
Combination" generally includes the following transactions: (a) any merger,
consolidation or share exchange of D & E (or any of its subsidiaries or any of
its affiliates which it controls) with an Interested Shareholder, a current or
post-transaction affiliate or associate of an Interested Shareholder or any
person which does not include in its articles of incorporation the substance of
the Business Combination provisions contained in the D & E Articles; (b) any
sale, other disposition, security arrangement or other arrangement (in one or a
series of transactions) to, with or for the benefit of any Interested
Shareholder (or an affiliate or associate of any Interested Shareholder)
involving assets, securities or commitments of D & E or its subsidiaries valued
at 5% or more of the fair market value of the total assets of D & E; (c) the
issuance or transfer (in one or a series of transactions) of securities of D & E
(or any of its subsidiaries) to an Interested Shareholder (or any affiliate or
associate of an Interested Shareholder) in exchange for cash, securities or
other consideration valued at 5% or more of the fair market value of the total
assets of D & E; (d) the adoption of any plan or proposal for the liquidation,
dissolution or division of D & E proposed by or on behalf of any Interested
Shareholder (or an affiliate or associate of an Interested Shareholder); (e) any
reclassification of securities, recapitalization of D & E, merger or
consolidation of D & E with any of its
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subsidiaries or other transaction which has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding shares of any class of
equity securities of D & E or any of its subsidiaries owned by any Interested
Shareholder (or any affiliate or associate of an Interested Shareholder); or (f)
any other transaction(s) similar in purpose or effect to, or any agreement or
arrangement providing for, any one or more of the foregoing transactions.
Disinterested Directors. For purposes of the D & E Articles, a
"Disinterested Director" generally is a director of D & E who is not an
Interested Shareholder (or an affiliate, associate or representative of an
Interested Shareholder) and either: (i) was a director of D & E immediately
prior to the time the Interested Shareholder became such; or (ii) is a successor
to a Disinterested Director and is recommended or elected to succeed a
Disinterested Director by a majority of the Disinterested Directors.
Minimum Price Requirements. In the case of payments to holders of D & E
Common Shares, the value per share to be received would have to be at least
equal in value to the highest of: (i) the highest per share price paid in
acquiring any D & E Common Shares at any time beneficially owned by the
Interested Shareholder which were acquired during the two years prior to the
date of the first public announcement (the "Announcement Date") of the proposed
Business Combination or in the transaction in which such Interested Shareholder
became such; (ii) the highest of the fair market value per D & E Common Share on
the Announcement Date or on the date on which the Interested Shareholder became
such Interested Shareholder (the "Determination Date"); and (iii) a price equal
to the fair market value per share calculated pursuant to clause (ii) above
times the highest premium (as determined by formula) paid in acquiring any of
the D & E Common Shares beneficially owned by the Interested Shareholder which
were acquired during the two-year period prior to the Announcement Date. For
example, if the acquisition by an Interested Shareholder of its D & E Common
Shares was by cash purchases in open market transactions and the highest price
paid per share thereof during the previous two years was $27.00, and assuming
that the fair market values per D & E Common Share on the first date during such
period that such Interested Shareholder beneficially owned any D & E Common
Shares, on the Determination Date and on the Announcement Date, were $24.00,
$26.00 and $25.00, respectively, the amount required to be paid to the D & E
Shareholders would be the amount per share in cash equal to the highest of (i)
$27.00 (the highest price paid), (ii) $26.00 (the fair market value on the
Determination Date), or (iii) $28.125 (the fair market value of $25.00 times a
premium of 1.125 calculated by dividing $27.00 by $24.00). Accordingly, in order
to comply with the minimum price requirements, the Interested Shareholder would
be required to pay at least $28.125 per share in cash in the Business
Combination to holders of D & E Common Shares.
In the case of payments to holders of any class of the D & E Preferred
Shares, the fair market value per share of such payments would have to be at
least equal to the highest of: (i) the price determined according to the
procedure set forth in the immediately preceding paragraph for payments to
holders of D & E Common Shares but substituting prices and values of such class
of D & E Preferred Shares; and (ii) the highest preferential amount per share to
which the holders of such class of D & E Preferred Shares are entitled in the
event of a liquidation, dissolution or winding-up of D & E.
All share prices of D & E Common Shares and of D & E Preferred Shares will
be adjusted for any intervening stock splits, stock dividends and reverse stock
splits in determining prices for purposes of the minimum price requirements. The
minimum price requirements provide that non-cash consideration is to be valued
as of consummation of the Business Combination rather than an earlier date, such
as the Announcement Date, because it is believed shareholders should not have to
bear the risk of a decrease in the value of non-cash consideration between the
date the value is determined and the consummation date (i.e., the date on which
shareholders are entitled to receive the non-cash consideration).
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It should be noted that an Interested Shareholder would be required to
meet the minimum price requirements with respect to each class of the Voting
Stock whether or not the Interested Shareholder owned shares of that class prior
to proposing the Business Combination. If the minimum price requirements
(discussed above) and the form of consideration and procedural requirements
(discussed below) are not met with respect to each class of Voting Stock, then a
Disinterested Shareholder Vote would be required to approve the Business
Combination unless the transaction were approved by a majority of the
Disinterested Directors. It should also be noted that if the transaction is not
of a type which involves the receipt of any cash, securities or other
consideration of any of the other holders of Voting Stock, such as a sale of
assets or an issuance of the D & E's securities to an Interested Shareholder,
then the minimum price requirements discussed above could not be met, and a
Disinterested Shareholder Vote would be required unless the transaction was
approved by a majority of the Disinterested Directors.
Form of Consideration Requirements. In Business Combinations involving
cash or other consideration being paid to the holders of the Voting Stock, the
consideration to be received by such holders would be required to be either cash
or the same type of consideration used by the Interested Shareholder in
acquiring the largest portion of its Voting Stock. In addition, the fair market
value of such consideration would be required to meet certain minimum price
requirements (discussed above).
Procedural Requirements. A Disinterested Shareholder Vote would be
required (unless a majority of the Disinterested Directors approved the Business
Combination) if any of the following events occurred:
(a) D & E, after the Interested Shareholder became an Interested
Shareholder, failed to declare and pay full quarterly dividends on any of
the D & E Preferred Shares which was then outstanding or reduced the
annual rate of dividends paid on the D & E Common Shares, unless such
failure or reduction was approved by a majority of the Disinterested
Directors. This provision is designed to prevent an Interested Shareholder
from attempting to depress the market price of D & E's capital stock prior
to proposing a Business Combination by causing D & E to fail to declare
and pay or reducing dividends on such stock, and thereby reducing the
consideration required to be paid pursuant to the minimum price
requirements (discussed above).
(b) The Interested Shareholder acquired any additional shares of the
Voting Stock, directly from D & E or otherwise, except as part of the
transaction in which it became an Interested Shareholder. This provision
is intended to deter an Interested Shareholder from purchasing additional
shares of the Voting Stock except in a Business Combination which complies
with the minimum price requirements (discussed above).
(c) The Interested Shareholder received, at any time after it became
an Interested Shareholder, whether in connection with the proposed
Business Combination or otherwise, the benefit of any loans or other
financial assistance or tax advantages (such as those which may be derived
from the transfer of tax credits) provided by D & E. This provision is
intended to deter an Interested Shareholder from self-dealing or otherwise
taking advantage of its equity position in D & E by using D & E's
resources to finance the proposed Business Combination or otherwise for
its own purposes in a manner not proportionately available to all D & E
Shareholders.
(d) A proxy or information statement disclosing the terms and
conditions of the proposed Business Combination and complying with the
requirements of the proxy rules promulgated under the Exchange Act was not
mailed to all D & E Shareholders at least 30 days prior to the earlier of
the date of a shareholder meeting relating thereto or the consummation of
a Business Combination, unless the Business Combination was approved by a
majority of the Disinterested Directors. This provision is intended to
ensure that the D & E Shareholders would
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be fully informed of the terms and conditions of the proposed Business
Combination even if the Interested Shareholder was not otherwise legally
required to disclose such information.
Description of PCS One Capital Stock
The following description of PCS One's capital stock is qualified in its
entirety by reference to the PCS One Certificate, the PCS One By-Laws, the
Series A Convertible Preferred Stock Purchase Agreement, dated as of November
28, 1995, between PCS One and the holders of PCS One Preferred Shares, as
amended (the "Series A Agreement"), the Stock Restriction Agreement, dated as of
November 28, 1995, as amended, between PCS One, the holders of PCS One Preferred
Shares, and the holders of Class I Common Shares (the "Stock Restriction
Agreement").
General
The PCS One Certificate provides for authorized capital stock consisting
of: (i) 6,000,000 Class I Common Shares; (ii) 57,975,000 Class II Common Shares;
and (iii) 50,000,000 shares of preferred stock, of which 22,500,000 are PCS One
Preferred Shares. As of the Record Date, _____ Class I Common Shares, _____
Class II Common Shares and _____ PCS One Preferred Shares were issued and
outstanding, and no other PCS One preferred shares were issued or outstanding.
PCS One Common Shares
The rights of the holders of PCS One Common Shares are subject to the
rights, designations, preferences, limitations, qualifications, privileges,
options, restrictions and special rights pertaining to the PCS One Preferred
Shares and any class or series of preferred shares as determined by an action or
actions of the PCS One Board in such respect or respects as described further
herein. See "Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock."
Voting Rights. The holders of PCS One Common Shares are entitled to one
vote per share with respect to all matters and are identical in all respects,
except that the vote of the Class I Common Shares is weighted so as to comprise
a majority of the votes held by all PCS One Shareholders voting together as a
single class until such time as the holders of Class I Common Shares are no
longer required by FCC rules to maintain voting control of PCS One. No
cumulative voting rights for the election of directors are available until the
tenth anniversary of the last FCC grant to PCS One of a C-Block PCS License (an
"Anniversary Date") and thereafter only to holders of Class II Common Shares.
PCS One Preferred Stock
The PCS One Board is authorized to issue preferred stock of PCS One from
time to time in one or more classes or series and to determine the rights,
designations, preferences, qualifications, limitations, restrictions or other
special rights, if any, including, without limitation, the dividend rights,
conversion rights, voting rights, redemption rights, sinking fund provisions and
liquidation preferences. Notwithstanding the foregoing, however, a supermajority
vote of PCS One Shareholders is required in such circumstances. See
"Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock--Supermajority Voting."
Voting Rights. Except as otherwise provided by the terms of the PCS One
Preferred Shares (see "Merger--Description of PCS One Capital Stock--PCS One
Preferred Stock--Supermajority Voting") or by law, the PCS One Preferred Shares
vote together with all other classes or series of PCS One capital stock and are
entitled to the same vote as the Class II Common Shares into which the PCS One
Preferred Shares are convertible, namely, one vote per share. See
"Merger--Description of PCS One Capital Stock--PCS One Common Shares--Voting
Rights."
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Supermajority Voting. In the exercise of the foregoing voting rights, the
PCS One Certificate imposes certain supermajority voting requirements on the
holders of the capital stock of PCS One. The PCS One Certificate presently
requires the vote of 72% the "Combined Voting Power"; to approve the following
as long as any PCS One Preferred Shares are outstanding (unless a greater vote
is required by law or otherwise in the PCS One Certificate):
(i) Create or authorize the creation of any class or series of
capital stock or increase the authorized shares thereof or any such stock
convertible to PCS One Preferred Shares unless junior to the PCS One Preferred
Shares with respect to liquidation rights;
(ii) Consent to any PCS One liquidation, dissolution, winding-up,
consolidation or merger or disposition of all or substantially all of its
assets;
(iii) Amend, alter or repeal the PCS One Certificate or PCS One
By-Laws;
(iv) Purchase or pay any dividend or distribution on any shares of
capital stock of PCS One other than PCS One Preferred Shares (with certain
limited exceptions), or redeem or otherwise acquire any PCS One Preferred Shares
except as authorized pursuant to the PCS One Certificate;
(v) Issue any shares of PCS One capital stock except Class II Common
Shares upon conversion of PCS One Preferred Shares;
(vi) Effect any recapitalization of PCS One; or
(vii) Effect any actions materially affecting the PCS One Preferred
Shares.
The foregoing 72% supermajority vote requirement shall be increased to 80%
of the Combined Voting Power in the event CoastalComm, Inc. exercises its option
under Section 2.2(a)(ii) of the Participation Agreement, dated as of November
24, 1995 and (executed November 28, 1995), by and between CoastalComm, Inc. and
PCS One and shall be revised to 51% of the PCS One Preferred Shares and Class II
Common Shares (excluding Class II Common Shares into which Class I Common Shares
have been or may be converted) after the tenth Anniversary Date.
In addition to the foregoing supermajority vote requirements, the PCS One
Certificate provides that none of the terms of the PCS One Preferred Shares may
be amended, modified or waived without the approval of at least 66 2/3% of the
holders of such Shares.
Board Representation. In addition to the foregoing supermajority vote
requirements, the PCS One Certificate requires a two-thirds vote of the PCS One
Preferred Shares to increase the maximum number of directors on the PCS One
Board beyond 11 members. Further, the PCS One Certificate provides that as long
as any PCS One Preferred Shares remain outstanding and until the tenth
Anniversary Date, the holders of PCS One Preferred Shares and Class II Common
Shares shall elect (five) 5 directors and the holders of Class I Common Shares
shall elect six (6) directors to the PCS One Board. However, upon the consent of
85% of the holders of PCS One Preferred Shares and Class II Common Shares
(excluding holders who also are holders of Class I Common Shares) and subject to
any required FCC approval, after the sixth Anniversary Date, the holders of PCS
One Preferred Shares and Class II Common Shares shall elect six (6) directors
and the holders of Class I Common Shares shall elect five (5) directors to the
PCS One Board. Furthermore, if PCS One fails or refuses to redeem all of the PCS
One Preferred Shares on November 28, 2005 as required by the PCS One
Certificate, the holders of PCS Preferred Shares shall be entitled to elect a
majority of the PCS One Board, subject to FCC requirements. See
"Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock--Redemption."
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Conversion. The PCS One Preferred Shares are, subject to any FCC
requirements, convertible at the option of the holder of such Shares into Class
II Common Shares on a share-for-share basis subject to adjustment in certain
circumstances causing dilution of the PCS One Preferred Shares, as long as such
adjustment does not have the effect of reducing the ownership of the holders of
Class I Common Shares to less than 25% of the capital stock of PCS One prior to
the third Anniversary Date and thereafter until the fifth Anniversary Date to
less than 15% of such capital stock. (the "Conversion Price"). The circumstances
upon the occurrence of which shall cause such an adjustment include PCS One's
issuance or sale of any PCS One Common Shares or PCS One Preferred Shares for
less than $1.00 per share, including the following: (i) any grant of warrants,
options or other rights to subscribe for the purchase of any PCS One Common
Shares or any security convertible or exchangeable for such Shares; (ii) any
issuance or sale of any security convertible or exchangeable for any PCS One
Common Shares; and (iii) any dividend or declaration payable in PCS One Common
Shares (except as paid on PCS One Common Shares) or options or convertible or
exchangeable securities as described in items (i) and (ii) above.
However, no such adjustment is required for the issuance of Class II
Common Shares on the conversion of PCS One Preferred Shares or Reserve Share
Options.
The Conversion Price shall also be proportionately reduced or increased,
as appropriate, if there occurs a subdivision of outstanding PCS One Common
Shares into a greater number or if such Shares are combined into a smaller
number of such Shares, or if PCS One fails to redeem all of the PCS One
Preferred Shares as required.
The PCS One Certificate includes mandatory and automatic conversion
provisions in connection with a firm commitment underwritten public offering of
Class II Common Shares in certain cases.
Dividend Rights. Subject to FCC requirement, other requirements of law and
a supermajority approval vote (See "Merger--Description of PCS One Capital
Stock--PCS One Preferred Stock--Supermajority Voting") dividends may be paid on
the PCS One Preferred Shares out of legally available funds at the same rate as
dividends paid on Class I Common Shares and Class II Common Shares (other than
dividends paid in additional Class II Common Shares).
Redemption. Upon request by a supermajority of PCS One Shareholders (see
"Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock--Supermajority Voting") or after the tenth Anniversary Date upon request
of 51% of the holders of PCS One Preferred Shares and Class II Common Shares
(excluding those holders of Class I Common Shares and Class II Common Shares who
were not previously holders of converted PCS One Preferred Shares) and subject
to FCC requirements, any PCS One Preferred Shares shall be redeemed on November
28, 2005 at the redemption price set forth in the PCS One Certificate.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of PCS One, including consolidation, merger or disposition of
substantially all of the assets of PCS One, the holders of PCS One Preferred
Shares are entitled to receive, prior to any distribution on account of capital
stock junior to the PCS One Preferred Shares, the greater of $1.00 per share
plus declared but unpaid dividends thereon or the amount per share payable had
such PCS One Preferred Shares been converted to Class II Common Shares. See
"Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock--Conversion." If the assets of PCS One are insufficient to permit the
foregoing payment, the assets of PCS One shall be distributed ratably among the
holders of PCS One Preferred Shares. After such distributions to holders of PCS
One Preferred Shares, remaining assets, if any, shall be distributed ratably
among the holders of PCS One Common Shares and any other capital stock ranking
junior to the PCS One Preferred Shares.
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Series A Agreement
In addition to the rights and other terms of the PCS One Preferred Shares
as provided in the PCS One Certificate, the Series A Agreement provides further
rights and obligations with respect to such Shares. Among other things, the
Series A Agreement provides:
(i) each Purchaser (as defined in the Series A Agreement) of PCS One
Preferred Shares and as long as holding 40,000 or more of such Shares a right of
first refusal to purchase any equity securities to be issued by PCS One with
certain exceptions, among which are the issuance or grant of any Reserved Share
Options not to exceed 525,000 Class II Common Shares;
(ii) supermajority voting requirements for approval of transactions
between PCS One and certain related parties and affiliates (excluding the vote
of interested PCS One Shareholders) and any grant of Reserved Share Options (as
described in item (i) above);
(iii) the PCS One By-Laws shall always provide (unless otherwise
required by New Jersey law) that any two directors and any holder(s) of at least
25% of the PCS One Preferred Shares may call a meeting of the PCS One Board or
PCS One Shareholders;
(iv) supermajority voting requirements for approval of any
amendments, modifications or terminations of employee nondisclosure, development
and noncompetition agreements;
(v) no issuance or sale of any equity securities of PCS One until
after the third Anniversary Date which would cause dilution of the holders of
Class I Common Shares such that such holders own less than 25% of the capital
stock of PCS One on a fully-diluted basis and thereafter, until the fifth
Anniversary Date, to less than 15% of such capital stock.
(vi) for each member of the Compensation and Audit Committees of the
PCS One Board to be elected by the holders of PCS One Preferred Shares and Class
II Common Shares and the delegated powers of such Committees specified.
See "Merger--Description of PCS One Capital Stock--PCS One Preferred
Stock--Supermajority Voting."
Stock Restriction Agreement
The Stock Restriction Agreement provides for several limitations on the
ability of the PCS One Shareholders to sell, assign, dispose of or transfer
their respective PCS One Common Shares and PCS One Preferred Shares.
Specifically, the Stock Restriction Agreement provides as follows:
(i) supermajority voting requirements in order for any holder of
Class I Common Shares to sell, assign, dispose of or transfer any of such Shares
in addition to satisfying the requirements of the FCC and other limitations on
public sale without the approval of underwriters in a firm commitment initial
underwritten public offering;
(ii) limitations on the ability of the purchasers of PCS One
Preferred Shares to sell, assign, dispose of or transfer such Shares except to
certain transferees;
(iii) first refusal rights to the purchasers of PCS One Preferred
Shares upon any proposed sale for cash of any Class I Common Shares or PCS One
Preferred Shares:
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(iv) tag-along sale rights to each purchaser of PCS One Preferred
Shares in the event any holder of Class I Common Shares seeks to sell such
Shares to any other party who or which is not such a purchaser.
In addition, the Stock Restriction Agreement includes the commitments of
the holders of the Class I Common Shares and the purchasers of the PCS One
Preferred Shares to vote all of their respective shares in favor of certain
individuals for election to the PCS One Board.
Material Differences Between Rights of Holders of D & E Common Shares and of
Holders of PCS One Common Shares
Holders of D & E Common Shares generally and holders of D & E Common
Shares acquired in connection with the Merger will have certain rights which
differ from the rights of holders of PCS One Common Shares. These rights are set
forth in the PBCL, the D & E Articles, the D & E By-Laws, the NJBCA, the PCS One
Certificate, the PCS One By-Laws and as further limited by the D & E
Shareholders Agreement. See "Merger--Plan of Merger--D & E Shareholders
Agreement." The following explanation focuses on the material differences
between such rights of the holders and is qualified in its entirety by reference
to the PBCL, the D & E Articles, the D & E By-Laws, the NJBCA, the PCS One
Certificate, the PCS One By-Laws and the D & E Shareholders Agreement.
Authorized Shares
With respect to the issuance of authorized shares, neither the
shareholders of D & E Common Shares nor the shareholders of PCS One Common
Shares have preemptive rights to receive or purchase any of the unissued D & E
Common Shares or PCS One Common Shares, respectively. On the other hand,
pursuant to the Series A Agreement, each holder of 40,000 or more PCS One
Preferred Shares, so long as any such shares remain outstanding, is entitled to
exercise a right of first refusal to purchase for cash any securities (other
than debt securities with no equity feature) of PCS One prior to the issuance of
such securities by PCS One. In addition, the PCS One Certificate includes
certain anti-dilution provisions which, if triggered, may adjust the conversion
ratio of PCS One Preferred Shares and, thereby, afford the holders of PCS One
Preferred Shares certain protections upon the issuance by PCS One of stock,
options or convertible securities. Lastly, and subject to the foregoing, the D &
E Board and the PCS One Board each have the authority to issue, respectively,
the unissued D & E Common Shares and D & E Preferred Shares and the PCS One
Common Shares and PCS One Preferred Shares, or any part thereof, without further
action by either the D & E Shareholders or the PCS One Shareholders except as
required by law.
With respect to the issuance of preferred stock, all of the D & E
Preferred Shares are "blank check." The PCS One Preferred Shares are also "blank
check," provided, however, that the PCS One Certificate currently provides
specific rights to holders of PCS One Preferred Shares, and the PCS One
Certificate may not be amended, modified or waived with respect to the terms of
such shares without the consent of at least 66 2/3% of the PCS One Preferred
Shares. The term "blank check" generally means that a board of directors is
authorized to establish various classes and series of such stock and to
determine the various rights attached thereto without further action by the
shareholders except as required by law.
Although PCS One is authorized to issue significantly more shares of the
PCS One Common Shares and the PCS One Preferred Shares than D & E, D & E is
authorized to issue a large number of the D & E Common Shares and the D & E
Preferred Shares. Specifically, after the Effective Time, D & E will have
authorized and unissued approximately ______ D & E Common Shares and ________ D
& E Preferred Shares which are available for issuance. Although D & E has no
plans for the issuance of any D & E Common Shares (other than pursuant to its
various stock plans) or D & E Preferred Shares, such shares could be useful, if
needed, for issuance in connection with raising additional capital,
acquisitions, joint ventures and other corporate purposes and, in the case of
the D & E Common Shares, to support the
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issuance of the D & E Preferred Shares or other securities convertible into or
exercisable for the D & E Common Shares. In addition, the issuance of the D & E
Common Shares and the D & E Preferred Shares in various manners could have the
effect of discouraging or thwarting takeover attempts. Further, dividend
requirements and any redemption, sinking fund or conversion provision pertaining
to shares of the D & E Preferred Shares, if authorized and issued, may have an
adverse effect on the availability of earnings for distribution to holders.
Supermajority Voting Requirements
The D & E Articles set forth certain supermajority voting requirements as
discussed above. See "Merger--Description of D & E Capital Stock--D & E Common
Shares--Supermajority Voting." Similar to the D & E Articles, the PCS One
Certificate imposes certain supermajority voting requirements. Such
supermajority voting requirements are only applicable when the PCS One Preferred
Shares are outstanding (as they currently are). For example, in order to amend,
alter or repeal the PCS One Certificate (other than with respect to the terms of
the PCS One Preferred Shares, which further require the consent of at least
66 2/3% of the PCS One Preferred Shares, see "Merger--Material Differences
Between Rights of Holders of D & E Common Shares and Holders of PCS One Common
Shares--Authorized Shares") or the PCS One By-Laws, the PCS One Certificate
requires, in addition to any other vote required by law, an affirmative vote of:
(i) 72% of the Combined Voting Power; (ii) 80% of the Combined Voting Power in
the event that CoastalComm, Inc. exercises its option under Section 2.2(a)(ii)
of that certain Participation Agreement by and between CoastalComm, Inc. and PCS
One dated as of November 24, 1995 (although such agreement was executed on
November 28, 1995); or (iii) after the tenth anniversary of the latest grant by
the FCC of a C-Block PCS License to PCS One, the affirmative vote of 51% of the
then outstanding PCS One Preferred Shares (including the Class II Common Shares
issued and outstanding or issuable upon conversion of the PCS One Preferred
Shares). These supermajority voting requirements are also applicable in other
circumstances including the following: (i) if PCS One creates or authorizes the
creation of certain classes of shares of stock, unless such stock ranks junior
to the PCS One Preferred Shares as to the distribution of assets on liquidation,
dissolution or winding-up of PCS One; (ii) if PCS One consents to any
liquidation, dissolution or winding-up or consolidates or merges into or with
any other entity or sells, leases, abandons, transfers or otherwise disposes of
all or substantially all of its assets; (iii) if PCS One purchases or sets aside
any sum for the purchase of or pays any dividend or makes any distribution on,
any shares of stock other than the PCS One Preferred Shares, except for
dividends payable on the PCS One Common Shares solely in the form of additional
PCS One Common Shares; (iv) if PCS One issues any shares of capital stock other
than on the conversion of the PCS One Preferred Shares; (v) if PCS One redeem
any of the PCS One Preferred Shares; (vi) if PCS One effects any
recapitalization; or (vii) if PCS One otherwise materially affects the PCS One
Preferred Shares. Because supermajority voting requirements establish a higher
minimum level of approval by the shareholders than is required generally by law,
such requirements could have the effect of preventing any action with respect to
which such vote is required.
In addition to the foregoing supermajority voting requirements set forth
in the PCS One Certificate, the Series A Agreement has further supermajority
voting requirements for holders of 40,000 or more PCS One Preferred Shares.
Those supermajority requirements include the approval of the grant of any
Reserved Share Options, the amendment, waiver or termination of certain
nondisclosure, development or noncompete agreements between PCS One and its
employees. In addition, there are further supermajority votes required to
approve the transfer of Class I Common Shares as set forth in the Stock
Restriction Agreement.
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PBCL Anti-Takeover Provisions
The PBCL contains a number of statutory "anti-takeover" provisions,
including Subchapters E, F, G and H of Chapter 25 and Section 2538, which apply
automatically to a Pennsylvania registered corporation (usually a public
company) unless such corporation has elected to opt-out as provided in such
provisions. D & E is a registered corporation which has elected in the D & E
Articles to opt-out of certain of the anti-takeover provisions, namely
Subchapters E and G (and the related Subchapters I and J as discussed below),
but Subchapters F and H continue to apply to D & E. The following descriptions
are qualified in their entirety by reference to such provisions of the PBCL:
(a) Subchapter F (relating to business combinations) generally
delays for five years and imposes conditions upon "business combinations"
between an "interested shareholder" and the corporation. The term
"business combination" is defined broadly to include various transactions
utilizing a corporation's assets for purchase price amortization or
refinancing purposes. An "interested shareholder" is defined generally as
the beneficial owner of at least 20% of a corporation's voting shares.
Subchapters F contains a wide variety of transactional and status
exemptions, exclusions and safe harbors.
(b) Subchapter H (relating to disgorgement) generally applies in the
event that any person or holding company publicly discloses that the
person or holding company may acquire control of the corporation or a
person or the holding company acquires (or publicly discloses an offer or
intent to acquire) 20% or more of the voting power of the corporation and,
in either case, sells shares within 18 months thereafter. Any profits from
sales of equity securities of the corporation by the person or the holding
company during the 18-month period belong to the corporation if the
securities that were sold were acquired during the 18-month period or
within the preceding 24 months. Subchapters H contains a wide variety of
transactional and status exemptions, exclusions and safe harbors.
(c) Section 2538 generally establishes certain shareholder approval
requirements with respect to specified transactions with "interested
shareholders."
Business Combination Provisions
In addition to the anti-takeover provisions in the PBCL which are
applicable to D & E, the D & E Articles also contain certain provisions with
respect to the approval of certain business combinations with an Interested
Shareholder. See "Merger--Description of D & E Capital Stock--Change of Control
Provisions." The PCS One Certificate imposes certain supermajority voting and
notice requirements to any consolidation, merger or sale of substantially all of
the assets of PCS One. See "Merger--Material Differences Between Rights of
Holders of D & E Common Shares and Holders of PCS One Common
Shares--Supermajority Voting Requirements."
Advance Notice of Business to Be Brought Before Shareholder Meetings
Except as otherwise provided with respect to the nomination of directors,
the D & E Articles restrict the ability of a D & E Shareholder to bring business
before an annual meeting. Specifically, to do so, such D & E Shareholder must
provide written notice of the proposed business to the Secretary of D & E at
least 120 days in advance of such annual meeting (or if less than 120 days'
notice or prior public disclosure of the date of such annual meeting is given,
not later than ten days after the date of mailing of such notice or the date of
such public disclosure, whichever occurs first). Such shareholder notice is
required to set forth the following information: (1) the name and address of the
D & E Shareholder proposing such business; (2) a brief description of such
business; (3) the class, series and number of shares of D & E's capital stock
owned by such D & E Shareholder; (4) a description of all arrangements or
understandings between such D & E Shareholder and any other person or persons
(naming such
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person or persons) in connection with such business or any special interest such
D & E Shareholder may have in connection with such business; (5) all other
information as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC had proxies been solicited with respect
to such business by the D & E Board; and (6) a representation that the D & E
Shareholder is a shareholder of record of stock of D & E entitled to vote at
such meeting and intends to appear in person or by proxy in order to bring such
business before such meeting.
The foregoing provisions may delay the ability of D & E Shareholders to
bring matters before an annual meeting other than matters which D & E deems
desirable and may provide sufficient time for D & E to institute litigation or
take other appropriate steps to respond to such business or to prevent such
business from being acted upon if such response or prevention is thought to be
necessary or desirable for any reason. The foregoing provisions do not limit a D
& E Shareholder's right to provide a proposal for inclusion in the proxy
statement of D & E in accordance with Rule 14a-8 of the Exchange Act. See "1997
Shareholder Proposals." The PCS One Certificate and the PCS One By-Laws do not
have advance notice procedures regarding proposal of business by a PCS One
Shareholder before an annual meeting.
Separately, the PBCL provides that unless specifically permitted in its
articles or by-laws, shareholders of a registered corporation are not entitled
to call a special meeting. Therefore, the D & E Shareholders are not entitled to
call a special meeting.
Advance Notice of Nominees for the Board of Directors
The D & E Articles restrict the ability of D & E Shareholders to nominate
individuals for election as directors. Specifically, in order for a D & E
Shareholder to make such nomination(s), such D & E Shareholder must provide
written notice of such nomination(s) to the Secretary of D & E at least 120 days
in advance of the meeting of the D & E Shareholders at which such election is to
be held (or if less than 120 days' notice or prior public disclosure of the date
of such annual meeting is given, not later than ten days after the date of
mailing of such notice or the date of such public disclosure, whichever occurs
first). Such shareholder notice is required to set forth the following
information: (1) the name and address of the D & E Shareholder who intends to
make the nomination(s) and of the person(s) to be nominated; (2) a
representation that the D & E Shareholder is a holder of record of stock of D &
E entitled to vote at such meeting and intends to appear in person or by proxy
at the meeting to nominate the person(s) specified in the notice; (3) a
description of all arrangements or understandings between such D & E Shareholder
and any other person(s) (naming such person(s)) pursuant to which the nomination
or nominations are to be made by the D & E Shareholder; (4) such other
information regarding each nominee proposed by such D & E Shareholder as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the SEC had the nominee been nominated by the D & E Board; and (5) the
consent of each nominee to serve as a director of D & E if so elected.
The foregoing provisions provide D & E sufficient time to assess the
qualifications of any person proposed for election to the D & E Board and
provide sufficient time for D & E to institute litigation or take other
appropriate steps to prevent the nominee from being elected or serving if such
prevention is thought to be necessary or desirable for any reason. Such
provisions also may inhibit D & E Shareholders who do not have any intention of
controlling D & E or the D & E Board from participating in the nomination
process. The PCS One Certificate and the PCS One By-Laws do not have such
advance notice procedures regarding nominations for the election of directors.
Additionally, the foregoing nomination provisions are included in the D &
E Articles. Thus, shareholder approval is required in order to change these
provisions in the D & E Articles in the future which may tend to inhibit any
future amendment thereof. Further, the D & E Articles provide that a 90%
supermajority shareholder vote is required to amend the D & E Articles which may
further inhibit any
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future amendment thereof. See "Merger--Description of D & E Capital Stock--D & E
Common Shares--Supermajority Voting."
Indemnification
The D & E Articles provide that the officers and directors of D & E, and
any persons serving at the request of D & E as a director, officer, employee,
fiduciary, trustee or other representative of another entity, are indemnified by
D & E against all expenses, liability and loss to the full extent not prohibited
by law, including, without limitation, in respect of liability arising under the
Securities Act. Such indemnification is substantially similar to the
indemnification provisions contained in the PCS One By-Laws. The effect of
including these provisions in the D & E Articles versus the D & E By-Laws, as is
the case with PCS One, is to require D & E Shareholder approval in order to
change these provisions in the future which may tend to inhibit any future
amendment thereof. Further, the D & E Articles provide that a 90% supermajority
shareholder vote is required to amend the D & E Articles which may further
inhibit any future amendment thereof. See "Merger--Description of D & E Capital
Stock--D & E Common Shares--Supermajority Voting." Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling D & E or PCS One pursuant to the foregoing
indemnification provisions, D & E and PCS One have been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
Rights of Dissenting Shareholders
Dissenters' Appraisal Rights
The following summary is qualified in its entirety by reference to (i)
excerpts of Chapter 11 of the NJBCA set forth in Exhibit D to this Proxy
Statement and Prospectus and (ii) all other provisions of the NJBCA. It is a
condition to the closing of the Merger, however, that no PCS One Shareholder
takes any steps to perfect Dissenters' Rights. See "Merger--Plan of
Merger--Conditions to Merger."
Each of the PCS One Shareholders has the right, upon compliance with the
relevant provisions of the NJBCA, to demand that PCS One (and ultimately, the
Surviving Corporation) purchase all (or in the case of certain beneficial
holders, some) of such holder's PCS One Preferred Shares, Class I Common Shares
or Class II Common Shares (collectively, the "PCS One Shares") for a cash price
equal to the fair value of such shares as of the day prior to the date on which
the vote approving the Merger is taken, without regard to any appreciation or
depreciation as a consequence of the Merger (the "Fair Value"). Within ten (10)
days after the Effective Time, the Surviving Corporation is required to give
written notice of the Effective Time to each PCS One Shareholder who filed a
Written Objection (as defined below) (the "Effective Time Notice").
A PCS One Shareholder who (a) prior to the Special Meeting, files a
written notice of dissent ("Written Objection") stating that s/he intends to
demand payment for all (or in the case of certain beneficial holders, some)
shares owned if the Merger is approved, (b) does not vote in favor of approving
the Merger, (c) within twenty (20) days after the mailing of the Effective Time
Notice, makes written demand on the Surviving Corporation for the payment of the
Fair Value of his or her PCS One Shares ("Written Demand"), (d) within twenty
(20) days after the Written Demand, submits the certificates representing such
shares to the Surviving Corporation for notation thereon that such Written
Demand has been made and (e) otherwise complies with the provisions of Section
14A:11-2 of the NJBCA, is entitled to be paid the Fair Value for such shares in
cash. Under the NJBCA, the marking of the proxy to indicate a vote against
approval of the Merger does not constitute a Written Objection, and failure to
vote against the proposed Merger does not constitute a waiver of a Written
Objection previously filed by a dissenting shareholder. The Written Demand must
state the number of the PCS One Shares owned by the dissenting
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PCS One Shareholder with respect to which such PCS One Shareholder dissents. A
dissenting PCS One Shareholder may dissent as to all or less than all of those
PCS One Shares owned of record by him or her; such PCS One Shareholder must
dissent, if at all, with respect to all of the PCS One Shares owned beneficially
regardless of whether such PCS One Shareholder is also the record owner of such
PCS One Shares.
If the Merger becomes effective, a PCS One Shareholder who has not both
filed the Written Objection and made the Written Demand within the periods
described above, shall be conclusively presumed to have consented to the Merger
and shall be bound by its terms. Failure of a dissenting PCS One Shareholder to
submit his or her PCS One Stock Certificate or Certificates for notation thereon
that the Written Demand has been made, as described above, shall, at the
Surviving Corporation's option, terminate such PCS One Shareholder's Dissenters'
Rights unless a court of competent jurisdiction for good and sufficient cause
shown otherwise directs. The Written Objection should be addressed to PCS One,
2500 English Creek Avenue, Building 11, Egg Harbor Township, New Jersey 08234,
Attention: President. The Written Demand and the presentation of PCS One Stock
Certificates for notation should be addressed to the Surviving Corporation at
its principal executive offices, attention Secretary. Upon making Written
Demand, the dissenting PCS One Shareholder shall not be entitled to vote or to
exercise any other rights of a PCS One Shareholder as to the PCS One Shares with
respect to which such PCS One Shareholder dissents.
If the Merger becomes effective, within ten (10) days after the expiration
of the period within which PCS One Shareholders may make a Written Demand
("Ten-Day, Post-Written Demand Period"), the Surviving Corporation shall mail to
each dissenting PCS One Shareholder the audited or unaudited balance sheet and
the surplus statement of PCS One, as of the latest available date (in any event
not earlier than twelve months prior to the date of such mailing), and a profit
and loss statement or statements for not less than a twelve-month period ended
on the date of such balance sheet. The Surviving Corporation may accompany such
mailing with a written offer to pay such dissenting PCS One Shareholder for such
PCS One Shareholder's PCS One Shares at a specified price deemed by the
Surviving Corporation to be fair value therefor. Such offer shall be made at the
same price per share to all dissenting PCS One Shareholders. If, not later than
thirty (30) days after the expiration of the Ten-Day, Post-Written Demand Period
("Thirty-Day Agreement Period"), the Fair Value of the PCS One Shares is agreed
upon by any dissenting PCS One Shareholder and the Surviving Corporation,
payment therefor shall be made upon surrender of the PCS One Stock Certificate
or Certificates representing such PCS One Shares.
If a dissenting PCS One Shareholder and the Surviving Corporation are
unable to agree on the Fair Value within the Thirty-Day Agreement Period, such
dissenting PCS One Shareholder may serve upon the Surviving Corporation a
written demand that it commence an action in the Superior Court of New Jersey
for the determination of the Fair Value of the PCS One Shares held by such
dissenting PCS One Shareholder. Such demand shall be served not later than
thirty (30) days after the expiration of the Thirty-Day Agreement Period and
such action shall be commenced by the Surviving Corporation not later than
thirty (30) days after receipt by the Surviving Corporation of such demand
("Thirty-Day Commencement Period"), but the Surviving Corporation may commence
such action at any earlier time. If the Surviving Corporation fails to so
commence the action, a dissenting PCS One Shareholder may do so in the Surviving
Corporation's name not later than sixty (60) days after the expiration of the
Thirty-Day Commencement Period. The costs and expenses of such an action shall
be determined by such Court and shall be apportioned and assessed upon the
parties as such Court may find equitable. Such expenses shall include reasonable
compensation for and reasonable expenses of the appraiser, if any, but shall
exclude fees and expenses of counsel for and experts employed by any party, but
if such Court finds that the offer of payment made by the Surviving Corporation
was not in good faith, or if no such
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offer was made, the Court in its discretion may award to any dissenting PCS One
Shareholder who is a party to the action reasonable fees and expenses of counsel
for and any experts employed by such dissenting PCS One Shareholder.
The right of a dissenting PCS One Shareholder to be paid the Fair Value of
such PCS One Shareholder's PCS One Shares shall cease if (a) such PCS One
Shareholder has failed to present such PCS One Shareholder's PCS One Stock
Certificates for notation unless a court having jurisdiction for good and
sufficient cause shown shall otherwise direct, (b) such PCS One Shareholder's
demand for payment is withdrawn with the written consent of the Surviving
Corporation, (c) the Fair Value of the PCS One Shares is not agreed upon and no
action for the determination of Fair Value by the Superior Court of New Jersey
is commenced within the time provided, (d) the Superior Court determines that
the PCS One Shareholder is not entitled to payment for such PCS One Shares, (e)
the Merger is abandoned or rescinded or (f) a court having jurisdiction
permanently enjoins or sets aside the Merger.
Accounting Treatment
The Merger will be accounted for by the purchase method of accounting.
Certain Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of the Merger that are generally applicable to the PCS One
Shareholders. This discussion does not deal with all income tax consequences
that may be relevant to particular PCS One Shareholders in light of their
particular circumstances, such as PCS One Shareholders who are dealers in
securities, foreign persons, acquired their PCS One Shares in connection with
stock option or stock purchase plans or in other compensatory transactions.
Furthermore, no foreign, state or local tax consequences are addressed herein.
ACCORDINGLY, PCS ONE SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
PCS One and the PCS One Shareholders will receive an opinion from
____________________ to the effect that, for federal income tax purposes, the
Merger will constitute a "reorganization" within the meaning of Section 368(a)
of the Code, with PCS One and D & E each qualifying as a "party to the
reorganization" under Section 368(b) of the Code. In addition, the following
federal income tax consequences will generally result:
1. No gain or loss will be recognized by the holders of the D & E Common
Shares or the PCS One Common Shares except as discussed below with respect to
any cash received by the PCS One Shareholders in lieu of fractional D & E Common
Shares.
2. The aggregate tax basis of the D & E Common Shares received in the
Merger by holders of PCS One Common Shares will equal the aggregate basis of the
PCS One Shares exchanged therefor, reduced by any amount allocable to any
fractional share interest of the PCS One Shareholders for which cash is
received.
3. No gain or loss will be recognized by D & E or PCS One in connection
with the Merger.
4. Provided that the PCS One Common Shares are held as a capital asset at
the Effective Time, the holding period of the D & E Common Shares will include
the holding period of the PCS One Common Shares surrendered therefor.
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5. A holder of PCS One Common Shares who receives cash in the Merger in
lieu of a fractional interest in the D & E Common Shares will be treated for
federal income tax purposes as having received cash in redemption of such
fractional share interest. The holder of PCS One Common Shares will recognize
gain or loss as of the Effective Time equal to the difference between the amount
of cash received and the portion of such holder's adjusted tax basis in the PCS
One Common Shares allocable to such fractional interest. Any gain or loss
generally will be capital gain or loss if the holder of PCS One Common Shares
holds the PCS One Common Shares as a capital asset at the Effective Time and
will be long-term capital gain or loss if the holding period for the fractional
interest deemed to be received and then redeemed is more than one year.
The parties are not requesting a ruling from the Internal Revenue Service
("IRS") in connection with the Merger. The foregoing opinion (the "Tax Opinion")
neither binds the IRS nor precludes the IRS from adopting a contrary position.
In addition, the Tax Opinion will be subject to certain assumptions and
qualifications and will be based on the truth and accuracy of certain
representations made by D & E, PCS One and the PCS One Shareholders, including
representations in certificates to be delivered to counsel by the respective
managements of D & E, PCS One and certain PCS One Shareholders.
A successful IRS challenge to the "reorganization" status of the Merger
would result in a PCS One Shareholder recognizing gain or loss with respect to
each PCS One Common Share surrendered equal to the difference between the PCS
One Shareholder's basis in such PCS One Common Share and the fair market value,
as of the Effective Time of the Merger, of the D & E Common Shares so received
would equal the D & E Common Shares' fair market value and his holding period of
such D & E Common Shares would begin the day after the Merger.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS BASED UPON CURRENT
LAW. BECAUSE EACH PCS ONE SHAREHOLDER'S TAX CIRCUMSTANCES MAY DIFFER, EACH PCS
ONE SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH PCS ONE SHAREHOLDER, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND OTHER LAWS AND ANY PROPOSED
CHANGES IN SUCH TAX LAWS.
Exchange of Stock Certificates
If the Plan of Merger is approved and the Merger is carried out, it will
be necessary for holders of PCS One Common Shares to surrender their existing
PCS One Stock Certificates for stock certificates representing D & E Common
Shares. HOWEVER, DO NOT DESTROY YOUR PCS ONE STOCK CERTIFICATES. The present PCS
One Stock Certificates representing PCS One Common Shares will automatically
represent the right to receive that number of D & E Common Shares to which such
holder is entitled. After the Effective Time, when presently outstanding PCS One
Stock Certificates representing PCS One Common Shares are presented for
transfer, new certificates bearing the name of D & E will be issued.
THE PCS ONE BOARD STRONGLY RECOMMENDS THAT THE PCS ONE SHAREHOLDERS VOTE FOR THE
MERGER.
PCS ONE
Business
PCS One is a development-stage company which was incorporated in New
Jersey on October 11, 1994, and began conducting business in 1995. PCS One was
created to provide PCS in selected basic trading areas throughout the United
States. PCS will be offered
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pursuant to the PCS Licenses auctioned by the FCC. PCS One participated in the
FCC's Auction for the C-Block of the PCS Licenses and was the successful bidder
for the Lancaster License (having submitted a bid of approximately $17,600,000
($13,200,000 net after the 25% entrepreneur's discount)). PCS One made a 10%
downpayment with the FCC, and the remaining 90% of the net Auction price for the
Lancaster License is to be paid to the FCC in installments (with payments of
interest only at 7.0% for the first six years and payments of interest at 7.0%
and principal amortized over the remaining four years of the ten-year PCS
License term). In lieu of pursuing the development of the Lancaster License
and/or the acquisition of additional PCS Licenses on its own, PCS One proposes
to merge with and into D & E, and D & E anticipates pursuing such development
and additional acquisitions.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of PCS One
Liquidity and Capital Resources
PCS One was formed in 1994 and, in 1995, raised the capital to enter the
Auction for the C-Block of PCS Licenses. PCS One raised $22,500,250 in 1995 and
made a deposit of $18,000,000 with the FCC for the Auction. At September 30,
1996, PCS One had total stockholders' equity and a working capital deficit of
$206,144 and $1,330,819, respectively, as compared to stockholders' equity of
$21,947,440 and working capital of $21,680,214 at December 31, 1995.
In 1996, PCS One participated in the FCC Auction and was the successful
bidder for the Lancaster License, having submitted a bid, net of the
entrepreneurs' discount, of approximately $13.2 million. PCS One was required to
pay 10% of this bid as a downpayment with the FCC and entered into a note
agreement with the FCC to pay the remaining 90% of the net Auction price
($11,878,574) in installments of interest only for the first six years and
payments of interest and principal over the remaining four years of the ten-year
PCS License term.
PCS One determined that it would not pursue development of the Lancaster
License or additional licenses and that it would merge with and into D & E.
Consequently, PCS One determined to return a substantial portion ($21,710,000)
of the capital raised in 1995. A payment of $20,391,058 was made to the holders
of PCS One Preferred Shares but $1,319,842 remains payable to D & E. This amount
is reflected as a current liability on the September 30, 1996 balance sheet. In
addition to the note agreement with the FCC, PCS One executed a promissory
note-line of credit with D & E for an amount of up to $14 million for the
purpose of acquiring the Lancaster License as well as, subject to D & E's
approval, construction and operation of the PCS system to which the Lancaster
License relates. The line of credit is payable on a demand basis subject to 270
days' advance notice.
PCS One is subject to the risks of being a development-stage company,
needing to raise substantial financing to fund development of the PCS system to
which the Lancaster License relates as well as the commercial viability of
offering services pursuant to this license in this market. PCS One believes that
it has sufficient cash and borrowing capacity to meet capital investment
commitments, operating cash requirements, and debt service payments through the
date of acquisition by D & E.
Results of Operations
Revenues. As a development-stage company, PCS One has not recognized any
revenues to date and does not expect to recognize revenues in the near future.
Operating expenses include administrative, marketing and other expenses incident
to the Auction and certain consulting expenses related to the design and
construction of the PCS system to which the Lancaster License relates.
Amortization expenses relate to organizational costs which are being amortized
over five years.
-36-
<PAGE>
Other Income. Other income relates to interest income which increased in
1996 due to higher average cash equivalents on hand.
Income Taxes. PCS One has been in a loss position since inception. No tax
benefit has been recognized as it is not likely that these tax benefits would be
realized.
Extraordinary Income. In 1996, a company controlled by a PCS One
Shareholder forgave an advance to PCS One in the amount of $104,000.
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
PCS One has never had a change in or disagreement with its accountants on
accounting and/or financial disclosure.
Market Price of and Dividends on the PCS One Common Shares and Related
Shareholder Matters
There is no established public trading market for the PCS One Shares. As
of the Latest Practicable Date, there were four (4) holders of the Class I
Common Shares, two (2) holders of the Class II Common Shares and 46 holders of
the PCS One Preferred Shares. As of the Latest Practicable Date, the following
beneficial owners of more than five percent of either the Class I Common Shares,
the Class II Common Shares or the PCS One Preferred Shares, individual directors
of PCS One, the directors and officers of PCS One as a group and the directors
and executive officers of PCS One as a group, hold the following number of such
shares and percentage of the total number of such issued and outstanding shares,
and if the Merger is consummated, will receive the following number of D & E
Common Shares and will hold the percentage of the then total number of issued
and outstanding D & E Common Shares.
<TABLE>
<CAPTION>
Amount and Nature Amount of D & E Percent of Total
Name and Address of of Beneficial Percent of Common Shares to D & E Common Shares
Title of Class Beneficial Owner Ownership (1) Class be Received(2) to be Outstanding(2)
- -------------- ---------------- ------------- ----- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Class I Common Dr. James Yoh 1,200,000 25% 13,146 *
Shares John F. Scarpa 1,440,000 30% 15,775 *
Michael Azeez(3) 1,260,000 26.25% 13,803 *
Sidney Azeez 900,000 18.75% 9,859 *
Directors and Officers as a 4,800,000 100% 52,582 *
Group(4)
Directors and Executive 4,800,000 100% 52,582 *
Officers as a Group(4)
Class II Common CoastalComm, Inc.(5) 250,000 55.56% 2,739 *
Shares Edison Venture Fund III,
L.P.(6) 200,000 44.44% 2,191 *
PCS One Preferred Dr. James Yoh 1,250,000 5.68% 13,693 *
Shares (7) John F. Scarpa 750,000 3.41% 8,216 *
Michael Azeez 750,000 3.41% 8,216 *
Sidney Azeez 750,000 3.41% 8,216 *
Donald Kaufmann 7,000 * 77 *
CoastalComm, Inc.(5) 5,000,000 22.73% 54,773 *
Edison Venture Fund,
III, L.P.(6) 2,000,000 9.09% 21,909 *
The D and E Group (8) 2,500,000 11.36% 27,386 *
</TABLE>
-37-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature Amount of D & E Percent of Total
Name and Address of of Beneficial Percent of Common Shares to D & E Common Shares
Title of Class Beneficial Owner Ownership (1) Class be Received(2) to be Outstanding(2)
- -------------- ---------------- ------------- ----- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Directors and Officers as a 4,552,000 20.69% 49,865 *
Group (4)
Directors and Executive 4,552,000 20.69% 49,865 *
Officers as a
Group(4)
</TABLE>
- ----------
(1) Calculated pursuant to Rule 13d-13(d) of the Exchange Act, which provides
that "beneficial ownership" includes all shares over which a person has
sole or shared dispositive or voting power. Does not include the issuance
of Class II Common Shares upon the exercise of the Reserved Share Options
or the Bonus Options which will be exercisable, if approved by the PCS One
Shareholders.
(2) Based on the assumption that 331,875 D & E Common shares will be issued to
the PCS One Shareholders in the Merger which is the product of the
$8,000,000 purchase price less estimated expenses of $35,000 divided by
the last reported trading price of $24.00 per share for the D & E Common
Shares on December 9, 1996.
(3) Dr. James Yoh currently serves as Chief Executive Officer, Vice President,
Secretary and Director. Michael Azeez currently serves as President,
Secretary, and Directors. John Scarpa currently serves as the Chairman of
the Board. Sidney Azeez currently serves as a Director.
(4) Scott Ungerer was appointed to the Board of Directors of PCS One as a
representative of CoastalComm, Inc.
(5) Richard DeFieux was appointed to the Board of Directors of PCS One as a
representative of Edison Venture Fund, III, L.P.
(7) Pursuant to the terms of the PCS One Certificate, the holders of any PCS
One Preferred Shares shall have the right, at any time, to convert any
such shares into Class II Common Shares. The number of Class II Common
Shares to be issued upon such conversion is calculated in accordance with
the terms of the PCS One Certificate and may be adjusted from time to time
upon the issuance by PCS One of stock options or convertible securities.
As of the Latest Practicable Date, each PCS One Preferred Share is
convertible into a right to receive one (1) Class II Common Share.
Approval by the PCS One Shareholders of the Reserved Share Options will
not affect this conversion ratio. In the event that the Amendment is
approved by the PCS One Shareholders, the Bonus Options will not affect
the conversion ratio of the PCS One Preferred Shares into Class II Common
Shares. Upon the Merger, each Class II Common Share shall be converted
into a right to receive D & E Common Shares, in accordance with the terms
of the Plan of Merger.
(8) Donald Kaufmann was appointed to the Board of Directors of PCS One as a
representative of The D and E Group, a Pennsylvania general partnership
and 80% owned by a subsidiary of D & E.
(*) Less than 1%.
PCS One has no present commitments to any of the foregoing persons with
respect to the issuance of PCS One Common Shares; provided, however, that the
PCS One Board has approved the issuance, pending approval of the PCS One
Shareholders, of the Reserved Share Options and Bonus Options.
PCS One has never declared a dividend and does not intend to do so for the
foreseeable future. The PCS One Certificate imposes certain supermajority voting
requirements which require an affirmative vote of 72% of the Combined Voting
Power in order to pay any dividend or make certain distributions payable on the
PCS One Common Shares.
-38-
<PAGE>
Change of Control
The PCS One Certificate provides that on or after the tenth Anniversary
Date, the PCS One Board shall be elected by the holders of the Class II Common
Shares. Until such time, the holders of PCS One Preferred Shares and Class II
Common Shares, voting together as a separate class, are entitled to elect five
(5) directors of PCS One, and the holders of Class I Common Shares are entitled
to elect six (6) directors of PCS One.
Cash, Bonus and Deferred Compensation to Executives
No cash, bonus, or deferred compensation has been awarded to, earned by,
or paid to any director of PCS One, including Michael Azeez, John Scarpa, Dr.
James Yoh, and Sidney Azeez, or to any officer of PCS One, or to Richard Harris,
in any fiscal year of PCS One. Directors and officers of PCS One do not receive
any compensation for their services. In connection with the PCS License
Auctions, Mr. Harris was engaged as an independent consultant of PCS One during
1995 and 1996 and was paid consulting fees for his services in an aggregate
approximate amount of $50,000. PCS One has, from time to time, elected to
reimburse its directors for reasonable travel expenses which, during fiscal year
1996, did not exceed approximately $5,000 in the aggregate.
Material Contracts Between PCS One and D & E
In November 1995, PCS One entered into the Series A Agreement, pursuant to
which PCS One issued 22,000,000 PCS One Preferred Shares, all of which are
currently issued and outstanding. Pursuant to the Series A Agreement, The D and
E Group, a Pennsylvania general partnership 80% -owned by Red Rose, purchased
2,500,00 PCS One Preferred Shares. See "Merger--Description of PCS One Capital
Stock--PCS One Preferred Stock--Series A Agreement." The Series A Agreement will
be terminated as a condition to the closing of the Merger. See "Merger--Plan of
Merger--Conditions to Merger."
In connection with the Series A Agreement, PCS One simultaneously entered
into a Registration Rights Agreement (the "Registration Rights Agreement"), with
the holders of PCS One Preferred Shares, including The D and E Group pursuant to
which PCS One agreed to afford such holders certain registration rights in the
event PCS One becomes a reporting company under the Exchange Act or in
connection with an initial public offering of any securities of PCS One. The
Registration Rights Agreement will be terminated as a condition to the closing
of the Merger. See "Merger--Plan of Merger--Conditions to Merger."
In connection with the Series A Agreement, PCS One also simultaneously
entered into the Stock Restriction Agreement with the holders of PCS One
Preferred Shares, including The D and E Group, and the holders of Class I Common
Shares, pursuant to which such holders agreed to certain restrictions on the
transfer and disposition of their respective Class I Common Shares and PCS One
Preferred Shares. See "Merger--Description of PCS One Capital Stock--PCS One
Preferred Stock--Stock Restriction Agreement." The Stock Restriction Agreement
will be terminated as a condition to the closing of the Merger. See
"Merger--Plan of Merger--Conditions to Merger."
In connection with the Series A Agreement, PCS One also simultaneously
entered into a Participation Agreement among PCS One, Red Rose and The D and E
Group, pursuant to which Red Rose and The D and E Group were provided certain
rights with respect to the operation services of the PCS system to which the
Lancaster License relates upon PCS One's successful bid at the Auction.
In connection with the Series A Agreement, PCS One also simultaneously
entered into a Letter Agreement, dated November 28, 1995 with The D and E Group,
pursuant to which PCS One and D & E agreed upon certain bidding strategies
relating to auctioned PCS Licenses.
-39-
<PAGE>
In December 1996, PCS One executed and delivered a Promissory Note in
favor of The D and E Group, pursuant to which PCS One borrowed $1,400,000 from D
& E and D & E agreed to make available to PCS One up to $14,000,000 in
connection with PCS One's acquisition of the Lancaster License. The D and E
Group requested that PCS One execute the Promissory Note to document the loan
transaction, and upon consummation of the Merger of PCS One with and into D & E,
all rights and obligations under the Promissory Note shall be merged into the
Surviving Corporation.
INCORPORATION, DELIVERY AND DISCLOSURE OF CERTAIN INFORMATION
The following information is incorporated herein by reference:
1. The annual report on Form 10-K/A of Predecessor for the year ended
December 31, 1995;
2. The quarterly reports on Form 10-Q of Predecessor for the quarter ended
March 31, 1996 and of D & E for the quarters ended June 30, 1996, and
September 30, 1996 (the "Third Quarter Form 10-Q");
3. The current report on Form 8-K of D & E filed on June 11, 1996;
4. The following sections of Predecessor's 1995 Report to the Shareholders:
"Market for Common Equity and Related Shareholder Matters" on page 15,
"Selected Financial Data" on page 14 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 16
through 22;
5. The following sections of Predecessor's Proxy Statement for 1996 Annual
Meeting of Shareholders and D & E's Prospectus: "Proposal 1: Election of
Directors--Directors" on pages 31 through 32, "Identification of Executive
Officers" on page 34, "Certain Relationships" on page 39 and "Certain
Related Transactions" on page 22.
D & E specifically does not incorporate by reference into this Proxy
Statement and Prospectus any portion of Predecessor's 1995 Report to the
Shareholders other than those portions identified in the fourth item of this
section.
This Prospectus and Proxy Statement is accompanied by a copy of
Predecessor's 1995 Report to the Shareholders and the Third Quarter Form 10-Q.
No material changes in D & E's affairs have occurred since December 31, 1995,
that were not described in the Third Quarter Form 10-Q.
1997 SHAREHOLDER PROPOSALS
Proposals of shareholders intended for inclusion in D & E's proxy
statement relating to the 1997 Annual Meeting of Shareholders must have been
received at D & E's principal executive offices, Brossman Business Complex, 124
East Main Street, P.O. Box 458, Ephrata, PA 17522 (please address to the
attention of W. Garth Sprecher, Secretary), no later than Monday, November 18,
1996. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the
proxy rules of the SEC or the procedures applicable to shareholder proposals as
set forth in the D & E Articles. In addition, the D & E Shareholders Agreement
further restricts the ability of the PCS One Shareholders to make shareholder
proposals. See "Merger--Plan of Merger--D & E Shareholders Agreement."
-40-
<PAGE>
LEGAL OPINIONS
The legality of the issuance of the Merger Amount will be passed upon by
Buchanan Ingersoll Professional Corporation, which is counsel to D & E. Certain
income tax consequences of the Merger will be passed upon by
___________________________________.
EXPERTS
The consolidated balance sheets of Predecessor and subsidiaries as of
December 31, 1995 and 1994 and the consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended December
31, 1995, have been incorporated herein by reference in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The consolidated balance sheets of MCG (as defined below) and subsidiaries
as of December 31, 1995 and 1994 and the consolidated statements of loss,
shareholders' equity, and cash flows for the years then ended, have been
incorporated herein by reference in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The audited balance sheet of PCS One as of December 31, 1995, and the
related statement of stockholders' equity, operations and accumulated deficit
and cash flows for the year then ended, included in this Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto dated January 19, 1996, and are
included herein in reliance on the authority of said firm as experts in
accounting and auditing in giving said reports.
FORWARD-LOOKING STATEMENTS
This Proxy Statement and Prospectus contains, either directly or by
incorporation by reference, certain forward-looking statements as to the future
performance of D & E and its various domestic and international investments and
long-term contracts, including the Lancaster County 911 system, Monor
Communications Group, Inc. ("MCG"), Monor Telephone Company, The D and E Group
and PCS One. Actual results may differ as a result of factors over which D & E
has no control, including, but not limited to, regulatory factors, uncertainties
and economic fluctuations in the domestic and foreign markets in which the
companies compete, foreign-currency risks and increased competition in domestic
markets due in large part to continued deregulation of the telecommunications
industry.
WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING OR NOT, PLEASE MARK, DATE,
SIGN AND MAIL THE ACCOMPANYING PROXY AS SOON AS POSSIBLE. AN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS INCLUDED FOR YOUR
CONVENIENCE.
-41-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
D & E
Pro Forma Combined Balance Sheet as of September 30, 1996 (Unaudited)....... F-2
Pro Forma Combined Income Statement as of December 31, 1995 (Unaudited)..... F-3
Pro Forma Combined Income Statement as of September 30, 1996 (Unaudited).... F-4
Notes to Pro Forma Financial Statements..................................... F-5
PCS One
December 31, 1995
Report of Independent Public Accountants (Arthur Andersen LLP)........... F-7
Balance Sheet............................................................ F-8
Statement of Stockholders' Equity........................................ F-9
Statement of Operations and Accumulated Deficit......................... F-10
Statement of Cash Flows................................................. F-11
Notes to Financial Statements........................................... F-12
September 30, 1996
Balance Sheet (Unaudited)............................................... F-15
Statement of Stockholders' Equity -- September 30, 1996 (Unaudited)..... F-16
Statement of Operations and Accumulated Deficit (Unaudited)............. F-17
Statement of Cash Flows (Unaudited)..................................... F-18
Notes to Financial Statements (Unaudited)............................... F-19
F-1
<PAGE>
D & E COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS D & E PCS PRO FORMA The COMPANY
Communications One Adjustments PRO FORMA
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .............................. $ 243,383 $ 27,309 -- $ 270,692
Accounts receivable .................................... 7,332,426 0 -- 7,332,426
Accounts receivable and notes receivable -
affiliated companies ............................... 1,041,854 -- 1,041,854
Inventories, lower of cost or market, at average cost .. 888,277 0 -- 888,277
Prepaid expenses ....................................... 854,375 0 -- 854,375
Other current assets ................................... 1,563,581 0 -- 1,563,581
------------- ------------- ------------- -------------
TOTAL CURRENT ASSETS ............................. 11,923,896 27,309 0 11,951,205
INVESTMENTS
Investments in affiliated companies .................... 9,806,694 0 (1,319,842)(C) 8,486,852
Other .................................................. 1,747,244 0 -- 1,747,244
------------- ------------- ------------- -------------
11,553,938 0 (1,319,842) 10,234,096
------------- ------------- ------------- -------------
PROPERTY, PLANT AND EQUIPMENT
Telephone plant in service ............................. 109,814,679 0 -- 109,814,679
Under construction ..................................... 444,016 0 -- 444,016
------------- ------------- ------------- -------------
110,258,695 0 0 110,258,695
Less accumulated depreciation .......................... 45,517,370 0 -- 45,517,370
------------- ------------- ------------- -------------
64,741,325 0 0 64,741,325
------------- ------------- ------------- -------------
OTHER ASSETS
Unamortized software costs ............................. 158,532 0 -- 158,532
PCS License ............................................ 0 13,198,416 8,042,301(A)(B) 21,240,717
Accounts receivable - affiliated company ............... 97,688 0 -- 97,688
Other .................................................. 1,042,516 217,121 (217,121)(B) 1,042,516
------------- ------------- ------------- -------------
1,298,736 13,415,537 7,825,180 22,539,453
------------- ------------- ------------- -------------
TOTAL ASSETS ....................................... $ 89,517,895 $ 13,442,846 $ 6,505,338 $ 109,466,079
============= ============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable .......................................... $ 7,830,000 $ 0 -- $ 7,830,000
Long-term debt maturing within one year ................ 363,316 0 -- 363,316
Accounts payable ....................................... 5,407,503 38,286 -- 5,445,789
Accounts payable - affiliated companies ................ 255,756 0 -- 255,756
Accrued taxes .......................................... 264,152 0 -- 264,152
Accrued interest and dividends ......................... 667,774 31,324 -- 699,098
Advance billings, customer deposits and other .......... 1,525,803 0 -- 1,525,803
------------- ------------- ------------- -------------
TOTAL CURRENT LIABILITIES .......................... 16,314,304 69,610 0 16,383,914
------------- ------------- ------------- -------------
LONG-TERM DEBT .............................................. 25,988,774 13,198,416 (1,319,842)(C) 37,867,348
------------- ------------- ------------- -------------
OTHER LIABILITIES
Deferred income taxes .................................. 6,792,230 0 -- 6,792,230
Regulatory liability, net .............................. 822,386 0 -- 822,386
Accrued retirement benefits ............................ 1,010,323 0 -- 1,010,323
Other .................................................. 258,616 0 -- 258,616
------------- ------------- ------------- -------------
8,883,555 0 -- 8,883,555
------------- ------------- ------------- -------------
MINORITY INTEREST ........................................... 238,397 0 -- 238,397
------------- ------------- ------------- -------------
PREFERRED STOCK, par value $100, cumulative, callable at par,
at the option of the Company, authorized 20,000,000
shares, outstanding: Series A 4 1/2%, 14,456 shares ... 1,445,600 0 -- 1,445,600
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock, par value $.16, authorized shares ........ 917,406 0 51,200(E) 968,606
30,000,000 and Outstanding shares:
5,733,787 at September 30, 1996
Common stock, .001 Par value (Class I) ...................... 4,800 (4,800)(F) 0
Common stock, .001 Par value (Class II) ..................... 450 (450)(F) 0
Preferred Stock .01 Par value ............................... $ 220,000 (220,000)(F) 0
Additional paid-in capital .................................. 1,850,893 70,000 7,878,800 (G) 9,799,693
Unearned ESOP Compensation .................................. (1,196,774) -- (1,196,774)
Retained earnings (Deficit) ................................. 35,075,740 (120,430) 120,430(H)(B) 35,075,740
------------- ------------- ------------- -------------
36,647,265 174,820 7,825,180 44,647,265
------------- ------------- ------------- -------------
TOTAL LIABILITIES, MINORITY INTEREST, PREFERRED STOCK AND
SHAREHOLDERS' EQUITY ........................................ $ 89,517,895 $ 13,442,846 $ 6,505,338 $ 109,466,079
============= ============= ============= =============
</TABLE>
F-2
<PAGE>
D & E COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENT
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
D & E PCS PRO FORMA The COMPANY
Communications One Adjustments PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local network services ........................... $ 8,320,747 $ 0 -- $ 8,320,747
Network access services .......................... 15,309,336 0 -- 15,309,336
Long distance network services ................... 4,024,374 0 -- 4,024,374
Directory advertising ............................ 2,670,357 0 -- 2,670,357
Other ............................................ 2,374,230 0 -- 2,374,230
Revenue from subsidiaries ........................ 8,177,438 0 -- 8,177,438
Miscellaneous .................................... (65,624) 0 -- (65,624)
------------ ------------ ------------ ------------
Total operating revenues ...................... 40,810,858 0 -- 40,810,858
------------ ------------ ------------ ------------
OPERATING EXPENSES
Network operations ............................... 6,162,733 0 -- 6,162,733
Network access ................................... 1,865,086 0 -- 1,865,086
Depreciation and Amortization .................... 6,768,751 66,807 (66,807)(J) 6,768,751
Customer services ................................ 1,696,501 0 -- 1,696,501
Financial and administrative services ............ 4,661,522 0 -- 4,661,522
Directory and other, net ......................... 1,663,764 0 -- 1,663,764
Operating taxes, other than income ............... 1,443,491 0 -- 1,443,491
Costs of products sold ........................... 3,307,857 0 -- 3,307,857
Other expenses ................................... 4,789,568 595 -- 4,790,163
------------ ------------ ------------ ------------
Total operating expenses ...................... 32,359,273 67,402 (66,807) 32,359,868
------------ ------------ ------------ ------------
Operating income .............................. 8,451,585 (67,402) 66,807 8,450,990
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
AFUDC ............................................ 26,882 0 -- 26,882
Equity in net loss of affiliates ................. (441,088) 0 -- (441,088)
Interest income (expense) ........................ (2,451,325) 9,592 -- (2,441,733)
Other, net ....................................... (9,903) 0 -- (9,903)
------------ ------------ ------------ ------------
Total other income (expense) .................. (2,875,434) 9,592 0 (2,865,842)
------------ ------------ ------------ ------------
Income before minority interest, subsidiary
preferred stock dividends and income taxes 5,576,151 (57,810) 66,807 5,585,148
MINORITY INTEREST .................................... 0 0 -- 0
------------ ------------ ------------ ------------
Income before subsidiary preferred
stock dividends and income taxes ......... 5,576,151 (57,810) 66,807 5,585,148
DIVIDENDS ON UTILITY SERIES A 4 1/2%
PREFERRED STOCK ................................. 66,264 0 -- 66,264
------------ ------------ ------------ ------------
Income before extraordinary items ........... 66,807
and income taxes ......................... 5,509,887 (57,810) 5,518,884
EXTRAORDINARY INTEREST ............................... 0 0 -- 0
------------ ------------ ------------ ------------
Income before income taxes .................. 5,509,887 (57,810) 66,807 5,518,884
INCOME TAXES ......................................... 2,166,447 0 3,026(L) 2,169,473
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 3,343,440 ($ 57,810) $ 63,781 $ 3,349,411
============ ============ ============ ============
Average common shares outstanding ................ 5,708,292 27,250,000 26,930,000(K) 6,028,292
Earnings per common share ........................ $ .59 0 -- $ .56
Dividends per common share ....................... $ .36 0 -- $ .36
</TABLE>
F-3
<PAGE>
D & E COMMUNICATIONS, INC. AND SUBSIDIARIES
PRO FORMA COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
D & E PCS PRO FORMA The COMPANY
Communications One Adjustments PRO FORMA
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Local network services ........................... $ 6,461,892 $ 0 -- $ 6,461,892
Network access services .......................... 11,779,710 0 -- 11,779,710
Long distance network services ................... 3,140,650 0 -- 3,140,650
Directory advertising ............................ 2,204,421 0 -- 2,204,421
Other sales and service .......................... 8,474,764 0 -- 8,474,764
Miscellaneous .................................... 1,316,450 0 -- 1,316,450
------------ ------------ ------------ ------------
Total operating revenues ...................... 33,377,887 0 -- 33,377,887
------------ ------------ ------------ ------------
OPERATING EXPENSES
Network operations ............................... 4,452,206 0 -- 4,452,206
Network access ................................... 1,374,388 0 -- 1,374,388
Depreciation and Amortization .................... 5,400,192 50,105 (50,105)(J) 5,400,192
Customer services ................................ 1,289,564 0 -- 1,289,564
Financial and administrative services ............ 3,777,213 0 -- 3,777,213
Directory ........................................ 1,373,289 0 -- 1,373,289
Operating taxes, other than income ............... 1,102,230 0 -- 1,102,230
Costs of products sold ........................... 3,961,098 0 -- 3,961,098
Other expenses ................................... 3,879,788 185,667 -- 4,065,455
------------ ------------ ------------ ------------
Total operating expenses ...................... 26,609,968 235,772 6 (50,105) 26,795,635
------------ ------------ ------------ ------------
Operating income .............................. 6,767,919 (235,772) 50,105 6,582,252
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
AFUDC ............................................ 63,595 0 -- 63,595
Equity in net income of affiliates ............... 646,564 0 -- 646,564
Interest income (expense) ........................ (1,946,688) 69,152 -- (1,877,536)
Other, net ....................................... 54,472 0 -- 54,472
------------ ------------ ------------ ------------
Total other income (expense) .................. (1,182,057) 69,152 0 (1,112,905)
------------ ------------ ------------ ------------
Income before minority interest, subsidiary
preferred stock dividends and income taxes 5,585,862 (166,620) 50,105 5,469,347
MINORITY INTEREST .................................... 33,662 0 -- 33,662
------------ ------------ ------------ ------------
Income before subsidiary preferred
stock dividends and income taxes ......... 5,619,524 (166,620) 50,105 5,503,009
DIVIDENDS ON UTILITY SERIES A 4 1/2% ................. --
PREFERRED STOCK ................................. 48,789 0 48,789
------------ ------------ ------------ ------------
Income before extraordinary items
and income taxes ......................... 5,570,735 (166,620) 50,105 5,454,220
EXTRAORDINARY INCOME ................................. 0 104,000 -- 104,000
------------ ------------ ------------ ------------
Income before income taxes .................. 5,570,735 (62,620) 50,105 5,558,220
INCOME TAXES ......................................... 2,278,605 0 7,686(L) 2,286,291
------------ ------------ ------------ ------------
NET INCOME ........................................... $ 3,292,130 ($ 62,620) $ 42,419 $ 3,271,929
============ ============ ============ ============
Average common shares outstanding ................ 5,724,994 29,725,000 29,405,000(K) 6,044,994
Earnings (Losses) per common share ............... $ 0.58 0 -- $ 0.54
Dividends per common share ....................... $ 0.29 0 -- $ 0.29
</TABLE>
F-4
<PAGE>
D & E COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Unaudited Proforma Financial Statements
The following pro forma financial information is given with respect to the
proposed merger of PCS One with and into D & E. The pro forma balance sheet is
presented as of September 30, 1996, which is the most recent period for which a
consolidated balance sheet of D & E is required. The pro forma condensed
statements of income are presented as of December 31, 1995 and September 30,
1996. This pro forma presentation shows (i) the combined balance sheet of D & E
as if the merger had occurred prior to September 30, 1996, and (ii) the combined
income statements of D & E as if the merger had occurred previously to the dates
indicated.
A Adjustment to record acquisition costs associated with the PCS license.
B Adjustment to write-off the organization costs of PCS One.
C Adjustment to reflect the elimination of D & E Communications equity
investment in PCS One and the corresponding debt recorded at PCS One.
E Adjustment to record par value at $0.16 per share of Company Common Stock
to be issued and outstanding. The number of shares of Common Stock was
estimated using the $8,000,000 purchase price divided by $25.00. The
agreement states that the $8,000,000 be divided by the weighted average
closing price of the D&F Common Shares on the NASDAQ/NMS over the 20
trading days on which the D & E Common Shares were traded immediately
preceding the Closing Date, but no less that $23.00, and no more than
$27.00, $25.00 being the middle of the range. The adjustment is summarized
below:
Common Stock:
Purchase Price $8,000,000
Price per Share $25.00
Number of Shares to be Issued 320,000
Par Value per Share $0.16
Par Value $51,200
F Adjustment to reflect the elimination of PCS One (1) Common Stock and (2)
Preferred Stock as a result of the acquisition.
G Adjustment to eliminate the additional paid-in capital ("APIC") of PCS One
and, increase APIC by amount of issuance of common stock for the
acquisition of PCS One.
H Adjustment to eliminate the retained earnings of PCS One.
J Adjustment to eliminate amortization of PCS One organization costs.
F-5
<PAGE>
K Adjustment to increase the number of common shares outstanding as a result
of the following:
Common Shares Outstanding:
Total D&E Communications 5,724,994
Total PCS One Communications 29,725,000
35,449,994
Less - PCS One - Class 1 Common Shares (4,800,000)
Less - PCS One - Class 2 Common Shares (450,000)
Less - PCS One - Preferred Stock (22,000,000)
Less - PCS One - Class 2 Common Stock Options (2,475,000)
Plus - D & E Communications Shares Issued for acquisition 320,000
-------
6,044,994
The PCS One Class II Common Stock options granted prior to the merger were
granted below the market value per share implicit in the merger.
Compensation cost of approximately $633,300 is expected to result from
this transaction, which has been included in the pro forma combined income
statements. The 2,475,00 shares issuable pursuant to the options are shown
as outstanding for all periods presented in the pro forma combined income
statements.
L Adjustment to record additional consolidated income tax expense resulting
from pro forma adjustments to the Pro Forma Combined Income Statement.
F-6
<PAGE>
[ARTHUR ANDERSEN LLP LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
PCS One, Inc.:
We have audited the accompanying balance sheet of PCS One, Inc. (a New Jersey
corporation in the development stage) as of December 31, 1995, and the related
statements of operations and accumulated deficit, stockholders' equity and cash
flows for the year then ended and for the period from inception (October 11,
1994) to December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PCS One, Inc. as of December
31, 1995, and the results of its operations and its cash flows for the year then
ended and for the period from inception to December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
-----------------------
Philadelphia, Pennsylvania
January 19, 1996 (except as to the matter discussed in Note 6 for which the date
is December 12, 1996)
F-7
<PAGE>
PCS ONE, INC.
(a development-stage company)
BALANCE SHEET -- DECEMBER 31, 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,797,116
Federal Communications Commission auction deposit 18,000,000
------------
Total current assets 21,797,116
LONG-TERM ASSETS:
Organizational costs, net of amortization of $66,807 267,226
------------
Total assets $ 22,064,342
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,902
Advance (Note 4) 104,000
------------
Total liabilities 116,902
------------
STOCKHOLDERS' EQUITY:
Class I Common Stock, $.001 par value;
6,000,000 shares authorized; 4,800,000
shares issued and outstanding 4,800
Class II Common Stock, $.001 par value;
57,975,000 shares authorized; 450,000
shares issued and outstanding 450
Preferred Stock, $.01 par value; 50,000,000
shares authorized, of which 22,500,000
have been designated Series A Convertible
Preferred Stock; 22,000,000 Series A
shares issued and outstanding 220,000
Additional paid-in capital 21,780,000
Deficit accumulated during the development stage (57,810)
------------
Total stockholders' equity 21,947,440
------------
Total liabilities and stockholders' equity $ 22,064,342
============
The accompanying notes are an integral part of this financial statement.
F-8
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENT OF STOCKHOLDERS' EQUITY -- DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series A
Convertible
Preferred Class II Class I Additional
Stock Common Stock Common Stock Paid-in
----- ------------ ------------ -------
Shares Amount Shares Amount Shares Amount Capital
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 -- $ -- -- $ -- -- $ -- $ --
Issuance of 4,800,000 shares of -- -- -- -- 4,800,000 4,800 --
Class I Common Stock at $.001 per
share
Issuance of 450,000 shares of -- -- 450,000 450 -- -- --
Class II Common Stock at $.001
per share
Issuance of 22,000,000 shares of 22,000,000 220,000 -- -- -- -- 21,780,000
Series A Convertible
Preferred Stock at $.01 per share
Net Loss -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 22,000,000 $ 220,000 450,000 $ 450 4,800,000 $ 4,800 $21,780,000
========== ========= ======= ======== ========= ======== ==========
</TABLE>
Deficit
Accumulated
During
Development
Stage Total
----- -----
BALANCE, JANUARY 1, 1995 $ -- $ --
Issuance of 4,800,000 shares of -- 4,800
Class I Common Stock at $.001 per
share
Issuance of 450,000 shares of -- 450
Class II Common Stock at $.001
per share
Issuance of 22,000,000 shares of -- 22,000,000
Series A Convertible
Preferred Stock at $.01 per share
Net Loss (57,810) (57,810)
-------- --------
BALANCE, DECEMBER 31, 1995 $ (57,810) $21,947,440
========= ==========
The accompany notes are an integral part of this financial statement.
F-9
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995
REVENUES $ --
--------
OPERATING EXPENSES:
Amortization expense 66,807
Other 595
--------
LOSS FROM OPERATIONS (67,402)
OTHER INCOME (EXPENSE):
Interest income 9,592
--------
Net loss (57,810)
ACCUMULATED DEFICIT, BEGINNING OF PERIOD --
--------
ACCUMULATED DEFICIT, END OF PERIOD $(57,810)
--------
EARNINGS PER SHARE (Note 2) $ --
========
The accompanying notes are an integral part of this financial statement.
F-10
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (57,810)
Adjustments to reconcile net loss to net cash
used in operating activities-
Amortization
66,807
Changes in assets and liabilities-
Increase in organizational costs (333,033)
Increase in note payable 104,000
Increase in accounts payable 12,902
------------
Net cash used in operating activities (208,134)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in Federal Communications
Commission auction deposit (18,000,000)
------------
Net cash used in investing activities (18,000,000)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of Class I Common Stock 4,800
Proceeds from the issuance of Class II Common Stock 450
Proceeds from the issuance of Series A
Convertible Preferred Stock 22,000,000
------------
Net cash provided by financing activities 22,005,250
NET INCREASE IN CASH 3,797,116
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD --
------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,797,116
============
The accompanying notes are an integral part of this financial statement.
F-11
<PAGE>
PCS ONE, INC.
(a development-stage company)
NOTES TO FINANCIAL STATEMENTS
1. DEVELOPMENT-STAGE RISKS:
PCS One, Inc. (the "Company") is a development-stage company incorporated in New
Jersey on October 11, 1994. The Company was created to provide personal
communication services in selected basic trading areas throughout the United
States. These services will be offered on the personal communication service
which is currently being pursued via the Federal Communications Commission
("FCC") C Band competitive licensed auctions.
The Company has incurred losses since its inception and is subject to risks
associated with being a development-stage company. Substantial financing will be
required by the Company to fund development of the operating systems and to fund
operations for the first several years. There is no assurance that such
financing will be available when needed or that the Company's planned services
will be commercially successful.
There was no activity of the Company from October 11, 1994 through December 31,
1994.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash equivalents at
December 31, 1995, consist of investments in money repurchase agreements.
Federal Communications Commission Auction Deposit
The Company has deposited $18,000,000 with the FCC as an up front payment in
order to qualify as a bidder in the C Band competitive licensed auctions. If the
Company wins a license(s), this deposit will offset required payments. The
deposit will be fully refunded if the Company does not win a license and has
complied with the FCC rules and regulations.
Organizational Costs
Organizational costs of $334,033 have been capitalized and represent the legal
fees, professional fees and other costs of bringing the Company into legal
existence. These costs are amortized to expense over a 60-month period.
Amortization expense related to these organizational costs for the year ended
December 31, 1995, was $66,807.
Income Taxes
The Company follows the accounting provisions of SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires the liability method of accounting for
deferred income taxes.
F-12
<PAGE>
3. COMMON AND PREFERRED STOCK:
Common Stock
The Company is authorized to issue 6,000,000 shares of Class I Common Stock,
$.001 par value (the "Class I Common Stock") and 57,975,000 shares of Class II
Common Stock, $.001 par value (the "Class II Common Stock" and together with the
Class I Common Stock, the "Common Stock"). At December 31, 1995, 4,800,000
shares of Class I Common Stock and 450,000 shares of Class II Common Stock were
issued and outstanding.
The Class I Common Stock is entitled to such number of votes per share as is
required so that the outstanding shares of Class I Common Stock at all times
represent a majority of the votes held by the outstanding Class I Common Stock,
the Class II Common Stock, and the Preferred Stock, voting together as a single
class. The Class II Common Stock will be entitled to one vote per share.
At such time as the Company is no longer required to maintain voting control in
the Control Group under applicable FCC regulations, each share of Class I Common
Stock will automatically convert into one share of Class II Common Stock.
Preferred Stock
The Company is authorized to issue 50,000,000 shares of Preferred Stock (the
"Preferred Stock"), 22,500,000 of which have been designated Series A
Convertible Preferred Stock, $.01 par value (the "Convertible Preferred Stock").
At December 31, 1995, 22,000,000 shares of the Convertible Preferred Stock were
issued and outstanding. Each share of Series A Convertible Preferred Stock shall
have voting privileges equivalent to the number of shares of Class II Common
Stock into which the Preferred Stock is convertible. Each share of Convertible
Preferred Stock is convertible at any time into the Company's Class II Common
Stock at a conversion price of $1 per share. The convertible preferred stock is
mandatorily redeemable in the event that the company is unsuccessful in the FCC
C Band competitive licensed auctions. This stock is also redeemable in certain
circumstances after ten years.
Earnings Per Share
Earnings per share are computed by dividing loss by the weighted average number
of common shares and common stock equivalents outstanding for each period.
Common shares outstanding at December 31, 1995 consisted of 4,800,000 shares of
Class I Common Stock and 450,000 shares of Class II Common Stock. Common Stock
equivalents outstanding at December 31, 1995 consisted of 22,000,000 Series A
Convertible Preferred Stock. Each share of the Series A Convertible Preferred
Stock is equivalent to one share of common stock.
4. RELATED-PARTY TRANSACTION:
The advance represents amounts received from a company controlled by a director
and shareholder of the Company. The directors and officers of the Company serve
without compensation on a limited part-time basis.
5. DEFERRED INCOME TAXES:
The Company provides deferred income taxes for temporary differences between
amounts reported for financial reporting and income tax purposes. As of December
31, 1995, there were no deferred tax
F-13
<PAGE>
liabilities. Deferred tax assets amounted to $20,000 at December 31, 1995. This
asset results from the net operating loss carry forward which expires in 2010.
The Company has provided a valuation allowance of $20,000 for this deferred tax
asset due to the anticipated losses of the Company in its initial years.
6. SUBSEQUENT EVENT:
On December 12, 1996, the board of directors of the Company approved the Plan of
Merger pursuant to which the Company is prepared to be merged with and into D &
E Communications, Inc. ("D & E"), subject to shareholder approval which results
in the acquisition of the Company by D & E.
F-14
<PAGE>
PCS ONE, INC.
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
December 31, 1996
ASSETS 1995 (Unaudited)
- ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 3,797,116 $ 27,309
FCC Auction Deposit 18,000,000 0
------------ ------------
Total current assets 21,797,116 27,309
LONG-TERM ASSETS:
PCS License 0 13,198,416
Organizational Costs (Net of Amortization
of $66,807 and $116,912) 267,226 217,121
------------ ------------
Total Assets $ 22,064,342 $ 13,442,846
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Interest Payable $ 0 $ 31,324
Accounts Payable 12,902 38,286
Advance 104,000 0
Payable to Shareholders 0 1,319,842
------------ ------------
Total Current Liabilities 116,902 1,389,452
LONG-TERM LIABILITIES:
Note Payable - FCC 0 11,878,574
------------ ------------
Total Liabilities 116,902 13,268,026
============ ============
STOCKHOLDERS' EQUITY:
Class I Common Stock, $.001 par value; 6,000,000
shares authorized; 4,800,000 shares issued and
outstanding
4,800 4,800
Class II Common Stock, $.001 par value; 57,975,000
shares authorized; 450,000 shares issued and
outstanding
450 450
Preferred Stock, $.01 par value; 50,000,000 shares
authorized, of which 22,500,000 shares have been
designated Series A Convertible Preferred Stock;
22,000,000 Series A shares issued and outstanding
220,000 220,000
Additional paid-in capital 21,780,000 70,000
Deficit accumulated during development stage (57,810) (120,430)
------------ ------------
Total Stockholders' Equity 21,947,440 174,820
------------ ------------
Total Liabilities and Stockholders' Equity $ 22,064,342 $ 13,442,846
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-15
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENT OF STOCKHOLDERS' EQUITY -- SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Series A
Convertible
Preferred Class II Class I Additional
Stock Common Stock Common Stock Paid-in
Shares Amount Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 -- $ -- -- $ -- $ -- $ -- $ --
Issuance of 4,800,000 shares -- -- -- -- 4,800,000 4,800 --
of Class I Common Stock at
$.001 per share
Issuance of 450,000 shares of -- -- 450,000 450 -- -- --
Class II Common Stock at
$.001 per share
Issuance of 22,000,000 shares 22,000,000 220,000 -- -- -- -- 21,780,000
of Series A Convertible
Preferred Stock at $.01 per
share
Net Loss -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 22,000,000 220,000 450,000 450 4,800,000 4,800 21,780,000
Return of capital (Note 2) -- -- -- -- -- -- (21,710,000)
Net loss -- -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, SEPTEMBER 30, 1996
(unaudited) 22,000,000 $ 220,000 450,000 $ 450 4,800,000 $ 4,800 $ 70,000
============ ============ ============ ============ ============ ============ ============
</TABLE>
Deficit
Accumulated
During
Development
Stage Total
------------ ------------
BALANCE, JANUARY 1, 1995 $ --
Issuance of 4,800,000 shares -- 4,800
of Class I Common Stock at
$.001 per share
Issuance of 450,000 shares of -- 450
Class II Common Stock at
$.001 per share
Issuance of 22,000,000 shares -- 22,000,000
of Series A Convertible
Preferred Stock at $.01 per
share
Net Loss (57,810) (57,810)
------------ ------------
BALANCE, DECEMBER 31, 1995 (57,810) 21,947,440
Return of capital (Note 2) -- (21,710,000)
Net loss (62,620) (62,620)
------------ ------------
BALANCE, SEPTEMBER 30, 1996 $ (120,430) $ 174,820
============ ============
The accompany notes are an integral part of this financial statement.
F-16
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Period Period From
From 1/1/96 Inception
Through Through
Year Ended 9/30/96 9/30/96
12/31/95 (Unaudited) (Unaudited)
--------- --------- ---------
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0
--------- --------- ---------
OPERATING EXPENSES:
Amortization Expense 66,807 50,105 116,912
Auction Administration 0 70,602 70,602
Marketing 0 25,549 25,549
Other 595 89,516 90,111
--------- --------- ---------
Total Operating Expenses 67,402 235,772 303,174
--------- --------- ---------
Loss From Operations (67,402) (235,772) (303,174)
OTHER INCOME (EXPENSE):
Interest Expense 0 (31,324) (31,324)
Interest Income 9,592 100,476 110,068
--------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM (57,810) (166,620) (224,430)
EXTRAORDINARY ITEM (Less applicable taxes of $0) 0 104,000 104,000
--------- --------- ---------
Net Loss (57,810) (62,620) (120,430)
Accumulated Deficit, Beginning of Period 0 (57,810) 0
--------- --------- ---------
Accumulated Deficit, End of Period ($ 57,810) ($120,430) ($120,430)
========= ========= =========
EARNINGS PER SHARE (Note 4):
Before extraordinary item $ -- $ -- $ (.01)
Extraordinary item $ -- $ -- .01
--------- --------- ---------
Total $ -- $ -- $ --
========= ========= =========
</TABLE>
The accompany notes are an integral part of this financial statement.
F-17
<PAGE>
PCS ONE, INC.
(a development-stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Period From
From 1/1/96 Inception
Through Through
Year Ended 9/30/96 9/30/96
12/31/95 (Unaudited) (Unaudited)
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($ 57,810) ($ 62,620) ($ 120,430)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 66,807 50,105 116,912
Changes in Assets and Liabilities:
Increase in organizational costs (334,033) 0 (334,033)
Increase in accounts payable 12,902 25,384 38,286
Increase (decrease) in note payable 104,000 (104,000) 0
Increase in payable to shareholder 0 1,319,842 1,319,842
------------ ------------ ------------
Net cash provided by (used) in operating activities (208,134) 1,228,711 1,020,577
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Federal Communications
Commission (deposit) auction refund (18,000,000) 16,680,158 (1,319,842)
------------ ------------ ------------
Net cash provided by (used) in investing activities (18,000,000) 16,680,158 (1,319,842)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of Class I Common Stock 4,800 0 4,800
Proceeds from the issuance of Class II Common Stock 450 0 450
Proceeds from the issuance of Series A Convertible
Preferred Stock 22,000,000 0 22,000,000
Increase in interest payable 0 31,324 31,324
Return of Capital 0 (21,710,000) (21,710,000)
------------ ------------ ------------
Net cash provided by (used) in financing activities 22,005,250 (21,678,676) 326,574
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 3,797,116 (3,769,807) 27,309
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
0 3,797,116 0
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,797,116 $ 27,309 $ 27,309
============ ============ ============
</TABLE>
The accompanying Notes are an integral part of this financial statement.
F-18
<PAGE>
PCS ONE, INC.
(a development - stage company)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
UNAUDITED
(1) The accompanying unaudited financial statements as of September 30, 1996 and
for the nine months then ended have been prepared in conformity with generally
accepted accounting principles. The management of PCS One, Inc. (the Company)
believes that all adjustments necessary for a fair statement of the results of
this interim period have been included. The financial information presented
herein should be read in conjunction with the audited financial statements for
the year ended December 31, 1995. The results of the interim period presented
may not be indicative of the results for a full year.
(2) In May 1996, the Company was the high bidder for the Lancaster, PA PCS
license having submitted a bid of approximately $13,200,000 after reflection of
the entrepreneur's discount. In accordance with the FCC auction procedures, a
down payment of $1,319,416 was retained by the FCC of the Ccompany's 1995
deposit of $18,000,000. The license was granted by the FCC on September 17,
1996. The Company issued a ten-year note payable to the FCC in the amount of
$11,878,574. Interest of 7% is payable on this note for six years; interest and
principal payments will be made over years 7-10 starting October 1, 1996. The
FCC has a first lien on and a continuing security interest in all of the
Company's rights and interest in the license and all proceeds, profits and
products of any sale of or other disposition thereof. The Company holds a
conditional license to use the spectrum with no ownership interest in the
above-mentioned collateral. Interest expense related to the note for the period
ended September 30, 1996 was $31,324. The remainder ($16,680,158) of the
Company's deposit was returned in 1996. In May 1996, the Company determined to
pay $21,710,000 to the Series A Convertible Preferred Stockholders as a return
of capital. Of this amount, $1,319,842 is reflected as a payable to one
shareholder at September 30, 1996; the remainder was paid in 1996.
(3) In 1996, the advance payable of $104,000 to a company controlled by a
director and shareholder of the Company was forgiven. This is reflected in
extraordinary income in the accompanying statement of operations.
(4) Earnings per share are computed by dividing loss by the weighted average
number of common shares and common stock equivalents outstanding for each
period. Common shares outstanding at September 30, 1996 consisted of 4,800,000
shares of Class I Common Stock and 450,000 shares of Class II Common Stock.
Common stock equivalents outstanding at September 30, 1996 consisted of
22,000,000 Series A Convertible Preferred Stock. Each share of the Series A
Convertible Preferred Stock is equivalent to one share of common stock.
(5) In November 1996, the Company entered into a line of credit loan arrangement
with D & E Communications, Inc. (D & E) in the maximum aggregate principal
amount of $14,000,000. The proceed of the loan may be used only for the
acquisition of the Lancaster PCS license and, subject to D & E approval, for the
design, construction and operation of the PCS system to which the license
relates.
(6) In November 1996, the Company's board voted, subject to stockholders'
approval, to issue options for 475,000 shares of Class II common stock and 2
million shares of Class II common stock to the founding shareholder group and to
two founders and members of management, respectively, in recognition of their
contributions to the Company. These options are immediately exercisable and have
an exercise price of $.0132 per share. Compensation expense will be recognized
for the difference between the exercise price and the fair value of the common
shares upon shareholder approval.
F-19
<PAGE>
(7) On November 14, 1996, the board of directors of the Company approved the
Plan of Merger pursuant to which the Company is prepared to be merged with and
into D & E, subject to shareholder approval which results in the acquisition of
the Company by D & E. The Merger Agreement was prepared and executed on December
12, 1996.
F-20
<PAGE>
GLOSSARY OF DEFINED TERMS
--A--
Amendment...............................................Outside Front Cover Page
Anniversary Date..............................................................24
Announcement Date.............................................................22
Articles of Merger.............................................................5
Auction........................................................................2
--B--
beneficial owner..............................................................21
blank check...................................................................28
Bonus Options...........................................Outside Front Cover Page
Business Combination..........................................................21
--C--
C-Block........................................................................2
Certificate of Merger..........................................................5
Charitable Foundation.........................................................21
Class I Common Shares...................................Outside Front Cover Page
Class II Common Shares..................................Outside Front Cover Page
Code...........................................................................6
Combined Voting Power.......................................................1, 2
Conversion Price..............................................................26
--D--
D & E...................................................Outside Front Cover Page
D & E Articles................................................................13
D & E Board....................................................................4
D & E By-Laws.................................................................13
D & E Common Shares.....................................Outside Front Cover Page
D & E Preferred Shares........................................................18
Determination Date............................................................22
Disinterested Director........................................................22
Disinterested Shareholder Vote................................................21
Dissenters' Rights.............................................................5
--E--
Effective Time..........................................Outside Front Cover Page
Effective Time Notice.........................................................32
Exchange Act.............................................Inside Front Cover Page
--F--
Fair Value....................................................................32
FCC 2
--I--
Interested Shareholder........................................................21
IRS 35
--L--
Lancaster License..............................................................2
Latest Practicable Date.................................Outside Front Cover Page
--M--
Marketing......................................................................3
MCG 41
Merger..................................................Outside Front Cover Page
Merger Agreement........................................Outside Front Cover Page
Merger Amount...........................................Outside Front Cover Page
--N--
NASDAQ/NMS..............................................Outside Front Cover Page
New Jersey Secretary of State..................................................5
NJBCA..........................................................................1
--P--
PBCL..........................................................................13
PCS 2
PCS Licenses...................................................................2
PCS One.................................................Outside Front Cover Page
PCS One Board..................................................................2
PCS One By-Laws................................................................1
PCS One Certificate.....................................Outside Front Cover Page
PCS One Common Shares...................................Outside Front Cover Page
PCS One Preferred Shares................................Outside Front Cover Page
PCS One Shareholders...........................................................4
PCS One Shares................................................................32
PCS One Stock Certificate...............................Outside Front Cover Page
Pennsylvania Department of State...............................................5
Plan of Merger..........................................Outside Front Cover Page
Predecessor.............................................Outside Front Cover Page
--R--
Record Date....................................................................1
Red Rose.......................................................................3
Registration Rights Agreement.................................................39
Registration Statement...................................Inside Front Cover Page
Reserved Share Options..................................Outside Front Cover Page
Reserved Shares...............................................................11
--S--
SEC Outside Front Cover Page
Securities Act...........................................Inside Front Cover Page
Series A Agreement............................................................24
Series A Preferred Designations...............................................11
Signatory Shareholder.........................................................16
Special Meeting.........................................Outside Front Cover Page
Stock Price...................................................................14
Stock Restriction Agreement...................................................24
Surviving Corporation...................................Outside Front Cover Page
--T--
Tax Opinion...................................................................35
Ten-Day, Post-Written Demand Period...........................................33
Third Quarter Form 10-Q.......................................................40
Thirty-Day Agreement Period...................................................33
Thirty-Day Commencement Period................................................33
--V--
Voting Stock..................................................................19
Voting Trust..................................................................21
--W--
Written Demand................................................................32
G-1
<PAGE>
Written Objection.............................................................32
G-2
<PAGE>
EXHIBIT A
PCS ONE CERTIFICATE, AS AMENDED
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
PCS ONE, INC.
THE SECRETARY OF STATE OF NEW JERSEY
THE UNDERSIGNED, on behalf of PCS one, Inc., a corporation organized and
existing under the laws of the State of New Jersey (the "Corporation"), in
accordance with Sections 14A:7-2(4), 14A:9-2(4) and 14A:9-4(3) of the New Jersey
Business Corporation Act, as amended (the "BCA"), does hereby execute the
following Amended and Restated Certificate of Incorporation:
1. The Name of the corporation is:
PCS One, Inc.
2. The Registered Agent of the corporation is: Dr. James Yoh.
3. The Registered Office of the corporation is:
2500 English Creek Avenue
Building 110
Egg Harbor Township, New Jersey 08234
4. The purpose for which this corporation is organized is to engage in any
activity within the purposes for which corporations may be organized under
section 14A:l-l et seq. of the BCA.
5. (a) The aggregate number of shares which the corporation shall have the
authority to issue is ONE HUNDRED TWELVE MILLION NINE HUNDRED TWENTY-FIVE
THOUSAND (112,925,000) shares of stock as follows:
(i) SIX MILLION (6,000,000) shares of Class I Common stock
with $.001 par value;
(ii) FIFTY-SIX MILLION NINE HUNDRED TWENTY-FIVE THOUSAND
(56,925,000) shares of Class II Common stock with $.001
par value;
(iii) FIFTY MILLION (50,000,000) shares of Preferred stock,
TWENTY-ONE MILLION FIVE HUNDRED THOUSAND (21,500,000) of
which are authorized Series A Convertible Preferred
Stock with $.0l par value.
(b) The Class I Common and Class II Common will be identical in
every respect, except that the Class I Common will be entitled to such number of
votes per share as is required so that the outstanding shares of Class I Common
at all times represent a majority of the votes held by the outstanding Class I
Common, Class II Common and Preferred, voting together as a single class, and
the Class II Common will be entitled to one vote per share. At such time as the
Company is no longer required to maintain voting control in the Control Group
under applicable Federal Communications Commission ("FCC") regulations each
share of Class I Common will automatically convert into one share of Class II
Common, the Company will amend its certificate of incorporation to delete any
reference to the Class I Common, and the Class II Common shall be redesignated
as the Common Stock of the Company.
(c) The Preferred shares may be issued from time to time in one or
more series, The Board of Directors is hereby authorized to fix or alter the
designations, preferences, and relative, participating, optional, or other
special rights and qualifications, limitations or restrictions, of such
preferred shares, including without limitation of the generality of the
foregoing, dividend rights, dividend rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices and liquidation preferences of any wholly unissued
series of preferred shares, and the number of shares constituting any such
series and the designation thereof, or any of them; and to increase or decrease
the number of shares of that series, but not below the number of shares of such
series then outstanding. In the case the number of shares of any series shall be
so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
(d) The series of Preferred Stock designated and known as "Series A
Convertible Preferred Stock" shall have the designations, preferences and rights
as set forth in Exhibit A to this Amended and Restated Certificate of
Incorporation attached hereto.
(e) Cumulative voting rights shall exist only to the extent as set
forth in Section 2C(3) of Exhibit A attached hereto.
A-1
<PAGE>
IN WITNESS WHEREOF, the Undersigned has executed this Amended and
Restated Certificate of Incorporation this _____ day of November, 1995.
________________________________________
Michael B. Azeez
President & Treasurer
A-2
<PAGE>
SERIES A CONVERTIBLE PREFERRED STOCK
1. Number of Shares. The series of Preferred Stock designated and known as
"Series A Convertible Preferred Stock" shall consist of 21,500,000 shares.
2. Voting.
2A. General. Except as may be otherwise provided in these terms of
the Series A Convertible Preferred Stock or by law, the Series A Convertible
Preferred Stock shall vote together with all other classes and series of stock
of the Corporation as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Series A Convertible Preferred
Stock shall entitle the holder thereof to such number of votes per share on each
such action as shall equal the number of shares of Class II Common Stock
(including fractions of a share) into which each share of Series A Convertible
Preferred Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Series A Convertible Preferred Stock, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
series, increase the maximum number of directors constituting the Board of
Directors to a number in excess of seven (7).
2C. Board Seats.
2C(1) As long as there is any Series A Convertible Preferred
Stock outstanding and until the tenth anniversary of the latest grant of a FCC
PCS C block license to the Corporation (the "Tenth Anniversary"), the holders of
the Series A Convertible Preferred Stock and the Class II Common Stock, voting
together as a separate class, shall be entitled to elect three (3) directors of
the Corporation. Until the Tenth Anniversary, the holders of the Class I Common
Stock, voting as a separate class, shall be entitled to elect four (4) directors
of the Corporation. Notwithstanding the foregoing or anything else to the
contrary provided in the Certificate of Incorporation, if the Corporation fails
or refuses, for any reason or for no reason, to redeem on any Redemption Date
(as defined in paragraph 8) all of the shares of Series A Convertible Preferred
Stock required to be redeemed on such Redemption Date in accordance with the
terms and provisions of paragraph 8, the holders of the Series A Convertible
Preferred Stock, voting as a separate series, shall be entitled to elect a
majority of the directors of the Corporation, subject to compliance with certain
Federal Communication Commission ("FCC") procedures relating to pro forma
changes in control, including Part 24 of the FCC's Rules, 47 C.F.R. Part 24 (the
"FCC's PCS Rules") and Section 310(d) of the Communications Act of 1934, as
amended, 47 U.S.C. 151 et. seq. (the "Act"). Any director elected by the holders
of the Series A Convertible Preferred Stock and the Class II Common Stock may be
removed only by the holders of the Series A Convertible Preferred Stock and the
Class II Common Stock, voting together as a separate class; any director elected
by the holders of the Class I Common Stock may be removed only by the holders of
the Class I Common Stock, voting as a separate class. At any meeting (or in a
written consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or the written consent) of the holders of a
majority of the shares of Series A Convertible Preferred Stock and the Class II
Common Stock then outstanding shall constitute a quorum of the Series A
Convertible Preferred Stock and the Class II Common Stock for the election of
directors to be elected solely by the holders of the Series A Convertible
Preferred Stock and the Class II Common Stock. A vacancy in any directorship
elected by the holders of the Series A Convertible Preferred Stock and the Class
II Common Stock shall be filled only by vote or written consent of the holders
of the Series A Convertible Preferred Stock and the Class II Common Stock. A
vacancy in any directorship elected by the holders of the Class I Common Stock
shall be filled only by vote or written consent of the holders of the Class I
Common Stock.
2C(2) Notwithstanding the provisions of subparagraph 2C(l)
above, upon the consent of 85% in interest of the Series A Convertible Preferred
Stock and Class II Common Stock (including the Class II Common Stock issued or
issuable upon conversion of the Series A Preferred Stock but excluding the
holders of Series A Preferred Stock who are also holders of Class I Common
Stock), given in writing or by vote at a meeting, consenting or voting (as the
case may be) together as a class and subject to any prior approval(s) that may
be required by the FCC pursuant to the Act or the FCC's PCS Rules, for not more
than sixty (60) days after the sixth (6th) anniversary of the latest date of the
grant of any C block license to the Corporation pursuant to the Act or the FCC's
PCS Rules, the holders of the Series A Convertible Preferred Stock and Class II
Common Stock, voting as a separate class, shall be entitled to elect four (4)
directors of the Corporation and the, holders of the Class I Common Stock,
voting as a separate class, shall be entitled to elect three (3) directors of
the Corporation. For purposes of the election described in the previous
sentence:
2C(2)(a) any director elected by the holders of the
Series A Convertible Preferred Stock may be removed only by the holders of the
Series A Convertible Preferred Stock, voting as a separate class;
2C(2)(b) any director elected by the holders of the
Class I Common Stock may be removed only by the holders of the Class I Common
Stock, voting as a separate class; provided, however, that the holders of Series
A Convertible Preferred Stock shall be entitled to remove one (1) director
previously elected by the holders of the Class I Common Stock and to elect his
replacement;
2C(2)(c) at any meeting (or in written consent in lieu
thereof) held for the purpose of electing directors, the presence in person or
by proxy (or the written consent) of the holders of a majority of the shares of
Series A Convertible Preferred Stock then outstanding (including the holders of
Class II Common Stock issued or issuable upon conversion of the Series A
Convertible Preferred Stock) shall constitute a quorum of the Series A
Convertible Preferred Stock for the election of directors to be elected by the
holders of the Series A Convertible Preferred Stock;
A-3
<PAGE>
2C(2)(d) at any meeting (or in written consent in lieu
thereof) held for the purpose of electing directors, the presence in person on
by proxy (or the written consent) of the holders of a majority of the shares of
Class I Common Stock then outstanding shall constitute a quorum of the Class I
Common Stock for the election of directors to be elected by the holders of the
Class I Common Stock;
2C(2)(e) a vacancy in any directorship elected by the
holders of the Series A Convertible Preferred Stock shall be filled only by vote
or written consent of the holders of the Series A Convertible Preferred Stock
(including the holders of Class II Common Stock issued or issuable upon
conversion of the Series A Convertible Preferred Stock); and
2C(2)(f) a vacancy in any directorship elected by the
holders of the Class I Common Stock shall be filled only by vote or written
consent of the holders of the Class I Common Stock.
2C(3) On or after the Tenth Anniversary and subject to any
prior approval(s) that may be required by the FCC pursuant to the Act or the
FCC's PCS Rules, the Board of Directors of the Corporation shall be elected by
the holders of the then outstanding shares of Class II Common Stock (including
all shares of Class II Common Stock issued or issuable upon the conversion of
the Series A Preferred Stock and the Class I Common Stock) with each holder of
Class II Common Stock being entitled to such number of votes as is equal to the
number of shares of Class II Common Stock held by such holder multiplied by the
number of directors to be elected. Each holder of shares of Class II Common
Stock may cast all of such votes for a single director or may distribute them
among the number of directors to be elected, or for any two (2) or more
directors to be elected, as it may see fit.
3. Dividends. Subject to the provisions of the Act and the FCC's PCS Rules
and any approvals that may be required thereunder, the holders of the Series A
Convertible Preferred Stock shall be entitled to receive, out of funds legally
available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Class II Common Stock) are paid with
respect to the Class I Common Stock and Class II Common Stock (together the
"Common Stock") (treating each share of Series A Convertible Preferred Stock as
being equal to the number of shares of Class II Common Stock (including
fractions of a share) into which each share of Series A Convertible Preferred
Stock is then convertible).
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series A Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation junior to
the Series A Convertible Preferred Stock, to be paid an amount equal to the
greater of (i) S1.00 per share plus, in the case of each share, an amount equal
to any dividends declared but unpaid thereon, computed to the date payment
thereof is made available (the "Base Liquidation Amount"), or (ii) such amount
per share as would have been payable had each such share been converted into
Class II Common Stock pursuant to paragraph 6 immediately prior to such
liquidation, dissolution or winding up, such amount payable with respect to one
share of Series A Convertible Preferred Stock being sometimes referred to as the
"Liquidation Preference Payment" and with respect to all shares of Series A
Convertible Preferred Stock being sometimes referred to as the "Liquidation
Preference Payments". If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Series A Convertible Preferred Stock shall be insufficient
to permit payment in full to the holders of Series A Convertible Preferred Stock
of the Base Liquidation Amount or the Liquidation Preference Payments, then the
entire assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Series A Convertible Preferred Stock. Upon any such
liquidation, dissolution or winding up of the Corporation, immediately after the
holders of Series A Convertible Preferred Stock shall have been paid in full the
Base Liquidation Amount or the Liquidation Preference Payments, the remaining
net assets of the Corporation available for distribution shall be distributed
ratably among the holders of stock ranking on liquidation junior to the Series A
Convertible Preferred Stock in accordance with the relative preferences of such
stock. Written notice of such liquidation, dissolution or winding up, stating a
payment date and the place where said payments shall be made, shall be delivered
in person, mailed by certified or registered mail, return receipt requested, or
sent by telecopier or telex, not less than 20 days prior to the payment date
stated therein, to the holders of record of Series A Convertible Preferred
Stock, such notice to be addressed to each such holder at its address or
telecopier number as shown by the records of the Corporation. The consolidation
or merger of the Corporation into or with any other entity or entities (other
than a merger to reincorporate the Corporation in a different jurisdiction or a
merger in which the shares of the Corporation outstanding immediately prior to
the closing of such merger (i) represent or are converted into shares of the
surviving entity that represent at least a majority of the total number of
shares of the surviving entity that are outstanding or are reserved for issuance
immediately after the closing of such merger and (ii) have the power to elect a
majority of the surviving corporation's directors), and the sale, lease,
abandonment, transfer or other disposition by the Corporation of all or
substantially all its assets, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of the provisions of this
paragraph 4. For purposes hereof, the Common Stock shall rank on liquidation
junior to the Series A Convertible Preferred Stock.
5. Restrictions. At any time when shares of Series A Convertible Preferred
Stock are outstanding, except where the vote or written consent of the holders
of a greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of (i) 72% of the
total combined voting power of the Series A Convertible Preferred Stock and the
Common Stock, given in writing or by vote at a meeting, consenting or voting (as
the case may be) together as a class or, (ii) in the event that CoastalComm,
Inc., exercises its option under Section 2.2(a)(ii) of that certain
Participation Agreement by and between the Corporation and CoastalComm, Inc.
dated as of November 24, 1995, without the approval of 80% of the total combined
voting power of the Series A Convertible Preferred Stock and the Common Stock,
given in writing or by vote at a meeting, consenting or voting (as the case may
be) together as a class or, (iii) after the Tenth Anniversary, without the
approval of 51% in interest of the then outstanding Series A Convertible
Preferred Stock (including the Class II Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, but specifically excluding the Class
I Common Stock and any shares issued or issuable upon conversion thereof), given
in writing or by vote at a meeting, consenting or voting (as the case may be)
separately as one class (each of (i) through (iii) being defined as the
"Supermajority") (For purposes of calculating the Supermajority, (a) each share
of Class II Common Stock shall be entitled to one vote per share, (b) each share
of Series A Convertible Preferred Stock shall be entitled to the number of votes
per share of Class II Common Stock into
A-4
<PAGE>
which each share of Series A Convertible Preferred Stock is then convertible,
including for this purpose fractional shares, and (c) for purposes of (i) and
(ii) above, each share of Class I Common Stock shall be entitled to the number
of votes per share which would designate to the Class I Common Stock, on an
aggregate basis, 50.1% of the voting power of all of the then outstanding shares
of Class I Common Stock, Class II Common Stock and Series A Convertible
Preferred Stock on a fully diluted basis), the Corporation will not:
5A. Create or authorize the creation of any additional class or
series of shares of stock unless the same ranks junior to the Series A
Convertible Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, or increase the authorized amount
of the Series A Convertible Preferred Stock or increase the authorized amount of
any additional class or series of shares of stock unless the same ranks junior
to the Series A Convertible Preferred Stock as to the distribution of assets on
the liquidation, dissolution or winding up of the Corporation, or create or
authorize any obligation or security convertible into shares of Series A
Convertible Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to the Series A Convertible Preferred Stock as to
the distribution of assets on the liquidation, dissolution or winding up of the
Corporation, whether any such creation, authorization or increase shall be by
means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities or
sell, lease, abandon, transfer or otherwise dispose of all or substantially all
its assets;
5C. Amend, alter or repeal its Certificate of Incorporation or
By-laws;
5D. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the Series
A Convertible Preferred Stock, except for dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock and except for the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price does not exceed the original issue price paid by
such former employee to the Corporation for such shares;
5E. Redeem or otherwise acquire any shares of Series A Convertible
Preferred Stock except as expressly authorized in paragraph 8 hereof or pursuant
to a purchase offer made pro rata to all holders of the shares of Series A
Convertible Preferred Stock on the basis of the aggregate number of outstanding
shares of Series A Convertible Preferred Stock then held by each such holder;
5F. Issue any shares of the Corporation's capital stock other than
shares of Class II Common Stock on the conversion of the Series A Convertible
Preferred Stock;
5G. Effect any recapitalization or other reclassification of the
Corporation's equity securities;
5H. Effect certain other actions materially affecting the Series A
Convertible Preferred Stock to the extent consistent with FCC regulations.
6. Debt Restrictions. At any time when shares of Series A Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
the Certificate of Incorporation, the Corporation shall not incur any funded
debt or grant any security interest or lien affecting a material portion of the
Corporation's assets without the written consent or affirmative vote, given in
writing or by vote at a meeting, of (a) 72% of the members of the Board of
Directors if the value of such transaction shall equal or exceed $5 million or
(b) a majority of the Board of Directors if the value of such transaction shall
equal less than $5 million.
7. Conversions. The holders of shares of Series A Convertible Preferred
Stock shall have the following conversion rights:
7A. Right to Convert. Subject to the terms and conditions of this
paragraph 7 and the relevant reporting or other requirements of the Act or the
FCC's PCS Rules, the holder of any share or shares of Series A Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series A Convertible Preferred Stock (except that upon any
liquidation of the Corporation the right of conversion shall terminate at the
close of business on the business day fixed for payment of the amount
distributable on the Series A Convertible Preferred Stock) into such number of
fully paid and nonassessable shares of Class II Common Stock as is obtained by
(i) multiplying the number of shares of Series A Convertible Preferred Stock so
to be converted by $1.00 and (ii) dividing the result by the conversion price of
$1.00 per share or, in case an adjustment of such price has taken place pursuant
to the further provisions of this paragraph 7, then by the conversion price as
last adjusted and in effect at the date any share or shares of Series A
Convertible Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of Series A
Convertible Preferred Stock into Class II Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the Series
A Convertible Preferred Stock) at any time during its usual business hours on
the date set forth in such notice, together with a statement of the name or
names (with address) in which the certificate or certificates for shares of
Class II Common Stock shall be issued.
7B. Issuance of Certificates; Time Conversion Effected. Promptly
after the receipt of the written notice referred to in subparagraph 7A and
surrender of the certificate or certificates for the share or shares of Series A
Convertible Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such
A-5
<PAGE>
holder may direct, a certificate or certificates for the number of whole shares
of Class II Common Stock issuable upon the conversion of such share or shares of
Series A Convertible Preferred Stock. To the extent permitted by law, such
conversion shall be deemed to have been effected and the Conversion Price shall
be determined as of the close of business on the date on which such written
notice shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Series A
Convertible Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Class II Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby.
7C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of Series A Convertible Preferred Stock
into Class II Common Stock and no payment or adjustment shall be made upon any
conversion on account of any cash dividends on the Class II Common -Stock issued
upon such conversion. At the time of each conversion, the Corporation shall pay
in cash an amount equal to all dividends declared and unpaid on the shares of
Series A Convertible Preferred Stock surrendered for conversion to the date upon
which such conversion is deemed to take place as provided in subparagraph 7B. In
case the number of shares of Series A Convertible Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 7A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Series A Convertible
Preferred Stock represented by the certificate or certificates surrendered which
are not to be converted. If any fractional share of Class II Common Stock would,
except for the provisions of the first sentence of this subparagraph 7C, be
delivered upon such conversion, the Corporation, in lieu of delivering such
fractional share, shall pay to the holder surrendering the Series A Convertible
Preferred Stock for conversion an amount in cash equal to the current market
price of such fractional share as determined in good faith by the Board of
Directors of the Corporation.
7D. Adjustment of Price Upon Issuance of Common Stock. If and
whenever the Corporation shall issue or sell, or is, in accordance with
subparagraphs 7D(1) through 7D(7), deemed to have issued or sold, any shares of
Common Stock or Series A Convertible Preferred Stock for a consideration per
share less than the Conversion Price in effect immediately prior to the time of
such issue or sale, then, forthwith upon such issue or sale, the Conversion
Price shall be reduced to the price determined by dividing (i) an amount equal
to the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Conversion Price and
(b) the consideration, if any, received by the Corporation upon such issue or
sale, by (ii) the total number of shares of Common Stock outstanding immediately
after such issue or sale. Notwithstanding the foregoing, until three years from
the date of the grant of a license pursuant to the FCC's PCS Rules (the "License
Grant Date"), if the effect of the reduction of the Conversion Price in
accordance with this Section 7D shall cause the number of shares of Class I
Common Stock to represent less than 25% of the total number of shares of capital
stock then outstanding or issuable upon the exercise or conversion of any of the
then outstanding securities of the Company, then the Conversion Price shall be
readjusted such that the Conversion Price shall allow the holders of the Class I
Common Stock to maintain at least 25% of the total number of shares of capital
stock then outstanding or issuable upon the exercise or conversion of any of the
then outstanding securities of the Company. In addition, after the date that is
three (3) years from the License Grant Date and until the date that is five (5)
years from the License Grant Date, if the effect of the reduction of the
Conversion Price in accordance with this Section 6D shall cause the number of
shares of Class I Common Stock to represent less than 15% of the total number of
shares of capital stock then outstanding or issuable upon the exercise or
conversion of any of the then outstanding securities of the Company, then the
Conversion Price shall be readjusted such that the Conversion Price shall allow
the holders of the Class I Common Stock to maintain at least 15% of the total
number of shares of capital stock then outstanding or issuable upon the exercise
or conversion of any of the then outstanding securities of the Company.
For purposes of this subparagraph 7D, the following subparagraphs 7D(1) to
7D(7) shall also be applicable:
7D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise
of such Options) shall be less than the Conversion Price in effect
immediately prior to the time of the granting of such Options, then the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the
issuance of such Convertible Securities and thereafter shall be deemed
to be outstanding. Except as otherwise provided in subparagraph 7D(3),
no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock
upon conversion or exchange of such Convertible Securities.
7D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or
receivable by the Corporation as
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consideration for the issue or sale of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities) shall be
less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such
Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided
that (a) except as otherwise provided in subparagraph 7D(3), no
adjustment of the Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of this
subparagraph 7D, no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
7D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 7D(1), the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
7D(1) or 7D(2), or the rate at which Convertible Securities referred to
in subparagraph 7D(1) or 7D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event
shall forthwith be readjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
reduced; and on the termination of any such Option or any such right to
convert or exchange such Convertible Securities, the Conversion Price
then in effect hereunder shall forthwith be increased to the Conversion
Price which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding
immediately prior to such termination, never been issued.
7D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or
distributions upon the Common Stock), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
7D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
7D(6) Record Date. In case the Corporation shall take a record
of the holders of its Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase,
as the case may be.
7D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 7D.
7E. Certain Issuances of Class II Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Conversion Price in the case of the issuance of (i)
shares of Class II Common Stock issuable upon conversion of the Series A
Convertible Preferred Stock and (ii) Reserved Shares (as defined in paragraph 10
hereof).
7F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to subparagraph 7D(4) by reason thereof.
7G. Reorganization or Reclassification . If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a. way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to
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or in exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby each
holder of a share or shares of Series A Convertible Preferred Stock shall
thereupon have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Series A Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
7H. Failure to Redeem. If the Corporation fails, for any reason or
for no reason, to redeem on any redemption Date (as defined in paragraph 8) all
of the shares of Series A Convertible Preferred Stock required to be redeemed on
such Redemption Date in accordance with the terms and conditions of paragraph 8,
the Conversion Price then in effect shall, on the 180th day after the Redemption
Date, be reduced to an amount equal to 90% thereof. Thereafter, until such
redemption has been made in full in accordance with such terms and conditions,
the Conversion Price shall be further reduced on the 270th day following such
Redemption Date and at the end of each 90-day period thereafter to an amount
equal to 90% of the Conversion Price in effect immediately prior to each such
reduction. The provisions of this Section 7G shall be in addition to all other
remedies the holders of Series A Convertible Preferred Stock may have at law or
in equity.
7I. Notice of Adjustment. Upon any adjustment of the Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by delivery in person, certified or registered mail, return receipt
requested, telecopier or telex, addressed to each holder of shares of Series A
Convertible Preferred Stock at the address or telecopier number of such holder
as shown on the books of the Corporation, which notice shall state the
Conversion Price resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
7J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the
holders of its Common Stock,
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into another entity or
entities, or a sale, lease, abandonment, transfer or other disposition of
all or substantially all of the assets of the Corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Series A Convertible Preferred
Stock at the address or telecopier number of such holder as shown on the books
of the Corporation, (a) at least 20 days' prior written notice of the date on
which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up and (b) in the case
of any such reorganization, reclassification, consolidation, merger,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.
7K. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Class II Common Stock, solely for the
purpose of issuance upon the conversion of Series A Convertible Preferred Stock
as herein provided, such number of shares of Class II Common Stock as shall then
be issuable upon the conversion of all outstanding shares of Series A
Convertible Preferred Stock. The Corporation covenants that all shares of Class
II Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be requisite to assure that the par value per share of the
Class II Common Stock is at all times equal to or less than the Conversion Price
in effect at the time. The Corporation will take all such action as may be
necessary to assure that all such shares of Class II Common Stock may be so
issued without violation of any applicable law or regulation, including the
Communications Act and the FCC's PCS Rules, or of any requirement of any
national securities exchange upon which the Class II Common Stock may be listed.
The Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Class II Common Stock issued
and issuable after such action upon conversion of the Series A Convertible
Preferred Stock would exceed the total number of shares of Class II Common Stock
then authorized by the Certificate of Incorporation.
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7L. No Reissuance of Series A Convertible Preferred Stock. Shares of
Series A Convertible Preferred Stock which are converted into shares of Class II
Common Stock as provided herein shall not be reissued.
7M. Issue Tax. The issuance of certificates for shares of Class II
Common Stock upon conversion of Series A Convertible Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series A Convertible Preferred Stock which is being converted.
7N. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series A Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series A Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Series A Convertible Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
7O. Definition of Common Stock. As used in this paragraph 7, the
term "Common Stock" shall mean and include the Corporation's authorized Class I
Common Stock, $.001 par value per share, and Class II Common Stock, $.001 par
value per share, as constituted on the date of filing of these terms of the
Series A Convertible Preferred Stock, and shall also include any capital stock
of any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends nor entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Class
II Common Stock receivable upon conversion of shares of Series A Convertible
Preferred Stock shall include only shares designated as Class II Common Stock of
the Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 7F.
7P. Mandatory Conversion. If at any time the Corporation shall
effect a firm commitment underwritten public offering of shares of Class II
Common Stock in which (i) the aggregate price paid for such shares by the public
shall be at least $15,000,000 and (ii) the price paid by the public for such
shares shall be at least $3.00 per share (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 7E), then effective upon the
closing of the sale of such shares by the Corporation pursuant to such public
offering, all outstanding shares of Series A Convertible Preferred Stock shall
automatically convert to shares of Class II Common Stock on the basis set forth
in this paragraph 7. Holders of shares of Series A Convertible Preferred Stock
so converted may deliver to the Corporation at its principal office (or such
other office or agency of the Corporation as the Corporation may designate by
notice in writing to such holders) during its usual business hours, the
certificate or certificates for the shares so converted. As promptly as
practicable thereafter, the Corporation shall issue and deliver to such holder a
certificate or certificates for the number of whole shares of Class II Common
Stock to which such holder is entitled, together with any cash dividends and
payment in lieu of fractional shares to which such holder may be entitled
pursuant to subparagraph 7C. Until such time as a holder of shares of Series A
Convertible Preferred Stock shall surrender his or its certificates therefor as
provided above, such certificates shall be deemed to represent the shares of
Class II Common Stock to which such holder shall be entitled upon the surrender
thereof.
8. Redemption. The shares of Series A Convertible Preferred Stock shall be
redeemed as follows:
8A. Mandatory Redemption. In the event that the Corporation is not
designated by the FCC as the winning bidder on any C Licenses pursuant to the C
License Auction, then the Corporation shall redeem any outstanding shares of
Series A Preferred Stock on a date of redemption to be specified by it, but in
any event not later than 90 days after the date on which the Company is not
designated as the winning bidder after the conclusion of the C License Auction
(the "Auction Redemption Date"). Each share of Series A Convertible Preferred
Stock shall be redeemed on such Auction Redemption Date at a price equal to the
original issue price thereof less the pro rata share of the expenses of the
Corporation incurred in connection with the C License Auction allocable to such
share (counting all common and preferred shares equally for this purpose);
provided that such expenses shall not exceed $150,000 plus any FCC auction
penalties, if applicable, (the "Auction Redemption Price") without the prior
approval of the Board of Directors. The mechanics of redemption shall be as set
forth in Section 8C.
8B. Additional Redemption. At the request of the Supermajority or,
on or after the Tenth Anniversary, at the request of 51% in interest of the
Series A Convertible Preferred Stock (including the Class II Common Stock issued
or issuable upon conversion of the Series A Preferred Stock, but specifically
excluding the Class I Common Stock and any shares issued or issuable upon the
conversion thereof) (the "Redemption Notice"), subject to any prior FCC approval
required under the Act or the FCC's PCS Rules, on November 28, 2005, (the
"Redemption Date"), the Corporation shall redeem any outstanding shares of
Series A Convertible Preferred Stock, provided, however, that such Redemption
Notice must be received by the Corporation at least 60 days before the
Redemption Date.
For purposes this Section 8B, each share of Series A Convertible
Preferred Stock to be redeemed on the Redemption Date shall be redeemed by
paying in cash an amount equal to the greater of (i) $1.00 per share plus, in
the case of each share, an amount equal to all dividends declared but unpaid
thereon, computed to such Redemption Date or (ii) the Fair Market Value, such
amount being referred to as the Redemption Price. Such payment shall be made in
full on the applicable Redemption Date to the holders entitled thereto. For
purposes of the foregoing, the "Fair Market Value" of the Corporation shall
equal the quotient obtained by dividing (A) the fair market value of the entire
Corporation as a going concern as of the date 60 days before the Redemption Date
(without any minority or marketability discounts and without taking into account
the effect of the redemption of the Series A Convertible Preferred Stock), as
determined by an investment banker mutually acceptable to the Corporation and
the holders of at least 66 2/3% of the outstanding shares of Series A
Convertible Preferred Stock, or if no mutually acceptable investment banker is
available, by two investment bankers, one of whom is to be selected by the
Corporation, and one of whom is to be selected by the holders of at least
66 2/3% of the outstanding shares of Series A Convertible Preferred Stock by
(B) the
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number of outstanding shares of Common Stock, plus the number of outstanding
Common Stock equivalents that would be used to calculate earnings per share in
accordance with generally accepted accounting principles.
8C. Redemption Mechanics. At least 20 but not more than 30 days
prior to each Redemption Date or the Auction Redemption Date, as the case may
be, written notice shall be (given by the Corporation by delivery in person,
certified or registered mail, return receipt requested, telecopier or telex, to
each holder of record (at the close of business on the business day next
preceding the day on which the notice is given) of shares of Series A
Convertible Preferred Stock notifying such holder of the redemption and
specifying the Redemption Price or the Auction Redemption Price, as the case may
be, the Redemption Date or the Auction Redemption Date, as the case may be, the
number of shares of Series A Convertible Preferred Stock to be redeemed from
such holder (computed on a pro rata basis in accordance with the number of such
shares held by all holders thereof) and the place where said Redemption Price or
the Auction Redemption Price, as the case may be, shall be payable. The notice
shall be addressed to each holder at his address or telecopier number as shown
by the records of the Corporation. From and after the close of business on a
Redemption Date or the Auction Redemption Date, as the case may be, unless there
shall have been a default in the payment of the Redemption Price or the Auction
Redemption Price, as the case may be, all rights of holders of shares of Series
A Convertible Preferred Stock (except the right to receive the Redemption Price
or the Auction Redemption Price, as the case may be) shall cease with respect to
the shares to be redeemed on such Redemption Date or such Auction Redemption
Date, as the case may be, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series A Convertible Preferred Stock on the Redemption Date or the
Auction Redemption Date, as the case may be, are insufficient to redeem the
total number of shares of Series A Convertible Preferred Stock to be redeemed on
such Redemption Date or such Auction Redemption Date, as the case may be, the
holders of such shares shall share ratably in any funds legally available for
redemption of such shares according to the respective amounts which would be
payable to them if the full number of shares to be redeemed on such Redemption
Date or such Auction Redemption Date, as the case may be, were actually
redeemed. The shares of Series A Convertible Preferred Stock required to be
redeemed but not so redeemed shall remain outstanding and entitled to all rights
and preferences provided herein. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of such Shares of
Series A Convertible Preferred Stock, such funds will be used, at the end of the
next succeeding fiscal quarter, to redeem the balance of such shares, or such
portion thereof for which funds are then legally available, on the basis set
forth above.
8D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
of Series A Convertible Preferred Stock redeemed pursuant to this paragraph 8 or
otherwise acquired by the Corporation in any manner whatsoever shall be
cancelled and shall not under any circumstances be reissued; and the Corporation
may from time to time take such appropriate corporate action as may be necessary
to reduce accordingly the number of authorized shares of Series A Convertible
Preferred Stock.
9. Amendments. No provision of these terms of the Series A Convertible
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least 66 2/3% of the then outstanding
shares of Series A Convertible Preferred Stock.
10. Reserved Shares . The term "Reserved Shares" shall mean shares of
Class II Common Stock reserved by the Corporation from time to time for the
exercise of options to purchase shares of Class II Common Stock granted to
holders of Series A Convertible Preferred Stock, directors, officers, employees
or consultants of the Corporation or any subsidiary or affiliate thereof, such
number of shares of Class II Common Stock being equal to (x) 0.05 multiplied by
(y) the number by which the number of shares purchased pursuant to that certain
Series A Convertible Preferred Stock Purchase Agreement dated as of November 28,
1995 exceeds 12,000,000, provided that the total number of such "Reserved
Shares" shall not exceed, in the aggregate, 475,000 shares (appropriately
adjusted to reflect share splits, share dividends, combinations of shares and
the like with respect to the shares of Class II Common Stock).
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CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
PCS ONE, INC.
(For use by Domestic Corporations Only)
To: The Secretary of State of
the State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
1. The name of the corporation is PCS ONE, INC.
2. The following amendments to the Amended and Restated Certificate of
Incorporation were approved by the directors and thereafter duly adopted by the
shareholders of the corporation on the 14th day of December, 1995:
RESOLVED, that Article 5 of the Amended and Restated Certificate of
Incorporation is hereby amended to provide as follows:
5. (a) The aggregate number of shares which the corporation
shall have the authority to issue is ONE HUNDRED THIRTEEN MILLION NINE HUNDRED
SEVENTY-FIVE THOUSAND (113,975,000) shares of stock as follows:
(i) SIX MILLION (6,000,000) shares of Class I Common stock
with $.001 par value;
(ii) FIFTY-SEVEN MILLION NINE HUNDRED SEVENTY-FIVE THOUSAND
(57,975,000) shares of Class II Common stock with $.001
par value;
(iii) FIFTY MILLION (50,000,000) shares of Preferred stock,
TWENTY-TWO MILLION FIVE HUNDRED THOUSAND (52,500,000) of
which are authorized Series A Convertible Preferred
Stock with $.01 par value.
RESOLVED, that Section 2B of Exhibit A of the Amended and Restated
Certificate of Incorporation is hereby amended to provide as follows:
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Series A Convertible Preferred Stock, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
series, increase the maximum number of directors constituting the Board of
Directors to a number in excess of eleven (11).
RESOLVED, that Section 2C(1) of Exhibit A of the Amended and
Restated Certificate of Incorporation is hereby amended to provide as follows:
2C(1) As long as there is any Series A Convertible Preferred
Stock outstanding and until the tenth anniversary of the latest grant of a FCC
PCS C block license to the Corporation (the "Tenth Anniversary"), the holders of
the Series A Convertible Preferred Stock and the Class II Common Stock, voting
together as a separate class, shall be entitled to elect five (5) directors of
the Corporation. Until the Tenth Anniversary, the holders of the Class I Common
Stock, voting as a separate class, shall be entitled to elect six (6) directors
of the Corporation. Notwithstanding the foregoing or anything else to the
contrary provided in the Certificate of Incorporation, if the Corporation fails
or refuses, for any reason or for no reason, to redeem on any Redemption Date
(as defined in paragraph 8) all of the shares of Series A Convertible Preferred
Stock required to be redeemed on such Redemption Date in accordance with the
terms and provisions of paragraph 8, the holders of the Series A Convertible
Preferred Stock, voting as a separate series, shall be entitled to elect a
majority of the directors of the Corporation, subject to compliance with certain
Federal Communications Commission ("FCC") procedures relating to pro forma
changes in control, including Part 24 of the FCC's Rules, 47 C.F.R. Part 24 (the
"FCC's PCS Rules") and Section 310(d) of the Communications Act of 1934, as
amended, 47 U.S.C. ss. 151 et. seq. (the "Act"). Any director elected by the
holders of the Series A Convertible Preferred Stock and the Class II Common
Stock may be removed only by the holders of the Series A Convertible Preferred
Stock and the Class II Common Stock, voting together as a separate class; any
director elected by the holders of the Class I Common Stock may be removed only
by the holders of the Class I Common Stock, voting as a separate class. At any
meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Series A Convertible Preferred
Stock and the Class II Common Stock then outstanding shall constitute a quorum
of the Series A Convertible Preferred Stock and the Class II Common Stock for
the election of directors to be elected solely by the holders of the Series A
Convertible Preferred Stock and the Class II Common Stock. A vacancy in any
directorship elected by the holders of the Series A Convertible Preferred Stock
and the Class II Common Stock shall be filled only by vote or written consent of
the holders of the Series A Convertible Preferred Stock and the Class II Common
Stock. A vacancy in any directorship elected by the holders of the Class I
Common Stock shall be filled only by vote or written consent of the holders of
the Class I Common Stock.
RESOLVED, that the introductory paragraph of Section 2C(2) of
Exhibit A of the Amended and Restated Certificate of Incorporation is hereby
amended to provide as follows:
A-11
<PAGE>
Notwithstanding the provisions of subparagraph 2(C)(1) above,
upon the consent of 85% in interest of the Series A Convertible Preferred Stock
and Class II Common Stock (including the Class II Common Stock issued or
issuable upon conversion of the Series A Preferred Stock but excluding the
holders of Series A Preferred Stock who are also holders of Class I Common
Stock), given in writing or by vote at a meeting, consenting or voting (as the
case may be) together as a class and subject to any prior approval(s) that may
be required by the FCC pursuant to the Act or the FCC's PCS Rules, for not more
than sixty (60) days after the sixth (6th) anniversary of the latest date of the
grant of any C block license to the Corporation pursuant to the Act or the FCC's
PCS Rules, the holders of the Series A Convertible Preferred Stock and Class II
Common Stock, voting as a separate class, shall be entitled to elect six (6)
directors of the Corporation and the holders of the Class I Common Stock, voting
as a separate class, shall be entitled to elect five (5) directors of the
Corporation. For purposes of the election described in the previous sentence:
3. The number of shares entitled to vote under the amendment was
23,625,000.
4. That in lieu of a meeting and vote of the shareholders and in
accordance with the provisions of Section 14A:5-6, the amendment was adopted by
the shareholders without a meeting pursuant to the written consent of the
shareholders and the number of shares represented by such consents is 23,625,000
shares.
(Note: If any class or series are entitled to vote as a class, set forth the
number of shares of any class or series entitled to vote as a class and indicate
that the amendment was also approved by the written consent of that class of
shareholders and the number of shares of said class or series represented by the
consents.)
Dated this 14th day of December, 1995.
PCS ONE, INC.
By: ________________________________
Michael B. Azeez, President
A-12
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
By and Between
D & E COMMUNICATIONS, INC.
and
PCS ONE, INC.
December 12, 1996
B-1
<PAGE>
TABLE OF CONTENTS
1. THE MERGER............................................................. B-4
1.1 The Merger of Company into D & E................................. B-4
1.2 Effective Date and Effective Time................................ B-4
1.3 Effects of Merger................................................ B-4
2. CLOSING, CLOSING DATE AND CONSIDERATION................................ B-4
2.1 The Closing and Closing Date..................................... B-4
2.2 Conversion of Capital Stock...................................... B-5
2.3 Fractional Shares................................................ B-5
2.4 Exchange of Certificates......................................... B-5
2.5 Tax Free Reorganization.......................................... B-5
2.6 Further Assurances............................................... B-6
3. REPRESENTATIONS AND WARRANTIES OF COMPANY.............................. B-6
3.1 Organization, Qualification and Status........................... B-6
3.2 Capitalization................................................... B-6
3.3 Ownership of Shares.............................................. B-6
3.4 No Subsidiary.................................................... B-6
3.5 Authorization; Valid and Binding Obligation...................... B-6
3.6 No Violation; Consents........................................... B-7
3.7 Financial Statements............................................. B-7
3.8 No Adverse Changes............................................... B-7
3.9 Taxes............................................................ B-7
3.10 Litigation....................................................... B-7
3.11 Title to PCS License, Intellectual Property and Other Assets..... B-8
3.12 Contracts........................................................ B-8
3.13 Compliance with Laws............................................. B-8
3.14 Disclosure....................................................... B-8
4. REPRESENTATIONS AND WARRANTIES OF D & E................................ B-8
4.1 Organization, Qualification and Status........................... B-8
4.2 Capitalization................................................... B-8
4.3 D & E Common Stock............................................... B-9
4.4 Authorization; Valid and Binding Obligation...................... B-9
4.5 No Violation..................................................... B-9
4.6 Financial Statements............................................. B-9
4.7 Qualifications to Hold License................................... B-9
4.8 No Adverse Changes............................................... B-9
5. COVENANTS AND UNDERTAKINGS............................................. B-9
5.1 Shareholder Meeting.............................................. B-10
5.2 Satisfaction of Conditions....................................... B-10
5.3 Preservation of Business; Cooperation and Consultation........... B-10
5.4 Exclusivity...................................................... B-10
5.5 FCC and Other Consents........................................... B-10
5.6 Negative Covenants............................................... B-10
5.7 Access in Connection with Investigation by D & E................. B-11
5.8 Resignations of Directors and Officers........................... B-11
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF D & E....................... B-11
6.1 Accuracy of Representations and Warranties....................... B-11
6.2 No Adverse Change................................................ B-11
6.3 No Injunction; Consents.......................................... B-11
6.4 Deliveries by Company............................................ B-12
6.5 Shareholder Approval............................................. B-12
6.6 FCC Approval..................................................... B-12
6.7 Shareholder Documents and Undertakings........................... B-12
6.8 Securities Laws Matter........................................... B-12
6.9 Conversion of the Company's Series A Preferred Stock............. B-12
7. CONDITIONS TO THE OBLIGATIONS OF COMPANY............................... B-13
7.1 Accuracy of Representations and Warranties....................... B-13
7.2 Deliveries by D & E.............................................. B-13
7.3 Shareholder Approval............................................. B-13
7.4 Securities Laws Matters.......................................... B-13
7.5 FCC Approval..................................................... B-13
B-2
<PAGE>
TABLE OF CONTENTS
8. EXPENSES............................................................... B-13
9. ABSENCE OF BROKER OR FINDER............................................ B-14
10. NEWS RELEASES.......................................................... B-14
11. NOTICES................................................................ B-14
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................. B-15
13. COOPERATION; FURTHER ASSURANCES........................................ B-15
14. TERMINATION............................................................ B-15
15. MISCELLANEOUS.......................................................... B-15
15.1 Legend........................................................... B-15
15.2 Successors and Assigns........................................... B-15
15.3 Governing Law.................................................... B-15
15.4 Counterparts/Use of Facsimiles................................... B-16
15.5 Entire Agreement................................................. B-16
15.6 No Presumption Against Draftsman................................. B-16
16. CONFIDENTIALITY........................................................ B-16
EXHIBITS
- --------
A Articles of Merger
B Certificate of Merger
C Opinion of Company's Counsel
D D & E Shareholder Agreement
SCHEDULES
- ---------
3.2 Company Shareholders and Rights Respecting Company Common Stock
3.7 Financial Statements of Company
3.11 Exceptions to Good Title of Company Assets
3.12 Material Contracts of Company
4.2 Rights Respecting D & E Common Stock
4.6 Financial Statements of D & E
4.8 Exceptions to Material Adverse Change Respecting D & E
B-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
December 12, 1996, is by and between D & E COMMUNICATIONS, INC., a Pennsylvania
corporation ("D & E"), and PCS ONE, INC., a New Jersey corporation (the
"Company"). D & E and the Company are sometimes together referred to as the
"Constituent Corporations".
WITNESSETH:
WHEREAS, the respective Boards of Directors of D & E and the Company
have each approved the merger of the Company with and into D & E, with D & E as
the surviving corporation, upon the terms and conditions set forth herein and
have approved this Agreement; and
WHEREAS, in accordance with the terms hereof, it is proposed that
the Company be merged with and into D & E and that the presently issued and
outstanding shares of capital stock of the Company be converted into shares of
common stock, par value $.16 per share, of D & E; and
WHEREAS, the Company and D & E desire to enter into and carry out
the merger in accordance with the terms hereof and the provisions of the New
Jersey Business Corporation Act, as amended (the "NJBCA"), and the Pennsylvania
Business Corporation Law, as amended ("PABCL").
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. THE MERGER
1.1 The Merger of Company into D & E.
On the Closing Date (as defined in Article 2 hereof), the Company
and D & E shall cause (a) Articles of Merger to be executed and filed in the
Department of State of the Commonwealth of Pennsylvania in substantially the
form attached as Exhibit A hereto (the "Articles of Merger") and (b) a
Certificate of Merger to be executed and filed with the Secretary of the State
of New Jersey substantially in the form attached as Exhibit B hereto (the
"Certificate of Merger").
1.2 Effective Date and Effective Time.
The effective date of the merger of the Company with and into D & E
(the "Merger") shall be the date (the "Effective Date") upon and the time (the
"Effective Time") at which the Articles of Merger are filed in the Department of
State of the Commonwealth of Pennsylvania and the Certificate of Merger is filed
with the Secretary of the State of New Jersey, whichever occurs later. At the
Effective Time, the Company will be merged with and into D & E, with D & E as
the surviving corporation (the "Surviving Corporation"), and the separate
existence of the Company shall cease.
1.3 Effects of Merger.
(a) The Merger shall have the effects set forth in the applicable
provisions of the PABCL and the NJBCA.
(b) At the Effective Time and without any further action on the part
of the Constituent Corporations, the Articles of Incorporation and By-Laws of D
& E shall be the Articles of Incorporation and By-Laws of the Surviving
Corporation.
(c) At the Effective Time, the directors and officers of D & E
immediately prior to the Effective Time shall become the directors and officers
of the Surviving Corporation, respectively, to hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
2. CLOSING, CLOSING DATE AND CONSIDERATION
2.1 The Closing and Closing Date.
The closing of the transactions contemplated hereby (the "Closing")
shall take place at the offices of Buchanan Ingersoll Professional Corporation,
One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh, PA 15219, at 10:00
a.m. local time on the last to occur of (a) the earliest date permitted by order
of the Federal Communications Commission (the "FCC") approving the transfer of
control of the License (as defined below) in connection with the Merger which
order is more fully described in Section 6.6 hereof, (b) the effective date of
the last order, approval or exemption of any other federal or state regulatory
agency approving or exempting the Merger if such action is required,
B-4
<PAGE>
(c) the date on which shareholders of the Company approve this Agreement and (d)
the date on which all other conditions to the obligations of each party
hereunder to effect the Merger are satisfied or waived, but in no case not later
than 180 days after the date hereof unless either party hereto in good faith
believes that such FCC approval is imminent at the end of such 180-day period,
then such party may provide written notice to the other party that it requests a
thirty (30) day extension and such extension shall be granted (the "Termination
Date"). The date of the Closing is hereinafter referred to as the "Closing
Date."
2.2 Conversion of Capital Stock.
(a) Subject to equitable adjustment in the event of stock split,
stock dividend, reverse stock split or other change in the number of shares
outstanding of the Company, at the Effective Time on the Effective Date, the
capital stock of the Company outstanding immediately prior thereto shall be
canceled or converted, as the case may be by virtue of the Merger and without
any further action by any holder thereof as follows: (i) each share of Class I
Common Stock, par value $.001 per share, of the Company ("Class I Common Stock")
and each share of Class II Common Stock, par value $.001 per share, of the
Company ("Class II Common Stock"; together with the Class I Common Stock, the
"Company Common Stock") issued and outstanding immediately prior thereto shall
be converted into (A) the number of shares (such number to be rounded to the
nearest whole number) of common stock, par value $.16 per share of D & E ("D & E
Common Stock") equal to $8,000,000, as adjusted pursuant to Article 8 hereof
(the "Purchase Price") divided by (B) the weighted average closing price of D &
E Common Stock on the NASDAQ National Market System over the twenty (20) trading
days on which the D & E Common Stock was traded immediately preceding the
Closing Date; provided, however, that if the price as so calculated under this
clause (B) is less than $23.00 per share, then the price of the D & E Common
Stock shall be fixed at $23.00 per share for the purposes hereof and if the
price as so calculated is more than $27.00 per share, then the price of the D &
E Common Stock shall be fixed at $27.00 per share for the purposes hereof (the
"D & E Stock Price") (such D & E Common Stock issued in connection with the
Merger to be apportioned to each Company Shareholder (defined below) in
accordance with the books and records of the Company as such Shareholder's
interest appears and registered by D & E on the books and records of D & E as
set forth on the Company's books and records); and (ii) each share of the
Company Common Stock and Series A Convertible Preferred Stock, par value $.01
per share, of the Company (the "Series A Preferred Stock") issued and held in
the treasury of the Company shall be canceled and retired; and
(b) All shares of D & E Common Stock outstanding immediately prior
to the Effective Time shall not be converted or changed as a result of the
Merger but shall continue as identical shares of the Surviving Corporation.
2.3 Fractional Shares.
No fractional shares of D & E Common Stock shall be issued in
connection with the Merger. In lieu thereof, each holder of the Company Common
Stock who would otherwise be entitled to receive a fraction of a share of D & E
Common Stock, after aggregating all shares of D & E Common Stock to be received
by such holder, shall instead receive from D & E an amount of cash (without
interest) equal to the D & E Stock Price multiplied by the fraction of a share
of D &E Common Stock to which such holder would otherwise be entitled.
2.4 Exchange of Certificates.
As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall mail, or cause to be mailed, to each holder of
record of Company Common Stock (a) notice that the Merger has been consummated
and instructions for effecting the surrender of their certificates that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock ("Company Certificates") in exchange for certificates
representing shares of D & E Common Stock and (b) a letter of transmittal (which
shall specify that delivery shall be affected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of the Company Certificates
to the Surviving Corporation and shall be in such form and have such other
provisions as the Surviving Corporation may reasonably specify). Upon surrender
of a Company Certificate for cancellation to the Surviving Corporation, together
with a properly completed and duly executed letter of transmittal and such other
documents as may reasonably be requested, the holder of such Company Certificate
shall be entitled to receive, and the Surviving Corporation shall promptly
deliver, in exchange therefor a certificate representing that number of whole
shares of D & E Common Stock which such holder has the right to receive in
respect of the Company Certificate surrendered pursuant to the provisions of
this Article 2 (after taking into account all shares of Company Common Stock
then held by such holder), and the Company Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of D & E Common Stock may
be issued to a transferee if the Company Certificate representing such Company
Common Stock is presented to the Surviving Corporation, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid.
2.5 Tax-Free Reorganization.
The parties intend to adopt this Agreement as a tax-free plan of
reorganization and to consummate the Merger as a merger in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). D & E Common Stock issued in the Merger shall be issued solely in
exchange for the Company Common Stock. Except for cash paid in lieu of
fractional shares, no consideration that could constitute "other property"
within the meaning of Section 356(b) of the Code is being paid by D & E for the
Company Common Stock in the Merger. The parties shall not take a position on any
tax returns inconsistent with this Section 2.5. In addition, D & E represents as
of the date of this Agreement, and as of the Closing Date, that it presently
intends to continue Company's historic business or use a significant portion of
Company's business assets in a business. Neither the Company nor D & E shall
intentionally take or cause to be taken action which would disqualify the Merger
as a reorganization within the meaning of Section 368(a)of the Code.
B-5
<PAGE>
2.6 Further Assurances.
The Company agrees that if, at any time after the Effective Time, D
& E considers or is advised that any further deeds, assignments or assurances
are reasonably necessary or desirable to be obtained from the Company or its
officers or directors, to consummate the Merger or to carry out the purposes of
this Agreement at or after the Effective Time, then the parties and their
respective officers and directors may execute and deliver all such proper deeds,
assignments and assurances and do all other things necessary or desirable to
consummate the Merger and to carry out the purposes of this Agreement, in the
name of the Company or otherwise.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to D & E and covenants and
agrees with D & E as follows:
3.1 Organization, Qualification and Status.
The Company is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of New Jersey.
The Company has full corporate power and authority to own, lease and use its
properties and to carry on its business as presently conducted. The Company is
duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a material adverse effect on its operations or
financial condition.
3.2 Capitalization.
The authorized capital stock of the Company consists of 6,000,000
shares of Class I Common Stock, of which 4,800,000 shares are issued and
outstanding; 57,975,000 shares of Class II Common Stock, of which 450,000 shares
are issued and outstanding; and 50,000,000 shares of Preferred Stock, par value
$.01 per share, of which are authorized 22,500,000 shares of Series A Preferred
Stock, of which 22,000,000 shares are issued and outstanding (collectively, the
"Company Shares"). The Company Shares are held beneficially and of record by the
Company shareholders listed on Schedule 3.2 attached hereto (the "Company
Shareholders"), and no shares are held in the treasury of Company. All of said
issued and outstanding Company Shares are validly issued, fully paid and
non-assessable and none of such shares has been issued in violation of any
preemptive rights of shareholders or transferred in violation of any transfer
restrictions relating thereto. Except for options to purchase an aggregate of,
and not to exceed, 475,000 shares of Class II Common Stock of the Company
granted to certain directors and/or officers of the Company in connection with
the private placement of the Company's Series A Preferred Stock and except as
disclosed on Schedule 3.2 attached hereto, there are no authorized or
outstanding options, warrants, convertible securities, subscription rights,
puts, calls, unsatisfied preemptive rights or other rights of any nature to
purchase or otherwise receive, or to require the Company to purchase, redeem or
acquire, any shares of the capital stock or other securities of the Company and
there is no outstanding security of any kind convertible into such capital
stock; provided, however, that each of the foregoing shall have been exercised
or shall have expired and be of no further force and effect immediately prior to
the Effective Time. Except as disclosed on Schedule 3.2 attached hereto, there
are no existing shareholder agreements, voting agreements or voting trusts
respecting any shares of the capital stock of Company.
3.3 Ownership of Shares.
The Company Shareholders listed on Schedule 3.2 attached hereto own
and hold, beneficially and of record, the entire right, title and interest in
and to the number of the Company Shares set forth opposite their names, free and
clear of any claim, suit, proceeding, call, commitment, voting trust, proxy,
restriction, limitation, security interest, pledge or lien or encumbrance of any
kind or nature whatsoever, and have full power and authority to vote said the
Company Shares and to approve the transactions contemplated by this Agreement,
such Company Shares constituting, in the aggregate, all of the issued and
outstanding shares of capital stock of Company. Each such Company Shareholder
has full power and authority to vote, transfer and dispose of the Company Shares
owned and held by such Company Shareholder, free and clear of any claim, suit,
proceeding, call, voting trust, proxy, restriction, security interest, lien or
other encumbrance of any kind or nature whatsoever.
3.4 No Subsidiary.
The Company does not have any subsidiary or any ownership interest
in any other entity. The Company is not a party to any joint venture arrangement
and does not have the right to acquire any securities of or ownership interests
in any other person or entity.
3.5 Authorization; Valid and Binding Obligation.
The Company has full corporate power and authority to execute and
deliver this Agreement, the Articles of Merger, the Certificate of Merger and
the other agreements and instruments to be executed and delivered in connection
herewith and therewith, and has full corporate power and authority to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. This Agreement, the Articles of Merger, the
Certificate of Merger and the other agreements and instruments to be executed
and delivered in connection herewith and therewith, have been or will be duly
authorized, executed and delivered by Company. All corporate action on the part
of the Company required in order to authorize the execution, delivery and
performance of this Agreement, the Articles of Merger and the Certificate of
Merger and the other agreements and instruments to be executed and delivered in
connection herewith and therewith, has been taken. Each of this Agreement, the
Articles of Merger and the Certificate of Merger constitutes, and the other
agreements and instruments to be executed and delivered in connection herewith
and therewith when duly executed and delivered by the Company each will
constitute, the valid and binding obligation of the Company enforceable against
it in accordance with its terms.
B-6
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3.6 No Violation; Consents.
Neither the execution and delivery of this Agreement, the Articles
of Merger, the Certificate of Merger by Company and the other agreements and
instruments to be executed and delivered in connection herewith and therewith,
nor the consummation of the transactions contemplated hereby or thereby, nor
compliance with the terms hereof or thereof, will (a) conflict with or result in
a breach of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of Company, as amended, nor (b) violate, conflict with
or result in a breach of or default under any of the terms, conditions or
provisions of any material instrument, agreement, contract or commitment, nor
(c) accelerate or give to others any interests or rights, including rights of
acceleration, termination, modification or cancellation, under any material
instrument, agreement, contract or commitment in or with respect to the business
or assets of Company, nor (d) result in the creation of any lien, claim, charge
or encumbrance on the assets, capital stock or properties of Company, nor (e)
conflict with, violate or result in a breach of or constitute a default under
any law, statute, rule, judgment, order, decree, injunction, ruling or
regulation of any government, governmental agency, authority or instrumentality,
court or arbitration tribunal to which the Company or any of its assets or
properties is subject; nor (f) require the consent of any third party, other
than (i) the legally required approval of the Company's shareholders (which
shall have been obtained prior to the Closing), (ii) the filing of all necessary
applications with the FCC and approval of the same and (iii) the filing of the
Articles of Merger in the Department of State of the Commonwealth of
Pennsylvania and the Certificate of Merger with the Secretary of State of the
State of New Jersey.
3.7 Financial Statements.
Schedule 3.7 attached hereto contains true and correct and complete
copies of the following financial statements of the Company at the dates and for
the periods specified:
(a) .An audited Balance Sheet of the Company as of December 31, 1995
(the "Company Balance Sheet") and an unaudited Balance Sheet as of September 30,
1996 (the "Company Interim Balance Sheet"); and
(b) An audited Income Statement and Statements of Cash Flows of the
Company for the period ended December 31, 1995; and unaudited Income Statements
and Statements of Cash Flows for the 9 month period ended September 30, 1996;
in each case together with the notes thereto. Each of the foregoing financial
statements has been prepared in conformity with generally accepted accounting
principals ("GAAP") applied on a consistent basis (subject in the case of
interim statements to the absence of footnotes and to normal year end
adjustments) and fairly presents in all material respects the financial
condition of the Company at the dates and for the periods specified and are in
accordance with the books and records of Company.
3.8 No Adverse Changes.
Since the date of the Company Interim Balance Sheet there has not
been a material adverse change in the condition (financial or otherwise),
properties, assets, liabilities, rights, operations or business of Company.
3.9 Taxes.
The Company has timely filed all federal, state, local and foreign
tax returns required to be filed, has timely paid all taxes required to be paid
in respect of all periods for which returns have been filed, has established an
adequate accrual or reserve for the payment of all taxes payable in respect of
the periods subsequent to the periods covered by the most recent applicable tax
returns, has made all necessary estimated tax payments, and has no material
liability for taxes in excess of the amount so paid or accruals or reserves so
established. The Company is not delinquent in the payment of any tax and is not
delinquent in the filing of any tax returns, and no deficiencies for any tax
have been threatened, claimed, proposed or assessed. The Company has not
received any notification that any material issues have been raised (and are
currently pending) by the Internal Revenue Service or any other taxing authority
(including but not limited to any sales tax authority) and no tax return of the
Company has ever been audited by the Internal Revenue Service or any other
taxing agency or authority.
3.10 Litigation.
There are no actions, suits or proceedings at law or in equity, or
arbitration proceedings, or claims, demands or investigations, pending or, to
Company's knowledge, threatened against or involving Company; there are no
proceedings pending or, to Company's knowledge, threatened against or involving
the Company by or before the FCC (other than proceedings generally applicable to
PCS (as defined below)) or any other governmental board, department, commission,
bureau, instrumentality or agency (including but not limited to any federal,
state, local or foreign governmental agency or body concerned with control of
environmental protection or pollution control, antitrust or trade regulation,
civil rights, labor or discrimination, wages and hours, safety or health, zoning
or land use); and the Company is not in violation of any order, ruling, decree
or judgment of any court or arbitration tribunal or the FCC or any other
governmental board, department, commission, bureau, instrumentality or agency.
3.11 Title to PCS License, Intellectual Property and Other Assets.
(a) The Company is the holder of that certain Frequency Block C
broadband Personal Communications Service ("PCS") license for the Lancaster,
Pennsylvania Basic Trading Area (the "License") issued by order of the FCC which
order is final, nonappealable and in full force and effect.
B-7
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(b) The Company owns the entire right, title and interest in and to
any and all tradenames and trademarks, including without limitation the mark
"PCS One" (the "Mark"), service marks, trademark and service mark registrations
and applications therefor, trademark and service mark licenses, copyrights,
copyright registrations and applications therefor, copyright licenses, software
licenses and know-how licenses, trade secrets, proprietary technical knowledge
and know-how used by the Company including without limitation the right to use
and license the same (collectively, the "Intellectual Property"). There are no
pending or threatened claims or actions of any nature affecting the Intellectual
Property or any rights therein. The Intellectual Property does not infringe on
any rights, including without limitation the patent, trademark, copyright or
trade secret rights of any third party and there is no reasonable basis upon
which any claim may be asserted against the Company for infringement or
misappropriation of any item or right included within the definition of
Intellectual Property. All registrations and certificates issued by any
governmental authority relating to any Intellectual Property and all licenses
and other agreements pursuant to which the Company uses any of the Intellectual
Property are valid and subsisting have been properly maintained and neither the
Company nor, to the knowledge of the Company, any other person is in default or
violation thereof.
(c) Except as set forth on Schedule 3.11, attached hereto, the
Company has good and valid title to the License, the Intellectual Property and
all of its assets and properties as shown on the Company Balance Sheet, free and
clear of all liens, mortgages, security interests, claims, charges, restrictions
or encumbrances.
3.12 Contracts.
Set forth on Schedule 3.12 attached hereto, is a list of all
material contracts, obligations and commitments relating to the business of the
Company (either written or oral), including without limitation employment
contracts, bonus, profit sharing, deferred compensation, stock option, stock
ownership, and all other employee benefit plans, leases, mortgages, pledges,
deeds of trust, loans or credit agreements, contracts and agreements not made in
the ordinary course of business which involve more than $2,500.
3.13 Compliance with Laws.
The Company has complied in all material respects with all
applicable laws, statutes, rules and regulations, orders and standards of
federal, state, local and foreign governments and governmental agencies
(including without limitation, the FCC) applicable to it and its business,
assets (including without limitation, the License), properties and operations
and the Company has not received notice of any claim of violation of any such
laws or regulations.
3.14 Disclosure.
Neither this Agreement nor any other document, certificate, exhibit,
statement or schedule furnished or to be furnished by or on behalf of the
Company to D & E at Closing in connection with the transactions contemplated
hereby contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the factual
statements contained therein, in light of the circumstances under which made,
not misleading.
4. REPRESENTATIONS AND WARRANTIES OF D & E
D & E represents and warrants to the Company and covenants and
agrees with the Company as follows:
4.1 Organization, Qualification and Status.
D & E is a corporation duly incorporated and organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania. D & E has full corporate power and authority to own, lease and use
its properties and to carry on its businesses as presently conducted. D & E is
duly qualified or licensed to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a material adverse effect on its operations or
financial condition.
4.2 Capitalization.
The authorized capital stock of D & E consists of 30,000,000 shares
of D & E Common Stock, of which 5,738,361 shares are issued and outstanding and
no shares of which are held in D & E's treasury. All of such capital stock of D
& E has been duly authorized, and all issued and outstanding shares of capital
stock of D & E have been validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 4.2, there are no outstanding rights, options,
warrants, conversion rights or agreements for the purchase or acquisition from,
or the sale or issuance by, D & E of any shares of its capital stock of any
class nor has D & E issued, granted, awarded or agreed or committed to issue,
grant or award any rights, options, warrants, conversion rights or purchase
rights with respect to the sale and issuance by D & E of any shares of its
capital stock of any class.
4.3 D & E Common Stock.
The shares of D & E Common Stock to be issued in accordance with
this Agreement will be, upon issuance, duly authorized, validly issued, fully
paid and nonassessable.
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4.4 Authorization; Valid and Binding Obligation.
D & E has full corporate power and authority to execute and deliver
this Agreement, the Articles of Merger and the Certificate of Merger and full
corporate power and authority to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
This Agreement, the Articles of Merger, and the Certificate of Merger have been
or will be duly authorized, executed and delivered by D & E. All corporate
action required on the part of D & E in order to authorize the execution,
delivery and performance of this Agreement, the Articles of Merger, and the
Certificate of Merger has been taken. Each of this Agreement, the Articles of
Merger and the Certificate of Merger constitutes, and the other instruments to
be executed and delivered in connection herewith and therewith when duly
executed and delivered by D & E will constitute, the valid and binding
obligation of D & E enforceable against D & E in accordance with its respective
terms.
4.5 No Violation.
The execution and delivery of this Agreement, the Articles of Merger
and the Certificate of Merger by D & E, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the terms hereof or
thereof, will not (a) conflict with or result in a breach of any of the terms,
conditions or provisions of the Articles of Incorporation or By-Laws of D & E,
nor (b) violate, conflict with or result in a breach of or default under any of
the terms, conditions or provisions of any material instrument, agreement,
contract or commitment, nor (c) accelerate or give to others any interests or
rights, including rights of acceleration, termination, modification or
cancellation, under any material instrument, agreement, contract or commitment
in or with respect to the business or assets of D & E, nor (d) result in the
creation of any lien, claim, charge or encumbrance on the assets, capital stock
or properties of D & E, nor (e) conflict with, violate or result in a breach of
or constitute a default under any law, statute, rule, judgment, order, decree,
injunction, ruling or regulation of any government, governmental agency,
authority or instrumentality, court or arbitration tribunal to which D & E or
any of its assets or properties is subject; nor require the consent of any third
party, other than (i) the filing of all necessary applications with the FCC and
approval of the same, (ii) the filing of the Articles of Merger in the
Department of State of the Commonwealth of Pennsylvania and the Certificate of
Merger with the Secretary of State of the State of New Jersey and (iii) filings
under the applicable federal and state securities laws in connection with the
issuance of the D & E Common Stock contemplated under this Agreement.
4.6 Financial Statements.
Schedule 4.6 hereto contains true and correct and complete copies of
the following financial statements of D & E at the dates and for the periods
specified:
(a) Audited Balance Sheet of D & E as of December 31, 1995 (the "D &
E Balance Sheet") and an unaudited Balance Sheet as of September 30, 1996 (the
"D & E Interim Balance Sheet"); and
(b) An audited Income Statement and Statements of Cash Flows of D &
E for the year ended December 31, 1995; and unaudited Income Statements and
Statements of Cash Flows for the 9 month period ended September 30, 1996;
in each case together with the notes thereto. Each of the foregoing financial
statements has been prepared in conformity with GAAP applied on a consistent
basis (subject in the case of interim statements to the absence of footnotes and
to normal year end adjustments) and fairly presents in all material respects the
financial condition of D & E at the dates and for the periods specified and are
in accordance with the books and records of D & E.
4.7 Qualifications to Hold License.
D & E is and on the Closing Date will be both eligible and qualified
as the Surviving Corporation to hold the License in accordance with the
applicable rules of the FCC.
4.8 No Adverse Changes.
Except as set forth on Schedule 4.8 hereto, since the date of the D
& E Interim Balance Sheet there has not been a material adverse change in the
condition (financial or otherwise), properties, assets, liabilities, rights,
operations or business of D & E.
5. COVENANTS AND UNDERTAKINGS
From and after the date of this Agreement to and including the
Effective Date of the Merger, the Company and D & E covenant and agree to comply
with the provisions of this Article 5.
5.1 Shareholder Meeting.
As promptly as practicable after the date of this Agreement, the
Company shall call and hold one or more meetings of its shareholders in
accordance with applicable laws and regulations of the State of New Jersey and
will use its best efforts to obtain at said meetings all approvals of its
shareholders required under New Jersey law in order to consummate the Merger. D
& E agrees to vote its shares of Company Common Stock in favor of approval of
the Merger.
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5.2 Satisfaction of Conditions.
The Company and D & E shall use their best efforts to satisfy the
conditions precedent to the obligations of the other party specified in Articles
6 and 7 hereof.
5.3 Preservation of Business; Cooperation and Consultation.
The Company shall (a) conduct its business affairs and operations in
the ordinary course, consistent with its method of operation for prior periods,
(b) maintain the full force and effect of the License and the Company's
ownership thereof, and comply in all material respects with all applicable rules
and regulations of the FCC with respect thereto, (c) use its best efforts to
keep available the services of its present officers, and (d) use its best
efforts to preserve its reputation and goodwill. In addition to, but not
limiting the generality of the foregoing, the Company and D & E shall consult
and cooperate with each other in connection with the design, development and
construction of the PCS system to which the License relates.
5.4 Exclusivity.
The Company and D & E shall each deal exclusively and in good faith
with each other with regard to the Merger and will not, and each will direct its
officers, directors, financial advisors, accountants, agents, and counsel not
to, (a) solicit submission of proposals or offers from any other person relating
to any acquisition of all or of a material part of its stock or assets, or any
merger, consolidation or business combination that would have the effect of
preventing the consummation of the transactions contemplated by this Agreement
(an "Acquisition Proposal"), (b) participate in any negotiations regarding, or
furnish, in connection with an Acquisition Proposal, any information to any
other person regarding the Company or otherwise cooperate in any way or assist,
facilitate or encourage any Acquisition Proposal by any other person, or (c)
enter into any agreement or understanding, whether oral or in writing, that
would have the effect of preventing the consummation of the transactions
contemplated by this Agreement.
5.5 FCC and Other Consents.
Within ten (10) days within execution of this Agreement and in no
event later than December 31, 1996, the Company and D & E shall file with the
FCC the necessary applications to obtain, prior to the Closing, a final and
nonappealable order of the FCC approving the consummation of all of the
transactions contemplated hereby, including without limitation, the transfer of
control of the License in connection with the Merger and thereafter by
contribution by D & E to an affiliate controlled by D & E, as well as any and
all approvals, orders and exemptions from other governmental authorities in
order to effect the Merger and the consummation of the transactions contemplated
hereby. Also, each party hereto shall file and shall cooperate in connection
with the filing of all reports, applications and other documents required to be
filed with the FCC between the date hereof and the Effective Time and shall make
available to the other parties copies of all such reports within a reasonable
time prior to filing and promptly after the same are filed. Except where
prohibited by applicable statutes and regulations, each party shall promptly
provide the other (or its counsel) with copies of all other filings to be made
or made by such party with the FCC or any other governmental entity in
connection with this Agreement, the Articles of Merger, the Certificate of
Merger, the transfer of the License in connection with the Merger or the
transactions contemplated hereby or thereby.
5.6 Negative Covenants.
The Company covenants and agrees that from and after the date hereof
through and including the Effective Date it will not, except as contemplated by
this Agreement, without the prior written consent of D & E:
(a) enter into any business combination transaction (such as a
merger, consolidation, sale of stock or sale of assets) with any person;
(b) amend or authorize any amendment to or modification of its
Certificate of Incorporation or By-Laws;
(c) make any change in its authorized or issued capital stock, or
issue any corporate securities of any nature or options for any of the foregoing
or enter into any contract of any nature respecting shares of its capital stock
or otherwise make any changes in its capital structure;
(d) make or declare any distribution or payment in respect of shares
of its capital stock or purchase or redeem any shares of its capital stock;
(e) enter into any material contract or commitment;
(f) sell or transfer the License, the Mark, any other Intellectual
Property or any other property other than in the ordinary course of business, or
acquire or dispose of any fixed assets, except as previously disclosed to D & E;
(g) mortgage, pledge or subject to any lien, charge or encumbrance
the License, the Mark, any other Intellectual Property or any other assets,
tangible or intangible;
(h) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities except indebtedness (i)
incurred in the ordinary course of business consistent with prior practice but
not to exceed, in the aggregate
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$5,000, (ii) owing to the FCC on the date hereof in connection with the
acquisition of the License, and (iii) owing to D & E and its subsidiaries and
affiliates;
(i) enter into any new line of business, or terminate or abandon any
existing line of business, or incur or commit to any capital expenditure;
(j) propose or effect a split or reclassification of its outstanding
capital stock or a recapitalization; or
(k) agree, whether in writing or otherwise, to do any of the
foregoing or do any act or thing which under the terms and conditions of this
Agreement would be in violation of any of the covenants or agreements of the
Company hereunder, or which would make any representation or warranty of the
Company hereunder inaccurate or untrue as of the Closing Date, or would result
in any of the conditions to the Merger set forth in Articles 6 or 7 not being
satisfied, or which would adversely affect the ability of any party to obtain
the FCC approval of the Merger and the consummation of the transactions
contemplated hereby or any other approval of a government entity required,
necessary or contemplated hereby.
5.7 Access in Connection with Investigation by D & E.
The Company covenants and agrees that prior to the Closing, the
Company shall afford to the employees, officers, attorneys, accountants and
other authorized representatives of D & E access during normal business hours to
the facilities and the books and records of the Company so as to afford D & E
full opportunity to make such review, examination and investigation of the
Company as D & E may desire to make. D & E will be permitted to make extracts
from or copies of such books and records. At the Closing, the Company shall
deliver to D & E all books and records of the Company all of which shall be true
and correct.
5.8 Resignations of Directors and Officers.
The Company shall cause all directors and officers of the Company to
deliver their written resignations from such offices to D & E, which
resignations shall be effective at the Closing and in form and substance
satisfactory to D & E.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF D & E
The obligations of D & E hereunder shall be subject to the following
conditions, any or all of which may be waived in writing by D & E (provided,
however, that there can be no waiver of FCC approval):
6.1 Accuracy of Representations and Warranties.
Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of such date and the
Company shall have performed and complied in all material respects with each of
the agreements, covenants, stipulations, terms and conditions contained herein
and required to be performed or compiled with by it on or prior to the Closing
Date.
6.2 No Adverse Change.
Since September 30, 1996, there shall have been no material adverse
change in the business, properties or financial condition of Company and the
Company shall not have suffered any loss on account of fire, flood, accident,
strike or other calamity which has a material adverse effect on the financial
condition, results of operation, business or properties of Company, whether or
not such loss shall have been covered by insurance.
6.3 No Injunction; Consents.
No action, proceeding or investigation shall have been instituted or
threatened to set aside the transactions provided for herein or to enjoin or
prevent the consummation of the transactions contemplated hereby and all
required approvals, orders and exemptions for the consummation of the
transactions contemplated hereby shall have been secured.
6.4 Deliveries by Company.
The Company shall have delivered to D & E the following:
(a) a good standing certificate and certified charter documents, as
amended, of Company, each of recent date from the Secretary of the State of New
Jersey and a good standing certificate for the Company of recent date from each
jurisdiction in which the Company is qualified to do business;
(b) copies of the resolutions duly adopted by the Board of Directors
and shareholders of Company, authorizing the execution, delivery and performance
of this Agreement, the Articles of Merger, the Certificate of Merger and the
other agreements, instruments and documents contemplated hereby and to be
delivered hereunder, and copies of the Company's By-Laws, as amended, duly
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certified by the Secretary or Assistant Secretary of Company, which resolutions
shall be in full force and effect at the time of delivery on the Closing Date;
(c) a certificate of incumbency, dated the Closing Date, executed by
the President or any Executive Vice President of the Company, and by the
Secretary or any Assistant Secretary of the Company, listing the officers of the
Company authorized to execute the Agreement, Articles of Merger, the Certificate
of Merger and the other certificates, schedules and the instruments to be
delivered on behalf of the Company, and their respective officer positions, and
containing the genuine signature of each such person set forth opposite his
name;
(d) a certificate, dated the Closing Date, of the President or
Executive Vice President of the Company, in form and substance reasonably
satisfactory to D & E and its legal counsel, to the effect that each of the
conditions set forth in Sections 6.1 and 6.2 of this Article 6 have been
satisfied in every respect;
(e) a certificate of its Secretary setting forth the number of
shares of the Company capital stock (i) entitled to vote at the shareholder
meeting approving the Merger, (ii) actually voted at any such meeting, (iii)
voted in favor of, and against, the Merger and (iv) setting forth the names of
any Company Shareholders who took any steps under New Jersey law to dissent from
the Merger; and
(f) an opinion of its counsel, Stradley, Ronon, Stevens & Young, and
special FCC counsel, Patton Boggs, L.L.P., each substantially in the form of
Exhibit C attached hereto.
6.5 Shareholder Approval.
The Company Shareholders shall have approved the Merger with no
fewer than eighty percent (80%) of all votes cast voting in favor of such
approval. No Company Shareholder shall have taken any steps for perfecting
dissenting shareholders' rights of appraisal as set forth in the NJBCA.
6.6 FCC Approval.
The FCC shall have issued a final and nonappealable order approving
the transfer of control of the License and the consummation of all transactions
contemplated hereby which order shall be in full force and effect without any
material limitations, restrictions or conditions contained therein.
6.7 Shareholder Documents and Undertakings.
Each Company Shareholder shall have together with D & E executed and
delivered the D & E Shareholder Agreement in substantially the form of Exhibit D
attached hereto (the "D & E Shareholder Agreement").
6.8 Securities Laws Matters.
D & E Common Stock shall be traded on the NASDAQ National Market
(trading on the date hereof under the symbol "DECC") and the registration
statement relating to the D & E Common Stock into which the Company Common Stock
shall be converted in connection with the Merger, shall be effective and there
has been no (a) issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the registration statement or prospectus
or any amendment or supplement thereto relating to the D & E Common Stock to be
issued hereunder; (b) receipt by D & E of any notification with respect to the
suspension of the qualification of such D & E Common Stock for sale or to D &
E's knowledge, the initiation or threatening of any such proceeding for such
purposes; and (c) event or condition shall exist which makes any statement made
in any such registration statement or the related prospectus untrue in any
material respect or which requires the making of any changes in such
registration statement or prospectus so that, as of such date, the statements
therein are not misleading and do not omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
6.9 Conversion of the Company's Series A Preferred Stock.
Prior to the Closing Date each holder of the Company's Series A
Preferred Stock shall have exercised its rights to convert and effected the
conversion of all the Company's Series A Preferred Stock held by such holder
into Class II Common Stock as provided for in the Company's Certificate of
Incorporation, as amended and shall have been held in the treasury of the
Company. Immediately prior to the Merger, all of the Company's Series A
Preferred Stock held in the treasury of the Company shall be canceled and
retired and no Preferred Stock of the Company shall be issued or outstanding.
7. CONDITIONS TO THE OBLIGATIONS OF COMPANY
The obligations of the Company shall be subject to the following
conditions, any or all of which may be waived in writing by Company (provided,
however, there can be no waiver of FCC approval):
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7.1 Accuracy of Representations and Warranties.
Each of the representations and warranties of D & E set forth in
Article 4 hereof shall be true and correct in all material respects on and as of
the Closing Date with the same effect as though made on and as of such date and
D & E shall have in all material respects performed and compiled with each of
the agreements, covenants, stipulations, terms and conditions contained herein
and required to be performed or compiled with by it on or prior to the Closing
Date.
7.2 Deliveries by D & E.
D & E shall have delivered to the Company the following:
(a) good standing certificates and certified charter documents of D
& E, each of recent date, from the Secretary of the State of Pennsylvania;
(b) copies of the resolutions duly adopted by the Board of Directors
of D & E authorizing the execution, delivery and performance of this Agreement,
the Articles of Merger and the Certificate of Merger and the other agreements,
instruments and documents contemplated hereby, duly certified by the Secretary
or Assistant Secretary of D & E which shall be in full force and effect at the
time of delivery on the Closing Date; and
(c) a certificate, dated the Closing Date, of the President or Vice
President of D & E, in form and substance reasonably satisfactory to the Company
and its legal counsel, to the effect that each of the conditions set forth in
Section 7.1 of this Article 7 have been satisfied in every respect.
7.3 Shareholder Approval.
The Company Shareholders shall have approved the Merger with no
fewer than eighty percent (80%) of all votes cast voting in favor of such
approval. No Company Shareholder shall have taken any steps for perfecting
dissenting shareholders' rights of appraisal as set forth in the NJBCA.
7.4 Securities Laws Matters.
D & E Common Stock shall be traded on the NASDAQ National Market and
the registration statement relating to the D & E Common Stock into which the
Company Common Stock shall be converted in connection with the Merger, shall be
effective and there has been no (a) issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the registration
statement or prospectus or any amendment or supplement thereto relating to the D
& E Common Stock to be issued hereunder; (b) receipt by D & E of any
notification with respect to the suspension of the qualification of such D & E
Common Stock for sale or to D & E 's knowledge, the initiation or threatening of
any such proceeding for such purposes; and (c) event or condition shall exist
which makes any statement made in any such registration statement or the related
prospectus untrue in any material respect or which requires the making of any
changes in such registration statement or prospectus so that, as of such date,
the statements therein are not misleading.
7.5 FCC Approval.
The FCC shall have issued a final and nonappealable order approving
the Merger, the transfer of control of the License and the consummation of all
transactions contemplated hereby which order shall be in full force and effect
without any material limitations, restrictions or conditions contained therein.
8. EXPENSES
Each Company Shareholder shall pay all fees and expenses incurred by such
Shareholder in connection with the transactions provided for hereunder and under
the D & E Shareholder Agreement and shall pay to (i) D & E in full such
Shareholder's pro rata portion of fifty percent (50%) of the total Registration
Expenses incurred by D & E in connection with the preparation, filing and/or
maintaining in effect of a registration statement covering the registration of
any D & E Common Stock under the Securities Act of 1933, as amended, and (ii)
the Company such Shareholder's pro rata portion of all fees and expenses
incurred by the Company in connection with the transactions provided for
hereunder and under the D & E Shareholder Agreement, including the fees and
expenses of Company's counsel and accountants, or in the absence of either such
payment, such pro rata portion shall be deemed paid by reducing the Purchase
Price by comparable value to such unpaid pro rata portion. For the purposes
hereof, "Registration Expenses" shall mean any and all registration and
qualification fees and expenses (including underwriters' discounts and
commissions), and any costs and disbursements of or related to accounting and
legal counsel for D & E that result from such registration. Except as otherwise
provided in this Agreement, D & E shall pay all expenses incurred by it in
connection with the transactions provided for hereunder, including the fees and
expenses of its counsel and accountants.
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9. ABSENCE OF BROKER OR FINDER
The Company represents and warrants to D & E that no person is acting or
has acted for it as broker or finder in connection with the transactions
provided for by this Agreement. D & E represents and warrants to the Company
that no person is acting or has acted for it as broker or finder in connection
herewith.
10. NEWS RELEASES
No notices to third parties or any publicity, including press releases,
concerning any of the transactions provided for herein shall be made unless
planned and coordinated jointly between the Company and D & E unless D & E is
advised by counsel that a news release or disclosure is required or appropriate
and D & E is unable to comply with the terms of this Article after making
reasonable efforts to do so.
11. NOTICES
Any notice, request, demand or other communication given by any party
under this Agreement (each a "notice") shall be in writing, may be given by a
party or its legal counsel, may and shall be deemed to be duly given (a) when
personally delivered, or (b) upon delivery by United States Express Mail or
similar overnight courier service which provides evidence of delivery, or (c)
when five (5) days have elapsed after its transmittal by registered or certified
mail, postage prepaid, return receipt requested, addressed to the party to whom
directed at that party's address as it appears below or another address of which
that party has given notice, or (d) when transmitted by telex (or equivalent
service), the sender having received the answer back of the addressee, or (e)
when delivered by facsimile transmission if a copy thereof is also delivered in
person or by overnight courier. Notices of address change shall be effective
only upon receipt notwithstanding the provisions of the foregoing sentence.
Notice to the Company shall be sufficient if given to:
PCS One, Inc.
Bayport One, Suite 400
West Atlantic City, NJ 08232
Attention: Michael B. Azeez
Facsimile: (609) 645-9696
with copies to: Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Attention: Joseph V. Del Raso
Facsimile: (215) 564-8120
Notice to D & E shall be sufficient if given to:
D & E Communications, Inc.
4139 Oregon Pike
Ephrata, PA 17522
Attention: Donald R. Kaufmann
Facsimile: (717) 738-7030
with copies to: Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street - 20th Floor
Pittsburgh, PA 15219
Attention: Vincent C. Deluzio
Facsimile: (412) 562-1041
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained herein or in any
document delivered pursuant hereto shall survive the consummation of the
transactions provided for in this Agreement.
13. COOPERATION; FURTHER ASSURANCES
Each party to this Agreement agrees to cooperate fully with the
other parties hereto and their counsel and accountants and other
representatives, will use best efforts to cause satisfaction of the conditions
to consummation of the Merger as promptly as possible, and
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will refrain from a course of action inconsistent with this Agreement, or the
Articles of Merger or the Certificate of Merger. Each party shall, upon request
of any of the other parties hereto, at any time and from time to time execute,
acknowledge, deliver and perform all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and instruments of further assurances
as may be necessary or appropriate to carry out the provisions and intent of
this Agreement, the Articles of Merger or the Certificate of Merger.
14. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby abandoned prior to Closing:
(a) by the mutual consent of D & E and Company;
(b) by D & E if any condition in Article 6 has not been satisfied
in full or previously waived by D & E in writing at or prior
to the Termination Date;
(c) by the Company if any condition in Article 7 has not been
satisfied in full or previously waived by the Company in
writing at or prior to the Termination Date; or
(d) by either party (other than a party that is in material breach
of its obligations under this Agreement) if the Closing shall
not have occurred on or before the Termination Date.
If this Agreement is terminated pursuant to clause (a) of this
Article 14, all obligations of the parties hereunder shall terminate without any
further liability or obligation of either party to the other, except that
Articles 8, 10 and 16 of this Agreement shall survive and continue in full force
and effect notwithstanding such termination. Except as limited by the preceding
sentence, the exercise by any party of the right to terminate this Agreement
shall not terminate or limit any remedy that such party may have at law or in
equity by reason of another party's breach of any obligation hereunder prior to
such termination.
15. MISCELLANEOUS
15.1 Legend.
In accordance with the D & E Shareholder Agreement, each certificate
for D & E Common Stock shall be imprinted with a legend in substantially the
following form:
THIS CERTIFICATE OF STOCK AND THE SHARES REPRESENTED THEREBY MAY NOT
BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THAT
CERTAIN SHAREHOLDER AGREEMENT DATED AS OF ___________________, 1997
AND ALL AMENDMENTS THERETO, A COPY OF WHICH AGREEMENT AND ANY
AMENDMENT THERETO IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
15.2 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
heirs, executors, administrators, successors and assigns of the parties hereto.
15.3 Governing Law.
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania without regard to any jurisdiction's provisions of conflicts of
law.
15.4 Counterparts/Use of Facsimiles.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute a
single agreement. The reproduction of signatures by means of a telecopying
device shall be treated as though such reproductions are executed originals and
each party hereto covenants and agrees to provide the other parties with a copy
of this Agreement bearing original signatures within five (5) days following
transmittal by facsimile.
15.5 Entire Agreement.
This Agreement (including, for purposes hereof, the Exhibits and
Schedules contemplated hereby) constitutes the entire agreement of the parties
hereto respecting its subject matter and supersedes all negotiations,
preliminary agreements and prior or contemporaneous discussions and
understandings of the parties hereto in connection with the subject matter
hereof. No term of this Agreement nor the termination hereof pursuant to Article
14, shall be deemed to waive, amend, modify, limit, supercede, or terminate any
rights or obligations under that certain Participation Agreement, dated as of
November 28, 1995, by and between the Company, Red Rose Systems, Inc. and The D
and E Group, which Agreement shall remain in full force and effect. This
Agreement may be amended, modified, or supplemented
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<PAGE>
only by a writing signed by all parties by their duly authorized
representatives. Any party may waive the benefit of a term or condition of this
Agreement but such waiver shall be in writing and signed by the party so waiving
such benefit and such waiver will not be deemed to constitute the waiver of
another breach of the same, or any other, term or condition. The headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of any provision of this Agreement.
15.6 No Presumption Against Draftsman.
There shall be no presumption against any party on the ground that
such party or its counsel was responsible for preparing this Agreement or any
part hereof.
16. CONFIDENTIALITY
Should the Merger not be consummated for any reason, all information
received from the Company or from D & E shall be held in strict confidence by D
& E or Company, as the case may be, and neither shall use any of such
information itself nor disclose any such information to others without Company's
or D & E's (as the case may be) written consent unless (a) the information in
question is, or becomes, public knowledge without breach hereunder, or (b) was
known to D & E or Company, as the case may be, at the time obtained, or (c) is
rightfully obtained from a third party with no restriction on disclosure.
IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
D & E COMMUNICATIONS, INC.
By: /s/ G. William Ruhl
-------------------
Name: G. William Ruhl
Title: Senior Vice President
PCS ONE, INC.
By: /s/ Michael Azeez
-----------------
Name: Michael Azeez
Title: President
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EXHIBIT C
FORM OF COUNSEL OPINION
___________ __, 199_
D & E Communications, Inc.
130 East Main Street
P.O. Box 458
Ephrata, PA 17522
Re: PCS One, Inc.
Ladies and Gentlemen:
We have acted as counsel to and for PCS One, Inc., a New Jersey
corporation ("PCS"), in connection with the transactions contemplated by a
certain Agreement and Plan of Merger dated as of December ___, 1996 ("Merger
Agreement") by and among PCS and D & E Communications, Inc. ("D & E"). This
opinion is furnished to you pursuant to Section 6.4(f) of the Merger Agreement.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement.
In our capacity as counsel, we have been requested by PCS to render
the opinions set forth in this letter, and in connection therewith, we have
reviewed executed counterparts of the (i) the Merger Agreement, and (ii)
Articles of Merger by and between PCS and D & E, together with a Certificate of
Merger (the foregoing are hereinafter collectively referred to as the
"Agreements"). The term Agreements as used herein shall only refer to the
contractual agreements themselves, exclusive of any exhibits or schedules
attached thereto, and shall not include any other documents, contracts or
matters referred to or described in the Agreements.
In our capacity as counsel for PCS we have also reviewed the
following additional documents and materials: (a) Amended and Restated
Certificate of Incorporation of PCS, certified as true and correct by the
Secretary of State of New Jersey ("Certificate of Incorporation"), (b) Amended
and Restated Bylaws of PCS, as amended to date, certified as true and correct by
the Secretary of PCS, (c) Certificate of Incumbency signed by certain of the
officers of PCS, (d) resolutions of the Board of Directors and Shareholders of
PCS authorizing the action taken in connection with the transactions
contemplated by the Agreements, certified as true and correct by the Secretary
of PCS, (e) good standing certificate with respect to PCS issued by the
Secretary of State of the State of New Jersey (the "Secretary of State") on
_______________ __, 199_ ("Good Standing Certificate"), (f) minutes of the
proceedings of the Board of Directors and Shareholders of PCS contained in the
official minute book of PCS and the official stock register of PCS, in each case
provided to us by PCS, and (g) an Officer's Certificate of the President and
Treasurer of PCS dated the date hereof, a copy of which is attached hereto
("Officer's Certificate"). The Agreements, together with the documents described
in clauses (a) through (g) above are hereinafter collectively referred to as the
"Documents." Other than our review of the Documents, we have not reviewed any
other documents or made any independent investigation for the purpose of
rendering this opinion and we make no representation as to the scope and
sufficiency of our document review for your purposes.
We have relied, without independent investigation, upon certain
certifications of governmental officials and private organizations having access
to and regularly reporting on government files and records, including
certificates and articles of incorporation, certificates as to good standing. In
addition, as to certain matters, we have relied without independent
investigation upon the Officer's Certificate, a copy of which is attached to
this Opinion, and upon the representations and warranties of PCS contained in
the Documents for the truth, accuracy and completeness of the matters contained
therein.
We express no opinion as to the remedies conferred upon you by the
Agreements or other agreements referred to therein or the remedy which any
court, other government body, agency or arbitrator may grant, impose or render.
Without limiting the generality of the foregoing, no opinion is expressed as to
the enforceability or recognition under the laws of the State of New Jersey or
the Commonwealth of Pennsylvania of (i) waiver of the right to a jury trial,
(ii) self-help, subrogation, indemnity, severability or the exercise of private
power of sale, (iii) confession of judgment, (iv) provisions which purport to
establish evidentiary standards, (v) provisions related to waiver of remedies
(or the delay or omission of enforcement thereof), disclaimers, liability
limitations with respect to third parties, releases or waivers of legal or
equitable rights, discharge or waivers of defenses or liquidated damages, or
(vi) provisions related to choice of governing laws, which may be qualified by
judicial decisions.
This letter shall be interpreted in accordance with the assumptions,
qualifications, exceptions, definitions, limitations on coverage and other
limitations provided for and specified in Sections 4, 6-A, 6-B, 7, 11-14, 17, 18
and 19 of the Legal Opinion Accord (the
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<PAGE>
"Accord") of the ABA Section of Business Law (1991), included in the Third Party
Legal Opinion Report, 47 Bus. Law. 167 (1991), and we expressly incorporate the
provisions of such Sections herein by reference. Each of the opinions expressed
herein is subject to the General Qualifications as defined in the Accord.
In addition, we are advised by PCS that a separate opinion letter
will be delivered to you by Patton, Boggs, L.L.P. opining as to federal
communications laws and regulations, and accordingly, no opinion is expressed
herein in any respect as to the Federal Communications Act of 1934, as amended,
or any law, rule, regulation or policy of the Federal Communications Commission
or any other governmental authority which specifically regulates the
acquisition, development or operation or transfer of control of the License.
The law covered by the opinions expressed herein is limited to (i)
the Federal statutes, judicial and administrative decisions and rules and
regulations of the governmental agencies of the United States and (ii) the
statutes, judicial and administrative decisions and rules and regulations of the
governmental agencies of the State of New Jersey and the Commonwealth of
Pennsylvania. We have noted, in the course of preparing this opinion, that the
substantive laws of other jurisdictions may be relevant in connection with
specific opinions which are given herein. We have, with your permission, assumed
in each instance that the substantive law of any such jurisdiction other than
the State of New Jersey and the Commonwealth of Pennsylvania is identical in all
respects to the substantive law of the Commonwealth of Pennsylvania without
regard to principles relating to conflict of laws.
This opinion is given only with respect to laws and regulations
presently in effect. We assume no obligation to advise you of any changes in law
or regulation which may hereafter occur, whether the same are retroactively or
prospectively applied, or to update or supplement this letter in any fashion to
reflect any facts or circumstances which hereafter come to our attention.
Based upon, and subject to, the foregoing, we are of the opinion, as
of the date hereof, that:
1. PCS is a corporation organized and, as of the date set forth on
the Good Standing Certificate issued with respect thereto, in good standing
under the laws of the State of New Jersey. To our actual knowledge, PCS has no
subsidiaries. To our actual knowledge, PCS has not received written notice from
any governmental authority that qualification as a foreign corporation may be
required in any jurisdiction.
2. PCS has the requisite corporate power to enter into the
Agreements and perform its obligations thereunder.
3. The execution, delivery and performance of the Agreements by PCS
have been duly authorized by all requisite corporate action on behalf of PCS.
The Agreements constitute legal, valid and binding obligations of PCS and are
enforceable against PCS in accordance with their respective terms.
4. The execution and delivery by PCS of the Agreements and the
performance by PCS of its obligations thereunder (i) do not result in a
violation of the Certificate of Incorporation or the Amended and Restated Bylaws
of PCS, (ii) are not prohibited by, and will not subject PCS to a fine, penalty
or other similar sanction or result in the creation or imposition of any lien or
encumbrance upon any of the properties or assets of PCS under, any statute or
regulation customarily applicable to the transactions contemplated by the
Agreements, (iii) to our actual knowledge, do not breach or result in a default
by PCS (immediately, upon notice or with the passage of time) under any material
indenture, agreement, contract or instrument to which PCS is a party or by which
PCS is bound, and (iv) does not violate any order, writ, judgment or decree to
which, to our actual knowledge, PCS is a party.
5. Upon the receipt and filing of Articles of Merger with the
Department of State of the Commonwealth of Pennsylvania and a Certificate of
Merger with the Secretary of State of the State of New Jersey, the Merger shall
become effective in accordance with the Pennsylvania Business Corporation Law
and the New Jersey Business Corporation Act, respectively.
6. The authorized capital stock of PCS consists of (a) 50,000,000
shares of preferred stock, $.0l par value per share ("Preferred Stock"),
22,500,000 of which shares have been designated Series A Convertible Preferred
Stock, (b) 6,000,000 shares of Class I common stock, $.00l par value per share
("Class I Common Stock"), and (c) 57,975,000 shares of Class II common stock,
$.001 par value per share ("Class II Common Stock"). Annex 1 attached hereto
sets forth the issued and outstanding shares of capital stock of PCS which are,
to our actual knowledge, fully paid and nonassessable, and (b) to our actual
knowledge, the stockholders of record and holders of record of any subscription,
warrant, option, convertible security or other right to purchase or otherwise
acquire equity securities of PCS immediately prior to the Closing Date, and the
number of shares of such capital stock and the number of subscriptions,
warrants, options, convertible securities, and other such rights held by each of
them are as set forth in Schedule 3.2 to the Merger Agreement,
7. To our actual knowledge, except as set forth in Schedule 3.2 to
the Merger Agreement, immediately prior to the Closing (i) no subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or acquire equity securities of PCS has been authorized and is
outstanding, (ii) there is no commitment by PCS to issue shares, subscriptions,
warrants, options, convertible securities, or other such rights or to distribute
to holders of any of its equity securities any evidence of indebtedness or
assets, and (iii) PCS has no obligation (contingent or other) to purchase,
redeem or otherwise acquire any of its equity securities or any interest therein
or to pay any dividend or make any other distribution in respect thereof except
as provided for in the Certificate of Incorporation of PCS or under applicable
law.
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<PAGE>
8. To our actual knowledge, PCS is not in default with respect to
any order, writ, injunction or decree, to which PCS is a party, of any court or
governmental authority.
9. To our actual knowledge, except as described in Schedule 3.11 to
the Merger Agreement, there is no -------------- suit, claim, investigation,
action or proceeding pending or overtly threatened against or affecting PCS
before or by any court, administrative agency or governmental authority.
This opinion is solely for your benefit and may not be published by
you (other than upon an order of a court or other legal tribunal), relied upon
in any manner or for any purpose by, or circulated to, any third party, without
the prior written approval of a partner of this law firm in each instance.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:_____________________________________
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<PAGE>
ANNEX 1
Capital Stock
As of the Closing Date:
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<PAGE>
EXHIBIT C
FORM OF SPECIAL FCC COUNSEL OPINION
[CLOSING DATE]
D & E Communications, Inc.
130 East Main Street
P.O. Box 458
Ephrata, PA 17522
Ladies & Gentlemen:
We have acted as Federal Communications Commission ("FCC" or "Commission")
counsel to PCS One, Inc. (the "Company") in connection with the Agreement and
Plan of Merger, dated as of December 12, 1996 (the "Agreement"), as well as the
Company's preparation of a certain application to the FCC for authority to
participate in the FCC's Broadband Personal Communications Services ("PCS") "C"
Block Auction ("Auction") (said application being hereinafter referred to as the
"FCC Application"), the issuance of that certain Frequency Block C Broadband PCS
License for the Lancaster, Pennsylvania Basic Trading Area (the "License"), and
the FCC's order (the "FCC Approval Order") approving the transfer of control of
the License in connection with the Merger (as defined in the Agreement).
This opinion is furnished to you pursuant to Section 6.4(f) of the
Agreement. All capitalized terms used but not defined in this opinion shall have
the meanings assigned to them in the Agreement.
In our capacity as FCC counsel to the Company as described above, we have
reviewed: (a) the FCC Application; (b) the relevant rules and policies of the
FCC related to the Auction, the licensing and operation of PCS facilities and
the acquisition, development, operation and transfer of control of PCS licenses
("FCC Rules"); (c) the relevant FCC records concerning the Auction, the
Company's acquisition of the License and the transfer of control of the License
in connection with the Merger which were publicly available at the Commission's
Washington offices as of 12:00 Noon Eastern Daylight Time on _______________,
1997; (d) files made available to us by the Company; and (e) files we maintain
as FCC counsel to the Company. In furnishing this opinion we have reviewed
originals or copies, certified or otherwise identified to our satisfaction, of
the Agreement and of all documents specified in clauses (a) through (e) above.
This opinion is based on and relates solely to the Company's (i) participation
in the Auction and no other PCS auction by the FCC, (ii) the acquisition of the
License and (iii) the transfer of control of the License in connection with the
Merger.
We have also examined and have relied upon certificates of the Company or
its officers, delivered to us prior to closing of the transactions contemplated
by the Agreement in connection with this opinion, and upon the representations
and warranties of the Company made in the Agreement as to matters of fact, other
than facts constituting the conclusions of law.
Whenever a statement herein is qualified by "to the best of counsel's
knowledge" or similar phrase, it is intended to indicate that those attorneys in
this firm who have rendered legal services in connection with the transactions
contemplated by the Agreement do not have current knowledge of the inaccuracy of
such statement. However, except as otherwise expressly indicated, we have not
undertaken any independent investigation to determine the accuracy of any such
statement, and no inference that we have any knowledge of any matters pertaining
to such statement should be drawn from our representation of the Company in FCC
matters. Except as otherwise specifically indicated, the opinions herein
expressed are limited to solely matters related to the Communications Act of
1934, as amended (the "Act"), and the applicable FCC Rules and we express no
opinion as to any other laws, regulations, rules or policies, including, without
limitation, state or local laws, regulations, rules, or policies that may be
applicable to the Company's qualifications for the Auction or to acquire and
hold the License or to construct and operate facilities pursuant to such License
or to transfer control of the License in connection with the Merger. Our opinion
is as of the date hereof, and we undertake no responsibility to advise you of
any changes which might occur after the date hereof.
We have assumed the genuineness of all signatures on all documents examined
by us, the authenticity and completeness of documents submitted to us as
originals, and the conformity to authentic original documents of all documents
submitted to us as certified, conformed or photostatic copies. In addition, we
have specifically assumed, based solely upon the representations of the
Surviving Corporation under the Agreement, and without any investigation
thereof, that the Surviving Corporation meets the requirements of Section
24.839(d)(2) of the FCC Rules relating to transfer of control of the License.
Based upon the foregoing and subject to the reservations and exceptions set
forth herein, we are of the opinion that:
1. Except with respect to general rulemakings and other proceedings
generally related to the licensing of PCS facilities, to the best of our
knowledge: (i) the Company is in compliance with all material terms and
conditions of the License; (ii) no event has occurred which (a) could result in
the Company being found unqualified to hold, or permits (or after notice or
lapse of time or both would permit) the rescission or revocation, material
impairment or termination of such License, or the denial of an application for
the renewal thereof, or (b) could materially and adversely affect any right of
the Company thereunder; (iii) there is no adverse judgment, decree or order that
has been issued by the FCC specifically against the Company; and (iv) there are
no actions, proceedings or investigations pending before the FCC or threatened
by the FCC against the Company or any of its officers, directors or shareholders
which, if adversely determined, would have a material adverse effect on the
Company's ability or qualifications to hold the License, transfer control of the
License or otherwise perform its obligations under the Agreement, or to
consummate the transactions contemplated by the Agreement.
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<PAGE>
2. The Company is the duly authorized holder of the License by order of the
FCC and the FCC has issued its further order approving the transfer of control
of the License as contemplated by the Agreement, which orders are final,
nonappealable and in full force and effect.
3. Except the orders of the FCC addressed in paragraph 2 hereof, no
approval, consent, order, authorization, designation, registration, declaration,
waiver or filing of or with the FCC is required in connection with (i) the
execution and delivery of the Agreement and the other agreements and instruments
to be executed and delivered in connection therewith; (ii) the transfer of
control of the License, in accordance with the Agreement and the other
agreements and instruments to be executed and delivered in connection therewith;
and (iii) compliance with the terms and conditions of the Agreement and the
other agreements and instruments to be executed and delivered in connection
therewith.
4. The execution, delivery and, subject to the requisite FCC approvals
which have been received or obtained, performance of the Agreement and the other
agreements and instruments to be executed and delivered in connection therewith
by the Company, including but not limited to the Merger of the Company with and
into D & E with D & E being the Surviving Corporation, the transfer of control
of the License in connection therewith and thereafter by contribution to D & E's
wholly-owned subsidiary (as contemplated by the Agreement and the other
agreements and instruments to be executed and delivered in connection therewith)
do not violate or conflict with the Act or the FCC Rules.
This opinion is limited to matters stated herein and no opinion is implied
or may be inferred beyond the matters expressly stated. This opinion is rendered
solely for your benefit. Accordingly it is not to be used, circulated, quoted,
filed with any governmental authority or other regulatory agency or otherwise
referred to or utilized for any other purpose without our prior written consent.
Very truly yours,
PATTON BOGGS, L.L.P.
By:
--------------------------------------
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EXHIBIT D
D & E SHAREHOLDER AGREEMENT
THIS D & E SHAREHOLDER AGREEMENT (this "Agreement"), dated as of
___________, 1997, by and among D & E COMMUNICATIONS, INC., a Pennsylvania
corporation (the "D & E"), and each of the several shareholders signatory hereto
(each a "Shareholder" and collectively the "Shareholders");
W I T N E S S E T H:
WHEREAS, D & E has entered into that certain Agreement and Plan of Merger,
dated as of December 12, 1996 (the "Merger Agreement"), with PCS One, Inc., a
New Jersey corporation (the "Company"), pursuant to which the Company will merge
with and into D & E, with D & E as the surviving corporation (the "Merger");
WHEREAS, the Shareholders owned all of the issued and outstanding capital
stock of the Company immediately prior to the Effective Time (as defined in the
Merger Agreement);
WHEREAS, pursuant to the Merger Agreement, all shares of Company Common
Stock (as defined in the Merger Agreement) issued and outstanding immediately
prior to the Effective Time shall be converted into shares of D & E Common Stock
(as defined in the Merger Agreement); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the obligations of D & E to close and consummate the Merger;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS
Unless otherwise defined herein, all capitalized terms used in this
Agreement shall have the meanings ascribed thereto in the Merger Agreement.
"Affiliate" shall mean, with respect to any person, any director or officer
of such person, or any person who controls, is controlled by, or is under common
control with, such person.
"Associate" shall mean, with respect to any person, (a) any corporation or
organization of which such person is a director, an officer or partner or is,
directly or indirectly, the beneficial owner of twenty percent (20%) or more of
any class of equity securities, (b) any trust as to which such person serves as
trustee or in a similar fiduciary capacity or any grantor trust as to which such
person is sole beneficiary, and (c) any relative (as used herein, the relatives
of any person shall include only such person's parents, children or siblings) or
spouse of such person, or any relative of such spouse or, if such person is a
corporation or partnership, any director, officer or partner of such corporation
or partnership or any relative or spouse of the directors, officers or partners
of such corporation or partnership or its Affiliates (with respect to any
Associate of any person such person shall be obligated only to use its best
efforts to cause such Associate to observe the provisions of this Agreement as
if the Associate were a party hereto and bound hereby).
"Business Combination" shall mean any fundamental change described in
Chapter 19 of the Pennsylvania Business Corporation Law of 1988.
"D & E Shares" shall mean the D & E Common Stock issued in connection with
the Merger and any shares of capital stock of D & E issued upon said D & E
Common Stock by way of dividend or other distribution, or in exchange therefor,
or by the exercise of any rights to subscribe incident thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Holder" shall mean any Shareholder and such Shareholder's successors,
assigns, heirs, personal representatives, transferees and any subsequent holder
of the D & E Shares; provided, however, that "Holder" shall not include (i)
persons to whom sales of D & E Shares, are made in unsolicited "brokers
transactions" within the meaning of Section 4(4) of the Securities Act otherwise
than into a tender offer under Section 14(d) of the Exchange Act or (ii) persons
who acquire such shares pursuant to Section 4(a)(iii) hereof.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Voting Securities" shall mean any securities of D & E or any successor to
D & E entitled, or which may be entitled, to vote (whether or not entitled to
vote generally in the election of directors), or securities convertible into or
exercisable or exchangeable for such securities, whether or not subject to
passage of time or contingencies.
2. SHAREHOLDER REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
2.1 Shareholders' Representations and Warranties. Each of the Shareholders
represents, warrants and acknowledges that:
(a) Such Shareholder owns and holds beneficially and of record, the entire
right, title and interest in and to the number of the Company Shares set forth
on Schedule 2.1 attached hereto opposite such Shareholder's name, free and clear
of any claim, suit, proceeding, call, commitment, voting trust, proxy,
restriction, limitation, security interest, pledge or lien or encumbrance of any
kind or nature whatsoever, and has full power and authority to vote said Company
Shares and to approve the transactions contemplated by this Agreement and the
Merger Agreement. Such Shareholder has full power and authority to vote,
transfer and dispose of the Company Shares owned and held by such Shareholder,
free and clear of any claim, suit, proceeding, call, voting trust, proxy,
restrictions, security interest, lien or other encumbrance of any kind or nature
whatsoever. Except as disclosed on Schedule 2.1 hereto, there are no existing
shareholder agreements, voting agreements or voting trusts respecting any shares
of the capital stock of Company.
(b) Such Shareholder has full power and authority to execute and deliver
this Agreement, and the other agreements and instruments to be executed and
delivered in connection herewith, and has full power and authority to perform
such Shareholder's obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. This Agreement, and the other
agreements and instruments to be executed and delivered in connection herewith,
have been duly authorized (if appropriate), executed and delivered by such
Shareholder. This Agreement, and the other agreements and instruments to be
executed and delivered in connection herewith, constitute the valid and binding
obligation of such Shareholder enforceable against such Shareholder in
accordance with its terms.
(c) No person is acting or has acted for it as a broker or finder in
connection with the transactions provided for by the Merger Agreement or this
Agreement.
2.2 Disclosure. Each Shareholder acknowledges its receipt of
Prospectus/Proxy Statement dated _______________, relating to the Merger. No
statement contained in the Prospectus/Proxy Statement contained, contains or
will contain at the Closing any untrue statements of a material fact nor
omitted, omits or will omit at Closing to state a material fact necessary in
order to make the statements therein not misleading in light of the
circumstances in which they were made.
2.3 Release. Each Shareholder agrees not to sue and fully releases and
discharges the Company, D & E and D & E's subsidiaries, affiliates, directors,
officers and shareholders with respect to and from any and all claims, wages,
demands, rights, liens, agreements, contracts, covenants, actions, suits, causes
of action, obligations, debts, costs, expenses, attorneys' fees, damages,
judgments, orders and liabilities of whatever kind or nature in law, equity or
otherwise whether now known or unknown, suspected or unsuspected, and whether or
not concealed or hidden, which such Shareholder now owns or holds or has at any
time heretofore owned or held as against the Company, D & E and D & E's
subsidiaries, affiliates, directors, officers and shareholders. Each Shareholder
further agrees that in executing this Agreement the same shall be effective as a
bar to each and every claim, demand and cause of action hereinabove specified;
and expressly consents that this release shall be given full force and effect
according to each and all of its express terms and provisions, including as well
those related to unknown and unsuspected claims, demands and causes of action
hereinabove specified.
2.4 Intellectual Property. To each Shareholder's actual knowledge, upon the
Merger D & E shall be the exclusive owner of all Intellectual Property, all
goodwill associated therewith or symbolized thereby, and such Shareholder does
not now have nor at any time previously had any right, title or interest
therein, and acknowledges and agrees that any use thereof by such Shareholder
not otherwise expressly authorized is an infringement of D & E's rights with
respect thereto.
3. STANDSTILL AGREEMENT
(a) No Holder shall, during the period commencing on the date hereof and
ending on _________________, 2002 (the "Standstill Termination Date"), nor shall
any of such Holder's Affiliates or Associates, regardless of whether such person
or entity is an Affiliate or Associate on the date hereof, directly or
indirectly, alone or in concert with others:
(i) in any manner acquire, agree to acquire or make any offer or
proposal to acquire, directly or indirectly, whether by purchase, tender or
exchange offer, through the acquisition of control of another person, by joining
a partnership, limited partnership, syndicate or other "group" (within the
meaning of Section 13(d)(3) under the Exchange Act or otherwise, "beneficial
ownership" (within the meaning of Rule 13d-3 under the Exchange Act) of any
Voting Securities, or a material portion of the assets of D & E or any of its
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subsidiaries; provided, however, that a Holder may acquire Voting Securities of
D & E (A) with the consent of D & E in a public offering of such securities by D
& E, (B) other than by tender or exchange offer, for investment purposes only
and not for the purpose of exercising control of D & E or influencing the
management of D & E, or (C) pursuant to Section 4(a)(iv) hereof, and in each
such case, the Holder shall be bound by the terms of this Agreement with respect
to such additional Voting Securities;
(ii) propose to enter into, directly or indirectly, any Business
Combination involving D & E or any of its subsidiaries or to purchase, directly
or indirectly, a material portion of the assets of D & E or any of its
subsidiaries, or otherwise;
(iii) seek directly or indirectly to control or influence D & E or the
management, policies or Board of Directors of D & E, either alone or in
connection with others;
(iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any Voting
Securities of D & E;
(v) seek election to, seek to place a representative on, or nominate
any person for election to, the D & E's Board of Directors, or make or in any
way participate, directly or indirectly, or engage in any "solicitation" of
proxies or consents (whether or not relating to the election or removal of
directors) within the meaning of Rule 14a-1 under the Exchange Act with respect
to Voting Securities;
(vi) call or seek to have called any meeting of the shareholders of D
& E;
(vii) initiate, propose or otherwise solicit the D & E's shareholders,
or induce any other person to initiate, propose or otherwise solicit D & E's
shareholders, for the approval of one or more shareholder proposals as described
in Rule 14a-8 under the Exchange Act or any other proposal otherwise submitted
by any shareholder of D & E;
(viii) permit any other person to become a member of a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with any Holder with
respect to any Voting Securities of D & E;
(ix) disclose any intention, plan or arrangement inconsistent with the
foregoing; or
(x) advise, assist or encourage or finance any other persons in
connection with any of the foregoing.
(b) During the period commencing on the date hereof and ending on the
Standstill Termination Date, no Holder will, nor will such Holder permit his,
her or its Affiliates and Associates to, (i) publicly or privately oppose the
slate of nominees proposed by the Board of Directors of D & E, or take a
position inconsistent with the position of the Board of Directors of D & E with
respect to any shareholder proposal as described in Rule 14a-8 under the
Exchange Act or any other proposal otherwise submitted to the shareholders of
the Holder, or (ii) otherwise seek to advise, encourage or influence any person
with respect to the voting of Voting Securities.
(c) At all times during the period commencing on the date hereof and ending
on the Standstill Termination Date, no Holder shall, nor shall any Holder permit
its Affiliates or Associates, regardless of whether such person is an Affiliate
or Associate on the date hereof, to, directly or indirectly, aid, encourage,
render advice to or act in concert with any person, firm, corporation, group or
entity to take any of the actions prohibited by this Article 3.
(d) Each Holder also agrees not to, and will cause his, her or its
Affiliates and Associates not to, (i) disclose an intent, purpose, plan or
proposal or make any statement with respect to D & E inconsistent with the
provisions of this Agreement, (ii) request D & E or the D & E's representatives,
directly or indirectly, to amend or waive any provision of this Article 3
(including this sentence) if such request would require public disclosure by D &
E, or (iii) take any action which would require D & E to make a public
announcement regarding the possibility of a Business Combination.
(e) In the event an unsolicited tender offer by a third party for at least
a majority of the outstanding Voting Securities of D & E, the provisions of
subsections a(i), a(ii) and (d) of this Article 3 shall not apply to any
Shareholder so long as the third party tender offer remains open and for a
period of 20 days after it is withdrawn or termination.
4. SHARE TRANSFER RESTRICTIONS
(a) Except as provided herein, no Holder shall sell, transfer, exchange or
otherwise dispose of (a "Transfer") in whole or part any interest in his, her or
its D & E Shares.
(i) A Holder may transfer his, her or its D & E Shares pursuant to a
transfer required by operation of law or pursuant to a will but only if the
transferee agrees in writing to be bound by the terms of this Agreement.
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(ii) A Holder may sell his, her or its D & E Shares in unsolicited
"brokers transactions" within the meaning of Section 4(4) of the Securities Act,
other than into a tender offer under Section 14(d) of the Exchange Act;
provided, however, that the Holder shall not sell his, her or its D & E Shares
pursuant to this subsection a(ii) during the 180-day period following the date
hereof; and provided, further, that after said 180-day period, no Holder may
sell or otherwise dispose of an aggregate number of shares of D & E Shares in
excess of fifty percent (50%) of the D & E Shares held by such Shareholder
distributed equally over each of the immediately succeeding six quarters of D &
E; and provided, further, that the volume restrictions contained in the provisos
to this subsection (a)(ii) shall lapse and be of no further force or effect upon
the earlier of (x) 180 days after the closing of an underwritten public offering
of D & E Shares, or (y) two years after the Closing Date (as defined in the
Merger Agreement).
(iii) A Holder may transfer or otherwise dispose of his, her or its D
& E Shares in a private sale transaction of such shares and not in the public
markets as long as any recipient thereof agrees in writing to be bound by the
terms of this Agreement.
(iv) A Shareholder may sell shares of D & E Shares to any other
Shareholder, provided, that, (A) the selling Shareholder shall give notice of
such sale and the terms thereof to D & E within five (5) days after the sale,
and (B) the buying Shareholder shall be bound by the terms of this Agreement
with respect to such shares.
(b) The certificates for shares of D & E Shares now or hereafter issued by
D & E during the term of this Agreement to any Holder shall be marked with the
following legend:
THIS CERTIFICATE OF STOCK AND THE SHARES REPRESENTED THEREBY MAY
NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THAT
CERTAIN SHAREHOLDER AGREEMENT DATED AS OF ______________, 1997 AND ALL
AMENDMENTS THERETO, A COPY OF WHICH AGREEMENT AND ANY AMENDMENT
THERETO IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
A certificate shall not bear such legend only if the securities were sold
in compliance with the provisions of Section 4(a)(ii) hereof.
5. MISCELLANEOUS
5.1 Notices. Any notice, request, demand or other communication given by
any party under this Agreement (each a "notice") shall be in writing, may be
given by a party or its legal counsel, may and shall be deemed to be duly given
(a) when personally delivered, or (b) upon delivery by United States Express
Mail or similar overnight courier service which provides evidence of delivery;
or (c) when five (5) days have elapsed after its transmittal by registered or
certified mail, postage prepaid, return receipt requested, addressed to the
party to whom directed or that party's address as it appears below or on the
signature pages hereto in the case of notices to any Shareholder or another
address of which that party has given notice, or (d) when transmitted by telex
(or equivalent service), the sender having received the answer back of the
addressee, or (e) when delivered by facsimile transmission if a copy thereto is
also delivered in person or by overnight courier. Notices of address change
shall be effective only upon receipt notwithstanding the provisions of the
foregoing sentence.
Notice to D & E shall be sufficient if given to:
D & E Communications, Inc.
130 East Main Street
Ephrata, PA 17522
Attention: W. Garth Sprecher
Facsimile No: (717) 733-2364
with copies to: Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street - 20th Floor
Pittsburgh, PA 15219
Attention: Vincent C. Deluzio
5.2 Survival of Representations and Warranties. The representations and
warranties contained herein or in any document delivered pursuant hereto shall
survive the consummation of the transactions provided for in this Agreement for
one (1) year after the Closing except those set forth in Section 2.1 hereof
which shall survive indefinitely.
5.3 Expenses. The Shareholders shall pay all fees and expenses incurred by
them and the Company in connection with the transactions provided for hereunder
and under the Merger Agreement, including the fees and expenses of Company's
counsel and accountants, and, except as otherwise provided in this Agreement, D
& E shall pay all expenses incurred by it in connection with the transactions
provided for hereunder, including the fees and expenses of its counsel and
accountants.
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5.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators, successors and assigns
of the parties hereto.
5.5 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania without regard to any jurisdiction's provisions of
conflicts of law.
5.6 Counterparts/Use of Facsimiles. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute a single agreement. The reproduction of
signatures by means of a telecopying device shall be treated as though such
reproductions are executed originals and each party hereto covenants and agrees
to provide the other parties with a copy of this Agreement bearing original
signatures within five (5) days followed transmittal by facsimile.
5.7 Entire Agreement. This Agreement (including, for purposes hereof, the
Exhibits and Schedules contemplated hereby) constitutes the entire agreement of
the parties hereto respecting its subject matter and supersedes all
negotiations, preliminary agreements and prior or contemporaneous discussions
and understandings of the parties hereto in connection with the subject matter
hereof. This Agreement may be amended, modified, or supplemented only by a
writing signed by all parties by their duly authorized representations. Any
party may waive the benefit of a term or conditions of this Agreement but such
waiver shall be in writing and signed by the party so waiving such benefit and
such waiver will not be deemed to constitute the waiver of another breach of the
same, or any other, term, or condition. The headings in this Agreement are for
reference purposes only and shall not alter the meaning or interpretation of any
provision of this Agreement.
5.8 Invalidity. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present of future law (a) such provision will
be fully severable, (b) this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (d) in lieu of such illegal, invalid
or unenforceable provision, there shall be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
IN WITNESS WHEREOF, the undersigned parties hereto, intending to be legally
bound hereby, have executed or caused this Agreement to be executed as of the
date first above written.
D & E COMMUNICATIONS, INC.
By:
--------------------------------------------------------
Title:
-----------------------------------------------------
[INSERT SIGNATURE BLOCKS FOR EACH SHAREHOLDER TOGETHER WITH
ADDRESS FOR NOTICES]
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EXHIBIT C
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
entered into as of the [20th] day of December, 1996, by and between D & E
COMMUNICATIONS, Inc., a Pennsylvania corporation ("D & E"), and PCS ONE, INC., a
New Jersey corporation (the "Company").
WITNESSETH:
WHEREAS, D & E and the Company have heretofore entered into that certain
Agreement and Plan of Merger, dated as of December 12, 1996 (the "Merger
Agreement), and desire to amend the Merger Agreement pursuant to Section 15.5
thereof as provided herein;
NOW, THEREFORE, for and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Definitions. Except as otherwise defined herein, capitalized terms shall
have the meanings set forth in the Merger Agreement.
2. Amendments. The first sentence of each of Section 6.5 and Section 7.3 of
the Merger Agreement is hereby deleted in its entirety and the following
substituted therefor:
"The Company Shareholders shall have approved the Merger with no fewer than
seventy-two percent (72%) of total combined voting power of the Company
Common Stock and Series A Preferred Stock voting in favor of such
approval."
3. Effect of Amendment. Except as expressly amended hereby, the terms and
conditions of the Merger Agreement shall remain in full force and effect and
shall be binding upon the parties hereto.
4. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties has executed or caused this
Amendment to be executed by its duly authorized officer as of the date first
above written.
D & E COMMUNICATIONS, INC.
By: /s/ G. William Ruhl
Name: G. William Ruhl
Title: Senior Vice President
PCS ONE, INC.
By: /s/ Michael Azeez
Name: Michael Azeez
Title: President
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EXHIBIT D
NEW JERSEY DISSENTERS' RIGHTS STATUTE
CHAPTER 11. RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1 RIGHT OF SHAREHOLDERS TO DISSENT.--(1) Any shareholder of a
domestic corporation shall have the right to dissent from any of the following
corporate actions
(a) Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise provides
(i) a shareholder shall not have the right to dissent from
any plan of merger or consolidation with respect to shares
(A) of a class or series which is listed on a
national securities exchange or is held of record by not
less than 1,000 holders on the record date fixed to
determine the shareholders entitled to vote upon the plan of
merger or consolidation; or
(B) for which, pursuant to the plan of merger or
consolidation, he will receive (x) cash, (y) shares,
obligations or other securities which, upon consummation of
the merger or consolidation, will either be listed on a
national securities exchange or held of record by not less
than 1,000 holders, or (z) cash and such securities;
(ii) a shareholder of a surviving corporation shall not have
the right to dissent from a plan of merger, if the merger did not
require for its approval the vote of such shareholders as provided in
section 14A:10-5.1 or in subsections 14A:10-3(4), 14A:10-7(2) or
14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business as conducted by such corporation, other than a transfer pursuant to
subsection (4) of N.J.S. 14A:10-11, provided that, unless the certificate of
incorporation otherwise provides, the shareholder shall not have the right to
dissent
(i) with respect to shares of a class or series which, at
the record date fixed to determine the shareholders entitled to vote
upon such transaction, is listed on a national securities exchange or
is held of record by not less than 1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of
the corporation which provides for distribution of substantially all
of its net assets to shareholders in accordance with their respective
interests within one year after the date of such transaction, where
such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which,
upon consummation or the plan of dissolution will either be
listed on a national securities exchange or held of record
by not less than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court having jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter. (Last amended by
Ch. 279, L. '95, eff. 12-15-95.)
14A:11-2 NOTICE OF DISSENT; DEMAND FOR PAYMENT; ENDORSEMENT OF
CERTIFICATES.--(1) Whenever a vote is to be taken, either at a meeting of
shareholders or upon written consents in lieu of a meeting pursuant to section
14A:5-6, upon a proposed corporate action from which a shareholder may dissent
under section 14A:11-1, any shareholder electing to dissent from such action
shall file with the corporation before the taking of the vote of the
shareholders on such corporate action, or within the time specified in
paragraphs 14A:5-6(2)(b) or 14A:5-6(2)(c), as the case may be, if no meeting of
shareholders is to be held, a written notice of such dissent stating that he
intends to demand payment for his shares if the action is taken.
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(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
(Last amended by Ch. 94, L. '88, eff. 12-1-88.)
14A:11-3 "DISSENTING SHAREHOLDER" DEFINED; DATE FOR DETERMINATION OF FAIR
VALUE.--(1) A shareholder who has made demand for the payment of his shares in
the manner prescribed by subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder".
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders at
which the proposed action was approved or as of the day prior to the day
specified by the corporation for the tabulation of consents to such action if no
meeting of shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or
subsection 14A:10-7(4) in which shareholder approval is not required, as of the
day prior to the day on which the board of directors approved the plan of
merger; or
(c) In the case of an acquisition of all the shares or all the shares
of a class or series by another corporation pursuant to section 14A:10-9, as of
the day prior to the day on which the board of directors of the acquiring
corporation authorized the acquisition, or, if a shareholder vote was taken
pursuant to section 14A:10-12, as of the day provided in paragraph
14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or depreciation
resulting from the proposed action. (Last amended by Ch. 94, L. '88, eff.
12-1-88.)
14A:11-4 TERMINATION OF RIGHT OF SHAREHOLDER TO BE PAID THE FAIR VALUE OF
HIS SHARES.--(1) The right of a dissenting shareholder to be paid the fair value
of his shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as provided
by subsection 14A:11-2(6), unless a court having jurisdiction, for good and
sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written consent of
the corporation;
(c) the fair value of the shares is not agreed upon as provided in
this Chapter and no action for the determination of fair value by the Superior
Court is commenced within the time provided in this Chapter;
(d) the Superior Court determines that the shareholder is not entitled
to payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets aside the
corporate action.
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(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsection 14A:11-2(3),
14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action which has
taken place during the interim period. In such event, he shall be entitled to
any intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5 RIGHTS OF DISSENTING SHAREHOLDER.--(1) A dissenting shareholder
may not withdraw his demand for payment of the fair value of his shares without
the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6 DETERMINATION OF FAIR VALUE BY AGREEMENT.--(1) Not later than 10
days after the expiration of the period within which shareholders may make
written demand to be paid the fair value of their shares, the corporation upon
which such demand has been made pursuant to subsections 14A:11-2(3), 14A:11-2(4)
or 14A:11-2(5) shall mail to each dissenting shareholder the balance sheet and
the surplus statement of the corporation whose shares he holds, as of the latest
available date which shall not be earlier than 12 months prior to the making of
such offer and a profit and loss statement or statements for not less than a
12-month period ended on the date of such balance sheet or, if the corporation
was not in existence for such 12-month period, for the portion thereof during
which it was in existence. The corporation may accompany such mailing with a
written offer to pay each dissenting shareholder for his shares at a specified
price deemed by such corporation to be the fair value thereof. Such offer shall
be made at the same price per share to all dissenting shareholders of the same
class, or, if divided into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares. (Last amended by Ch. 366, L. '73, eff. 5-1-74.)
14A:11-7 PROCEDURE ON FAILURE TO AGREE UPON FAIR VALUE; COMMENCEMENT OF
ACTION TO DETERMINE FAIR VALUE.--(1) If the fair value of the shares is not
agreed upon within the 30-day period limited by subsection 14A:11-6(2), the
dissenting shareholder may serve upon the corporation upon which such demand has
been made pursuant to subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a
written demand that it commence an action in the Superior Court for the
determination of the fair value of the shares. Such demand shall be served not
later than 30 days after the expiration of the 30-day period so limited and such
action shall be commenced by the corporation not later than 30 days after
receipt by the corporation of such demand, but nothing herein shall prevent the
corporation from commencing such action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8 ACTION TO DETERMINE FAIR VALUE; JURISDICTION OF COURT; APPOINTMENT
OF APPRAISER.--In any action to determine the fair value of shares pursuant to
this Chapter:
(a) The Superior Court shall have jurisdiction and may proceed in the
action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those who
have agreed with the corporation upon the price to be paid for their shares,
shall be made parties thereto as an action against their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to receive
evidence and report to the court on the question of fair value, who shall have
such power and authority as shall be specified in the order of his appointment;
and
(d) The court shall render judgment against the corporation and in
favor of each shareholder who is a party to the action for the amount of the
fair value of his shares.
14A:11-9 JUDGMENT IN ACTION TO DETERMINE FAIR VALUE.--(1) A judgment for
the payment of the fair value of shares shall be payable upon surrender to the
corporation of the certificate or certificates representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
14A:11-10 COSTS AND EXPENSES OF ACTION.--The costs and expenses of bringing
an action pursuant to section 14A:11-8 shall be determined by the court and
shall be apportioned and assessed as the court may find equitable upon the
parties or any of them. Such expenses shall include reasonable compensation for
and reasonable expenses of the appraiser, if any, but shall exclude the fees and
expenses of counsel for and experts employed by any party; but if the court
finds that the offer of payment made by the corporation under section 14A:11-6
was not made in good faith, or if no such offer was made, the court in its
discretion may award to any dissenting shareholder who is a party to the action
reasonable fees and expenses of his counsel and of any experts employed by the
dissenting shareholder.
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14A:11-11 DISPOSITION OF SHARES ACQUIRED BY CORPORATION.--(1) The shares of
a dissenting shareholder in a transaction described in subsection 14A:11-1(1)
shall become reacquired by the corporation which issued them or by the surviving
corporation, as the case may be, upon the payment of the fair value of shares.
(2) [Deleted.]
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled. (Last amended by Ch. 279, L. '95, eff. 12-15-95.)
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification Of Directors And Officers
Subchapter D of Chapter 17 of the PBCL provides in general that a
corporation may indemnify any person, including its directors, officers and
employees, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (including actions by or in the right of the
corporation) by reason of the fact that he or she is or was a representative of
or serving at the request of the corporation, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action or proceeding if
he or she is determined by the board of directors, or in certain circumstances
by independent legal counsel to the shareholders, to have acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal proceeding,
had no reason to believe his conduct was unlawful. In the case of actions by or
in the right of the corporation, indemnification is not permitted in respect of
any claim, issue or matter as to which the person has been adjudged to be liable
to the corporation except to the extent a court determines that the person is
fairly and reasonably entitled to indemnification. In any case, to the extent
that the person has been successful on the merits or otherwise in defense of any
claim, issue or matter, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith. Subchapter D of Chapter 17 also provides that the
indemnification permitted or required thereby is not exclusive of any other
rights to which a person seeking indemnification may be entitled.
The D & E Articles provide that, except as prohibited by law, each person
is entitled to be indemnified by D & E against reasonable expenses and any
liability paid or incurred by such person in connection with any actual or
threatened claim, action, suit or proceeding whether civil, criminal,
administrative, investigative or other in which he or she may be involved by
reason of being or having been a director or officer of D & E or by reason that
such person is or was serving at the request of D & E as a director, officer,
employee, fiduciary, trustee or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other entity, or
whether the basis of such proceeding is any alleged action or failure to take
action by any such of the foregoing persons while acting in an official capacity
as a director or officer of D & E or in any other capacity on behalf of D & E
while such person is or was serving as a director or officer. However, the D & E
Articles provide further that D & E shall indemnify any person seeking
indemnification in connection with a proceeding initiated by such person only if
such proceeding was authorized by the D & E Board.
Such indemnification includes the right to have expenses incurred paid in
advance by D & E prior to final disposition, after a request made to D & E
stating in reasonable detail the expenses incurred. However, to the extent
required by law, the payment of such expenses incurred by a director or officer
of D & E in advance of a final disposition shall only be made upon receipt of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if and to the extent is it ultimately determined by a court that
such director or officer is not entitled to indemnification under the D & E
Articles, or in the case of a criminal action, the majority of the D & E Board
determines that such director or officer is not entitled to indemnification..
Persons who are not directors or officers of D & E may be similarly indemnified
in respect of service to D & E, or to another such entity at the request of D &
E, to the extent the D & E Board designates. Expenses include fees and expenses
of counsel selected
II-1
<PAGE>
by such person, and liability includes amounts of judgments, excise taxes, fines
and penalties, and amounts paid in settlement. Under the PBCL, indemnification
pursuant to this provision of the D & E Articles is not permitted in any case in
which the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
The D & E Articles also provide that to the fullest extent that the laws of
the Commonwealth of Pennsylvania, as now in effect or as hereafter amended,
permit elimination or limitation of the liability of directors, no director of D
& E shall be personally liable for monetary damages as such for any action
taken, or any failure to take any action, as a director. Under Section 1713 of
the PBCL, the shareholders of D & E may adopt a by-law providing that a director
shall not personally be liable for monetary damages for any action unless: (a)
the director has breached or failed to perform the duties of his office under
Subchapter B of Chapter 17 of the PBCL (relating to the fiduciary duties of
directors); and (b) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness. Furthermore, this limitation to the personal
liability of directors of D & E does not apply to: (i) the responsibility or
liability of a director pursuant to any criminal statute; or (ii) the liability
of a director for the payment of taxes pursuant to local, state or federal law.
The D & E Articles also provide that D & E may purchase and maintain
insurance to protect itself and any person eligible to be indemnified hereunder
against any liability or expense asserted or incurred by such person in
connection with any claim, action, suit or proceeding whether or not D & E would
have the power to indemnify such persons against such liability or expense by
law or under the indemnification provisions discussed above. D & E may create a
trust fund, grant a security interest, cause a letter of credit to be issued or
use other means to ensure the payment of sums as may become necessary to effect
such indemnification.
D & E and its subsidiaries carry insurance for their directors and officers
against certain liabilities which they might incur as directors or officers of D
& E or any organization as to which they serve at the request of D & E for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling D & E pursuant to the foregoing indemnification
provisions, D & E has been informed that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
II-2
<PAGE>
Item 21.
The following is a complete list of exhibits filed as part of this
Registration Statement, which are incorporated herein by reference:
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
2.1 Agreement and Plan of Merger, as See Exhibits B and C to the Proxy
amended, between D & E Statement and Prospectus.
Communications, Inc. (a
Pennsylvania corporation) and PCS
One, Inc. (a New Jersey
corporation)
3.1 Articles of Incorporation of D & E Incorporated herein by reference to
Communications, Inc. D & E's Amendment No. 2 to the
Registration Statement on Form S-4
(Registration No. 333-2960),
Exhibit 3.1.
3.2 By-Laws of D & E Communications, Incorporated herein by reference to
Inc. D & E's Amendment No. 2 to the
Registration Statement on Form S-4
(Registration No. 333-2960),
Exhibit 3.2.
4.1 Articles of Incorporation of D & E See Exhibit 3.1 hereof.
Communications, Inc.
4.2 Note Agreement between Allstate Incorporated herein by reference
Life Company, Allstate Life from Predecessor's Registration
Insurance Company of New York, and Statement on Form 10, Exhibit 4.1.
Denver and Ephrata Telephone and
Telegraph Company, dated as of
November 15, 1991, Re: $10,000,000
9.18% Senior Notes due November
15, 2021
4.3 First Amendment to Note Agreement Incorporated herein by reference
dated as of November 15, 1991 from Predecessor's 1993 Annual
between Allstate Life Insurance Report on Form 10-K, Exhibit 4.2.
Company, Allstate Life Insurance
Company of New York, and Denver
and Ephrata Telephone and
Telegraph Company, dated as of
January 14, 1994, due November 15,
2021, Re: $10,000,000 9.18% Senior
Notes due November 15, 2021
4.4 Note Agreement between Allstate Incorporated herein by reference
Life Insurance Company and Denver from Predecessor's 1993 Annual
and Ephrata Telephone and Report on Form 10-K, Exhibit 4.3.
Telegraph Company, dated as of
January 14, 1994, Re: $10,000,000
6.49% Senior Notes due January 14,
2004
4.5 Second Amendment to Note Agreement Incorporated herein by reference
dated as of November 15, 1991 from Predecessor's Registration
between Allstate Life Insurance Statement on Form S-3, Exhibit 4.3.
Company, Allstate Life Insurance
Company of New York, and Denver
and Ephrata Telephone and
Telegraph Company, dated as of
September 27, 1994, Re:
$10,000,000 9.18% Senior Notes due
November 15, 2021
II-3
<PAGE>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
4.6 First Amendment to Note Agreement Incorporated herein by reference
dated as of January 14, 1994 from Predecessor's Registration
between Allstate Life Insurance Statement on Form S-3, Exhibit 4.5.
Company and Denver and Ephrata
Telephone and Telegraph Company,
dated as of September 27, 1994,
Re: $10,000,000 6.49% Senior Notes
due January 14, 2004
4.7 Second Amendment to Note Agreement Incorporated herein by reference
dated as of January 14, 1994 from Predecessor's 1995 Annual
between Allstate Life Insurance Report on Form 10-K, Exhibit 4.6.
Company and Denver and Ephrata
Telephone and Telegraph Company,
dated as of September 1, 1995, Re:
$10,000,000 6.49% Senior Notes due
January 14, 2004
4.8 Third Amendment to Note Agreement Incorporated herein by reference
dated as of November 15, 1991 from Predecessor's 1995 Annual
between Allstate Life Insurance Report on Form 10-K, Exhibit 4.7.
Company, Allstate Life Insurance
Company of New York, and Denver
and Ephrata Telephone and
Telegraph Company, dated as of
September 1, 1995, Re: $10,000,000
9.18% Senior Notes due November
15, 2021
4.9 Fourth Amendment, Consent and Incorporated herein by reference
Waiver to Note Agreement dated as from D & E's Quarterly Report on
of November 15, 1991 between Form 10-Q for the quarterly period
Allstate Life Insurance Company, ended June 30, 1996, Exhibit 4.1.
Allstate Life Insurance Company of
New York and Denver and Ephrata
Telephone and Telegraph Company
dated as of June 7, 1996, RE:
$10,000,000 9.18% Senior Notes due
November 15, 2021
4.10 Third Amendment, Consent and Incorporated herein by reference
Waiver to Note Agreement dated as from D & E's Quarterly Report on
of January 14, 1994 between Form 10-Q for the quarterly period
Allstate Life Insurance Company ended June 30, 1996, Exhibit 4.2.
and Denver and Ephrata Telephone
and Telegraph Company, dated as of
June 7, 1996, RE: $10,000,000
6.49% Senior Notes due January 14,
2004.
None of the other long-term debt
of D & E and its
to-be-consolidated subsidiaries
exceeds 10 percent of the total
assets of D & E and its
subsidiaries on a consolidated
basis. D & E will furnish a copy
of the instrument relating to any
such long-term debt to the
Commission upon request.
5.1 Opinion of Buchanan Ingersoll Filed herewith.
Professional Corporation
8.1 [Tax Opinion] Filed herewith.
9.1 Form of Voting Trust Agreement, Incorporated herein by reference
Among Shareholders of Denver and from Predecessor's 1995 Annual
Ephrata Telephone and Telegraph Report on Form 10-K, Exhibit 9.1.
Company and Kay William Shober,
Anne Brossman Sweigart, W. Garth
Sprecher, Ronald B. Frisbie and
John Amos as Voting Trustees,
dated as of November 19, 1992
II-4
<PAGE>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
9.2 Form of Amendment to the Voting Incorporated herein by reference
Trust Agreement dated November 19, from Predecessor's 1995 Annual
1992 Report on Form 10-K, Exhibit 9.2.
10.1 Executive Incentive Plan Incorporated herein by reference
from Predecessor's Registration
Statement on Form 10, Exhibit 10.1.
10.2 AT&T Communications Standard Incorporated herein by reference
Agreement for the Provision of from Predecessor's Registration
Telecommunications Services and Statement on Form 10, Exhibit 10.2.
Facilities between AT&T
Communications of Pennsylvania,
Inc. and Denver and Ephrata
Telephone and Telegraph Company;
Article 1 General Provisions,
effective May 25, 1984; Article
8-2 Billing and Collection
Services effective April 1, 1992
10.3 Telecommunications Services and Incorporated herein by reference
Facilities Agreement between the from Predecessor's Registration
Bell Telephone Company of Statement on Form 10, Exhibit 10.3.
Pennsylvania and Denver and
Ephrata Telephone and Telegraph
Company, effective January 1,
1986; and Amendment to
Telecommunications Services and
Facilities Agreement and the
IntraATA Compensation Agreement,
dated May 7, 1992; Appendix 1
IntraLATA Telecommunications
Services, effective January 1,
1986; Appendix 2 Ancillary
Services, effective January 1,
1986; Appendix 5 Jointly Provided
Feature Group A Compensation
effective July 24, 1986; and
Appendix 7 Extended Area Service,
effective October 1, 1988.
10.4 IntraLATA Compensation Agreement Incorporated herein by reference
between the Pennsylvania Non-Bell from Predecessor's Registration
Telephone Companies and Denver and Statement on Form 10, Exhibit 10.4.
Ephrata Telephone and Telegraph
Company effective January 1, 1986;
and Amendment to
Telecommunications Services and
Facilities Agreement and the
IntraLATA Compensation Agreement,
dated May 7, 1992
10.5 Agreement between Donnelley Incorporated herein by reference
Directory, division of The Reuben from Predecessor's Registration
H. Donnelley Corporation and Statement on Form 10, Exhibit 10.5.
Denver and Ephrata Telephone and
Telegraph Company, dated April 19,
1991
10.6 Agreement for the distribution of Incorporated herein by reference
Interstate Access Revenues between from Predecessor's Registration
the National Exchange Carrier Statement on Form 10, Exhibit 10.6.
Association, Inc. and Denver and
Ephrata Telephone and Telegraph
Company, effective May 25, 1984
II-5
<PAGE>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
10.7 Agreement for the Provision of Incorporated herein by reference
Enhanced 9-1-1 Services between from Predecessor's Quarterly Report
the County of Lancaster and Denver on Form 10-Q for the quarterly
and Ephrata Telephone and period ended June 30, 1994, Exhibit
Telegraph Company, effective upon 10.1.
approval of the Pennsylvania
Public Utility Commission which
occurred May 18, 1994 Attachment
#1 Request for Proposal as
Amended; Attachment #2 Best and
Final Offer, April 28, 1994;
Attachment #3 Clarifications to
RFP; Attachment #4 Lancaster
County Resolution #74, September
22, 1993; Attachment #5 Lancaster
County Resolution #32, May 5,
1994; Attachment #6 Addenda,
Errata, Bulletins to Contract
Documents; Attachment #7 Facility
Lease; and Attachment #8 Tariffed
Local Exchange Carrier Services.
10.8 Amendment 1 to Exhibit A of Incorporated herein by reference
Appendix 1 of the from Predecessor's Quarterly Report
Telecommunications Services and on Form 10-Q for the quarterly
Facilities Agreement signed June period ended September 30, 1994,
23, 1994 Exhibit 10.2.
10.9 Modification to the Agreement for Incorporated herein by reference
the Provision of Enhanced 9-1-1 from Predecessor's 1994 Annual
Services between the County of Report on Form 10-K, Exhibit 10.9.
Lancaster and Denver and Ephrata
Telephone and Telegraph Company,
February 23, 1995
10.10 Affiliated Interest Agreement Incorporated herein by reference
between Denver and Ephrata from Predecessor's 1995 Annual
Telephone and Telegraph Company Report on Form 10-K, Exhibit 10.10.
and D & E Marketing Corp.
10.11 Affiliated Interest Agreement Incorporated herein by reference
between Denver and Ephrata from Predecessor's 1995 Annual
Telephone and Telegraph Company Report on Form 10-K, Exhibit 10.11.
and Red Rose Systems, Inc.
10.12 Joint Venture Agreement for Incorporated herein by reference
Lancaster Area Cellular from Predecessor's 1995 Annual
Enterprises (LACE) Report on Form 10-K/A, Exhibit
10.13 Sales Agreement Between Denver and Incorporated herein by reference
Ephrata Telephone Telegraph from Predecessor's 1995 Annual
Company and Northern Telecom, Inc. Report on Form 10-K/A, Exhibit
10.13.+
- ----------
+ Confidential treatment received with respect to portions thereof.
II-6
<PAGE>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
10.14 Project Completion Agreement among Incorporated herein by reference
Monor Communications Group Inc., from Predecessor's 1995 Annual
Denver and Ephrata Telephone and Report on Form 10-K/A, Exhibit
Telegraph Company, Consolidated 10.14. +
Companies, Inc., United
International Holdings, Inc.,
Huntel Systems, Inc., and Overseas
Private Investment Corporation
10.15 Stock Pledge Agreement among D & E Incorporated herein by reference
Marketing Corp., Huntel Systems, from Predecessor's 1995 Annual
Inc., Consolidated Companies, Report on Form 10-K/A, Exhibit
Inc., UIH Hungary, Inc., and 10.15.
Overseas Private Investment
Corporation
10.16 First Amendment to Stock Pledge Incorporated herein by reference
Agreement among D & E Marketing from Predecessor's 1995 Annual
Corp., Huntel Systems, Inc., Report on Form 10-K/A, Exhibit
Consolidated Companies, Inc., UIH 10.16.
Hungary, Inc., and Overseas
Private Investment Corporation
10.17 Subordination Agreement Among Incorporated herein by reference
Monor Telefon Tarsasag, Rt., Monor from Predecessor's 1995 Annual
Communications Group Inc., MCG Report on Form 10-K/A, Exhibit
Management Inc., Denver and 10.17.
Ephrata Telephone and Telegraph
Company, D & E Marketing Corp.,
Consolidated Companies, Inc.,
United International Holdings,
Inc., UIH Hungary, Inc., Huntel
Systems, Inc., and Overseas
Private Investment Corporation
10.18 First Amendment to Subordination Incorporated herein by reference
Agreement among Monor Telefon from Predecessor's 1995 Annual
Tarsasag, Rt., Monor Report on Form 10-K/A, Exhibit
Communications Group Inc., MCG 10.18.
Management Inc., Denver and
Ephrata Telephone and Telegraph
Company, D & E Marketing Corp.,
Consolidated Companies, Inc.,
United International Holdings,
Inc., UIH Hungary, Inc., Huntel
Systems, Inc., and Overseas
Private Investment Corporation
10.19 Agreement and Plan of Exchange Incorporated herein by reference
between Predecessor and D & E from D & E's Amendment No. 2 to the
Registration Statement on Form S-4
(Registration No. 333-2960),
Exhibit 2.1.
10.20 Joint Venture Agreement for Incorporated herein by reference
Lancaster Area Cellular from D & E's Amendment No. 2 to the
Enterprises, dated October 12, Registration Statement on Form S-4
1984 (Registration No. 333-2960),
Exhibit 10.19.+
- ----------
+ Confidential treatment received with respect to portions thereof.
II-7
<PAGE>
Exhibit
Number Description Method of Filing
- ------ ----------- ----------------
10.21 Network Product Purchase Agreement Incorporated herein by reference
between Northern Telecom, Inc., from Predecessor's Quarterly Report
and Denver and Ephrata Telephone on Form 10-Q for the quarterly
and Telegraph Company, dated May period ended March 31, 1996,
3, 1996. Exhibit 10.1
13.1 Predecessor's 1995 Annual Report Incorporated herein by reference
on Form 10-K/A. from Predecessor's 1995 Annual
Report on Form 10-K/A.
13.2 D & E's Quarterly Report on Form Incorporated herein by reference
10-Q for the quarter ended from D & E's Quarterly Report on
September 30, 1996. Form 10-Q for the quarter ended
September 30, 1996.
13.3 D & E's Current Report on Form 8-K Incorporated herein by reference
filed June 11, 1996. from D & E's Current Report on Form
8-K filed June 11, 1996.
13.4 The following sections of Incorporated herein by reference
Predecessor's 1995 Report to the from Predecessor's 1995 Annual
Shareholders: "Market for Common Report on Form 10-K/A.
Equity and Related Shareholder
Matters" on page 15, "Selected
Financial Data" on page 14 and
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations" on
pages 16 through 22.
13.5 The following sections of Incorporated herein by reference
Predecessor's Proxy Statement for from D & E's Amendment No. 2 to the
1996 Annual Meeting of Registration Statement on Form S-4
Shareholders and D & E's (Registration No. 333-2960).
Prospectus: "Proposal 1: Election
of Directors - Directors" on pages
31 through 32, "Identification of
Executive Officers" on page 34,
"Certain Relationships" on page 39
and "Certain Related Transactions"
on page 22.
21.1 Subsidiaries of D & E Filed herewith.
23.1 Consent of Buchanan Ingersoll See Exhibit 5.1 hereof.
Professional Corporation
23.2 Consent of Stradley, Ronon, See Exhibit 8.1 hereof.
Stevens & Young LLP
23.3 Consent of Coopers & Lybrand, Filed herewith.
L.L.P.
23.4 Consent of Coopers & Lybrand, Filed herewith.
L.L.P.
23.5 Consent of Arthur Andersen LLP Filed herewith.
24.1 Powers of Attorney for D & E Filed herewith.
Communications, Inc.
99.1 Forms of Proxy of Denver and Filed herewith.
Ephrata Telephone and Telegraph
II-8
<PAGE>
Item 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from Registration by means of a post-effective amendment any
of the securities being Registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S--X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable Registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether
II-9
<PAGE>
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference to the prospectus pursuant to
Items 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 this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Ephrata, Commonwealth of
Pennsylvania, on the 20th day of December, 1996.
D & E COMMUNICATIONS, INC.
(Registrant)
By: /s/ Anne B. Sweigart
-----------------------------------------------------
Mrs. Anne B. Sweigart, Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on the 20th day of December, 1996.
Signature Title
--------- -----
/s/ Anne B. Sweigart Principal Executive Officer and Director
- ---------------------------------------
Mrs. Anne B. Sweigart, Chairman
President and Chief Executive Officer
/s/ Thomas E. Morell Principal Financial
- --------------------------------------- and Accounting Officer
Thomas E. Morell, Vice President, Chief
Financial Officer and Treasurer
- --------------------------------------- Director
John Amos
- --------------------------------------- Director
Paul W. Brubaker
- --------------------------------------- Director By: /s/ W. Garth Sprecher
Ronald E. Frisbie -------------------------
W. Garth Sprecher
Attorney in Fact
- --------------------------------------- Director
Robert M. Lauman
- --------------------------------------- Director
G. William Ruhl
- --------------------------------------- Director
Steven B. Silverman
- --------------------------------------- Director
W. Garth Sprecher
- --------------------------------------- Director
Charles E. Thomas
II-11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
2.1 Agreement and Plan of See Exhibits B and C to the
Merger, as amended, Proxy Statement and
between D & E Prospectus.
Communications, Inc. (a
Pennsylvania
corporation) and PCS
One, Inc. (a New Jersey
corporation)
3.1 Articles of Incorporated herein by
Incorporation of D & E reference to D & E's Amendment
Communications, Inc. No. 2 to the Registration
Statement on Form S-4
(Registration No. 333-2960),
Exhibit 3.1.
3.2 By-Laws of D & E Incorporated herein by
Communications, Inc. reference to D & E's Amendment
No. 2 to the Registration
Statement on Form S-4
(Registration No. 333-2960),
Exhibit 3.2.
4.1 Articles of See Exhibit 3.1 hereof.
Incorporation of D & E
Communications, Inc.
4.2 Note Agreement between Incorporated herein by
Allstate Life Company, reference from Predecessor's
Allstate Life Insurance Registration Statement on Form
Company of New York, and 10, Exhibit 4.1.
Denver and Ephrata
Telephone and Telegraph
Company, dated as of
November 15, 1991, Re:
$10,000,000 9.18% Senior
Notes due November 15,
2021
4.3 First Amendment to Note Incorporated herein by
Agreement dated as of reference from Predecessor'
November 15, 1991 1993 Annual Report on Form
between Allstate Life 10-K, Exhibit 4.2.
Insurance Company,
Allstate Life Insurance
Company of New York, and
Denver and Ephrata
Telephone and Telegraph
Company, dated as of
January 14, 1994, due
November 15, 2021, Re:
$10,000,000 9.18% Senior
Notes due November 15,
2021
4.4
Note Agreement between Incorporated herein by
Allstate Life Insurance reference from Predecessor's
Company and Denver and 1993 Annual Report on Form
Ephrata Telephone and 10-K, Exhibit 4.3.
Telegraph Company, dated
as of January 14, 1994,
Re: $10,000,000 6.49%
Senior Notes due January
14, 2004
4.5 Second Amendment to Note Incorporated herein by
Agreement dated as of reference from Predecessor's
November 15, between 1991 Registration Statement on
Allstate Life Insurance Form S-3, Exhibit 4.3.
Company, Allstate Life
Insurance Company of New
York, and Denver and
Ephrata Telephone and
Telegraph Company, dated
as of September 27,
1994, Re: $10,000,000
9.18% Senior Notes due
November 15, 2021
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
4.6 First Amendment to Note Incorporated herein by
Agreement dated as of reference from Predecessor's
January 14, between 1994 Registration Statement on
Allstate Life Insurance Form S-3, Exhibit 4.5.
Company and Denver and
Ephrata Telephone and
Telegraph Company, dated
as of September 27,
1994, Re: $10,000,000
6.49% Senior Notes due
January 14, 2004
4.7 Second Amendment to Note Incorporated herein by
Agreement dated as of reference from Predecessor's
January 14, 1994 between 1995 Annual Report on Form
Allstate Life Insurance 10-K, Exhibit 4.6.
Company and Denver and
Ephrata Telephone and
Telegraph Company, dated
as of September 1, 1995,
Re: $10,000,000 6.49%
Senior Notes due January
14, 2004
4.8 Third Amendment to Note Incorporated herein by
Agreement dated as of reference from Predecessor's
November 15, 1991 1995 Annual Report on Form
between Allstate Life 10-K, Exhibit 4.7.
Insurance Company,
Allstate Life Insurance
Company of New York, and
Denver and Ephrata
Telephone and Telegraph
Company, dated as of
September 1, 1995, Re:
$10,000,000 9.18% Senior
Notes due November 15,
2021
4.9 Fourth Amendment, Incorporated herein by
Consent and Waiver to reference from D & E's
Note Agreement dated as Quarterly Report on Form 10-Q
of November 15, 1991 for the quarterly period ended
between Allstate Life June 30, 1996, Exhibit 4.1.
Insurance Company,
Allstate Life Insurance
Company of New York and
Denver and Ephrata
Telephone and Telegraph
Company dated as of June
7, 1996, RE: $10,000,000
9.18% Senior Notes due
November 15, 2021
4.10 Third Amendment, Consent Incorporated herein by
and Waiver to Note reference from D & E's
Agreement dated as of Quarterly Report on Form 10-Q
January 14, 1994 between for the quarterly period ended
Allstate Life Insurance June 30, 1996, Exhibit 4.2.
Company and Denver and
Ephrata Telephone and
Telegraph Company, dated
as of June 7, 1996, RE:
$10,000,000 6.49% Senior
Notes due January 14,
2004.
None of the other
long-term debt of D & E
and its
to-be-consolidated
subsidiaries exceeds 10
percent of the total
assets of D & E and its
subsidiaries on a
consolidated basis. D &
E will furnish a copy of
the instrument relating
to any such long-term
debt to the Commission
upon request.
5.1 Opinion of Buchanan Filed herewith.
Ingersoll Professional
Corporation
2
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
8.1 [Tax Opinion] Filed herewith.
9.1 Form of Voting Trust Incorporated herein by
Agreement, Among reference from Predecessor's
Shareholders of Denver 1995 Annual Report on Form
and Ephrata Telephone 10-K, Exhibit 9.1.
and Telegraph Company
and Kay William Shober,
Anne Brossman Sweigart,
W. Garth Sprecher,
Ronald B. Frisbie and
John Amos as Voting
Trustees, dated as of
November 19, 1992
9.2 Form of Amendment to the Incorporated herein by
Voting Trust Agreement reference from Predecessor's
dated November 19, 1992 1995 Annual Report on Form
10-K, Exhibit 9.2.
10.1 Executive Incentive Plan Incorporated herein by
reference from Predecessor's
Registration Statement on Form
10, Exhibit 10.1.
10.2 AT&T Communications Incorporated herein by
Standard Agreement for reference from Predecessor's
the Provision of Registration Statement on Form
Telecommunications 10, Exhibit 10.2.
Services and Facilities
between AT&T
Communications of
Pennsylvania, Inc. and
Denver and Ephrata
Telephone and Telegraph
Company; Article 1
General Provisions,
effective May 25, 1984;
Article 8-2 Billing and
Collection Services
effective April 1, 1992
10.3 Telecommunications Incorporated herein by
Services and Facilities reference from Predecessor's
Agreement between the Registration Statement on Form
Bell Telephone Company 10, Exhibit 10.3.
of Pennsylvania and
Denver and Ephrata
Telephone and Telegraph
Company, effective
January 1, 1986; and
Amendment to
Telecommunications
Services and Facilities
Agreement and the
IntraATA Compensation
Agreement, dated May 7,
1992; Appendix 1
IntraLATA
Telecommunications
Services, effective
January 1, 1986;
Appendix 2 Ancillary
Services, effective
January 1, 1986;
Appendix 5 Jointly
Provided Feature Group A
Compensation effective
July 24, 1986; and
Appendix 7 Extended Area
Service, effective
October 1, 1988.
3
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
10.4 IntraLATA Compensation Incorporated herein by
Agreement between the reference from Predecessor's
Pennsylvania Non-Bell Registration Statement on Form
Telephone Companies and 10, Exhibit 10.4.
Denver and Ephrata
Telephone and Telegraph
Company effective
January 1, 1986; and
Amendment to
Telecommunications
Services and Facilities
Agreement and the
IntraLATA Compensation
Agreement, dated May 7,
1992
10.5 Agreement between Incorporated herein by
Donnelley Directory, reference from Predecessor's
division of The Reuben Registration Statement on Form
H. Donnelley Corporation 10, Exhibit 10.5.
and Denver and Ephrata
Telephone and Telegraph
Company, dated April 19,
1991
10.6 Agreement for the Incorporated herein by
distribution of reference from Predecessor's
Interstate Access Registration Statement on Form
Revenues between the 10, Exhibit 10.6.
National Exchange
Carrier Association,
Inc. and Denver and
Ephrata Telephone and
Telegraph Company,
effective May 25, 1984
10.7 Agreement for the Incorporated herein by
Provision of Enhanced reference from Predecessor's
9-1-1 Services between Quarterly Report on Form 10-Q
the County of Lancaster for the quarterly period ended
and Denver and Ephrata June 30, 1994, Exhibit 10.1.
Telephone and Telegraph
Company, effective upon
approval of the
Pennsylvania Public
Utility Commission which
occurred May 18, 1994
Attachment #1 Request
for Proposal as Amended;
Attachment #2 Best and
Final Offer, April 28,
1994; Attachment #3
Clarifications to RFP;
Attachment #4 Lancaster
County Resolution #74,
September 22, 1993;
Attachment #5 Lancaster
County Resolution #32,
May 5, 1994; Attachment
#6 Addenda, Errata,
Bulletins to Contract
Documents; Attachment #7
Facility Lease; and
Attachment #8 Tariffed
Local Exchange Carrier
Services.
10.8 Amendment 1 to Exhibit A Incorporated herein by
of Appendix 1 of the reference from Predecessor's
Telecommunications Quarterly Report on Form 10-Q
Services and Facilities for the quarterly period ended
Agreement signed June September 30, 1994, Exhibit
23, 1994 10.2.
10.9 Modification to the Incorporated herein by
Agreement for the reference from Predecessor's
Provision of Enhanced 1994 Annual Report on Form
9-1-1 Services between 10-K, Exhibit 10.9.
the County of Lancaster
and Denver and Ephrata
Telephone and Telegraph
Company, February 23,
1995
4
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
10.10 Affiliated Interest Incorporated herein by
Agreement between Denver reference from Predecessor's
and Ephrata Telephone 1995 Annual Report on Form
and Telegraph Company 10-K, Exhibit 10.10.
and D & E Marketing
Corp.
10.11 Affiliated Interest Incorporated herein by
Agreement between Denver reference from Predecessor's
and Ephrata Telephone 1995 Annual Report on Form
and Telegraph Company 10-K, Exhibit 10.11.
and Red Rose Systems,
Inc.
10.12 Joint Venture Agreement Incorporated herein by
for Lancaster Area reference from Predecessor's
Cellular Enterprises 1995 Annual Report on Form
(LACE) 10-K/A, Exhibit 10.12.+
10.13 Sales Agreement Between Incorporated herein by
Denver and Ephrata reference from Predecessor's
Telephone Telegraph 1995 Annual Report on Form
Company and Northern 10-K/A, Exhibit 10.13.+
Telecom, Inc.
10.14 Project Completion Incorporated herein by
Agreement among Monor reference from Predecessor's
Communications Group 1995 Annual Report on Form
Inc., Denver and Ephrata 10-K/A, Exhibit 10.14.+
Telephone and Telegraph
Company, Consolidated
Companies, Inc., United
International Holdings,
Inc., Huntel Systems,
Inc., and Overseas
Private Investment
Corporation
10.15 Stock Pledge Agreement Incorporated herein by
among D & E Marketing reference from Predecessor's
Corp., Huntel Systems, 1995 Annual Report on Form
Inc., Consolidated 10-K/A, Exhibit 10.15.
Companies, Inc., UIH
Hungary, Inc., and
Overseas Private
Investment Corporation
10.16 First Amendment to Stock Incorporated herein by
Pledge Agreement among D reference from Predecessor's
& E Marketing Corp., 1995 Annual Report on Form
Huntel Systems, Inc., 10-K/A, Exhibit 10.16.
Consolidated Companies,
Inc., UIH Hungary, Inc.,
and Overseas Private
Investment Corporation
10.17 Subordination Agreement
Among Monor Telefon
Tarsasag, Rt.,
Incorporated herein by
reference from
Predecessor's 1995 Monor
Communications Group
Inc., MCG Management
Inc., Denver Annual
Report on Form 10-K/A,
Exhibit 10.17. and
Ephrata Telephone and
Telegraph Company, D & E
Marketing Corp.,
Consolidated Companies,
Inc., United
International Holdings,
Inc., UIH Hungary, Inc.,
Huntel Systems, Inc.,
and Overseas Private
Investment Corporation
- ----------
+ Confidential treatment received with respect to portins thereof.
5
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
10.18 First Amendment to
Subordination Agreement
among Monor Incorporated
herein by reference from
Predecessor's 1995
Telefon Tarsasag, Rt.,
Monor Communications
Group Inc., MCG Annual
Report on Form 10-K/A,
Exhibit 10.18.
Management Inc., Denver
and Ephrata Telephone
and Telegraph Company, D
& E Marketing Corp.,
Consolidated Companies,
Inc., United
International Holdings,
Inc., UIH Hungary, Inc.,
Huntel Systems, Inc.,
and Overseas Private
Investment Corporation
10.19 Agreement and Plan of Incorporated herein by
Exchange between reference from D & E's
Predecessor and D & E Amendment No. 2 to the
Registration Statement on Form
S-4 (Registration No.
333-2960), Exhibit 2.1.
10.20 Joint Venture Agreement Incorporated herein by
for Lancaster Area reference from D & E's
Cellular Enterprises, Amendment No. 2 to the
dated October 12, 1984 Registration Statement on Form
S-4 (Registration No.
333-2960), Exhibit 10.19.+
10.21 Network Product Purchase
Agreement between
Northern Telecom,
Incorporated herein by
reference from
Predecessor's Inc., and
Denver and Ephrata
Telephone and Telegraph
Company, Quarterly
Report on Form 10-Q for
the quarterly period
dated May 3, 1996. ended
March 31, 1996, Exhibit
10.1
13.1 Predecessor's 1995 Incorporated herein by
Annual Report on Form reference from Predecessor's
10-K/A. 1995 Annual Report on Form
10-K/A.
13.2 D & E's Quarterly Report Incorporated herein by
on Form 10-Q for the reference from D & E's
quarter ended September Quarterly Report on Form 10-Q
30, 1996. for the quarter ended
September 30, 1996.
13.3 D & E's Current Report Incorporated herein by
on Form 8-K filed June reference from D & E's Current
11, 1996. Report on Form 8-K filed June
11, 1996.
13.4 The following sections Incorporated herein by
of Predecessor's 1995 reference from Predecessor's
Report to the 1995 Annual Report on Form
Shareholders: "Market 10-K/A.
for Common Equity and
Related Shareholder
Matters" on page 15,
"Selected Financial
Data" on page 14 and
"Management's Discussion
and Analysis of
Financial Condition and
Results of Operations"
on pages 16 through 22.
- ----------
+ Confidential treatment received with respect to portions thereof.
6
<PAGE>
Exhibit
Number Description Method of Filing Page*
- ------ ----------- ---------------- -----
13.5 The following sections Incorporated herein by
of Predecessor's Proxy reference from D & E's
Statement for 1996 Amendment No. 2 to the
Annual Meeting of Registration Statement on Form
Shareholders and D & E's S-4 (Registration No.
Prospectus: "Proposal 1: 333-2960).
Election of Directors -
Directors" on pages 31
through 32,
"Identification of
Executive Officers" on
page 34, "Certain
Relationships" on page
39 and "Certain Related
Transactions" on page
22.
21.1 Subsidiaries of D & E Filed herewith.
23.1 Consent of Buchanan See Exhibit 5.1 hereof.
Ingersoll Professional
Corporation
23.2 Consent of Stradley, See Exhibit 8.1 hereof.
Ronon, Stevens & Young
LLP
23.3 Consent of Coopers & Filed herewith.
Lybrand, L.L.P.
23.4 Consent of Coopers & Filed herewith..
Lybrand, L.L.P.
23.5 Consent of Arthur Filed herewith.
Andersen LLP
24.1 Powers of Attorney for D Filed herewith.
& E Communications, Inc.
99.1 Forms of Proxy of Denver Filed herewith.
and Ephrata Telephone
and Telegraph
7
Exhibit 5.1
<PAGE>
[Letterhead of Buchanan Ingersoll Professional Corporation]
____________, 1996
D & E Communications, Inc.
130 East Main Street
Ephrata, Pennsylvania 17522
Dear Ladies and Gentlemen:
You have requested our opinion with respect to the Registration Statement
on Form S-4 (the "Registration Statement") of D & E Communications, Inc. (the
"Company") to be filed by the Company on or about the date hereof with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), relating to the issuance of that number of shares of the Common
Stock, par value $.16 per share, of the Company (the "Common Shares") equal to
$8,000,000 (less certain expenses as more fully described in that certain
Agreement and Plan of Merger between the Company and PCS One, Inc. (the "Plan of
Merger")) divided by the weighted average closing price of the D & E Common
Shares on the National Association of Securities Dealers, Inc. Automated
Quotations National Market System over the 20 trading days immediately preceding
the Closing Date (as defined in the Plan of Merger) but not less than $23.00 and
no more than $27.00 per share.
In connection with this opinion, we have reviewed the articles of
incorporation and bylaws of the Company, the Registration Statement and such
other documents and public records as we have deemed necessary or appropriate
for the purposes of this opinion. In addition, we have expressly relied upon
certain representations made to us by the Company. If any statements contained
in the Registration Statement are not true and accurate, or if such
representations made to us are not true and accurate, then we express no opinion
to the extent that the subject matter of our opinion is affected thereby. Unless
otherwise defined herein, capitalized terms shall have the meanings ascribed to
them in the Registration Statement.
Based on the foregoing, it is our opinion that:
1. The Company is a corporation duly organized and validly existing under
the laws of the Commonwealth of Pennsylvania and is duly qualified to carry on
the business which it is now conducting in that Commonwealth.
2. When the Common Shares have been issued in accordance with the
transactions proposed in the Registration Statement, as the same may be amended,
and when the appropriate actions, as set forth below, have been taken, the
Common Shares will be authorized, validly issued, fully paid and nonassessable.
The actions to be taken which are referred to in the immediately preceding
paragraph consist of the following:
(a) Appropriate definitive action by the Board of Directors or Executive
Committee of the Company;
(b) The filing of Articles of Merger pursuant to the Plan of Merger with
the Corporation Bureau of the Department of State of the Commonwealth
of Pennsylvania;
<PAGE>
(c) The filing of a Certificate of Merger pursuant to the Plan of Merger
with the Secretary of State of the State of New Jersey;
(d) Compliance with the Act and applicable state securities laws; and
(e) Issuance of the Common Shares in accordance with the corporate
authorizations aforesaid.
We are members of the Bar of the Commonwealth of Pennsylvania, and we do
not express any opinion herein concerning any law other than the law of the
Commonwealth of Pennsylvania and the federal law of the United States of
America.
We have not undertaken any independent investigation to determine the
existence or absence of any facts set forth in the Registration Statement or the
representations made to us by the Company, and any limited inquiry undertaken by
us during the preparation of this opinion should not be regarded as such an
investigation. No inference as to our knowledge of the existence or absence of
such facts should be drawn from the fact of our representation as counsel to the
Company in connection with the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference of this firm appearing in the
Registration Statement under the caption "Legal Opinions."
This opinion is intended solely for your use and is not to be made
available to or relied upon by other persons or entities without our prior
written consent.
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By:
------------------------------------
Vincent C. Deluzio
2
Exhibit 8.1
<PAGE>
[Tax Opinion]
Exhibit 21.1
<PAGE>
Subsidiaries
Jurisdiction of
Incorporation or
Subsidiary Organization Fictitious Names
---------- ---------------- ----------------
Denver and Ephrata PA None
Telephone and Telegraph
Company
Red Rose Communications, Inc. PA Com Tech Technical Services
D & E Marketing Corp. PA None
The D and E Group* PA None
Red Rose SuperNet** PA None
- ----------
* Red Rose Communications, Inc. owns 80% of The D & E Group, a Pennsylvania
general Partnership.
** D & E Marketing Corp. owns 50% of Red Rose SuperNet, a Pennsylvania
[general] partnership.
Exhibit 23.3
<PAGE>
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 10, 1995, on our audits of the financial statements of Denver
and Ephrata Telephone and Telegraph Company. We also consent to the reference to
our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
-------------------------------------
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
December 20, 1996
Exhibit 23.4
<PAGE>
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form S-4 of our
report dated March 15, 1996, on our audits of the financial statements of Monor
Communications Group, Inc. and Subsidiaries. We also consent to the reference to
our firm under the Caption "Experts."
/s/ Coopers & Lybrand L.L.P.
-------------------------------------
Coopers & Lybrand L.L.P.
Lincoln, Nebraska
December 20, 1996
Exhibit 23.5
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 19, 1996 and to all references to our Firm included in this
registration statement.
/s/Arthur Andersen LLP
-------------------------------------
Arthur Andersen LLP
Philadelphia, Pennsylvania
December 19, 1996
Exhibit 24.1
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Charles E. Thomas
---------------------
Charles E. Thomas
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Steven B. Silverman
-----------------------
Steven B. Silverman
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ John Amos
-------------
John Amos
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ G. William Ruhl
-------------------
G. William Ruhl
Director and Senior Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Robert M. Lauman
--------------------
Robert M. Lauman
Director, Executive Vice President and
Chief Operating Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Ronald E. Frisbie
---------------------
Ronald E. Frisbie
Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Anne B.Sweigart
------------------
Anne B. Sweigart
Director, Chairman, President and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer
of D & E Communications, Inc., hereby constitutes and appoints W. GARTH SPRECHER
the undersigned's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for the undersigned in his or her name, place
and stead, in any and all capacities (including the undersigned's capacity as a
director and/or officer of D & E Communications, Inc.), granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable or which may be
required to enable D & E Communications, Inc., to comply with the Securities Act
of 1933, as amended (the "'33 Act"), and any rules, regulations, or requirements
of the Securities and Exchange Commission (the "SEC") in respect thereof, in
connection with the registration under the '33 Act of the common stock, par
value $0.16 per share, of D & E Communications, Inc., proposed to be issued in
exchange for each issued and outstanding share of the common stock, par value
$0.001 per share, of PCS One, Inc. pursuant to that certain Agreement and Plan
of Merger between D & E Communications, Inc. and PCS One, Inc., as fully to all
intents and purposes as the undersigned might or could do in person, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign the name of the undersigned in the capacity of director
and/or officer of D & E Communications, Inc., to any registration statement to
be filed with the SEC in respect of said shares of common stock of D & E
Communications, Inc., to any and all amendments and supplements to any such
registration statement, including post-effective amendments thereto, and to any
instruments or documents filed as part of or in connection with any such
registration statement or amendments or supplements thereto, and to file such
documents with the SEC; and the undersigned hereby ratifies and confirms that
said attorney-in-fact and agent, or any one or more of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents on the
date set forth opposite his or her name below.
Date: December 20, 1996 /s/ Paul W. Brubaker
--------------------
Paul W. Brubaker
Director
Exhibit 99.1
<PAGE>
PCS ONE, INC.
Bayport One, Suite 400
West Atlantic City, New Jersey 08232
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY CARD
SPECIAL MEETING OF SHAREHOLDERS -- FEBRUARY [15], 1997, 10:00 a.m.
The undersigned hereby appoints _____________________, and each of them
(with full power to act alone), as Proxies of the undersigned, each with the
power to appoint his substitute, and hereby authorized them to represent and to
vote, as designated below, the shares of Class I Common Stock, Class II Common
Stock and Series A Convertible Preferred Stock of PCS One, Inc. (the "Company")
held of record by the undersigned on the record date of January 20, 1997, at the
Special Meeting of Shareholders to be held on February [15], 1997, at the
offices of the Company in West Atlantic City, New Jersey, and at any
postponements or adjournments thereof, all as in accordance with the Notice of
Special Meeting and Prospectus and the Proxy Statement furnished with this
Proxy.
1. PROPOSAL TO APPROVE AND ADOPT an amendment to the Amended and Restated
Certificate of Incorporation of the Company, as further amended, to
increase the number of Reserve Shares, as defined in Exhibit A thereto,
from 475,000 to 2,475,000 (the "Amendment"), such increase representing the
Bonus Options addressed in Proposal 3 below. The issuance of the Bonus
Options is specifically conditioned upon approval of the Amendment:
/ / FOR / / AGAINST / / ABSTAIN
2. PROPOSAL TO APPROVE AND ADOPT the grant and issuance of Reserve Share
Options to certain officers, directors and consultants of the Company
integral to the formation and viability of the Company for an aggregate of
475,000 shares of Class II Common Stock of the Company, par value $.01 per
share:
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO APPROVE AND ADOPT the grant and issuance of Bonus Options to
certain officers and directors of the Company integral to the consummation
of the transactions contemplated by the Merger for an aggregate of
2,000,000 shares of Class II Common Stock of the Company, par value $.01
per share. The issuance of the Bonus Options is specifically conditioned
upon approval of the Amendment addressed in Proposal 1 above:
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. PROPOSAL TO APPROVE AND ADOPT the merger of the Company with and into D & E
Communications, Inc. ("D & E"), where D & E would survive (the "Merger"),
described in the accompanying Prospectus and Proxy Statement, which will be
effected pursuant to an Agreement and Plan of Reorganization dated as of
December 12, 1996, by and between the Company and D & E:
/ / FOR / / AGAINST / / ABSTAIN
5. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND AT ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF.
This Proxy, if properly executed and received in time for the voting, will
be voted in the manner directed herein by the undersigned shareholder. If
no direction is made, this Proxy will be voted FOR the Proposals addressed
herein.
Please sign exactly as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If partnership, please sign in partnership name by
authorized person.
Signature
Signature, if jointly held
Dated:___________________________________, 1997
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
2
